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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) March 1, 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 March 1, 1996, Kmart Corporation entered into the attached written
agreements which were also executed by the requisite banks and bondholders
that are parties thereto regarding amendments to certain terms and conditions
of its existing revolving credit facilities and certain real estate obligations
and the establishment of a new committed letter of credit facility. These
agreements, together with certain ancillary and supplemental documentation,
generally implement the agreements reported by the Company in its Form 8-K
reports dated December 20, 1995 and January 17, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KMART CORPORATION
(Registrant)
By: /s/ Martin E. Welch
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Martin E. Welch
Senior Vice President
and Chief Financial Officer
Date: March 12, 1996
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RESTRUCTURING AND REPURCHASE AGREEMENT
RESTRUCTURING AND REPURCHASE AGREEMENT, dated as of December 22, 1995, by
and among Kmart Corporation, a Michigan corporation (together with its
successors and assigns permitted under this Agreement, the "COMPANY"), the
holders of certain securities listed on Schedule I hereto (the "ORIGINAL
SECURITYHOLDERS"; the holders of Repurchase Rights (as defined in Recital C)
from time to time being referred to herein as the "SECURITYHOLDERS"), and
trustees that are parties to certain of the Existing Transaction Documents (as
defined in Recital A). Capitalized terms used herein, and not otherwise
defined, have the respective meanings ascribed thereto in Section 8.1.
R E C I T A L S:
A. The Original Securityholders (or their predecessors in interest) have
made investments in the Company, or in entities that have leased real property
to the Company and the Subsidiaries (or corporations that formerly were
Subsidiaries), and, in connection therewith, have entered into certain
agreements (as further defined in Section 8.1, the "EXISTING TRANSACTION
DOCUMENTS") setting forth the terms relating to the repurchase or repayment of
such investments and the collateral therefor.
B. Among other things, certain of the Existing Transaction Documents grant
to the Original Securityholders the option (as further defined in Section 8.1,
the "EXISTING RATING DECLINE PUT OPTIONS") to have the Company purchase the
Original Securityholders' investments for the amount specified in such Existing
Transaction Documents if the Company's senior unsecured debt ceases to be rated
"investment grade" (or, with respect to certain investments, if the rating is
reduced to the lowest "investment grade" rating).
C. The Company desires that the Original Securityholders surrender the
Existing Rating Decline Put Options in exchange for the Company's obligation to
repurchase, from each Securityholder, such Securityholder's outstanding
investment on October 3, 1997, or sooner upon the occurrence of certain events
specified in this Agreement, and the Original Securityholders are willing to
make such exchange (the right of a Securityholder to require the Company to
repurchase a Note issued in respect of any such investment being referred to
herein as a "REPURCHASE RIGHT," and the aggregate amount payable upon the
repurchase of all such Notes from all Securityholders being referred to herein
as the "AGGREGATE REPURCHASE PRICE," in each case as further defined in Section
1.1 and Section 2.1(c), respectively).
D. The Company and the Original Securityholders desire to leave the
Existing Transaction Documents in full force and effect except to the extent
necessary:
(i) to give effect to the exchange referred to in the foregoing
Recital C (including, without limitation, amending the Existing
Transaction Documents to eliminate provisions regarding the Existing
Rating Decline Put Options);
(ii) to amend certain provisions of the Existing Transaction
Documents to make them consistent with the surrender of the Existing
Rating Decline Put Options (all as specified in this Agreement, the Deal
6 Amendment Documents and the Deal 7 Amendment Documents);
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(iii) to require prepayments of the Aggregate Repurchase Price in
connection with the payment of indebtedness (as further defined in
Section 8.1, the "BANK DEBT") owing to the institutions from time to time
holding such indebtedness (the "BANKS");
(iv) to suspend temporarily, in the Existing Transaction Documents,
certain of the Company's obligations to substitute other collateral for
any collateral consisting of closed stores;
(v) to amend the collateral structure securing the Deal 6 Notes
pursuant to certain agreements (as further defined in Section 8.1, the
"DEAL 6 AMENDMENT DOCUMENTS"), as more fully described in Recital H
below; and
(vi) to provide reasonable assurances that, upon satisfaction of
certain conditions precedent, the Company will be deemed to have
fulfilled its obligation to substitute collateral resulting from a single
store closing in September, 1995 with respect to the Deal 2 Notes.
The amendments to the Existing Transaction Documents required to effect the
foregoing clauses (i) to (iv), inclusive with respect to the Deal 1 Notes, Deal
2 Notes, Deal 3 Notes, Deal 4 Notes and Deal 5 Notes are set forth in this
Agreement, and the amendments to the Existing Transaction Documents required to
effect the foregoing clause (v) and, with respect to the Deal 7 Notes, the
foregoing clauses (i) to (iv), inclusive, are set forth in the Collateral
Amendment Documents. The Existing Transaction Documents, as amended and
supplemented by this Agreement and the Collateral Amendment Documents, are
referred to herein as the "AMENDED TRANSACTION DOCUMENTS."
E. The documents pursuant to which the Bank Debt is outstanding (as
further defined in Section 8.1, the "BANK AGREEMENTS") are being amended,
simultaneously with the amendments effected hereby to the Existing Transaction
Documents, to, among other things, extend the maturities of a portion of the
Bank Debt and eliminate defaults related to the credit rating of the Company's
senior unsecured debt.
F. The willingness of the Securityholders to surrender the Existing Rating
Decline Put Options, and of the Banks to extend the maturities of the Bank Debt
and to eliminate defaults related to the credit rating of the Company's senior
unsecured debt, are subject to the agreement of the Company, the Original
Securityholders and the Banks to effect (i) ratable prepayments of the
Aggregate Repurchase Price upon certain reductions of Bank Debt and (ii)
ratable reductions in the Bank Debt upon certain prepayments of the Aggregate
Repurchase Price (such ratable reduction arrangements being referred to herein
as the "RATABLE REDUCTION PRINCIPLE").
G. Some of the Bank Debt (as further defined in Section 2.2(b), the "BANK
R/E DEBT") may be repaid by the Company or another obligor or obligors and
subsequently readvanced by the Banks, in whole or in part. In order to
preserve the Ratable Reduction Principle in such circumstances, the Company and
a trustee for the Securityholders will enter into a trust agreement (as further
defined in Section 4.6, the "PAYDOWN TRUST AGREEMENT") pursuant to which the
Company will make deposits with such trustee upon payments of Bank R/E Debt
sufficient in amount so that the application of such deposits to the prepayment
of the Aggregate Repurchase Price would preserve the Ratable Reduction
Principle. The amounts so deposited
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with such trustee will either be applied to the prepayment of the Aggregate
Repurchase Price upon a permanent reduction in the Bank R/E Debt Commitment or
will be disbursed to the Company in proportion to the amount of Bank R/E Debt
readvanced subsequent to any repayment of Bank R/E Debt.
H. In connection with, and as a condition to, the execution of this
Agreement, the Existing Transaction Documents relating to the Deal 6 Notes are
being restructured pursuant to the Collateral Amendment Documents to, among
other things, segregate the collateral securing the Deal 6 Notes into (i) one
trust (the "WAL-MART TRUST") consisting of properties currently leased to
Wal-Mart Stores, Inc., a Delaware corporation ("WAL-MART"), or a Wal-Mart
affiliate, and (ii) a second trust consisting of properties currently leased to
the Company or a Subsidiary. Each such trust shall secure only that portion of
the Deal 6 Notes allocable to the properties included therein. After giving
effect to the Collateral Amendment Documents, the Indebtedness secured by each
such trust shall be evidenced by reissued Notes. The restructuring of the
Existing Transaction Documents relating to the Deal 6 Notes pursuant to the
Collateral Amendment Documents (including, without limitation, the severance of
the collateral) shall not affect the Repurchase Rights granted to the
Securityholders of the Deal 6 Notes pursuant to this Agreement.
Notwithstanding the foregoing, if any Original Securityholder elects to
transfer any of the reissued Notes secured by the properties of the Wal-Mart
Trust (the "WAL-MART NOTES") to any Person (other than an affiliate of such
Securityholder, a transfer by operation of law or an assignment to any Bank in
accordance with the Setoff and Sharing Agreement), the Repurchase Rights
attributable to the Notes so transferred shall be extinguished.
I. Pursuant to reimbursement agreements relating to certain note
repurchase agreements (as further defined in Section 8.1, the "SPIN-OFF TENANT
PUT AGREEMENTS"), the holders of the Deal 8 Notes and the holders of the Deal 9
Notes have the option to require the Company to purchase such Deal 8 Notes and
Deal 9 Notes, respectively, if the credit rating of the Company's senior
unsecured debt ceases to be "investment grade." Pursuant to certain other
Spin-Off Tenant Put Agreements, the holders of the Deal 10 Notes and the
holders of the Deal 11 Notes have the option to require the respective tenants
identified therein (the "SPIN-OFF TENANTS") to purchase such Deal 10 Notes and
Deal 11 Notes, respectively, if the credit rating of the Company's senior
unsecured debt ceases to be "investment grade." If such Spin-Off Tenants fail
to purchase such Deal 10 Notes or Deal 11 Notes, as the case may be, within the
time periods prescribed therein, then the holders of such Deal 10 Notes or Deal
11 Notes, as the case may be, may require the Company to purchase such Notes
(such put options, together with the put options described in the first
sentence of this Recital I, as further defined in Section 8.1, the "SPIN-OFF
TENANT PUT OPTIONS"). Pursuant to the Lease Guaranty, Indemnification and
Reimbursement Agreements between the Company and each of the Spin-Off Tenants,
the Company has the right to seek reimbursement from such Spin-Off Tenants of
losses incurred by the Company in respect of the Spin-Off Tenant Put Options
with respect to the Deal 8 Notes, Deal 9 Notes, Deal 10 Notes and Deal 11
Notes. The Company and the Securityholders desire that the Company honor the
exercise of the Spin-Off Tenant Put Options and seek reimbursement in respect
of such amounts. On February 8, 1996, the holders of the Deal 8 Notes and Deal
9 Notes sent the Company notice that such Securityholders are exercising their
Spin-Off Tenant Put Options.
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NOW, THEREFORE, in consideration of the foregoing recitals and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and the Securityholders hereby agree as follows:
SECTION 1. EXCHANGE OF RIGHTS
The Original Securityholders hereby transfer to the Company the Existing
Rating Decline Put Options in exchange for the rights described in Section 2.1
(collectively, the "REPURCHASE RIGHTS"), and acknowledge that they have no
further right, title or interest in the Existing Rating Decline Put Options.
SECTION 2. REPURCHASES AND PAYMENTS IN RESPECT OF REPURCHASE RIGHTS
2.1 REPURCHASE RIGHTS EXERCISED UPON OCCURRENCE OF A TRIGGERING EVENT.
(a) Upon the occurrence of any Triggering Event, all of the
Repurchase Rights shall be deemed immediately and automatically
exercised, without any requirement for notice to the Company, the Banks
or any other Person, or any other action whatsoever by the
Securityholders or any other Person. Upon such occurrence, the Company
shall repurchase the Notes from the Securityholders at the Aggregate
Repurchase Price by paying, to each Securityholder, an amount equal to
the sum of the Repurchase Prices of all of the Notes held by such
Securityholder. Upon receipt of such amount, such Securityholder shall
deliver such Notes to the Company, as provided in Section 2.8 (or an
affidavit as to the loss thereof, together with an unsecured indemnity to
the Company for liabilities arising from such loss).
(b) A "TRIGGERING EVENT" means any of the following:
(i) October 3, 1997 shall occur;
(ii) any Bank Debt outstanding under any Bank Agreement shall
become due and payable, except (A) upon the expiration of a letter
of credit, or (B) as the result of a Bank L/C Prepayment, a Bank
Line Debt Catch-Up Reduction or a Bank R/E Debt Catch-Up Reduction,
(C) as the result of the occurrence of the originally stated
maturity of such Bank Debt, (D) if such Bank Debt is Big Beaver I
Minority Bank Debt, or (E) in connection with a Bank Debt
Refinancing;
(iii) an Early Repurchase Event shall occur and, except for
(A) the Early Repurchase Events specified in Section
7(a) and Section 7(b), and
(B) an Early Repurchase Event specified in Section 7(c)
resulting from the occurrence of a breach of Section 5.5
at any time with respect to Liens securing Indebtedness
exceeding Fifty Million Dollars ($50,000,000) in the
aggregate
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(as to which no such written notice shall be necessary), the
Requisite Securityholders shall have delivered written notice to
the Company stating that such Early Repurchase Event constitutes a
Triggering Event; or
(iv) (A) any Insolvency Proceeding shall be commenced by the
Company, or (B) any Insolvency Proceeding shall have been commenced
against the Company and shall not have been dismissed within ninety
(90) days after the commencement thereof.
(c) The following terms have the following meanings:
(i) "AGGREGATE REPURCHASE PRICE" means, at any time, the sum
of the Repurchase Prices of all of the outstanding Notes held by
the Securityholders at such time.
(ii) "BANK L/C PREPAYMENT" means a voluntary prepayment, in
whole or in part, of the outstanding principal amount of Loans
(under and as defined in the Three Year Credit Agreement) made by
the Company solely for the purpose of creating availability under
the Three Year Credit Agreement for the issuance of Letters of
Credit (as defined therein); provided that such prepayment shall be
in an amount equal to the greater of (A) Five Million Dollars
($5,000,000) and (B) the face amount of such Letters of Credit
issued within five (5) Business Days from the date of such
prepayment, rounded up to the next One Million Dollars
($1,000,000); provided, however, that the aggregate net reduction
at any time in outstanding Obligations (as defined in the Three
Year Credit Agreement) arising from all such prepayments, which
aggregate net reduction has not resulted in a prepayment to the
Securityholders pursuant to Section 2.2(a), shall not exceed Five
Million Dollars ($5,000,000).
(iii) "REPURCHASE PRICE" means, at any time with respect to
any Note, the result of:
(A) the outstanding principal amount of such Note minus
the sum of the aggregate amount of prepayments pursuant to
Section 2.2, Section 2.3, Section 2.4 and Section 2.5
theretofore allocated, pursuant to Section 2.6, to the
principal component of the Repurchase Price applicable to
such Note subsequent to the Effective Date, plus
(B) accrued and unpaid interest on such Note, plus
(C) the Premium on the amount specified in the foregoing
clause (A) that would be due and payable at such time under
the Existing Rating Decline Put Option applicable to such
Note upon satisfaction of all of the conditions to the
exercise thereof (assuming that such Existing Rating Decline
Put Option remained in full force and effect after the date
hereof and deeming the prepayments of the Repurchase Price
referred to in such clause (A) to have been prepayments of
such Note applied in the inverse order of the scheduled
principal prepayments thereof), minus
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(D) the Extension Fee Credit Amount with respect to such
Note as of the most recent Extension Fee Payment Date (after
giving effect to any reduction in the Extension Fee Credit
Amount on such date arising from the application of a portion
thereof to reduce the Extension Fee payable in respect of
such Note on such date as provided in Section 5.2).
Any reference in this Agreement to
(1) the "PRINCIPAL COMPONENT" of any Note at any time means an
amount determined in accordance with the foregoing clause (A) at
such time,
(2) the "INTEREST COMPONENT" of any Note at any time means an
amount determined in accordance with the foregoing clause (B) at
such time, and
(3) the "REPURCHASE PREMIUM COMPONENT" of any Note at any time
means an amount determined in accordance with the foregoing clause
(C) at such time.
For purposes of determining the Repurchase Premium component of the
Repurchase Price payable upon the prepayment, pursuant to Section 2.4, of
a portion (but not all) of a Repurchase Price, it shall be assumed that
the applicable Existing Rating Decline Put Option could be exercised in
part.
The Company shall have no right or obligation to repurchase any
Wal-Mart Note pursuant to this Agreement that has been transferred
subsequent to the Effective Date; following any such transfer, for
purposes of any determination of the Aggregate Repurchase Price or the
respective Repurchase Prices of the Notes, the Repurchase Price of any
such Wal-Mart Note shall be zero.
2.2 PAYMENT DUE UPON BANK LINE DEBT REDUCTION.
(a) If at any time there is a Bank Line Debt Reduction and, after
giving effect thereto, the outstanding Bank Line Debt shall be less than
the Bank Line Debt Closing Threshold (regardless of whether the
outstanding Bank Line Debt was greater or less than the Bank Line Debt
Closing Threshold before giving effect to such Bank Line Debt Reduction),
the Company shall prepay the Securityholder Ratable Paydown Share of the
principal component of the Aggregate Repurchase Price within ten (10)
Business Days after such Bank Line Debt Reduction shall occur; provided,
however, that the obligations of the Company under this Section 2.2(a)
shall not apply to such Bank Line Debt Reduction (i) to the extent of the
amount of a Bank Line Debt Refinancing or a Bank Line Debt Reborrowing
that is effected within ten (10) Business Days after such Bank Line Debt
Reduction, (ii) to the extent that such Bank Line Debt Reduction results
from a Permitted L/C Reduction, or (iii) if such Bank Line Debt Reduction
constitutes a Bank Line Debt Catch-Up Reduction. Any such prepayment
shall not be applied as a prepayment of the Notes and all payments of
principal, interest and other amounts owing in respect of the Notes shall
continue to be made when due, as if such prepayment of a portion of the
Aggregate Repurchase Price had not been made.
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(b) The following terms have the following meanings:
(i) "BANK DEBT PAYDOWN/DEPOSIT FRACTION" means, at any time,
a fraction with
(A) a numerator equal to the sum of (1) the Bank Line
Debt outstanding at such time plus (2) the Bank R/E Debt
outstanding at such time, and
(B) a denominator equal to the sum of (1) the Bank Line
Debt Closing Threshold plus (2) the Bank R/E Debt Closing
Threshold.
(ii) "BANK LINE DEBT" means, at any time, the principal amount
of Indebtedness outstanding (including, without limitation, the
undrawn face amount of letters of credit) at such time under the
364 Day Credit Agreement, the Three Year Credit Agreement, the
Seasonal Credit Agreement and any Bank Line Debt Refinancing
Agreement.
(iii) "BANK LINE DEBT CATCH-UP REDUCTION" means a Bank Line
Debt Reduction following any payment of a portion of the principal
component of the Aggregate Repurchase Price or a regularly
scheduled amortization payment in respect of the Notes (but
excluding a Repurchase Catch-Up Reduction), such that, immediately
after giving effect to such Bank Line Debt Reduction, the Bank Debt
Paydown/Deposit Fraction, expressed as a percentage (rounded to the
nearest 0.000001%), shall be equal to the Repurchase
Paydown/Deposit Fraction, expressed as a percentage (rounded to the
nearest 0.000001%).
(iv) "BANK LINE DEBT CLOSING THRESHOLD" means the aggregate
amount of Bank Line Debt outstanding at the close of business on
December 22, 1995, which was Two Billion One Hundred Million
Dollars ($2,100,000,000).
(v) "BANK LINE DEBT REBORROWING" means, in connection with
any Bank Line Debt Reduction, either or both of
(A) a reborrowing under the Bank Agreement with respect
to which such Bank Line Debt Reduction was made (and/or a
borrowing of Bank Line Debt under another Existing Bank
Agreement, as amended by the Bank Agreement Amendments and as
may be further amended from time to time), and
(B) the issuance of new letters of credit under the Bank
Agreement with respect to which such Bank Line Debt Reduction
was made (and/or an issuance of new letters of credit under
another Existing Bank Agreement (as amended by the Bank
Agreement Amendments and as may be further amended from time
to time) providing for the issuance of letters of credit, but
excluding, in any event, letters of credit issued under the
New Bank Letter of Credit Facility).
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The amount of any such Bank Line Debt Reborrowing shall be deemed
to be the sum of (x) the principal amount of such reborrowing plus
(y) the aggregate face amount of such new letters of credit.
(vi) "BANK LINE DEBT REDUCTION" means any of the following in
respect of the Bank Line Debt: (A) a reimbursement payment to any
Bank in respect of a draw on a letter of credit, (B) the expiration
of a letter of credit that is not fully drawn at the time of such
expiration (the amount of the Bank Line Debt Reduction to be equal
to the undrawn face amount of the expired letter of credit), or (C)
any refinancing (other than pursuant to a Bank Line Debt
Refinancing Agreement) or payment of, or other reduction in, Bank
Line Debt (including, without limitation, payment upon the
occurrence of the stated maturity of any Bank Line Debt).
(vii) "BANK LINE DEBT REFINANCING" means, in connection with
any Bank Line Debt Reduction, either or both of
(A) a new borrowing by the Company, under an agreement
which is not an Existing Bank Agreement (as amended by the
Bank Agreement Amendments and as further amended from time to
time), which new borrowing is not secured, except to the
extent permitted by Section 5.5, and which requires no
principal repayment on any date prior to the final date for
repayment of the Bank Line Debt to be paid with the proceeds
of such new borrowing, as set forth in the Bank Agreement
relating to such Bank Line Debt, and
(B) the issuance of letters of credit, pursuant to an
agreement which is not an Existing Bank Agreement (as amended
by the Bank Agreement Amendments and as further amended from
time to time) and which is not the New Bank Letter of Credit
Facility, which letters of credit replace letters of credit
comprising Bank Line Debt, but only if the Company's
reimbursement obligation in respect of such replacement
letters of credit is not secured by any Lien, except to the
extent the incurrence of such Lien is permitted by Section
5.5.
The amount of any such Bank Line Debt Refinancing shall be deemed
to be the sum of (x) the principal amount of such new borrowing
plus (y) the aggregate face amount of such replacement letters of
credit.
(viii) "BANK R/E DEBT" means, at any time, the principal
amount of Indebtedness outstanding (including, without limitation,
the face amount of letters of credit) at such time under the
Warehouse Facility Credit Agreement, Big Beaver I, Big Beaver II
and any Bank R/E Debt Refinancing Agreement.
(ix) "BANK R/E DEBT CLOSING THRESHOLD" means the aggregate
amount of Bank R/E Debt outstanding at the close of business on
December 22, 1995, which was Five Hundred Sixty-Six Million Two
Hundred One Thousand Five Hundred Twenty-Nine Dollars
($566,201,529).
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(x) "NEW BANK LETTER OF CREDIT FACILITY" means the Letter of
Credit Issuance Agreement dated as of the Closing Date between the
Company and certain banks, pursuant to which such banks agreed to
issue trade letters of credit and standby letters of credit on the
terms and subject to the conditions provided for therein.
(xi) "PAYDOWN TRUST ACCOUNT" is defined in Section 2.3(a).
(xii) "PERMITTED L/C REDUCTION" means a Bank Line Debt
Reduction resulting from (A) a Bank L/C Prepayment or (B) payments
on, or the expiration or reduction in the face amount by amendment
of, Letters of Credit (each a "ROLLOFF") issued under and as
defined in the Three Year Credit Agreement to the extent that the
Company is unable to make a Borrowing of Loans under, and as
defined in, the Three Year Credit Agreement, in the amount of such
Rolloffs solely as a result of the minimum and incremental
borrowing requirements under the Three Year Credit Agreement;
provided, however, that the aggregate net reduction at any time in
outstanding Obligations (as defined in the Three Year Credit
Agreement) arising from all such Rolloffs, which aggregate net
reduction has not resulted in a prepayment to the Securityholders
pursuant to Section 2.2(a), shall not exceed Five Million Dollars
($5,000,000).
(xiii) "REPURCHASE CATCH-UP REDUCTION" means a prepayment of a
portion of the principal component of the Aggregate Repurchase
Price pursuant to Section 2.2(a), or a deposit into the Paydown
Trust Account pursuant to Section 2.3(a), or a prepayment of a
portion of the principal component of the Aggregate Repurchase
Price from amounts on deposit in the Paydown Trust Account pursuant
to Section 2.3(b), as the case may be.
(xiv) "REPURCHASE PAYDOWN/DEPOSIT FRACTION" means, at any
time, a fraction with
(A) a numerator equal to (1) the principal component of
the Aggregate Repurchase Price at such time minus (2) the
amount on deposit in the Paydown Trust Account at such time,
and
(B) a denominator equal to (1) the aggregate principal
amount of the Notes outstanding at the close of business on
December 22, 1995 minus (2) with respect to any Wal-Mart Note
that has been transferred subsequent to the Effective Date
(except to a Person identified in the second parenthetical
expression in the last sentence of Recital H), the principal
amount of such Note outstanding at the close of business on
December 22, 1995 (determined on the assumption that all
Wal-Mart Notes were outstanding on such date in the
respective principal amounts of the Notes in respect of which
such Wal-Mart Notes have been issued).
(xv) "SECURITYHOLDER RATABLE PAYDOWN SHARE" means, with
respect to the Aggregate Repurchase Price and in connection
with any Bank Line Debt Reduction, a portion of the principal
component of the Aggregate Repurchase
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Price such that, immediately after giving effect to the prepayment
thereof, the Repurchase Paydown/Deposit Fraction, expressed as
a percentage (rounded to the nearest 0.000001%), shall be equal to
the Bank Debt Paydown/Deposit Fraction, expressed as a percentage
(rounded to the nearest 0.000001%).
2.3 DEPOSIT INTO PAYDOWN TRUST ACCOUNT REQUIRED UPON BANK R/E DEBT
REDUCTION.
(a) If at any time there is a Bank R/E Debt Reduction and, after
giving effect thereto, the outstanding Bank R/E Debt shall be less than
the Bank R/E Debt Closing Threshold (regardless of whether the
outstanding Bank R/E Debt was greater or less than the Bank R/E Debt
Closing Threshold before giving effect to such Bank R/E Debt Reduction),
the Company shall deposit into an account (the "PAYDOWN TRUST ACCOUNT"),
established by the Company pursuant to the Paydown Trust Agreement,
immediately available funds in an amount equal to the Securityholder
Ratable Deposit Share of the principal component of the Aggregate
Repurchase Price; provided, however, that the obligations of the Company
under this Section 2.3(a) shall not apply to the extent that such Bank
R/E Debt Reduction is made with the proceeds of a Bank R/E Debt
Refinancing or constitutes a Bank R/E Debt Catch-Up Reduction. Any such
deposit shall not be deemed to be a prepayment of the Notes and all
payments of principal, interest and other amounts owing in respect of the
Notes shall continue to be made when due as if such deposit had not been
made.
(b) (i) Amounts disbursed from the Paydown Trust Account shall be
applied to the prepayment of a portion of the principal component of the
Aggregate Repurchase Price, in the manner provided in the Paydown Trust
Agreement, as follows:
(A) upon the occurrence of a Triggering Event, the full
amount on deposit in the Paydown Trust Account shall be
disbursed and applied, when disbursed, as a credit to the
prepayment of a portion of the principal component of the
Aggregate Repurchase Price; and
(B) if at any time there is a reduction in (including,
without limitation, a reduction to zero at stated maturity or
otherwise), or a termination of, the Bank R/E Debt Commitment
and, after giving effect thereto, the Bank R/E Debt
Commitment shall be less than the Bank R/E Debt Closing
Threshold (regardless of whether the Bank R/E Debt Commitment
was greater or less than the Bank R/E Debt Closing Threshold
before giving effect to such reduction), the Securityholder
Ratable Commitment Reduction Share of the amount on deposit
in the Paydown Trust Account shall be disbursed from the
Paydown Trust Account and applied to the prepayment of a
portion of the principal component of the Aggregate
Repurchase Price;
provided, however, that there shall be no such disbursement if the
reduction or termination of such Bank R/E Debt Commitment is made
simultaneously with a Bank R/E Debt Refinancing and the aggregate amount
of the commitments to provide Bank R/E Debt under the related Bank R/E
Debt Refinancing Agreement
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is not less than the aggregate amount of the Bank R/E Debt
Commitment so reduced or terminated.
Any such prepayment shall not be applied as a prepayment of the
Notes and all payments of principal, interest and other amounts
owing in respect of the Notes shall continue to be made when due,
as if such prepayment of a portion of the Aggregate Repurchase
Price had not been made.
(ii) Amounts on deposit in the Paydown Trust Account shall be
disbursed to the Company, in the manner provided in the Paydown
Trust Agreement, at such time as there shall be a request for a
readvance of Bank R/E Debt under the relevant Bank Agreements and
the relevant Banks shall make such readvance. The amount so
disbursed shall be an amount such that, immediately after giving
effect to such disbursement, the Repurchase Paydown/Deposit
Fraction, expressed as a percentage (rounded to the nearest
0.000001%), shall be equal to the Bank Debt Paydown/Deposit
Fraction, expressed as a percentage (rounded to the nearest
0.000001%).
(c) The following terms have the following meanings:
(i) "BANK DEBT COMMITMENT REDUCTION FRACTION" means, at any
time, a fraction with
(A) a numerator equal to the sum of (1) the Bank Line
Debt outstanding at such time plus (2) the Bank R/E Debt
Commitment in effect at such time, and
(B) a denominator equal to the sum of (1) the Bank Line
Debt Closing Threshold plus (2) the Bank R/E Debt Closing
Threshold.
(ii) "BANK DEBT PAYDOWN/DEPOSIT FRACTION" is defined in
Section 2.2(b).
(iii) "BANK R/E DEBT" is defined in Section 2.2(b).
(iv) "BANK R/E DEBT CATCH-UP REDUCTION" means a Bank R/E Debt
Reduction following any payment of a portion of the principal
component of the Aggregate Repurchase Price or a regularly
scheduled amortization payment in respect of the Notes (but
excluding a Repurchase Catch-Up Reduction), such that, immediately
after giving effect to such Bank R/E Debt Reduction, the Bank Debt
Commitment Reduction Fraction, expressed as a percentage (rounded
to the nearest 0.000001%), shall be equal to the Repurchase
Commitment Reduction Fraction, expressed as a percentage (rounded
to the nearest 0.000001%).
(v) "BANK R/E DEBT CLOSING THRESHOLD" is defined in Section
2.2(b).
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(vi) "BANK R/E DEBT COMMITMENT" means the aggregate amount of
the commitments of the Banks to provide Bank R/E Debt to the
Company under the Bank Agreements.
(vii) "BANK R/E DEBT REDUCTION" means any of the following in
respect of the Bank R/E Debt: (A) a reimbursement payment to any
Bank in respect of a draw on a letter of credit, (B) the expiration
of a letter of credit that is not fully drawn at the time of such
expiration (the amount of the Bank R/E Debt Reduction to be equal
to the undrawn face amount of the expired letter of credit), or (C)
any refinancing (other than pursuant to a Bank R/E Debt Refinancing
Agreement) or payment of, or other reduction in, Bank R/E Debt
(including, without limitation, payment upon the occurrence of the
stated maturity of any Bank R/E Debt).
(viii) "BANK R/E DEBT REFINANCING" means either or both of
(A) a new borrowing by the Company, under an agreement
which is not an Existing Bank Agreement (as amended by the
Bank Agreement Amendments and as further amended from time to
time), which new borrowing is not secured, except to the
extent permitted by Section 5.5, and which requires no
principal repayment on any date prior to the final date for
repayment of the Bank R/E Debt to be paid with the proceeds
of such new borrowing, as set forth in the Bank Agreement
relating to such Bank R/E Debt, and
(B) the issuance of letters of credit, pursuant to an
agreement which is not an Existing Bank Agreement (as amended
by the Bank Agreement Amendments and as further amended from
time to time) and which is not the New Bank Letter of Credit
Facility, which letters of credit replace letters of credit
comprising Bank R/E Debt, but only if the Company's
reimbursement obligation in respect of such replacement
letters of credit is not secured by any Lien, except to the
extent the incurrence of such Lien is permitted by Section
5.5.
The amount of any such Bank R/E Debt Refinancing shall be deemed to
be the sum of (x) the principal amount of such new borrowing plus
(y) the aggregate face amount of such replacement letters of
credit.
(ix) "NEW BANK LETTER OF CREDIT FACILITY" is defined in
Section 2.2(b).
(x) "REPURCHASE CATCH-UP REDUCTION" is defined in
Section 2.2(b).
(xi) "REPURCHASE COMMITMENT REDUCTION FRACTION" means, at any
time, a fraction with
(A) a numerator equal to the principal component of the
Aggregate Repurchase Price at such time and
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(B) a denominator equal to (1) the aggregate principal
amount of the Notes outstanding at the close of business on
December 22, 1995, minus (2) with respect to any Wal-Mart
Note that has been transferred subsequent to the Effective
Date (except to a Person identified in the second
parenthetical expression in the last sentence of Recital H),
the principal amount of such Note outstanding at the close
of business on December 22, 1995 (determined on the
assumption that all Wal-Mart Notes were outstanding in their
respective original principal amounts on such date).
(xii) "REPURCHASE PAYDOWN/DEPOSIT FRACTION" is defined in
Section 2.2(b).
(xiii) "SECURITYHOLDER RATABLE COMMITMENT REDUCTION SHARE"
means, in connection with any reduction in the Bank R/E Debt
Commitment, a portion of the amount on deposit in the Paydown Trust
Account such that, immediately after giving effect to the
disbursement thereof from the Paydown Trust Account and the
application thereof to the prepayment of a portion of the Aggregate
Repurchase Price, the Repurchase Commitment Reduction Fraction,
expressed as a percentage (rounded to the nearest 0.000001%), shall
be equal to the Bank Debt Commitment Reduction Fraction, expressed
as a percentage (rounded to the nearest 0.000001%).
(xiv) "SECURITYHOLDER RATABLE DEPOSIT SHARE" means, with
respect to the Aggregate Repurchase Price and in connection with
any Bank R/E Debt Reduction, a portion of the principal component
of the Aggregate Repurchase Price such that, immediately after
giving effect to the deposit thereof in the Paydown Trust Account,
the Repurchase Paydown/Deposit Fraction, expressed as a percentage
(rounded to the nearest 0.000001%), shall be equal to the Bank Debt
Paydown/Deposit Fraction, expressed as a percentage (rounded to the
nearest 0.000001%).
2.4 OPTIONAL PREPAYMENTS OF REPURCHASE RIGHTS.
(A) OPTIONAL PREPAYMENTS. The Company may, at any time after the
Effective Date, prepay the principal component of the Repurchase Price of
any Note, in whole or in part, at one hundred percent (100%) of the
amount thereof at such time plus (i) the Repurchase Premium component,
(ii) the interest component and (iii) the Optional Prepayment Premium, in
each case attributable to such principal component. The "OPTIONAL
PREPAYMENT PREMIUM" means, with respect to the prepayment of the
principal component, in whole or in part, of any Repurchase Price, at any
time, the amount, if any, by which
(i) the premium that would be payable upon an optional
prepayment of the Note to which such Repurchase Price relates
(computed in accordance with the Amended Transaction Document
containing the optional prepayment provision applicable to such
Note), assuming such optional prepayment were made at the same time
as the prepayment of such principal component pursuant to this
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Section 2.4(a) and in a principal amount equal to the amount of
such principal component so prepaid, would exceed
(ii) the Repurchase Premium component attributable to the
principal component of such Repurchase Price so prepaid.
The Company shall not make any prepayment pursuant to this Section 2.4 in
respect of the principal component of the Repurchase Price of any Note
unless it shall prepay the principal components of the Repurchase Prices
of all Notes ratably in accordance with the respective amounts thereof.
(B) NOTICE OF OPTIONAL PREPAYMENT. The Company will give notice to
each Securityholder of any prepayment of the principal component of the
Aggregate Repurchase Price of the Notes not less than ten (10) days or
more than thirty (30) days before the date fixed for prepayment,
specifying:
(i) the prepayment date,
(ii) the principal and interest components of the Repurchase
Price of each Note to be prepaid on such date, and
(iii) with respect to each Note, a certificate of a financial
officer of the Company specifying the method of the calculation of
the Repurchase Premium component of such Repurchase Price and the
Optional Prepayment Premium payable in connection with such
prepayment (calculated as if the date of such notice were the date
of prepayment), if any, due in connection with such prepayment.
Notice of prepayment having been so given, the principal component of the
Repurchase Price specified in such notice to be prepaid, together with
the interest component and the Repurchase Premium component attributable
to such Repurchase Price, and the Optional Prepayment Premium payable in
respect of such prepayment, shall become due and payable on the specified
prepayment date.
Any determination of the Repurchase Premium component of any
Repurchase Price or any Optional Prepayment Premium made by the Company
under the terms of this Agreement shall not be binding on the
Securityholders or the Company if such determination shall be erroneous
(including, without limitation, any calculating error or error in the
application of the terms and principles of the definition of such term)
and no such determination shall be, or shall be deemed to be, binding
upon any Securityholder or the Company by virtue of the submission of
such payment by the Company or the acceptance by such Securityholder of
any amounts paid by the Company in respect of such Repurchase Premium
component or Optional Prepayment Premium. The Company and the
Securityholders hereby acknowledge that (A) any Securityholder or the
Company, as the case may be, may contest any determination by the Company
of the Repurchase Premium component of any Repurchase Price or the
related Optional Prepayment Premium, (B) any Securityholder may recover
such additional amounts in respect thereof as shall be lawfully owing
by the Company to such Securityholder in respect of such
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Repurchase Premium component or Optional Prepayment Premium, and (C) the
Company may recover from any Securityholder any excess amount paid in
error to such Securityholder in respect of such Repurchase Premium
component or Optional Prepayment Premium.
2.5 PAYMENT DUE UPON CERTAIN PAYMENTS OF NOTES.
(A) SECURITYHOLDER ACCELERATION. If at any time the Company shall
make an Acceleration Payment in respect of a Securityholder Acceleration,
the Company shall, concurrently with such payment, prepay the
Securityholder Ratable Acceleration Share of the principal component of
the Aggregate Repurchase Price, together with the amounts that would be
payable under Section 2.4 in connection with an optional prepayment of
the same portion of such principal component. Any such prepayment shall
not be applied as a prepayment of the Notes and all payments of
principal, interest and other amounts owing in respect of the Notes shall
continue to be made when due, as if such prepayment of a portion of the
Aggregate Repurchase Price had not been made.
(B) CERTAIN DEFINITIONS. The following terms have the following
meanings:
(i) "ACCELERATION PAYMENT" means, with respect to any
Securityholder Acceleration, the principal amount (if any) paid by
the Company in respect of any Note on account of such
Securityholder Acceleration, provided that such amount shall not
include the proceeds of any collateral received and applied to the
payment of amounts owing in respect of such Note, through
foreclosure, deed in lieu thereof, or otherwise, pursuant to the
exercise of any collateral remedies under any Amended Transaction
Document, or payments received from any insurance company,
Governmental Authority or other Person (other than the Company) in
respect of any Collateral Loss Event.
(ii) "ACCELERATION PERCENTAGE" means, with respect to the
Securityholder Acceleration of any Note, the result obtained by
dividing (A) the Acceleration Payment, by (B) the principal amount
of such Note (immediately prior to the payment of such Acceleration
Payment), due in connection with such Securityholder Acceleration.
(iii) "SECURITYHOLDER ACCELERATION" means the acceleration of
a Note by any Securityholder pursuant to the terms of the relevant
Amended Transaction Documents.
(iv) "SECURITYHOLDER RATABLE ACCELERATION SHARE" means, with
respect to the Aggregate Repurchase Price and in connection with
any Securityholder Acceleration, a portion of the principal
component of the Aggregate Repurchase Price (determined immediately
prior to the payment of the Acceleration Payment payable in
connection with such Securityholder Acceleration but excluding the
portion of such principal component allocable to the Notes which
are the subject of such Securityholder Acceleration) equal to the
result of (A) the Acceleration Percentage multiplied by (B) such
principal component.
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(C) CASUALTY, CONDEMNATION, EMINENT DOMAIN OR RELEASE. If at any
time the Company shall have the obligation or the right to prepay any
Notes as a result of a Collateral Loss Event or a Collateral Release, and
shall make such prepayment, then, to the extent that such prepayment
shall be made in whole or in part with funds ("COMPANY FUNDS") other than
those paid by a Governmental Authority, an insurer, a purchaser of the
property subject to any Collateral Release, or any other third party, the
Company shall, concurrently therewith, prepay the Securityholder Ratable
Loss/Release Share of the principal component of the Aggregate Repurchase
Price. Any such prepayment of such principal component shall not be
applied as a prepayment of the Notes and all payments of principal,
interest and other amounts owing in respect of the Notes shall continue
to be made when due, as if such prepayment of a portion of the Aggregate
Repurchase Price had not been made.
(D) CERTAIN DEFINITIONS. The following terms have the following
meanings:
(i) "COLLATERAL LOSS EVENT" means the occurrence of a
casualty, condemnation or eminent domain event, or the existence of
an environmental condition, which requires the Company to make a
prepayment of Notes under the terms of an Amended Transaction
Document.
(ii) "COLLATERAL RELEASE" means any release of property from
the Lien created by any Amended Transaction Document.
(iii) "SECURITYHOLDER RATABLE LOSS/RELEASE SHARE" means the
result of (a) (I) the amount of Company Funds used for the
prepayment of the principal of a Note divided by (II) the principal
amount of such Note (determined immediately prior to such
prepayment) multiplied by (b) the principal component of the
Aggregate Repurchase Price (determined immediately prior to such
prepayment but excluding the portion of such principal component
allocable to the Note which is the subject of such prepayment).
(E) SCHEDULED PRINCIPAL AND INTEREST PAYMENTS. Notwithstanding any
other provision of this Agreement, no provision of this Agreement shall
be deemed to prohibit the Company from making all scheduled payments of
principal and interest on the Notes when due in accordance with the
provisions of the Amended Transaction Documents and all parties hereto
acknowledge and agree that the Company is obligated to, and not
restricted from, making such payments when due.
2.6 ALLOCATION OF PREPAYMENTS OF AGGREGATE REPURCHASE PRICE.
All partial prepayments of the Aggregate Repurchase Price pursuant to
Section 2.2(a), Section 2.3(b) and Section 2.4(a) shall be allocated to the
principal component of the Repurchase Price of each of the outstanding Notes
ratably in accordance with the respective unpaid principal components thereof.
All partial prepayments of the Aggregate Repurchase Price pursuant to Section
2.5(a) shall be allocated to the principal component of the Repurchase Price of
each of the outstanding Notes other than the Notes which are the subject of an
Acceleration Payment at such time, ratably in accordance with the respective
unpaid principal components thereof. All partial prepayments of the Aggregate
Repurchase Price pursuant to Section 2.5(c)
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shall be allocated to the principal component of the Repurchase Price of each
of the outstanding Notes other than the Notes which are the subject of a
prepayment with Company Funds at such time, ratably in accordance with the
respective unpaid principal components thereof. All such prepayments shall be
made to the holders of the Notes to which such principal component relates.
2.7 OVERDUE PAYMENTS.
The Company shall pay to each Securityholder holding the Repurchase Right
relating thereto, on demand, interest on any overdue payment in respect of any
Repurchase Price owing under this Section 2, until paid, at a rate equal to the
lesser of (a) the highest rate allowed by applicable law and (b) a per annum
rate equal to two (2) percent plus the interest rate applicable to the Note to
which such Repurchase Right relates.
2.8 DELIVERY OF NOTES.
At such time as the Company has made payment of the full amount of the
Repurchase Price in respect of any Note held by any Securityholder, and has
made payment of any other amounts then due and owing to such Securityholder
under this Agreement, any other Financing Document or any Amended Transaction
Document, such Securityholder shall deliver such Note to the Company without
any representation or warranty of any kind, except as to its unencumbered
ownership of such Note (or shall execute and deliver to the Company an
affidavit in respect of the loss thereof, together with an unsecured indemnity
to the Company for liabilities arising from such loss).
2.9 PAYMENT OF AGGREGATE REPURCHASE PRICE; METHOD OF PAYMENT.
The Company will punctually pay, or cause to be paid, all amounts in
respect of the Aggregate Repurchase Price as and when the same shall become due
according to the terms of this Agreement. All payments to be made by the
Company under this Section 2 shall be made by wire transfer of immediately
available funds to the Securityholders or the Paydown Trust Account, as the
case may be, not later than 11:00 a.m., eastern time on the respective due
dates thereof. Payments to any Securityholder shall be made to each
Securityholder at the address set forth opposite its name in Schedule I hereto
or to such other address as such Securityholder shall have from time to time
specified to the Company in writing for such purpose.
SECTION 3. REPRESENTATIONS AND WARRANTIES
The Company warrants and represents to each Securityholder that as of the
date of this Agreement and as of the Effective Date:
3.1 ORGANIZATION; POWER AND AUTHORITY.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Michigan and is duly qualified as a
foreign corporation and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which
the failure to be so qualified or in good standing could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.
The Company
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has the corporate power and authority to own or hold under lease the properties
it purports to own or hold under lease, to transact the business it transacts
and proposes to transact, to execute and deliver this Agreement and the other
Financing Documents to which it is a party and to perform its obligations under
this Agreement, the Paydown Trust Agreement and the Amended Transaction
Documents to which it is a party.
3.2 AUTHORIZATION, ETC.
This Agreement and the other Financing Documents to which the Company is a
party have been duly authorized by all necessary corporate action on the part
of the Company, and this Agreement constitutes, and upon execution and delivery
thereof each other Financing Document to which the Company is a party and each
Amended Transaction Document to which the Company is a party will constitute, a
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
(b) general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
3.3 DISCLOSURE.
The Company has delivered to each Securityholder copies of the information
described on Part 1 of Schedule II hereto (collectively, the "COMPANY FINANCIAL
INFORMATION") relating to the transactions contemplated hereby. Except as
disclosed on Part 2 of Schedule II hereto, the Company Financial Information
and the other information set forth on the Schedules hereto (other than
Schedule I hereto), taken as a whole, do not contain any untrue statement of a
Material fact or omit to state any Material fact necessary to make the
statements therein not misleading in light of the circumstances under which
they were made. The foregoing notwithstanding, the Company Financial
Information described in paragraph 1 on Part 1 of Schedule II hereto and the
other financial information furnished to the Securityholders (excluding
financial information included in filings with the Securities and Exchange
Commission) consists of internally generated analyses prepared solely for the
purpose of evaluating, among other things, the financial aspects of the
Company's operations. Such information has not been prepared in accordance
with GAAP and has not undergone the review procedures that would typically
accompany a formal audit process. Further, with respect to the Company
Financial Information described in paragraph 1 on Part 1 of Schedule II hereto
and the other financial information furnished to the Securityholders, such
information with respect to anticipated performance reflects assumptions by the
Company which are inherently subject to significant economic, competitive and
other uncertainties and contingencies beyond the Company's control and that may
or may not prove to be accurate. Except as disclosed in the Company Financial
Information or as expressly described on Part 2 of Schedule II hereto or in one
of the documents, certificates or other writings identified therein, since
December 18, 1995 there has been no change in the financial condition,
operations, business, properties or prospects of the Company or any Subsidiary
except changes that individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect.
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3.4 FINANCIAL STATEMENTS.
The Company's Form 10-Q for the quarterly fiscal period of the Company
ended October 25, 1995, delivered to each Securityholder (including the related
schedules and notes) fairly present in all Material respects the consolidated
financial position of the Company and the Subsidiaries as of the respective
dates specified in such financial statements and the consolidated results of
their operations and cash flows for the respective periods covered thereby and
have been prepared in accordance with GAAP consistently applied throughout the
periods involved except as set forth in the notes thereto (subject to normal
year-end adjustments).
3.5 COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of this Agreement
and the other Financing Documents to which the Company is a party, and the
performance of the Amended Transaction Documents to which the Company is a
party, will not (a) contravene, result in any breach of, or constitute a
default under, or, except as affected by the Collateral Amendment Documents,
result in the creation of any Lien in respect of any property of the Company or
any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or
credit agreement, lease, corporate charter or by-laws, or any other agreement
or instrument to which the Company or any Subsidiary is bound or by which the
Company or any Subsidiary or any of their respective properties may be bound or
affected, (b) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any
court, arbitrator or Governmental Authority applicable to the Company or any
Subsidiary or (c) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to the Company or any
Subsidiary.
3.6 GOVERNMENTAL AUTHORIZATIONS, ETC.
Except for filings necessary to perfect Liens, no consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by the Company of this Agreement or the other Financing Documents to which the
Company is a party or the performance by the Company of the Amended Transaction
Documents to which the Company is a party.
3.7 LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
(a) Except as disclosed in Part 3 of Schedule II hereto, there are no
actions, suits or proceedings pending or, to the knowledge of the Company,
threatened against or affecting the Company or any Subsidiary or any
property of the Company or any Subsidiary in any court or before any
arbitrator of any kind or before or by any Governmental Authority that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any term
of any agreement or instrument to which it is a party or by which it is
bound, or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance,
rule or regulation of any Governmental Authority, which
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default or violation, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect.
3.8 TAXES.
The Company and the Subsidiaries have filed all tax returns that are
required to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and assessments
levied upon them or their properties, assets, income or franchises, to the
extent such taxes and assessments have become due and payable and before they
have become delinquent, except for any taxes and assessments (a) the amount of
which is not individually or in the aggregate Material or (b) the amount,
applicability or validity of which is currently being contested in good faith
by appropriate proceedings and with respect to which the Company or a
Subsidiary, as the case may be, has established adequate reserves in accordance
with GAAP. The Company knows of no basis for any other tax or assessment that
could reasonably be expected to have a Material Adverse Effect. The charges,
accruals and reserves on the books of the Company and the Subsidiaries in
respect of Federal, state or other taxes for all fiscal periods are believed by
the Company in good faith to be adequate under current law. The Federal income
tax liabilities of the Company and the Subsidiaries have been determined by the
Internal Revenue Service and paid for all fiscal years up to and including the
fiscal year ended January 1992.
3.9 TITLE TO PROPERTY; LEASES.
The Company and the Subsidiaries have good and sufficient title to their
respective properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance
sheet referred to in Part 1 of Schedule II hereto or purported to have been
acquired by the Company or any Subsidiary after said date (except as sold or
otherwise disposed of in the ordinary course of business). All leases of the
Company and the Subsidiaries that individually or in the aggregate are Material
are valid and subsisting and are in full force and effect in all material
respects. The Company has good and sufficient title to the Company Owned
Properties, in each case free and clear of all Liens except as expressly
permitted under the Existing Transaction Documents. The leases by the Company
of the Company Leasehold Interests are valid and subsisting and are in full
force and effect, and the Company Leasehold Interests created thereby are each
free and clear of all Liens except as expressly permitted under the Existing
Transaction Documents. Neither the Company nor any of the Subsidiaries is in
default in any material respect under any lease to which it is a party (whether
as tenant or landlord thereunder) which has been pledged to secure the Notes or
with respect to which the Company has executed a lease guaranty.
3.10 EXISTING INDEBTEDNESS; COMPANY PREFERRED STOCK; FUTURE LIENS.
(A) THE NOTES AND EXISTING TRANSACTION DOCUMENTS. Schedule III-A sets
forth a complete and correct schedule of all outstanding Deal 1 Notes, Deal
2 Notes, Deal 3 Notes, Deal 4 Notes and Deal 5 Notes as of December 22,
1995.
(B) THE BANK DEBT AND BANK AGREEMENTS. Schedule V-A sets forth a
complete and correct schedule of all outstanding Bank Debt as of December
22, 1995; and Schedule V-B sets forth a complete and correct schedule of
the Existing Bank
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Agreements, including all amendments thereto subsequent to the initial
execution thereof (other than the Bank Agreement Amendments).
(C) OTHER INDEBTEDNESS. Schedule VI sets forth a complete and correct
schedule of the aggregate amount of all other outstanding Indebtedness
(including the face amount of outstanding letters of credit and the principal
amount of all Guaranty Obligations of Indebtedness for borrowed money) as of
January 31, 1996, specifically describing any such Indebtedness in excess of
Twenty-Five Million Dollars ($25,000,000).
(D) NO MATERIAL PREPAYMENTS; NO OTHER DEBT FOR MONEY BORROWED; NO DEFAULT.
Except as described on Schedule V-A hereto, there has been no reduction in the
outstanding principal amount of Bank Debt subsequent to December 22, 1995.
Except as described in Part 4 of Schedule II hereto, neither the Company nor
any Subsidiary is in default in (and no waiver of default is currently in
effect regarding) the payment of any principal of or interest on any
Indebtedness for money borrowed of, or in respect of any reimbursement
obligation relating to a letter of credit issued for the benefit of, the
Company or such Subsidiary and, after giving effect to the provisions of this
Agreement, the other Financing Documents and the Bank Agreement Amendments, no
event or condition will exist with respect to any (i) Indebtedness for money
borrowed of the Company or any Subsidiary (other than the Big Beaver I Minority
Bank Debt) that would permit (or that with notice or the lapse of time, or
both, would permit) one or more Persons to cause such Indebtedness to become
due and payable before its stated maturity or before its regularly scheduled
dates of payment, or (ii) agreement for the issuance of a letter of credit that
would prevent the Company from causing letters of credit to be reissued
thereunder.
(E) COMPANY PREFERRED STOCK. All of the Company's shares of convertible
preferred stock outstanding as of December 22, 1995 have been converted into
shares of the Company's common stock.
(F) LIENS. Neither the Company nor any Subsidiary has agreed or consented
to cause or permit in the future (upon the happening of a contingency or
otherwise) any of its property, whether now owned or hereafter acquired, to be
subject to a Lien prohibited by Section 5.5.
3.11 COMPLIANCE WITH ERISA.
(a) The Company and each member of the Controlled Group have operated and
administered each Plan in compliance with all applicable laws except for such
instances of noncompliance as have not resulted in and could not reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any
member of the Controlled Group has incurred any liability pursuant to Title I
or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans (as defined in Section 3 of ERISA), and no
event, transaction or condition has occurred or exists that could reasonably be
expected to result in the incurrence of any such liability by the Company or
any member of the Controlled Group, or in the imposition of any Lien on any of
the rights, properties or assets of the Company or any member of the Controlled
Group, in either case pursuant to Title I or IV of ERISA or to such penalty or
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excise tax provisions or to Section 401(a)(29) or 412 of the Code,
other than such liabilities or Liens as would not be individually or in the
aggregate Material.
(b) The present value of the aggregate benefit liabilities under each of
the Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities. The term "benefit liabilities" has the
meaning specified in Section 4001 of ERISA and the terms "current value" and
"present value" have the respective meanings specified in section 3 of ERISA.
(c) Neither the Company nor the members of the Controlled Group have
incurred withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer
Plans that individually or in the aggregate are Material.
(d) The expected postretirement benefit obligation (determined as of the
last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by Section 4980B of
the Code) of the Company and the Subsidiaries is not Material.
(e) The execution and delivery of this Agreement and the issuance and sale
of the Notes hereunder will not involve any transaction that is subject to the
prohibitions of section 406 of ERISA or in connection with which a tax could be
imposed pursuant to section 4975(c)(1)(A)-(D) of the Code.
3.12 COMPLIANCE WITH SECURITIES ACT.
Neither the Company nor anyone acting on its behalf has taken, or will
take, any action that would subject the execution and delivery of this
Agreement to the registration requirements of Section 5 of the Securities Act
of 1933, as amended.
SECTION 4. CONDITIONS TO EFFECTIVENESS OF THIS AGREEMENT
This Agreement shall have no effect until all of the following conditions
precedent shall have been fulfilled (such time of effectiveness is referred to
as the "CLOSING DATE"):
4.1 WARRANTIES AND REPRESENTATIONS TRUE.
The warranties and representations set forth in Section 3 shall be true on
the Closing Date with the same effect as though made on and as of that date.
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4.2 NO PROHIBITED ACTION.
(a) Neither the Company nor any Subsidiary shall have taken any
action or permitted any condition to exist that would have been
prohibited by any of Sections 5.3 to 5.8, inclusive, Section 5.10,
Section 5.11 and Section 5.13 had such Sections been binding and
effective at all times during the period from December 18, 1995 to and
including the Closing Date, and
(b) except for Big Beaver I (but only with respect to the Big Beaver
I Minority Bank Debt), no event has occurred or will have occurred, and
no condition exists or will exist, which would constitute a default or an
event of default under any Amended Transaction Document or Bank Agreement
immediately after, and after giving effect to, the consummation of the
transactions contemplated by this Agreement and the Bank Agreement
Amendments.
4.3 NO PAYMENTS ON EXERCISED PUTS. The Company shall not have made any
payment (a) under Big Beaver I or Big Beaver II in respect of any events of
default relating to a decline in the credit rating of the Company's
indebtedness or (b) in respect of any Existing Rating Decline Put Options.
4.4 LEGAL OPINIONS. Each of the Securityholders shall receive from
(a) A.N. Palizzi, Esq., General Counsel to the Company,
(b) Skadden, Arps, Slate, Meagher & Flom, special counsel to the
Company,
(c) Bingham, Dana & Gould, special counsel to the Disbursement
Agent,
(d) Jones, Day, Reavis & Pogue, special counsel to the beneficial
owner of the owner trusts relating to the Deal 6 Notes,
(e) Bingham, Dana & Gould, special counsel to the owner trustee
relating to the Deal 6 Notes,
(f) Bingham, Dana & Gould, special counsel to the equity trustee
relating to the Deal 6 Notes, and
(g) Jacob & Weingarten, P.C., special counsel to the owner of the
collateral relating to the Deal 7 Notes,
their respective opinions, addressed to each of the Securityholders, dated the
Closing Date, in form and substance satisfactory to each of such
Securityholders, and covering the matters set forth in Exhibits B1, B2, B3, B4,
B5, B6 and B7 hereto, respectively.
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4.5 CONSENT OF ALL SECURITYHOLDERS. The Company and all of the
Securityholders shall have executed this Agreement.
4.6 PAYDOWN TRUST AGREEMENT.
(a) The Company and State Street Bank and Trust Company, as
disbursement agent for the Securityholders (the "DISBURSEMENT AGENT"),
shall have executed and delivered the Paydown Trust Agreement, dated as
of the date hereof (the "PAYDOWN TRUST AGREEMENT"), substantially in the
form of Exhibit C hereto.
(b) There shall have been deposited into the Paydown Trust Account
the amount, if any, equal to the amount that would have been on deposit
therein on the Closing Date had this Agreement been in effect at all
times subsequent to December 22, 1995 and had no amount deposited into
the Paydown Trust Account been applied to the prepayment of the Aggregate
Repurchase Price. The amount, if any, that would have been applied to
such prepayment prior to the Closing Date shall have been disbursed and
so applied on the Closing Date after giving effect to such deposit into
the Paydown Trust Account.
4.7 RATABLE REDUCTION PRINCIPLE.
Immediately after giving effect to the deposit and disbursement referred
to in Section 4.6(b), (a) the Bank Debt Paydown/Deposit Fraction shall be equal
to the Repurchase Paydown/Deposit Fraction and (b) the Bank Debt Commitment
Reduction Fraction shall be equal to the Repurchase Commitment Reduction
Fraction (each of such fractions being expressed as a percentage (rounded to
the nearest 0.000001%)).
4.8 DEAL 6 AMENDMENT DOCUMENTS AND DEAL 7 AMENDMENT DOCUMENTS.
The Deal 6 Amendment Documents and Deal 7 Amendment Documents identified
on Schedules X-A and X-B hereto shall have been executed and delivered by each
of the parties thereto.
4.9 SETOFF AND SHARING AGREEMENT.
The Banks and the Securityholders shall have executed and delivered the
Setoff and Sharing Agreement, dated as of the date hereof (the "SETOFF AND
SHARING AGREEMENT"), substantially in the form of Exhibit D hereto.
4.10 BANK AGREEMENT AMENDMENTS.
The Company and the Banks shall have executed and delivered the Bank
Agreement Amendments, dated as of the date hereof, in form and substance in
accordance with the Bank Term Sheet -- Summary of Indicative Terms.
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4.11 CERTAIN COLLATERAL INFORMATION.
The Company shall have delivered to the Securityholders the Company
Financial Information set forth in paragraphs 2, 3 and 4 of Part 1 of Schedule
II hereto.
4.12 PAYMENT OF RESTRUCTURING FEE.
The Company shall have paid to each Securityholder its portion of the
restructuring fee of Three Million Four Hundred Eighty-Four Thousand Six
Hundred Ninety-Nine Dollars and Thirty-Eight Cents ($3,484,699.38), as set
forth opposite such Securityholder's name in Schedule I, by wire transfer of
immediately available funds to the account of such Securityholder set forth in
Schedule I hereto.
4.13 STATEMENT OF REPURCHASE RIGHTS.
The Company shall have executed and delivered to each of the
Securityholders a Statement of Repurchase Rights, substantially in the form of
Exhibit A hereto.
4.14 PAYMENT OF FEES AND EXPENSES.
The Company shall have paid all reasonable costs and expenses of the
Securityholders relating to this Agreement and the transactions contemplated
hereby, in accordance with Section 10.2.
4.15 COMPLIANCE CERTIFICATES.
(A) OFFICER'S CERTIFICATE. The Company shall have delivered to you
a certificate of an Executive Officer, dated the Closing Date, certifying
that the conditions specified in Sections 4.1 and 4.2 have been
fulfilled.
(B) COMPANY SECRETARY'S CERTIFICATE. The Company shall have
delivered to you a certificate, dated the Closing Date, signed by the
Secretary or an Assistant Secretary of the Company, and certifying as to
the resolutions, the bylaws and the articles of incorporation of the
Company attached thereto and as to other corporate proceedings relating
to the authorization, execution and delivery of this Agreement and the
other Financing Documents to which the Company is a party.
(C) DISBURSEMENT AGENT OFFICER'S CERTIFICATE. The Disbursement
Agent shall have delivered to you a certificate, dated the Closing Date,
signed by an authorized officer of the Disbursement Agent, and certifying
as to the authorization, execution and delivery of the Paydown Trust
Agreement by the Disbursement Agent.
4.16 PROCEEDINGS SATISFACTORY.
All proceedings taken in connection with the execution and delivery of
this Agreement and the transactions contemplated hereby shall be satisfactory
to the Securityholders and their special counsel, and the Securityholders and
their special counsel shall have received copies of such documents and papers
as they may reasonably request in connection therewith.
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SECTION 5. COMPANY COVENANTS.
Without limiting the obligations of the Company set forth in the Amended
Transaction Documents, from and after the Closing Date and continuing so long
as any amount remains unpaid on any Note (other than any Wal-Mart Note
transferred subsequent to the Closing Date):
5.1 PROVISION OF INFORMATION.
The Company shall furnish to the Disbursement Agent, on behalf of each of
the Securityholders, sufficient copies of each of the following so that the
Disbursement Agent can deliver one copy to each Securityholder:
(A) MONTHLY STATEMENTS. As soon as available and in any event
within thirty (30) days after the end of each monthly fiscal period of
each fiscal year, copies of:
(i) a balance sheet as of the close of such period on a
consolidating basis for each of U.S. Kmart, Builders Square and
Kmart International (collectively, the "OPERATING GROUPS"), and
(ii) statements of income on a consolidating basis for each
Operating Group, and consolidated cash flows of the Company and the
Subsidiaries, for the portion of the fiscal year ending with such
period,
in each case setting forth, in comparative form, the figures for the
corresponding period set forth in the annual business plan for such year
delivered pursuant to subsection (h) below, together with a discussion of
operations, all in reasonable detail and certified, subject to accrual,
tax accounting and other adjustments historically made by the Company on
a quarterly basis and changes resulting from year-end audit adjustments,
by an Executive Officer of the Company as accurate (subject to such
adjustments) to the best of such officer's knowledge and belief;
(B) QUARTERLY STATEMENTS. As soon as available and in any event
within forty-five (45) days after the end of each quarterly fiscal period
of each fiscal year, copies of:
(i) a balance sheet as of the close of such period on a
consolidating basis for each Operating Group, and
(ii) statements of income on a consolidating basis for each
Operating Group, and consolidated cash flows for the Company and
the Subsidiaries, for the portion of the fiscal year ending with
such period,
in each case setting forth, in comparative form, (1) the figures for the
corresponding period set forth in the annual business plan for such year
delivered pursuant to subsection (h) below, and (2) the figures for the
corresponding period of the preceding fiscal year, all in reasonable
detail and certified as complete and correct, subject to changes
resulting from year-end audit adjustments, by an Executive Officer;
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(C) AUDITED ANNUAL STATEMENTS. As soon as available and in any
event within one hundred twenty (120) days after the close of each fiscal
year of the Company, copies of:
(i) a consolidated balance sheet of the Company and the
Subsidiaries, and consolidating balance sheets for each Operating
Group, in each case as of the close of such fiscal year, and
(ii) consolidated statements of income and cash flows of the
Company and the Subsidiaries, and consolidating statements of
income and cash flows for each Operating Group, in each case for
such fiscal year, and
(iii) a consolidated statement of shareholders' equity of the
Company and the Subsidiaries as of the close of such fiscal year;
in each case setting forth in comparative form (A) the figures for the
prior fiscal year set forth in the annual business plan for such prior
fiscal year delivered pursuant to subsection (h) below, and (B) the
figures for the preceding fiscal year, all in reasonable detail and
accompanied by an opinion (unqualified as to scope of audit and
unqualified as to going concern) of a firm of independent public
accountants of recognized national standing selected by the Company,
stating that such consolidated financial statements present fairly, in
all material respects, the financial position of the Company and the
Subsidiaries and the results of their operations and cash flows, as of
the date, and for the period, therein indicated, and that such
consolidated financial statements have been prepared in accordance with
GAAP;
(D) WEEKLY CASH REPORT. On Tuesday of each week or, if later, on
the second (2nd) Business Day of each week, a statement of cash position
for all of the Business Days during the prior week (or such other period
as may be covered in any such statement delivered to the Banks),
substantially in the form furnished to the representatives of the Banks,
along with a certificate of an Executive Officer certifying as to the
accuracy of such statement;
(E) SEC REPORTS. Promptly, copies of all financial statements and
reports that the Company sends to its shareholders and copies of all
forms 10K, 10Q, and 8K that the Company files with the Securities and
Exchange Commission;
(F) MONTHLY REPORTS.
(i) As soon as available and in any event within thirty (30)
days after the end of each monthly fiscal period of each fiscal
year, copies of:
(A) BANK DEBT -- a schedule of the Bank Debt showing,
for each day of such monthly fiscal period,
(I) the aggregate principal amount of Bank Debt
(including, without limitation, the undrawn face amount
of letters of credit) outstanding under each Bank
Agreement,
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(II) the aggregate principal amount of Bank Line
Debt and the aggregate principal amount of Bank R/E
Debt, specifying, in the case of any Bank Line Debt
Reduction or Bank R/E Debt Reduction which did not
result in a payment in respect of the Aggregate
Repurchase Price or a deposit into the Paydown Trust
Account, the reason therefor,
(III) the Bank R/E Debt Commitment under each Bank
Agreement, and
(IV) the Securityholder Ratable Paydown Share, the
Securityholder Ratable Deposit Share, the
Securityholder Ratable Commitment Reduction Share, and
the Securityholder Ratable Loss/Release Share, if any,
required to be paid or deposited, as the case may be,
on such date;
(B) OTHER DEBT -- a schedule setting forth
(I) the amount, and a description, of any
cumulative increase or decrease in excess of
Twenty-five Million Dollars ($25,000,000) in the
aggregate amount of obligations of the Company and the
Subsidiaries that are not required in accordance with
GAAP to be included in the financial statements of the
Company or the footnotes thereto, measured as of the
last day of such monthly fiscal period as compared with
the most recent fiscal year end, and
(II) the aggregate principal amount of
Indebtedness for money borrowed, if any, of the Company
and the Subsidiaries paid prior to the scheduled
maturity thereof during such monthly fiscal period;
(C) SPIN-OFF CREDITOR PUT OPTION EXERCISE -- a schedule
of:
(I) all Spin-Off Tenant Put Options exercised
during such monthly fiscal period, the date or dates of
such exercise and the Purchase Amounts in respect
thereof,
(II) all Purchase Amounts paid by the Company
during such monthly fiscal period in respect of the
exercise of any Spin-Off Tenant Put Options and the
date or dates of such payments, and
(III) the aggregate amount of Unreimbursed Put
Payments as of the last day of such monthly fiscal
period, on each date of payment of any Purchase Amount
during such period (after giving effect to such
payment), and on each date of receipt of any
reimbursement amounts in respect of such Unreimbursed
Put
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Payments (indicating the Spin-Off Tenant Put Option
with respect to which such reimbursement payment has
been made);
(D) INTEREST EXPENSE -- a schedule of the aggregate
amount of gross interest expense of the Company and the
Subsidiaries during such period in respect of the Bank Debt
and the Notes, in each case setting forth in comparative form
the figures for the preceding monthly period and for the
corresponding period of the preceding fiscal year; and
(E) CASH COLLATERAL -- a statement setting forth the
aggregate amount of cash collateralizing letters of credit,
as permitted by Section 5.5(g), Section 5.5(i) and Section
5.5(j); and
(ii) As soon as available and in any event within thirty (30)
days after the end of each monthly fiscal period of each fiscal
year, the following items, certified as complete and correct by an
Executive Officer:
(A) INVESTMENTS AND DIVESTITURES -- a report describing
the nature and amount of
(I) each Investment (other than Investments in
Cash Equivalents) made by the Company or any Subsidiary
during such period, or commitment entered into by the
Company or any Subsidiary during such period to make an
Investment, which is outside the scope of the operating
activities of the Company and the Subsidiaries as of
the Effective Date and which equals or exceeds (or is
reasonably expected to equal or exceed) Twenty-five
Million Dollars ($25,000,000), and
(II) each sale or other divestiture of any
non-current asset by the Company or any Subsidiary
during such period, or commitment entered into by the
Company or any Subsidiary during such period to sell or
otherwise divest any non-current asset, the proceeds of
which equals or exceeds (or is reasonably expected to
equal or exceed) Twenty-five Million Dollars
($25,000,000), and
(B) SAME STORE SALES -- a schedule of same-store
comparable sales reports for each of the Operating Groups
setting forth in comparative form the figures for the
corresponding period of the preceding fiscal year;
(g) QUARTERLY OFFICER'S CERTIFICATES. Together with the financial
statements delivered pursuant to Sections 5.1(b) and (c), a certificate
of an Executive Officer setting forth:
(i) COVENANT COMPLIANCE -- the information (including detailed
calculations) required in order to establish whether the Company
was in compliance with the requirements of Sections 5.4, 5.6, 5.7,
5.9, 5.12 (specifying computations with respect to incorporated
covenants) and 7(j) during the quarterly
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or annual period covered by the statements then being furnished
(including with respect to each such Section, where applicable, the
calculations of the maximum or minimum amount, ratio or percentage,
as the case may be, permissible under the terms of such Sections,
and the calculation of the amount, ratio or percentage then in
existence); and
(ii) NO EARLY REPURCHASE EVENT -- a statement that such
Executive Officer has been advised of the relevant provisions of
this Agreement and stating whether there existed as of the date of
such financial statements and whether, to the best of such
officer's knowledge, there exists at the time of the certificate
(or existed at any time during the period covered by such financial
statements) any Early Repurchase Event and, if any such condition
or event does exist on the date of the certificate, specifying the
nature and period of existence thereof and the action the Company
is taking or proposes to take with respect thereto;
(h) ANNUAL BUSINESS PLAN. Not later than the fifteenth (15th) day
of the first month of each fiscal year of the Company, a comprehensive
business plan of the Company and the Subsidiaries for such fiscal year of
the Company, including, without limitation,
(i) projected balance sheets on a consolidating basis for each
Operating Group as at the end of such fiscal year and at the end of
each fiscal month during such fiscal year, and
(ii) projected statements of income on a consolidating basis
for each Operating Group, and consolidated cash flows for the
Company and Subsidiaries, for such fiscal year and for each fiscal
month during such fiscal year;
(i) COLLATERAL. Within thirty (30) days after the end of each
quarterly fiscal period of the Company, the following information to each
Securityholder solely with respect to the collateral securing all or any
portion of the Notes held by such Securityholder:
(i) the location of such collateral,
(ii) a description of the Notes which are secured by such
collateral,
(iii) a description of the terms and the amount of any other
Indebtedness secured by any portion of such collateral as at the
end of such period,
(iv) a description of any changes in the rent rolls for such
collateral (including the name and street address of, and the
monthly rent payable by, each lessee) during such period,
(v) a description of any changes in the payment terms of any
Company lease of any portion of the collateral,
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(vi) a copy of any new space lease of any portion of the
collateral entered into during such period,
(vii) sales, gross profit, contribution profit, gross margin
and contribution margin for each Company store located on such
collateral for such quarterly fiscal period, setting forth in
comparative form the figures for the corresponding period one year
earlier,
(viii) a description of any renovations or capital
expenditures made to such collateral during such period,
(ix) a copy of any appraisal of such collateral made during
such period, and
(x) any other material information pertaining to such
collateral (including, without limitation, the occurrence of any
casualty, condemnation or eminent domain event, any pending or
threatened litigation, or any default under, or termination of, any
ground or space lease) during such period;
(j) MATERIAL EVENTS. Promptly, but not later than three (3)
Business Days after the Company becomes aware thereof, written notice of
the occurrence of any of the following events, describing in reasonable
detail such event and what action the Company is taking, or proposes to
take, with respect thereto:
(i) any Triggering Event specified in clause (ii) or clause
(iii) of the definition of such term,
(ii) any Potential Early Repurchase Event,
(iii) any event or development which could reasonably be
expected to have a Material Adverse Effect, and
(iv) any Reportable Event;
(k) OTHER DOCUMENTS. Concurrently with the delivery thereof
(i) to the Banks, copies of all reports, budgets, projections
and other information provided to the Banks (or to any agent acting
on behalf of the Banks) pursuant to any of the Bank Agreements, and
(ii) to the holders of any New Indebtedness, copies of all
reports, budgets, projections and other information provided to
such holders (or to any agent acting on behalf of such holders)
pursuant to any agreement pursuant to which such New Indebtedness
has been issued or any agreement relating thereto; and
(l) OTHER INFORMATION. As soon as practicable, such other
information respecting the properties, business affairs, financial
condition and/or operations of the
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Company or any Subsidiary (including, without limitation, performance
measures on Investments and capital improvements) as any Securityholder
from time to time may reasonably request.
5.2 EXTENSION FEE.
(a) Except as provided in subsection (b) below, so long as the
Company shall not have paid the Aggregate Repurchase Price in full, the
Company shall pay to each Securityholder a fee (the "EXTENSION FEE") in
respect of the Repurchase Rights held by such Securityholder in an amount
equal to 0.75% per annum (subject to increase pursuant to Section 5.13
and calculated on the basis of a three hundred sixty (360) day year of
twelve (12) thirty (30) day months, of the principal component of the
Repurchase Price applicable to each Note held by such Securityholder.
The Extension Fee shall be payable quarterly on the last day of April,
July, October and January in each year (each, an "EXTENSION FEE PAYMENT
DATE"), commencing on April 30, 1996. In addition, on the Closing Date,
the Company shall pay to each Securityholder a fee in an amount equal to
.08425% of the principal component of the Repurchase Price applicable to
each Note held by such Securityholder (such fee being calculated on the
same basis as the Extension Fee and being in respect of the period from
December 22, 1995 to January 31, 1996). The fee payable pursuant to the
preceding sentence and each payment of the Extension Fee shall be made by
wire transfer of immediately available funds to the Disbursement Agent,
on behalf of each Securityholder, in the case of each payment of the
Extension Fee not later than 11:00 a.m. eastern time, on the respective
due dates thereof. The Company shall, concurrently with such payment,
provide written notice (by facsimile) to the Disbursement Agent
specifying the portion of such fee allocable to each of the
Securityholders.
(b) Commencing on April 30, 1996, and on each Extension Fee Payment
Date thereafter, the amount of the Extension Fee payable in respect of
each Repurchase Right shall be reduced (but not below zero) by the
Extension Fee Credit Amount, if applicable, attributable to such
Repurchase Right.
(c) The following terms have the following meanings:
(i) The "EXTENSION FEE CREDIT AMOUNT," with respect to any
Repurchase Right, as of any Extension Fee Payment Date, shall be an
amount equal to the result of (x) the sum of the Interest Reduction
Amounts for all Interest Periods ended subsequent to the Closing
Date and on or prior to such Extension Fee Payment Date minus (y)
the portion (not to exceed one hundred percent (100%), of the sum
referred to in the foregoing clause (x) theretofore applied to
reduce the Extension Fee payable on all preceding Extension Fee
Payment Dates.
(ii) An "INTEREST PAYMENT DATE" means, with respect to any
Note, each date on which interest is due and payable on such Note.
(iii) An "INTEREST PERIOD" means the period from and including
an Interest Payment Date to, but not including, the next succeeding
Interest Payment Date.
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(iv) The "INTEREST REDUCTION AMOUNT" means, in respect of any
Interest Period, and in respect of any Note and the Repurchase
Right related thereto, the result of
(A) the interest actually paid in respect of such period
on such Note, minus
(B) the interest that would have been payable in respect
of such period on such Note had there been applied as
prepayments of such Note any prepayments during such period
pursuant to Section 2.2, Section 2.3, Section 2.4, or Section
2.5 in respect of the principal component of the Repurchase
Price attributable to such Note (such prepayments of such
Note being deemed to have occurred on the same dates as the
actual prepayments of such principal component).
5.3 CONSOLIDATIONS AND MERGERS, ETC.
(a) CONSOLIDATIONS AND MERGERS. The Company shall not merge or
consolidate with any other Person, unless:
(i) the successor formed by or resulting from such
consolidation or merger is the Company or a Subsidiary of the
Company (and, if the survivor is a Subsidiary of the Company, such
Subsidiary shall affirm, in writing, the Company's obligations
under the Amended Transaction Documents to which the Company is a
party), and
(ii) no Early Repurchase Event or Potential Early Repurchase
Event shall have occurred and then be continuing or would arise
after giving effect thereto.
(b) DECONSOLIDATION. Except to the extent expressly permitted or
otherwise contemplated by Section 5.3(a), notwithstanding any provisions
hereof to the contrary, the Company shall not merge or consolidate with
or into, reorganize, incorporate, reincorporate, reconstitute or
deconsolidate into, any other Person, nor will the Company consent to,
permit, cause or effect any other transaction the effect of which is to
(i) cause a novation under any of the Amended Transaction Documents to
which the Company is a party or (ii) in any other way effect a
substitution of any other Person for the Company under any of the Amended
Transaction Documents to which the Company is a party.
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5.4 DISPOSITION OF ASSETS.
The Company shall not, directly or indirectly, sell, assign, lease,
convey, transfer or otherwise dispose of (whether in one or a series of
transactions) any property (including accounts and notes receivable, with or
without recourse) or enter into any agreement to do any of the foregoing,
except:
(a) dispositions of inventory, or used, worn-out or surplus
equipment, all in the ordinary course of business;
(b) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied
to the purchase price for such replacement equipment;
(c) dispositions of inventory or equipment by the Company to any
Subsidiary pursuant to reasonable business requirements;
(d) dispositions of Scheduled Assets; and
(e) other dispositions of assets having, in any fiscal year of the
Company, an aggregate book value not exceeding ten percent (10%) of the
Company's consolidated total assets as of the end of the most recently
ended fiscal year of the Company, as reflected in the Company's balance
sheet contained in its audited financial statements for such fiscal year;
provided, however, that this Section 5.4 shall not be deemed to prohibit the
sale of all, substantially all, or a part of the Capital Stock of, or of all,
substantially all, or a part of the assets of, any Specialty Retail Subsidiary,
if (x) the consideration received therefor is equal to the Fair Market Value
(as reasonably determined by the Company) of such Capital Stock or assets, or
(y) the Company's board of directors deems such transaction to be necessary by
reason of applicable laws, regulations or governmental policies applicable to
the Company.
5.5 LIMITATION ON LIENS.
The Company shall not, and shall not permit any Subsidiary to, create,
incur or suffer to exist any Lien on any assets of the Company or any
Subsidiary (other than Liens granted by Kmart Canada Ltd. and its subsidiaries
or by Kmart CR a.s. (Czech operations) on such Person's respective assets prior
to the Closing Date), whether now owned or hereafter acquired, provided,
however, that such restriction shall not apply with respect to any of the
following types of Liens:
(a) Liens for taxes not delinquent or being contested in good faith;
(b) Liens created and deposits made in connection with workers'
compensation, unemployment insurance and other social security
legislation, or to secure the performance of bids, tenders, contracts
(other than for the repayment of borrowed money), statutory obligations,
surety and appeal bonds and other similar obligations incurred in the
ordinary course, and Liens securing obligations to mechanics, materialmen,
bailees, warehousemen and similar Liens arising by operation of law and
incurred in the ordinary course of business;
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(c) purchase money mortgages (including vendors' rights under
purchase or land contracts or under other agreements whereby title or
another interest is retained by the vendor for the purpose of securing
the purchase price thereof) on property acquired or constructed after the
Effective Date, or the acquisition after the Effective Date of property
subject to such a Lien which is limited to such property and was not
created in anticipation of such acquisition;
(d) mortgages, security interests and Liens on assets of the Company
or any Subsidiary existing on the Effective Date, and set forth on
Schedule VII hereto, which secure any Indebtedness of the Company or such
Subsidiary, or any refundings or extensions for an amount not exceeding
the principal amount of such Indebtedness so long as such refundings or
extensions are secured only by the same property or assets;
(e) Liens on property of the Company or any Subsidiary (i) created
concurrently with the release of existing Liens on other property of the
Company or any such Subsidiary, as provided under the Amended Transaction
Documents, but only if such substitution is one of several alternative
actions available to the obligor under the relevant Amended Transaction
Document, of which such obligor must choose one, following the occurrence
of a casualty, condemnation or eminent domain event, or upon the
existence of an environmental condition provided that the Fair Market
Value of the property subjected to any such Lien does not exceed One
Hundred Ten Percent (110%) of the Fair Market Value of the property as to
which a Lien is concurrently being released (the fair market value of the
property being relieved of such Lien being determined immediately prior
to the occurrence of such casualty, condemnation or eminent domain event,
or the discovery of such environmental condition), or (ii) in respect of
a substitution of collateral resulting from the single store collateral
substitution obligation existing on the Effective Date and resulting from
a store closing in September, 1995 with respect to the Deal 2 Notes;
(f) Liens on deposits in favor of the Banks and/or the
Securityholders, provided that the proceeds of the disposition of such
deposits shall be subject to the provisions of the Setoff and Sharing
Agreement, and Liens on cash balances of Kmart Canada Ltd. and its
subsidiaries or Kmart CR a.s. (Czech operations) maintained in the
ordinary course of business, consistent with past practices in favor of
the lenders to such entities, and Liens on monies held in the Paydown
Trust Account;
(g) Liens on the assets of Kmart Canada Ltd. and its subsidiaries to
secure New Indebtedness incurred by such Persons and Liens to secure New
Indebtedness (including, without limitation, New Indebtedness incurred
pursuant to the New Bank Letter of Credit Facility), provided in each
case that such Liens securing New Indebtedness shall encumber only
(i) non-current assets including, without limitation,
Scheduled Assets, (or cash collateral pledged to secure
Indebtedness under the New Bank Letter of Credit Facility in
substitution of a Lien on non-current assets concurrently with the
release of such Lien in connection with the sale or other
disposition of the non-current assets subject to such Lien), and
(ii) in the case of the New Bank Letter of Credit Facility,
documents of title relating to goods which are the subject of trade
letters of credit issued by the Trade B Banks (as defined therein)
and securing the Trade B Letters of Credit (as defined therein) on
the terms set forth in such agreement as in effect on the Closing
Date, provided that the percentage of the aggregate face amount of
all Trade B Letters of Credit outstanding at any time that are so
secured shall not exceed thirty-five percent (35%) (or as close to
thirty-five percent (35%) as
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practicable in light of the face amounts of Trade B Letters of
Credit that are drawn or paid as contemplated by the New Bank
Letter of Credit Facility) of the Trade B Letters of Credit issued
by the Trade B Banks;
provided, further, that no such Lien shall be permitted under this clause
(g) to secure (A) any Indebtedness existing on the Effective Date under,
or extended after the Effective Date pursuant to, any of the Bank
Agreements (except for any New Indebtedness outstanding under any Bank
Debt Refinancing Agreement), (B) any other unsecured Indebtedness of the
Company or any Subsidiary outstanding on the Effective Date, or (C) any
refundings or extensions of the Indebtedness described in the foregoing
clause (A) or clause (B);
(h) easements, rights-of-way, zoning and similar restrictions and
other similar charges or encumbrances not interfering in any material
respect with the ordinary conduct of the business of the Company and the
Subsidiaries;
(i) Liens on cash collateral to secure the Company's reimbursement
obligations under letters of credit issued pursuant to the New Bank
Letter of Credit Facility to the extent such cash collateral is permitted
under the terms thereof as in effect on the Closing Date; and
(j) Liens on cash collateral to secure the Company's reimbursement
obligations under two standby letters of credit issued by [ ] after the
Effective Date in an aggregate amount that shall not exceed the lesser or
(x) one hundred five percent (105%) of the outstanding face amount
thereof or (y) Twenty-Five Million Dollars ($25,000,000).
5.6 EBITDAR COVERAGE RATIO.
The Company shall not permit its ratio of
(a) EBITDAR (measured as of the end of any fiscal quarter ending
after the Effective Date for the four fiscal quarters of the Company then
ended), to
(b) the sum of (i) consolidated net interest expense of the Company
for such four fiscal quarter period plus (ii) Rent Expense for such four
fiscal quarter period,
to be less than 1.50 to 1.00.
5.7 CONSOLIDATED NET WORTH.
The Company shall not permit its Consolidated Net Worth at any time to be
less than Four Billion Five Hundred Million Dollars ($4,500,000,000).
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5.8 RESTRICTED PAYMENTS.
The Company will not, and will not permit any Subsidiary to, declare or
make, or incur any liability to declare or make, any Restricted Payments,
except that
(a) any Subsidiary may declare and pay dividends to the Company,
(b) the Company may pay any dividend payable in respect of Voting
Stock of the Company which has been declared by the Company on or prior
to December 31, 1995, and
(c) the Company or any Subsidiary may purchase Capital Stock of the
Company or any Subsidiary or options to acquire the same from directors,
officers and employees of the Company or any Subsidiary consistent with
past practices in connection with ordinary course employment and
severance arrangements, provided that (i) the Company is obligated to
make such purchase pursuant to a binding contract and (ii) the aggregate
amount of all such purchases by the Company and the Subsidiaries from and
after the Closing Date shall not exceed Five Million Dollars
($5,000,000).
5.9 PAYMENT OF INDEBTEDNESS.
(a) The Company will not, and will not permit any Subsidiary to,
directly or indirectly, make any principal payment in respect of any
Indebtedness (excluding, solely for purposes of this Section 5.9, Bank Debt,
the Notes and payments by Kmart Canada Ltd. or any of its subsidiaries or by
Kmart CR a.s. (Czech operations) in respect of any such Person's Indebtedness
in existence on the Effective Date, or New Indebtedness incurred by such Persons
in the ordinary course of business consistent with past practices) during the
period from December 17, 1995 through February 28, 1997 (including by way of
purchase, refinancing, defeasance or other direct or indirect transfer of cash
consideration to the holders thereof; provided that the Company may exchange
any of its outstanding Indebtedness for money borrowed for shares of its
capital stock and make cash payments to the holders of such Indebtedness in
respect of fractional shares in connection with such exchange) other than
(i) scheduled principal payments of mortgage indebtedness (other
than the Notes) in an amount not to exceed Twelve Million Dollars
($12,000,000) in the aggregate,
(ii) payments made pursuant to guaranties of existing leases of
former Subsidiaries of the Company, provided that such payments may only
be made with respect to rents so guaranteed as and when the same may
become due in the ordinary course (and not on any accelerated rents that
may become due as a result of a default on the underlying lease),
(iii) payments made with respect to Spin-Off Tenant Put Options,
(iv) regular, ordinary course payments of Capitalized Lease
Obligations in amounts consistent with past practices,
(v) repayment of Indebtedness secured by Liens on real property in
connection with the sale or other disposition of such real property
provided that the Company or such Subsidiary receives net cash proceeds
from such sale or other disposition in excess of the Indebtedness
required to be repaid,
(vi) payments in respect of any New Indebtedness,
(vii) payments of reimbursement obligations under letters of credit
issued under the New Bank Letter of Credit Facility as in effect on the
Closing Date, provided that such payments do not reduce the commitments
thereunder except to the extent provided under the New Bank Letter of
Credit Facility as in effect on the Closing Date,
(viii) other payments of principal in respect of Indebtedness in an
aggregate principal amount that, together with payments of principal made
in reliance on Section 5.9(b)(iii), shall not exceed the lesser of (A)
Fifty Million Dollars ($50,000,000) in any fiscal year of the Company and
(B) Seventy-Five Million Dollars ($75,000,000) in the aggregate for all
such payments made on or after the Closing Date, and
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(ix) subject to Section 5.14, payments in respect of the
termination of leases to the extent that the Company believes that
such payments provide a substantial benefit to the Company; provided
that such lease termination payments, together with lease termination
payments made pursuant to Section 5.9(b)(iv), do not exceed the lesser
of (A) One Hundred Million Dollars ($100,000,000) in the aggregate in
any fiscal year of the Company and (B) One Hundred Twenty-Five Million
Dollars ($125,000,000) in the aggregate for all such payments made on
or after the Closing Date.
(b) The Company will not, and will not permit any Subsidiary to,
directly or indirectly, make any principal payment in respect of any
Indebtedness (excluding, solely for purposes of this Section 5.9, Bank Debt,
the Notes and payments by Kmart Canada Ltd. or any of its subsidiaries or by
Kmart CR a.s. (Czech operations) in respect of any such Person's Indebtedness
in existence on the Effective Date, or New Indebtedness incurred by such
Persons in the ordinary course of business consistent with past practices)
during the period from December 17, 1995 through October 3, 1997 (including by
way of purchase, refinancing, defeasance or other direct or indirect transfer
of cash consideration to the holders thereof; provided that the Company may
exchange any of its outstanding Indebtedness for money borrowed for shares of
its capital stock and make cash payments to the holders of such Indebtedness in
respect of fractional shares in connection with such exchange) other than
(i) scheduled principal payments on such Indebtedness,
(ii) repayments of Indebtedness of the type permitted under
Sections 5.9(a)(ii),(iii),(v),(vi) and (vii),
(iii) other payments of principal in respect of Indebtedness
in an aggregate principal amount that, together with payments of
principal made in reliance on Section 5.9(a)(viii), shall not exceed
the lesser of (a) Fifty Million Dollars ($50,000,000) in any fiscal
year of the Company and (b) Seventy-Five Million Dollars ($75,000,000)
in the aggregate for all such payments made on or after the Closing
Date, and
(iv) subject to Section 5.14, payments in respect of the
termination of leases to the extent that the Company believes that
such payments provide a substantial benefit to the Company, provided
that such lease termination payments, together with lease termination
payments made pursuant to Section 5.9(a)(ix), do not exceed the lesser
of (A) One Hundred Million Dollars ($100,000,000) in the aggregate in
any fiscal year of the Company and (B) One Hundred Twenty-Five Million
Dollars ($125,000,000) in the aggregate for all such payments made on
or after the Closing Date.
5.10 SATISFACTION OF CERTAIN PUT OPTIONS.
In the event any Spin-Off Creditor shall exercise its Spin-Off Tenant
Put Option, the Company shall:
(a) in accordance with the terms of the relevant Spin-Off Tenant Put
Agreement, honor the exercise of such Spin-Off Tenant Put Option and pay
to such Spin-Off Creditor the amounts (including any applicable premium,
as provided for therein) required to purchase the securities tendered by
such Spin-Off Creditor (the "PURCHASE AMOUNT"); and
(b) subject to the reasonable business judgment of the Company,
promptly exercise all rights the Company shall have to be reimbursed by
any other Person which is obligated, directly or indirectly, in respect
of such Spin-Off Tenant Put Option (the "UNREIMBURSED PUT PAYMENT").
5.11 PREPAYMENTS OF THE NOTES.
The Company will not make any prepayment (whether directly or indirectly
by purchase or other acquisition) in respect of any of the Notes (including,
without limitation, the Deal 6 Notes and the Deal 7 Notes) under any Amended
Transaction Document and will not purchase any Notes except in accordance with
Section 2; provided that the foregoing shall not restrict the prepayment of any
Note made with funds provided by a Governmental Authority, an insurer, a
purchaser of property subject to any Collateral Release, or any other party
(other than the Company) in connection with a casualty, condemnation or eminent
domain event with respect to, or relating to the environmental condition of,
all or a portion of the collateral securing such Note, nor shall the foregoing
restrict the Company from making any scheduled prepayment of principal.
5.12 INCORPORATION OF BANK FINANCIAL COVENANTS, DEFAULTS AND EVENTS OF
DEFAULT.
The Company hereby agrees that, without limitation of any of the
provisions of this Agreement, if
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(a) any of the Bank Financial Covenants applicable to the Company
shall be amended at any time in a manner more beneficial to the Banks or
more onerous to the Company,
(b) any Existing Bank Agreement, as amended by the Bank Agreement
Amendments, shall be amended after the Effective Date to incorporate one
or more additional financial covenants relating to the financial
performance or condition of the Company or any of the Subsidiaries,
(c) any of the Bank Events of Default applicable to the Company
shall be amended at any time in a manner more beneficial to the Banks or
more onerous to the Company,
(d) any Existing Bank Agreement, as amended by the Bank Agreement
Amendments, shall be amended after the Effective Date to incorporate one
or more additional events of default applicable to the Company,
(e) the Company shall enter into any Bank Debt Refinancing
Agreement, which includes any financial covenants or events of default
which are not set forth in this Agreement (except that this clause (e)
shall not apply to any Bank Debt Refinancing Agreement relating solely to
New Indebtedness), or
(f) the Company shall otherwise add any provision to any Bank
Agreement or Bank Debt Refinancing Agreement which enhances the rights
and benefits of any Bank,
then such amended Bank Financial Covenants, additional financial covenants,
amended Bank Events of Default, additional events of default, Bank Debt
Refinancing Agreement financial covenants, Bank Debt Refinancing Agreement
events of default and other provisions (including, in each case, all terms used
in such covenants, events of default and other provisions, effective as of
their respective effective dates in any Bank Agreement or Bank Debt Refinancing
Agreement, as the case may be, with the same meaning as used therein) shall be
automatically incorporated herein by reference and shall have the same force
and effect (such events of default as incorporated herein being deemed herein
to be Early Repurchase Events) as if such covenants, events of default and
other provisions were fully set forth herein. In the event that at any time
there is any question as to whether any amendment to a Bank Financial Covenant
or a Bank Event of Default shall render such provision more beneficial to the
Banks or more onerous to the Company, the written determination of
Securityholders holding a majority of the principal component of the Aggregate
Repurchase Price at such time shall be conclusive.
5.13 AMENDMENT OF BANK AGREEMENTS.
(a) The Company shall not enter into any agreement amending or
modifying the provisions of any Bank Agreement which would, directly or
indirectly,
(i) provide for an interest rate payable on the Bank Debt
outstanding under such Bank Agreement in excess of the interest
rate provided for in such Bank Agreement on the Closing Date,
unless, concurrently with such increase in
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the interest rate payable on such Bank Debt, the Company agrees to
an Increased Extension Fee; or
(ii) provide for the payment of any fees in addition to the
fees payable under such Bank Agreement (or provide for any increase
in the existing fees payable thereunder) on the Closing Date,
unless, concurrently with the Company's agreement to pay such new
or increased fees, as the case may be, the Company agrees to pay to
each Securityholder, concurrently with the payment thereof to the
Banks, an amount equal to the same proportion of the principal
components of the respective Repurchase Prices of the Notes held by
such Securityholder at the time of any such payment that the
aggregate amount of such new fees, or the aggregate amount of the
increase in the existing fees, payable to all Banks under such Bank
Agreement bears to the aggregate principal amount of the Bank Debt
outstanding under such Bank Agreement at such time.
(b) An "INCREASED EXTENSION FEE" means, at any time in connection
with an increase in the interest rate applicable to any Bank Debt, the
sum of:
(i) the Extension Fee theretofore in effect, plus
(ii) the amount by which (A) the interest rate applicable to
the relevant Bank Debt, after giving effect to such increase,
exceeds (B) the interest rate applicable to such Bank Debt on the
Effective Date (said excess being expressed as a percentage per
annum).
If there is an increase in the interest rate applicable to Bank Debt
outstanding under more than one Bank Agreement, the Increased Extension Fee
shall be determined by reference to the Bank Debt outstanding under the Bank
Agreement as to which there has been the largest increase in interest rate
subsequent to the Effective Date.
5.14 REDUCTION OR TERMINATION OF LEASE OR LEASE GUARANTY LIABILITY.
The Company shall not, and shall not permit any Subsidiary to:
(a) terminate any lease securing the Deal 6 Notes or the Deal 7
Notes (or any Note issued in substitution for any Deal 6 Note or Deal 7
Note) or any guaranty of the Lessee's obligation under any such lease, or
(b) reduce, limit, or eliminate its Indebtedness, or other
liabilities thereunder,
unless and until the Aggregate Repurchase Price shall have been paid in full.
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5.15 REFINANCING ARRANGEMENTS.
The Company shall not enter into any Bank Debt Refinancing Agreement (a)
that in any way restricts the Company from making a voluntary prepayment of the
Aggregate Repurchase Price of the Notes or (b) unless the aggregate amount of
Set-Offs and Set-Off Recoveries which are not shared by the Securityholders on
the basis set forth in the Setoff and Sharing Agreement shall not exceed Four
Hundred Million Dollars ($400,000,000) for all the Bank Agreements.
SECTION 6. AMENDMENTS OF EXISTING TRANSACTION DOCUMENTS
Each of the Company and, subject to the satisfaction of the conditions set
forth in Section 4, the Securityholders hereby consents and agrees to the
amendments to the Existing Transaction Documents set forth in Schedule IX
hereto, and authorizes and directs the trustee acting on its behalf under any
trust agreement or trust indenture referred to therein to execute and deliver
this Agreement (solely for purposes of evidencing its agreement to the
amendments to such trust agreement or trust indenture set forth therein), the
Deal 6 Amendment Documents and the Deal 7 Amendment Documents. Each such
amendment is incorporated herein by reference as if set forth verbatim in this
Agreement. Except as amended by such amendments and by the Deal 6 Amendment
Documents and the Deal 7 Amendment Documents, all terms and provisions of the
Existing Transaction Documents remain in full force and effect (including,
without limitation, all terms and provisions relating to the payment of
interest and premium, amortization of principal and maturity).
SECTION 7. EARLY REPURCHASE EVENTS
The occurrence and continuance of any one or more of the following shall
constitute an "EARLY REPURCHASE EVENT" under this Agreement and shall further
constitute, upon satisfaction of the conditions precedent, if any, specified in
Section 2.1(b) with respect to such Early Repurchase Event, the occurrence of a
Triggering Event under Section 2.1(a):
(a) NON-PAYMENT OF REPURCHASE PRICE. The Company fails to pay, when
and as required to be paid herein, any amount required to be paid under
Section 2.2, Section 2.3, Section 2.4 or Section 2.5 of this Agreement
(whether directly to the Securityholders or to the Paydown Trust Account)
and such default shall continue unremedied for a period of three (3)
Business Days; or
(b) NON-PAYMENT OF EXTENSION FEES. The Company fails to pay the
Extension Fee, when due, and such default shall continue unremedied for a
period of three (3) Business Days; or
(c) SPECIFIC DEFAULTS. The Company fails to perform or observe any
term, covenant or agreement contained in Section 5.1 (j)(i) or any of
Sections 5.3 through 5.6, inclusive, 5.8, 5.9 or 5.11 through 5.15,
inclusive; or
(d) OTHER DEFAULTS. The Company fails to perform or observe any
other term or covenant contained in this Agreement and such default shall
continue unremedied for a period of thirty (30) days after the date upon
which notice thereof is given to the Company by any Securityholder; or
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(e) DEFAULTS RE NEW INDEBTEDNESS. The Company or any Subsidiary
fails to perform or observe any term, covenant or agreement with respect
to any New Indebtedness having an aggregate principal amount of more than
Fifty Million Dollars ($50,000,000) and such default shall continue
unremedied or unwaived, or the term or covenant in respect of such
failure shall not have been amended, as the case may be, for a period of
forty-five (45) days after the first date upon which the holder or
holders of such New Indebtedness (or any representative of such holder or
holders) shall have the right, on account of such failure and after
giving effect to any required notice and the expiration of any applicable
cure periods, to declare such New Indebtedness to be immediately due and
payable; or
(f) REPRESENTATION OR WARRANTY. Any representation or warranty by
the Company made or deemed made herein proves to have been inaccurate or
untrue in any material respect on or as of the date made or deemed made
herein or any false certification is made in any certificate delivered
under the Paydown Trust Agreement; or
(g) LEASE DEFAULT; CROSS-ACCELERATION.
(i) An event of default exists under any lease, sublease or
space lease identified in Schedule III-B hereto as the result of
the Company's failure to make any payment of rent required to be
made by the Company thereunder and after the expiration of any
period of grace and the giving of any notice required thereunder,
or
(ii) an event of default exists under any lease, sublease or
space lease identified in Schedule III-B hereto as the result of
any Subsidiary's failure to make any payment of rent required to be
made by such Subsidiary thereunder and after the expiration of any
period of grace and the giving of any notice required thereunder,
or
(iii) the Company fails to make any payment required to be
made under any of the Lease Guaranties and any period of grace with
respect thereto shall have expired and any notice required with
respect thereto shall have been given, or
(iv) the Company fails to perform or observe any condition or
covenant or any other event shall occur or condition exist relating
to Indebtedness (other than Indebtedness under the Bank Agreements
(as to which the definition of "Triggering Event" is applicable))
having an aggregate principal amount (including undrawn committed
or available amounts) of more than Fifty Million Dollars
($50,000,000) if the effect of any such failure, event or condition
is to cause such Indebtedness to be declared to be due and payable
or otherwise to become due and payable prior to its stated
maturity, or the Company fails to pay any such Indebtedness in full
at its stated maturity; or
(h) ERISA. The occurrence of a Reportable Event which the PBGC
deems grounds to terminate any employee pension benefit plan or for the
appointment of a trustee to administer such plan and such Reportable
Event is not corrected and such
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determination by the PBGC is not revoked within thirty (30) days after
notice thereof; or the institution of proceedings by the PBGC to terminate
any such plan; or the appointment of a trustee to administer
any such plan; or
(i) MONETARY JUDGMENTS. A final judgment or judgments in excess of
Fifty Million Dollars ($50,000,000) shall be entered against the Company
by a court of record and not discharged in accordance with its terms or,
within sixty (60) days from the date of entry thereof, stayed from
execution and (within said period of sixty (60) days or such longer
period during which execution of such judgment(s) shall have been stayed)
appeal taken therefrom and execution thereof stayed during such appeal;
or
(j) UNREIMBURSED PUT PAYMENTS. The expiration of ten (10) days
after satisfaction of the following conditions:
(i) the exercise of a Spin-Off Tenant Put Option and the
assertion of a claim against the Company in connection therewith,
and
(ii) the expiration of the one hundred twenty (120) day period
following the payment by the Company of the Purchase Amount in
respect of such exercise if, upon such expiration, the aggregate
amount of Unreimbursed Put Payments (after giving effect to all
amounts received by the Company from (x) the sale or other
disposition of the relevant tendered securities and/or any asset or
assets securing the same and (y) any other Person that is
obligated, directly or indirectly, in respect of the relevant
Spin-Off Tenant Put Option or otherwise makes any payment with
respect thereto) in respect of (1) such exercise and (2) all
Spin-Off Tenant Put Options which have been exercised prior to the
commencement of such one hundred twenty (120) day period, exceeds
Fifteen Million Dollars ($15,000,000).
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS
8.1 DEFINITIONS.
Unless the context otherwise requires, the terms hereinafter set forth
when used herein shall have the following meanings and the following
definitions shall be equally applicable to both the singular and plural forms
of any of the terms herein defined.
ACCELERATION PAYMENT -- is defined in Section 2.5(b).
ACCELERATION PERCENTAGE -- is defined in Section 2.5(b).
AFFILIATE -- means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of the management
and policies of the other Person, whether through the ownership of voting
securities, by contract or otherwise.
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AGGREGATE REPURCHASE PRICE -- is defined in Section 2.1(c).
AGREEMENT, THIS -- means this Restructuring and Repurchase
Agreement, as amended from time to time.
AGREEMENT IN PRINCIPLE -- means the Agreement in Principle dated as
of December 18, 1995 entered into by the Company and certain
Securityholders, together with the letter dated as of December 18, 1995
from the Company to Chaim Fortgang, Esq. and Michael J. Reilly, Esq.
AMENDED TRANSACTION DOCUMENT TRUSTEES -- is defined in Section 10.2.
AMENDED TRANSACTION DOCUMENTS -- is defined in Recital D.
BANK AGREEMENT AMENDMENTS -- means
(a) Amendment No. 1 to 364 Day Credit Agreement dated as of December
22, 1995, among the Company, [ ], as Documentation Agent, and the other
financial institutions party thereto,
(b) First Amendment to Warehouse Facility Credit Agreement dated as
of December 22, 1995, among the Company, [ ], as Documentation Agent,
and the other financial institutions party thereto,
(c) Amendment No. 1 to Three Year Credit Agreement dated as of
December 22, 1995, among the Company, [ ], as Documentation Agent, and
the other financial institutions party thereto,
(d) Fourth Amendment to Loan Agreement and Limited Forebearance
Agreement dated as of December 22, 1995, among the Company, [ ],
as Managing Agent, and the other financial institutions party thereto,
(e) Second Amendment to Loan Agreement dated as of December 22,
1995, among the Company, [ ], as Agent, and the other financial
institutions party thereto, and
(f) Amendment No. 1 to Seasonal Credit Agreement dated as of
December 22, 1995, among the Company, [ ], as Documentation Agent, and
the other financial institutions party thereto.
BANK AGREEMENTS -- means, collectively, the Existing Bank
Agreements, as amended by the Bank Agreement Amendments, and as may be
further amended from time to time, and any Bank Debt Refinancing
Agreement, in each case as amended from time to time.
BANK DEBT -- means the Bank Line Debt and the Bank R/E Debt.
BANK DEBT COMMITMENT REDUCTION FRACTION -- is defined in Section
2.3(c).
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BANK DEBT PAYDOWN/DEPOSIT FRACTION -- is defined in Section 2.2(b).
BANK DEBT REFINANCING -- means either or both of a Bank Line Debt
Refinancing and a Bank R/E Debt Refinancing.
BANK DEBT REFINANCING AGREEMENT-- means either or both of a Bank
Line Debt Refinancing Agreement and a Bank R/E Debt Refinancing
Agreement.
BANK EVENTS OF DEFAULT -- means, collectively, the Events of Default
described,
(a) in the case of the 364 Day Credit Agreement, in clauses
(a) through (n), inclusive of Section 8.01 of such agreement;
(b) in the case of the Warehouse Facility Credit Agreement, in
clauses (a) through (m), inclusive, of Section 7.1, and (to the
extent applicable to the Company as a "Borrower" thereunder)
clauses (a) through (i), inclusive, of Section 7.2 of such
agreement;
(c) in the case of the Three Year Credit Agreement, in clauses
(a) through (n), inclusive, of Section 8.01 of such agreement;
(d) in the case of Big Beaver I, in clauses (a) through (o),
inclusive, of Section 7.1 of such agreement;
(e) in the case of Big Beaver II, in clauses (a) through (o),
inclusive, of Section 7.1 of such agreement; and
(f) in the case of the Seasonal Credit Agreement, in clauses
(a) through (n), inclusive, of Section 8.01 of such agreement;
in each case as in effect on the Effective Date after giving effect to
the Bank Agreement Amendments.
BANK FINANCIAL COVENANTS -- means, collectively:
(a) in the case of the 364 Day Credit Agreement, Sections 7.01
through 7.09, inclusive, of such agreement;
(b) in the case of the Warehouse Facility Credit Agreement,
subsections (a) through (i), inclusive, of Section 5.4 of such
agreement;
(c) subsections 4(b)(1) through 4(b)(5), inclusive, of the
Guaranty Agreement dated as of October 7, 1994, made by the Company
in favor of the holders of the Bank Debt incurred under the
Warehouse Facility Credit Agreement;
(d) in the case of the Three Year Credit Agreement, Sections
7.01 through 7.09, inclusive, of such agreement;
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(e) in the case of Big Beaver I, Sections 5.1 through 5.9,
inclusive, of such agreement;
(f) in the case of Big Beaver II, Sections 5.1 through 5.9,
inclusive, of such agreement; and
(g) in the case of the Seasonal Credit Agreement, Sections
7.01 through 7.09, inclusive, of such Agreement;
in each case as in effect on the Effective Date after giving effect to
the Bank Agreement Amendments.
BANK L/C PREPAYMENT -- is defined in Section 2.1(c).
BANK LINE DEBT -- is defined in Section 2.2(b).
BANK LINE DEBT CATCH-UP REDUCTION -- is defined in Section 2.2(b).
BANK LINE DEBT CLOSING THRESHOLD -- is defined in Section 2.2(b).
BANK LINE DEBT REBORROWING -- is defined in Section 2.2(b).
BANK LINE DEBT REDUCTION -- is defined in Section 2.2(b).
BANK LINE DEBT REFINANCING -- is defined in Section 2.2(b).
BANK LINE DEBT REFINANCING AGREEMENT -- means any agreement pursuant
to which a Bank Line Debt Refinancing has been effected within the
limitations of Section 2.2(a)(i).
BANK R/E DEBT -- is defined in Section 2.2(b).
BANK R/E DEBT CATCH-UP REDUCTION -- is defined in Section 2.3(c).
BANK R/E DEBT CLOSING THRESHOLD -- is defined in Section 2.2(b).
BANK R/E DEBT COMMITMENT -- is defined in Section 2.3(c).
BANK R/E DEBT REDUCTION -- is defined in Section 2.3(c).
BANK R/E DEBT REFINANCING -- is defined in Section 2.3(c).
BANK R/E DEBT REFINANCING AGREEMENT -- means any agreement pursuant
to which a Bank R/E Debt Refinancing has been effected in connection with
a Bank R/E Debt Reduction, as contemplated by the proviso to the first
sentence of Section 2.3(a).
BANK TERM SHEET -- SUMMARY OF INDICATIVE TERMS -- means the Bank
Term Sheet -- Summary of Indicative Terms attached as Exhibit D to the
Agreement in Principle.
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BANKS -- is defined in Recital D.
BIG BEAVER I -- means the Loan Agreement dated as of January 21,
1992, as amended from time to time, among the Company and the other
borrowers thereunder, [ ], as Managing Agent, and the other financial
institutions party thereto.
BIG BEAVER I MINORITY BANK DEBT -- means Bank Debt outstanding under
Big Beaver I in an aggregate principal amount not in excess of Eighteen
Million Dollars ($18,000,000), the holders of which have not consented to
the Bank Agreement Amendments applicable to Big Beaver I.
BIG BEAVER II -- means the Loan Agreement dated as of August 7,
1992, as amended from time to time, among the Company and the other
borrowers thereunder, [ ], as Agent, and the other financial
institutions party thereto.
BUILDERS SQUARE -- means Builders Square, Inc., a Delaware
corporation, as long as a majority of the Capital Stock of such entity
shall be owned, directly or indirectly, by the Company.
BUSINESS DAY -- means any 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.
CAPITALIZED LEASE OBLIGATION -- means, in relation to any Person,
obligations for the payment of rent for any real or personal property
under leases or agreements to lease that, in accordance with GAAP, have
been or should be capitalized on the books of the lessee and, for
purposes hereof, the amount of any such obligation shall be the
capitalized amount thereof determined in accordance with GAAP.
CAPITAL STOCK -- means any and all shares, interests, participations
or other equivalents (however designated) of capital stock or other
equity interests of any corporation, association or other business
entity, including, without limitation, Preferred Stock and Voting Stock
of such Person.
CASH EQUIVALENTS -- means any one or more of the following:
(a) balances in demand deposit accounts with one or more of
the Banks;
(b) balances in one or more store depository accounts with one
or more of the Banks;
(c) amounts in the Company's concentration account through one
or of the Banks whereby Automated Clearing House (ACH) debits to
Company store depository banks are not immediately available for
the Company's use until one (1) Business Day after the ACH debit is
initiated;
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(d) amounts used to fund the Company's disbursement and/or
payroll accounts maintained with one or more of the Banks;
(e) amounts related to credit card sales being processed by
one or more of the Banks, until funds are available for the
Company's use; and
(f) amounts invested through one or more of the Banks in the
form of certificates of deposit, Eurodollar time deposits,
commercial paper, obligations issued by the U.S. government or by
an agency thereof, other interest bearing or non-interest bearing
deposits on account with one or more of the Banks and investments
held in safekeeping for the Company by one or more of the Banks.
CLOSING DATE -- is defined in Section 4.
CODE -- means the Internal Revenue Code of 1986, as amended from
time to time, and any regulations promulgated thereunder.
COLLATERAL AMENDMENT DOCUMENTS -- means the Deal 6 Amendment
Documents and the Deal 7 Amendment Documents.
COLLATERAL LOSS EVENT -- is defined in Section 2.5(d).
COLLATERAL RELEASE -- is defined in Section 2.5(d).
COMPANY -- is defined in the introductory paragraph of this
Agreement.
COMPANY FINANCIAL INFORMATION -- is defined in Section 3.3.
COMPANY FUNDS -- is defined in Section 2.5(c).
COMPANY LEASEHOLD INTERESTS -- means those leasehold interests of
the Company in the properties identified in Part 7 of Schedule II hereto.
COMPANY OWNED PROPERTIES -- means those properties identified in
Part 6 of Schedule II hereto.
CONSOLIDATED NET WORTH -- means, as of the date of any determination
thereof, the consolidated net worth of the Company, determined in
accordance with GAAP consistently applied; provided, however, that any
gains or losses from the disposition of any Specialty Retail Subsidiary
(or from any write-downs of the Company's investment in any Specialty
Retail Subsidiary or in Builders Square, Kmart Canada, Ltd., Kmart CR
a.s., Kmart SR a.s. and Kmart s.r.o permitted under Financial Accounting
Standards Board Statement No. 121 prior to any such disposition) and any
changes after the Closing Date in the foreign currency translation
adjustment account as presented in the Company's financial statements
(and in accordance with GAAP consistently applied) shall be excluded from
the determination of Consolidated Net Worth.
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CONTROLLED GROUP -- means the Company and all Persons (whether or
not incorporated) under common control or treated as a single employer
with the Company pursuant to Sections 414(b), (c), (m) or (o) of the
Code.
COSTS -- is defined in Section 10.3.
DEAL 1 NOTES -- means the securities identified in Item 1B of
Schedule III-B hereto.
DEAL 2 NOTES -- means the securities identified in Item 2B of
Schedule III-B hereto.
DEAL 3 NOTES -- means the securities identified in Item 3B of
Schedule III-B hereto.
DEAL 4 NOTES -- means the securities identified in Item 4B of
Schedule III-B hereto.
DEAL 5 NOTES -- means the securities identified in Items 5B and 5I
of Schedule III-B hereto.
DEAL 6 AMENDMENT DOCUMENTS -- means, collectively, the documents
identified in Schedule X-A hereto.
DEAL 6 NOTES -- means the securities identified in Item 6B of
Schedule III-B hereto.
DEAL 7 AMENDMENT DOCUMENTS -- means, collectively, the documents
identified on Schedule X-B hereto.
DEAL 7 NOTES -- means the securities identified in Item 7B of
Schedule III-B hereto.
DEAL 8 NOTES -- means the securities identified in Item 8B of
Schedule IV hereto.
DEAL 9 NOTES -- means the securities identified in Item 9B of
Schedule IV hereto.
DEAL 10 NOTES -- means the securities identified in Items 10G and
10V of Schedule IV hereto.
DEAL 11 NOTES -- means the securities identified in Items 11I, 11P,
11W, 11AD, 11AK, 11AR, 11AY, 11BF and 11BM of Schedule IV hereto.
DISBURSEMENT AGENT -- is defined in Section 4.6(a).
EARLY REPURCHASE EVENT -- is defined in Section 7.
EBITDAR -- means, for any applicable period, for the Company, the
aggregate of the following, without duplication, (a) consolidated net
income for such period, plus (b) consolidated interest expense (net of
any interest income) for such period, plus (c) consolidated provision for
taxes for such period, plus (d) consolidated depreciation expense for
such period, plus (e) consolidated amortization expense for such period,
plus (f) Rent Expenses for such period, minus (g) on a consolidated
basis, any extraordinary gains (or plus any extraordinary losses) for
such period (including any loss resulting from
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any write-downs of the Company's investment in Builders Square, Kmart
Canada Ltd., Kmart CR a.s. (Czech operations), Kmart SR a.s. (Slovak
operations), or Kmart s.r.o. (servicer of Czech and Slovak operations)
permitted under Financial Accounting Standards Board Statement No. 121),
minus (h) any gains (or plus any losses) attributable to the Specialty
Retail Subsidiaries for such period other than results of operations in
the ordinary course of business, plus (i) solely with respect to the four
fiscal quarter period of the Company ending in October 1994, the One
Billion Three Hundred Forty-Eight Million Dollar ($1,348,000,000)
restructuring charge recorded in the fourth fiscal quarter of the
Company's fiscal year ending January 26, 1994, minus (j) any gains (or
plus any losses) realized from the sale of Kmart Canada Ltd. and each of
its Subsidiaries, Kmart CR a.s., Kmart SR a.s. and Kmart s.r.o.
EFFECTIVE DATE -- means December 22, 1995.
ERISA -- means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any regulations promulgated thereunder.
EXECUTIVE OFFICER -- means the President, any Vice President or the
Treasurer of the Company.
EXISTING BANK AGREEMENTS -- means, collectively:
(a) the 364 Day Credit Agreement,
(b) the Warehouse Facility Credit Agreement,
(c) the Three Year Credit Agreement,
(d) Big Beaver I,
(e) Big Beaver II, and
(f) the Seasonal Credit Agreement,
in each case as amended to the date hereof.
EXISTING RATING DECLINE PUT OPTIONS -- means, collectively, the
provisions of the Existing Transaction Documents which permit the
Original Securityholders to require the Company to repurchase the Notes,
as more particularly set forth in:
(a) Section 2.3 of the Note Purchase Agreement identified in
Item 1A of Schedule III-B hereto;
(b) Section 5.5 of the Trust Indenture identified in Item 2C
of Schedule III-B hereto;
(c) Section 406 of the Trust Indenture identified in Item 3C
of Schedule III-B hereto;
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(d) Section 2.3 of the Note Purchase Agreement identified in
Item 4A of Schedule III-B hereto;
(e) Section 2.4 of the Note Purchase Agreement identified in
Item 5A of Schedule III-B hereto;
(f) Section 2.4 of the Note Purchase Agreement identified in
Item 5H of Schedule III-B hereto;
(g) Section 5.04 of the Trust Indenture identified in Item 6C
of Schedule III-B hereto;
(h) Section 2.2(a) of the Bond Put Agreement (solely with
respect to a Triggering Event resulting from a Rating Decline, as
such terms are defined in such Bond Put Agreement) identified in
Item 6D of Schedule III-B hereto;
(i) Section 4.01(c) and Section 4.01(e) of the Trust Agreement
(in the case of Section 4.01(e), solely with respect to a
Triggering Event resulting from a Rating Decline, as such terms are
defined in such Trust Agreement) identified in Item 7D of Schedule
III-B hereto; and
(j) Section 2.2 of the Note Put Agreement identified in Item
7C of Schedule III-B hereto.
The term "EXISTING RATING DECLINE PUT OPTION" means the provisions
referred to in any one of clauses (a) to (j), inclusive, of this
definition.
EXISTING TRANSACTION DOCUMENTS -- means, collectively, the documents
identified in Schedule III-B hereto.
EXTENSION FEE -- is defined in Section 5.2(a).
EXTENSION FEE CREDIT AMOUNT -- is defined in Section 5.2(c).
EXTENSION FEE PAYMENT DATE -- is defined in Section 5.2(a).
FAIR MARKET VALUE -- means, at any time and with respect to any
property, the sale value of such property that would be realized in an
arm's-length sale at such time between an informed and willing buyer and
an informed and willing seller (neither being under a compulsion to buy
or sell).
FINANCING DOCUMENTS -- means, collectively, this Agreement, the
Paydown Trust Agreement, the Setoff and Sharing Agreement and the
Collateral Amendment Documents.
GAAP -- means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as may be
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in general use by significant segments of the U.S. accounting profession,
which are applicable to the circumstances as of the date of
determination.
GOVERNMENTAL AUTHORITY -- means any nation or government, any state
or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, or any entity exercising
executive, legislative, judicial, regulatory or administrative functions
of or pertaining to government.
GUARANTY OBLIGATIONS -- means, as applied to any Person, any
obligation, direct or indirect, of that Person guaranteeing any
Indebtedness of any other Person, and, without limiting the generality of
the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person:
(i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness (whether arising by
agreement to keep-well, to purchase assets, goods, securities or
services, to take-or-pay, or to maintain financial statement
conditions or otherwise); or
(ii) entered into for the purpose of assuring in any other
manner the obligee of such Indebtedness of the payment thereof or
to protect such obligee against loss in respect thereof (in whole
or in part);
provided, that the term Guaranty Obligation shall not include:
(a) endorsements for collection or deposit in the ordinary
course of business;
(b) obligations that are not required in accordance with GAAP
to be included in the financial statements of such Person or the
footnotes thereto; or
(c) "unconditional purchase obligations" (including
take-or-pay contracts) as defined in and as required to be
disclosed pursuant to Statement of Financial Accounting Standards
No. 47 and the related interpretations, as the same may be amended
from time to time.
INCREASED EXTENSION FEE -- is defined in Section 5.13.
INDEBTEDNESS -- of any Person means at any date, without
duplication,
(a) all obligations of such Person for borrowed money;
(b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments;
(c) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts
payable and other expenses and accounts payable arising in the
ordinary course of business;
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(d) all reimbursement obligations with respect to letters of
credit and bankers' acceptances except ordinary trade credits;
(e) all Indebtedness of others secured by a Lien on any asset
of such Person whether or not such Indebtedness is assumed by such
Person;
(f) all obligations (to the extent capitalized for accounting
purposes) of such Person as lessee under any lease of any property
by that Person as lessee which, in conformity with GAAP, is
accounted for as a capital lease on the balance sheet of that
Person; and
(g) all Guaranty Obligations of such Person.
INDEMNIFIED PERSON -- is defined in Section 10.3.
INSOLVENCY PROCEEDING -- means (a) any case, action or proceeding
before any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the
benefit of creditors, composition, marshalling of assets for creditors or
other similar arrangement in respect of a debtor's creditors generally or
any substantial portion of its creditors, in the case of each of the
foregoing clauses (a) and (b), undertaken under United States Federal,
State or foreign law.
INTEREST COMPONENT -- is defined in Section 2.1(c).
INTEREST PAYMENT DATE -- is defined in Section 5.2(c).
INTEREST PERIOD -- is defined in Section 5.2(c).
INTEREST REDUCTION AMOUNT -- is defined in Section 5.2(c).
INVESTMENT -- means any expenditure made or liability (contingent or
otherwise) incurred for the acquisition of stock, ownership interests or
Indebtedness of, or for loans, advances, capital contributions or
transfers of property to, or in respect of any guaranties (or other
similar commitments) of obligations of, any Person.
KMART INTERNATIONAL -- means Kmart International, a division of the
Company which operates the Company's discount stores in areas of the
world in which U.S. Kmart does not operate.
LEASE GUARANTIES -- means the Lease Guaranty Agreements identified
in Items 6X, 6AC, 6AG, 6AK, 6AO, 6AS, 6AW, 6BA, 7K, 7M, 7O and 7Q of
Schedule III-B hereto.
LEASE GUARANTY, INDEMNIFICATION AND REIMBURSEMENT AGREEMENTS --
means (i) the Lease Guaranty, Indemnification and Reimbursement Agreement
dated as of November 9, 1994, between the Company and OfficeMax, Inc., as
amended from time to time, (ii) the Lease Guaranty, Indemnification and
Reimbursement Agreement dated as of November 23, 1994, between the
Company and The Sports Authority, Inc., as amended
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from time to time, and (iii) the Lease Guaranty, Indemnification and
Reimbursement Agreement dated as of May 24, 1995, between the Company and
Borders Group, Inc., as amended from time to time.
LIEN -- means any mortgage, deed of trust, pledge, charge,
encumbrance, lien (statutory or other) or security interest of any nature
whatsoever (including those created by, arising under or evidenced by any
conditional sale or other title retention agreement), or any assignment
or deposit arrangement intended as or having the effect of security.
MATERIAL -- means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of the
Company and the Subsidiaries, taken as a whole.
MATERIAL ADVERSE EFFECT -- means a material adverse change in, or
material adverse effect on, (a) the business, financial condition,
operations, assets or prospects of the Company, or of the Company and the
Subsidiaries taken as a whole, or (b) the Company's ability to perform
its obligations under this Agreement or any Amended Transaction Document
to which the Company is a party, or (c) the validity or enforceability of
this Agreement or any such Amended Transaction Document; provided,
however, that any past or future reduction in the Company's credit rating
or decline in the market price of the Company's stock shall not of
themselves be deemed to constitute a Material Adverse Effect.
MULTIEMPLOYER PLAN -- means any Plan that is a "multiemployer plan"
(as such term is defined in section 4001(a)(3) of ERISA).
NEW BANK LETTER OF CREDIT FACILITY -- is defined in Section 2.2(b).
NEW INDEBTEDNESS -- means any Indebtedness incurred by the Company
or any of the Subsidiaries after the Effective Date, other than (a) Bank
Debt incurred under the Existing Bank Agreements, as amended by the Bank
Agreement Amendments and as further amended from time to time, (b) any
Indebtedness refunding or refinancing Bank Debt except to the extent of
the portion thereof, if any, that is in excess of the Bank Debt so
refunded or refinanced, and (c) any Indebtedness refunding or refinancing
unsecured Indebtedness of the Company or any of the Subsidiaries
outstanding on the Effective Date. Indebtedness outstanding under the
New Bank Letter of Credit Facility shall constitute New Indebtedness.
NOTES -- means each Deal 1 Note, Deal 2 Note, Deal 3 Note, Deal 4
Note, Deal 5 Note, Deal 6 Note and Deal 7 Note and any such Note issued
in substitution therefor pursuant to the applicable provisions of any
Amended Transaction Document.
OPERATING GROUPS -- is defined in Section 5.1(a).
OPTIONAL PREPAYMENT PREMIUM -- is defined in Section 2.4(a).
ORIGINAL SECURITYHOLDER -- is defined in the introductory paragraph
of this Agreement.
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PAYDOWN TRUST ACCOUNT -- is defined in Section 2.3(a).
PAYDOWN TRUST AGREEMENT -- is defined in Section 4.6(a).
PBGC -- means the Pension Benefit Guaranty Corporation or any
successor thereto.
PERMITTED L/C REDUCTION -- is defined in Section 2.2(b).
PERSON -- means any individual, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association,
joint venture, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
PLAN -- means an employee benefit plan (as defined in Section 3(3)
of ERISA) which the Company or any member of the Controlled Group
sponsors or maintains or to which the Company or any member of the
Controlled Group makes, is making or is obligated to make contributions.
POTENTIAL EARLY REPURCHASE EVENT -- means any event or circumstance
which, with the giving of notice, the lapse of time, or both, would (if
not cured or otherwise remedied) constitute an Early Repurchase Event.
PREFERRED STOCK -- means any class of Capital Stock of a corporation
which is preferred over any other class of Capital Stock of such
corporation as to the payment of dividends or the payment of any amount
upon liquidation or dissolution of such corporation.
PREMIUM -- means, with respect to any Note held by any
Securityholder, the "Make-Whole Premium," the "Make Whole Amount," the
"Make Whole Payment" or the "Yield Maintenance Amount," as the case may
be, which would be payable upon the exercise of the Existing Rating
Decline Put Options, as each such term is defined in the Existing
Transaction Document to which such Securityholder (or any agent acting on
behalf of such Securityholder) has been a party (assuming, for purposes
of calculations under this Agreement, that references in such term (and
related terms used in connection with the calculation thereof in such
Existing Transaction Document) to the principal amount of the Notes are
references to the principal component of the Notes held by such
Securityholder).
PRINCIPAL COMPONENT -- is defined in Section 2.1(c).
PURCHASE AMOUNT -- is defined in Section 5.10(a).
RATABLE REDUCTION PRINCIPLE -- is defined in Recital F.
RENT EXPENSE -- means, for any period, consolidated rent expense of
the Company for such period determined in accordance with GAAP, minus
consolidated rental income of the Company for such period.
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REPORTABLE EVENT -- means, as to any Plan, (a) any of the events set
forth in Section 4043(b) of ERISA or the regulations thereunder, other
than any such event for which the 30-day notice requirement under ERISA
has been waived in regulations issued by the PBGC, or (b) a withdrawal
from a Plan described in Section 4062(e) of ERISA.
REPURCHASE CATCH-UP REDUCTION -- is defined in Section 2.2(b).
REPURCHASE COMMITMENT REDUCTION FRACTION -- is defined in Section
2.3(c).
REPURCHASE PAYDOWN/DEPOSIT FRACTION -- is defined in Section 2.2(b).
REPURCHASE PREMIUM COMPONENT -- is defined in Section 2.1(c).
REPURCHASE PRICE -- is defined in Section 2.1(c).
REPURCHASE RIGHT -- is defined in Section 1.
REQUISITE SECURITYHOLDERS -- means, at any time, Securityholders
holding at least a majority of the principal component of the Aggregate
Repurchase Price at such time (exclusive of the principal component of
the Repurchase Price of any Note then owned by any one or more of the
Company, any Subsidiary or any Affiliate).
RESTRICTED PAYMENT -- means, with respect to any Person,
(a) any dividend or other distribution, direct or indirect, or
the incurrence of any liability to make any other payment or
distribution of cash or other property or assets in respect of such
Person's Capital Stock (which shall include, without limitation,
preferred stock, common stock, options, warrants or any other
equity security),
(b) any payment on account of the purchase, prepayment,
conversion, exchange, redemption, retirement, surrender or
acquisition of such Person's Capital Stock or any other payment or
distribution made in respect thereof, either directly or
indirectly, and
(c) any purchase or other acquisition or payment in respect of
any option, warrant or other right to acquire any of, or any
interest in, such Person's Capital Stock;
provided, however, that "RESTRICTED PAYMENT" shall not include any of the
following:
(i) any dividend payable solely in shares of capital stock of
such Person, or
(ii) any purchase or exchange of existing employee stock
options for consideration consisting solely of new employee stock
options.
ROLLOFF -- is defined in the definition of "Permitted L/C Reduction"
in Section 2.2(b).
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SCHEDULED ASSETS -- means the assets of the Company identified on
Schedule VIII hereto.
SEASONAL CREDIT AGREEMENT -- means the Seasonal Credit Agreement
dated as of October 5, 1995, as amended from time to time, among the
Company, [ ], as Documentation Agent, and the other financial
institutions party thereto.
SECURITYHOLDER -- is defined in the introductory paragraph of this
Agreement.
SECURITYHOLDER ACCELERATION -- is defined in Section 2.5(b).
SECURITYHOLDER RATABLE ACCELERATION SHARE -- is defined in Section
2.5(b).
SECURITYHOLDER RATABLE COMMITMENT REDUCTION SHARE -- is defined in
Section 2.3(c).
SECURITYHOLDER RATABLE DEPOSIT SHARE -- is defined in Section
2.3(c).
SECURITYHOLDER RATABLE LOSS/RELEASE SHARE -- is defined in Section
2.5(d).
SECURITYHOLDER RATABLE PAYDOWN SHARE -- is defined in Section
2.2(b).
SET-OFF -- has the meaning ascribed thereto in the Setoff and
Sharing Agreement.
SETOFF AND SHARING AGREEMENT -- is defined in Section 4.9.
SET-OFF RECOVERY -- has the meaning ascribed thereto in the Setoff
and Sharing Agreement.
SPECIALTY RETAIL SUBSIDIARY -- means any of the following
Subsidiaries (or the continuing Investment of the Company in any such
entity): Builders Square; Borders, Inc; Coles Myer, Ltd.; OfficeMax,
Inc.; PACE Membership Warehouse, Inc.; PayLess Drug Stores Northwest,
Inc.; The Sports Authority, Inc.; and Walden Book, Inc.
SPIN-OFF CREDIT DOCUMENTS -- means, collectively, the documents
identified in Schedule IV hereto.
SPIN-OFF CREDITOR -- means, at any time, a holder of any Spin-Off
Creditor Debt.
SPIN-OFF CREDITOR DEBT -- means the Deal 8 Notes, Deal 9 Notes, Deal
10 Notes and Deal 11 Notes.
SPIN-OFF TENANT PUT AGREEMENTS -- means (a) with respect to the
holders of the Deal 8 Notes, the agreement identified in Item 8E of
Schedule IV hereto, (b) with respect to the holders of the Deal 9 Notes,
the agreement identified in Item 9E of Schedule IV hereto, (c) with
respect to the holders of the Deal 10 Notes, the agreements identified in
Items 10I and 10W of Schedule IV hereto, and (d) with respect to the
holders of the Deal
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11 Notes, the agreements identified in Items 11K, 11Q, 11X, 11AE, 11AL,
11AS, 11AZ, 11BG and 11BN of Schedule IV hereto.
SPIN-OFF TENANT PUT OPTIONS -- means the put options set forth in
the Spin-Off Tenant Put Agreements.
SPIN-OFF TENANTS -- is defined in Recital I.
SUBSIDIARY -- means any corporation of which stock having by the
terms thereof ordinary voting power to elect at least a majority of the
board of directors of said corporation is at the relevant time directly
or indirectly owned by the Company, by the Company and one or more
Subsidiaries, or by one or more Subsidiaries or any trust the majority of
the beneficial interests of which are owned by the Company or any
Subsidiary.
364 DAY CREDIT AGREEMENT -- means the 364 Day Credit Agreement
dated as of October 5, 1995, as amended from time to time, among the
Company, [ ], as Documentation Agent, and the other financial
institutions party thereto.
THREE YEAR CREDIT AGREEMENT -- means the Three Year Credit
Agreement dated as of October 7, 1994, as amended from time to time,
among the Company, [ ], as Documentation Agent, and the other financial
institutions party thereto.
TRIGGERING EVENT -- is defined in Section 2.1(b).
UNREIMBURSED PUT PAYMENT -- is defined in Section 5.10(b).
U.S. KMART -- a division of the Company which operates a chain of
over 2,100 of the Company's discount stores located throughout the fifty
states, Puerto Rico, the U.S. Virgin Islands and Guam.
VOTING STOCK -- means, with respect to any corporation, association
or other business entity, any Capital Stock of any class or classes of
such Person, if such Person is a corporation, or other voting equity
interests, if such Person is an association or other business entity, the
holders of which together
(a) are, in the case of such Person which is a corporation,
ordinarily, in the absence of contingencies, entitled to elect
corporate directors or classes of corporate directors and are not
otherwise limited in the exercise of the voting rights in respect
of such Capital Stock except upon default by the Company in
performance of its obligations in respect of Preferred Stock or
Indebtedness, or
(b) are, in the case of such Person that is an association or
other business entity, entitled to (i) elect or replace Persons
performing managerial functions similar to those of corporate
directors, (ii) elect or replace general partners or Persons
performing managerial functions similar to those of general
partners or (iii) perform functions similar to those of a corporate
director or a
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general partner or to otherwise directly manage such Person and, in
each such case in this clause (b), are not otherwise limited in the
exercise of such voting or managerial rights other than as
expressly provided in any applicable organic or constitutive
document of such Person or by applicable law.
WAL-MART -- is defined in Recital H.
WAL-MART NOTES -- is defined in Recital H.
WAL-MART TRUST -- is defined in Recital H.
WAREHOUSE FACILITY CREDIT AGREEMENT -- means the Warehouse Facility
Credit Agreement dated as of October 7, 1994, as amended from time to
time, among the Company and the other borrowers thereunder, [ ], as
Documentation Agent, and the other financial institutions party thereto.
8.2 GAAP.
Where the character or amount of any asset or liability or item of income
or expense, or any consolidation or other accounting computation is required to
be made for any purpose hereunder, it shall be done in accordance with GAAP as
in effect on the date of, or at the end of the period covered by, the financial
statements from which such asset, liability, item of income, or item of
expense, is derived, or, in the case of any such computation, as in effect on
the date as of which such computation is required to be determined, provided,
that if any term defined herein specifically includes or excludes amounts,
items or concepts that would not be included in or excluded from such term if
such term were defined solely with reference to GAAP, such term will be deemed
to include or exclude such amounts, items or concepts as set forth herein.
8.3 DIRECTLY OR INDIRECTLY.
Where any provision herein refers to action to be taken by any Person, or
which such Person is prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such Person, including
actions taken by or on behalf of any partnership in which such Person is a
general partner.
8.4 SECTION HEADINGS AND TABLE OF CONTENTS AND CONSTRUCTION.
(A) SECTION HEADINGS AND TABLE OF CONTENTS, ETC. The titles of the
Sections and the Table of Contents appear as a matter of convenience
only, do not constitute a part hereof and shall not affect the
construction hereof. The words "herein," "hereof," "hereunder" and
"hereto" refer to this Agreement as a whole and not to any particular
Section or other subdivision.
(B) INDEPENDENT CONSTRUCTION. Each covenant contained herein shall
be construed (absent an express contrary provision herein) as being
independent of each other covenant contained herein, and compliance with
any one covenant shall not (absent
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such an express contrary provision) be deemed to excuse compliance with
one or more other covenants.
SECTION 9. AMENDMENTS, WAIVERS AND CONSENTS
9.1 CONSENT REQUIRED.
Any term, covenant, agreement or condition of this Agreement may, with the
consent of the Company, be amended, or compliance therewith may be waived
(either generally or in a particular instance and either retroactively or
prospectively), with the consent in writing of the Requisite Securityholders;
provided that without the written consent of the Securityholders holding the
entire principal component of the Aggregate Repurchase Price then outstanding,
no such waiver, modification, alteration or amendment shall be effective which
will (i) waive any Early Repurchase Event arising under Section 7(a) or Section
7(b), (ii) decrease either of the time periods or the dollar amount set forth
in Section 7(j), (iii) amend any of the provisions of Section 1, Section 2 or
Section 5.2 (to the extent that the same would have the effect of (A) reducing
any amount payable thereunder or (B) delaying any such payment), or any of the
defined terms set forth therein, as used in such Sections, or (iv) change the
percentage of Securityholders required to consent to any such amendment,
alteration or modification; provided, further, that no amendment to Schedule IX
hereto shall be effective without the written consent of those parties to the
document referenced in such schedule whose written consent, in accordance with
the provisions of such document, is necessary for an amendment thereof.
Notwithstanding the foregoing, any term of this Agreement may be amended, with
the consent in writing of the Company and the Requisite Securityholders, if
such amendment is necessary or desirable for the purpose of curing or
correcting any defective or inconsistent provisions or clerical omission or
mistake or manifest error contained in this Agreement, provided that the rights
of the Securityholders herein are in no material respect prejudiced thereby.
9.2 EFFECT OF AMENDMENT OR WAIVER.
Any amendment or waiver shall apply equally to all of the Securityholders
and shall be binding upon them, upon each future Securityholder and upon the
Company, whether or not any Person shall have notice thereof. No such
amendment or waiver shall extend to or affect any obligation not expressly
amended or waived or impair any right consequent thereon. Executed or true and
correct copies of any waiver or consent effected pursuant to the provisions of
this Section 9 shall be delivered by the Company to each Securityholder
forthwith following the date on which the same shall have been executed and
delivered by the Securityholders holding the requisite percentage of the
principal component of the outstanding Aggregate Repurchase Price.
9.3 SOLICITATION OF SECURITYHOLDERS.
The Company will not solicit, request or negotiate for or with respect to
any proposed waiver or amendment of any of the provisions of this Agreement
unless each Securityholder (irrespective of the principal component of the
Notes then owned by it) shall be informed thereof by the Company. The Company
will not, and will not permit any Subsidiary or Affiliate to, directly or
indirectly, pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, to any Securityholder as
consideration for or as inducement to the entering into by any Securityholder
of any waiver or amendment of any of the terms and
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provisions of this Agreement unless such remuneration is concurrently paid, on
the same terms, ratably to all Securityholders in accordance with the
respective principal components of the Notes then held by each such
Securityholder.
SECTION 10. MISCELLANEOUS
10.1 NOTICES.
All communications provided for hereunder shall be in writing and, if to a
Securityholder, delivered or mailed by overnight courier or by facsimile
communication (confirmed in writing by overnight courier), in each case prepaid
and addressed (i) if to a Securityholder, to its address appearing on Schedule
I hereto or such other address as such Securityholder or any subsequent
Securityholder of any Note may designate to the Company in writing, and (ii) if
to the Company, to Kmart Corporation, 3100 West Big Beaver Road, Troy, MI
48084-3163, Attention: General Counsel, or to such other address as the
Company may in writing designate to each Securityholder.
10.2 COSTS AND EXPENSES. On the Closing Date, the Company shall pay all
reasonable costs and expenses of the Securityholders relating to the
negotiation, documentation and closing of this Agreement, including, but not
limited to, the statements for reasonable fees and disbursements of the
following special counsel presented to the Company on or prior to the Closing
Date and any such statement rendered thereafter in respect of such negotiation,
documentation and closing (including, without limitation, all post-closing
matters related thereto such as completion of the substitution of collateral
referred to in Section 5.5(e)(ii)):
(a) Hebb & Gitlin, a Professional Corporation, the Securityholders'
special counsel,
(b) Debevoise & Plimpton, special counsel to [ ],
(c) Stroock & Stroock & Lavan, special counsel to the
Securityholders holding the Deal 2 Notes and the Deal 4 Notes,
(d) Latham & Watkins, special counsel to [ ], and
(e) Weil, Gotshal & Manges, special counsel to [ ].
In addition, the Company will pay:
(i) all recording and filing fees and stamp taxes in connection with
recordation or filing and rerecordation or refiling of any of the
Collateral Amendment Agreements and financing and continuation statements
and other notices in connection therewith,
(ii) the cost of conducting all reasonable uniform commercial code,
judgment and tax lien searches,
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(iii) the reasonable fees, premiums and disbursements of First
American Title Insurance Company and Chicago Title Insurance Company and
related escrow fees in connection with title searches or endorsements to
existing loan policies of title insurance relating to the real properties
to which the Amended Transaction Documents relate), and
(iv) the reasonable fees and disbursements of the Disbursement Agent
and each trustee acting under the Amended Transaction Documents (the
"AMENDED TRANSACTION DOCUMENT TRUSTEES").
The Company will also pay, upon receipt thereof, each additional statement
for reasonable fees and disbursements of counsel referred to in the foregoing
clause (a) rendered after the Closing Date relating to (1) the ongoing
evaluation of the rights of the Securityholders with respect to the matters
contemplated by this Agreement and the rendering of legal advice to the
Securityholders as to such matters and (2) any amendments, waivers or consents
requested by the Company (whether or not adopted) pursuant to the provisions
hereof or pursuant to the Amended Transaction Documents or relating to any
work-out or restructuring of Indebtedness of the Company after the Effective
Date. The Company will also pay, upon receipt thereof, the reasonable fees and
disbursements of other counsel retained by any of the Securityholders relating
to the matters described in the foregoing clause (2) only in accordance with
the provisions of the Amended Transaction Documents, unless the Company shall
otherwise agree in writing. The provisions of this Section 10.2 shall not in
any way limit or otherwise affect the Company's obligations to reimburse costs
and expenses incurred by any Securityholder under any Amended Transaction
Document to which such Securityholder is a party.
The obligations of the Company under this Section 10.2 shall survive the
payment or prepayment of the Notes and the termination hereof.
10.3 INDEMNITY.
The Company agrees to indemnify and hold harmless the Securityholders, the
Disbursement Agent, the Amended Transaction Document Trustees and each of their
respective directors, officers and employees (each, an "INDEMNIFIED PERSON")
from and against any and all actions, suits, proceedings, settlements, damages,
liabilities and expenses ("COSTS") of any kind or nature whatsoever which may
be incurred by or asserted against any such Indemnified Person (a) as a result
of any default or Early Repurchase Event under this Agreement or any other
Financing Document, or (b) by any third party who has a relationship with the
Company and asserts in connection therewith that an Indemnified Person is
liable to such third party by reason of being a party to this Agreement or any
other Financing Document, provided that no Indemnified Person shall be
indemnified for any Costs to the extent attributable to its gross negligence,
willful misconduct or bad faith in performing its duties and obligations under
this Agreement or any other Financing Document.
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10.4 SURVIVAL.
All warranties, representations, certifications and covenants made by the
Company in this Agreement or in any certificate or other instrument delivered
by it or on its behalf under this Agreement shall be considered to have been
relied upon by the Securityholders and shall survive the execution of this
Agreement, regardless of any investigation made by or on behalf of any
Securityholder. All statements in any such certificate or other instrument
shall constitute warranties and representations of the Company under this
Agreement.
10.5 POWERS AND RIGHTS NOT WAIVED; REMEDIES CUMULATIVE.
No delay or failure on the part of any Securityholder in the exercise of
any power or right shall operate as a waiver thereof; nor shall any single or
partial exercise of the same preclude any other or further exercise thereof, or
the exercise of any other power or right, and the rights and remedies of each
Securityholder are cumulative to and are not exclusive of any rights or
remedies any such Securityholder would otherwise have, and no waiver or consent
given or extended pursuant to Section 9.1 shall extend to or affect any
obligation or right not expressly waived or consented to.
10.6 REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating hereto, including without
limitation (a) consents, waivers and modifications which may hereafter be
executed, (b) documents received by the Securityholders or the Company in
connection with the satisfaction of the conditions precedent to the Closing
Date, and (c) financial statements, certificates and other information
previously or hereafter furnished to the Securityholders, may be reproduced by
the Securityholders or the Company or any of them by any photographic,
photostatic, microfilm, micro-card, miniature photographic or other similar
process, and such Securityholders may destroy any original document so
reproduced. The Company and the Securityholders agree and stipulate that, to
the extent permitted by applicable law, any such reproduction which is legible
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made in the regular course of business)
and that any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence; provided that nothing
herein contained shall preclude the Company or the Securityholders from
objecting to the admission of any reproduction on the basis that such
reproduction is not accurate, has been altered or is otherwise incomplete.
10.7 AUTHORIZATION OF DISBURSEMENT AGENT.
By the execution of this Agreement, each Securityholder thereby authorizes
the Disbursement Agent to enter into the Paydown Trust Agreement, and agrees
and consents to all of the provisions thereof.
10.8 INTEGRATION; SEVERABILITY.
This Agreement, the other Financing Documents and the Amended Transaction
Documents embody the entire agreement and understanding between the
Securityholders and
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the Company, and supersede all prior oral or written agreements and
understandings (including, without limitation, the Agreement in Principle)
relating to the subject matter hereof and thereof. In case any one or more of
the provisions contained in this Agreement, any Financing Document or any
Amended Transaction Document, or the application thereof, shall be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein, and
any other application thereof, shall not in any way be affected or impaired
thereby and it is hereby declared the intention of the parties that they would
have executed the remaining portion of this Agreement without including therein
any such part, parts, or portion which may, for any reason, be hereafter
declared invalid, illegal or unenforceable.
10.9 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon the Company and its successors and
assigns and shall inure to the benefit of each of the Securityholders and to
the benefit of their respective successors and assigns; provided, however, that
the Company shall not assign its obligations under this Agreement without the
prior written consent of the Securityholders of the entire principal component
of the Aggregate Repurchase Price.
10.10 GOVERNING LAW.
This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of New York.
10.11 SUBMISSION TO JURISDICTION.
The Company hereby consents to the jurisdiction of any state or federal
court located within the County of New York, State of New York, and irrevocably
agrees that all actions or proceedings relating to this Agreement may be
litigated in such courts, and the Company waives, to the fullest extent
permitted by law, any objection which it may have based on improper venue or
forum non conveniens to the conduct of any proceeding in any such court and
waives personal service of any and all process upon it, and consents that all
such service of process may be made by registered or certified mail (return
receipt requested) or messenger directed to it at its address set forth in
Section 10.1 or to its agent referred to below at such agent's address set
forth below and that service so made shall be deemed to be completed in
accordance with Section 10.1. The Company hereby irrevocably appoints CT
Corporation System, with an office on the date hereof at 1633 Broadway, New
York, New York 10019, as its agent for the purpose of accepting service of any
process within the State of New York. Nothing contained in this Section 10.11
shall affect the right of any Securityholder to serve legal process in any
other manner permitted by law or to bring any action or proceeding in the
courts of any jurisdiction against the Company or to enforce a judgment
obtained in the courts of any other jurisdiction.
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10.12 WAIVER OF JURY TRIAL.
THE COMPANY AND THE SECURITYHOLDERS WAIVE THEIR RESPECTIVE RIGHTS TO A
TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR
RELATED TO THIS AGREEMENT, THE OTHER FINANCING DOCUMENTS OR THE AMENDED
TRANSACTION DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN
ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT
CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY AND THE SECURITYHOLDERS AGREE
THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT WITHOUT A
JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY ARE WAIVED BY OPERATION OF THIS SECTION AS
TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT, THE OTHER
FINANCING DOCUMENTS OR THE AMENDED TRANSACTION DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, THE OTHER FINANCING
DOCUMENTS AND THE AMENDED TRANSACTION DOCUMENTS.
10.13 DUPLICATE ORIGINALS; EXECUTION IN COUNTERPART.
Two or more duplicate originals of this Agreement may be signed by the
parties, each of which shall be an original but all of which together shall
constitute one and the same instrument. This Agreement may be executed in one
or more counterparts and shall be effective when at least one counterpart shall
have been executed by each party to this Agreement, and each set of
counterparts which, collectively, show execution by each such party to this
Agreement shall constitute one duplicate original.
[Remainder of page intentionally blank. Next page is signature page.]
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IN WITNESS WHEREOF, the Company and the Securityholders have executed
this Agreement as of the date first above written.
KMART CORPORATION
By:____________________________
Name:
Title:
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[Restructuring Agreement Signatures]
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LETTER OF CREDIT ISSUANCE AGREEMENT
This LETTER OF CREDIT ISSUANCE AGREEMENT (this "Agreement") is entered
into as of this 29th day of February, 1996 among [ ](collectively, the
"Banks"), Kmart Corporation ("Kmart" or the "Borrower") and [ ], as Agent.
W I T N E S S E T H:
WHEREAS, each Bank has issued letters of credit for the benefit of
Kmart as account party under individual arrangements and agreements between
such Bank and the Borrower, apart from certain arrangements for the issuance of
letters of credit by certain of the Banks under the Three Year Credit Agreement
(as hereafter defined); and
WHEREAS, each Bank has agreed to continue to issue letters of credit
subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings herein contained and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, each Bank and
Kmart hereby agree as follows:
ARTICLE I
Section 1.01 Defined Terms. Capitalized terms defined herein shall
have the meanings ascribed thereto in this Agreement or, if not otherwise
defined herein, shall have the meanings ascribed to such terms in the Three
Year Credit Agreement as in effect on the date hereof. The following terms
shall have the following meanings:
"Adjusted Availability" means, (i) for any Trade A Bank, at the time of
determination, such Bank's Availability, (ii) for any Trade B Bank, at the time
of determination, such Trade B Bank's Availability less the aggregate amount of
participations of such Trade B Bank in Reimbursement Obligations purchased from
another Trade B Bank and plus the aggregate amount of participations of such
Trade B Bank in Reimbursement Obligations sold to another Trade B Bank, in each
case pursuant
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to Section 4.01(a) or (iii) for any Standby Bank, at the time of
determination, such Standby Bank's Availability less the aggregate amount of
participations of such Standby Bank in Reimbursement Obligations purchased
from another Standby Bank and plus the aggregate amount of participations of
such Standby Bank in Reimbursement Obligations sold to another Standby Bank,
in each case pursuant to Section 4.01(b).
"Affiliate" means, as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, by contract or otherwise. In no
event shall any Bank be deemed an "Affiliate" of the Borrower or any Subsidiary
of the Borrower.
"Agent" means [ ] or such other Bank designated by the Required LC
Issuance Banks.
"Agent-Related Persons" means [ ] and any successor agent under
Section 9.09, together with their respective Affiliates and the
officers, directors, employees, agents and attorneys-in-fact of such Persons
and Affiliates.
"Aggregate Credit Exposure" means, as of any date of determination, the
sum of (i) the aggregate principal amount of all loans then outstanding under
the Kmart Credit Agreements, which are either direct obligations of Kmart as a
borrower or obligations of Kmart as a guarantor or surety, (ii) the aggregate
amount of all unreimbursed obligations on letters of credit issued under the
Kmart Credit Agreements which have been drawn and honored and (iii) the
aggregate undrawn face amount of all letters of credit issued under the Kmart
Credit Agreements which are either (x) outstanding or (y) expired and under
which the beneficiary thereunder disputes the refusal of the issuing bank to
honor a requested draw thereunder for so long as such dispute shall not have
been resolved (to the extent of the amount of such dispute).
"Attorney Costs" means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the reasonable
allocated cost of internal legal services and all reasonable disbursements of
internal counsel.
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"Availability" means for any Trade A Bank, Trade B Bank or Standby
Bank, at the time of determination, such Bank's Maximum Trade A L/C Commitment
Amount, Maximum Trade B L/C Commitment Amount or Maximum Standby L/C Commitment
Amount, as applicable, less without duplication the sum of (i) Contingent LC
Indebtedness of such Bank and (ii) the Unpaid Reimbursement Obligations to such
Bank.
"Average L/C Outstandings" mean, with respect to each Bank, for each
period of determination, (i) the aggregate undrawn outstanding face amount of
all Letters of Credit (including Existing Letters of Credit) issued by such
Bank and outstanding on each day in such period divided by (ii) the number of
days in such period.
"Big Beaver I Credit Agreement" means that certain Loan Agreement dated
as of January 21, 1992 among the borrowers named therein, the financial
institutions signatory thereto and [ ], as managing agent.
"Big Beaver II Credit Agreement" means that certain Loan Agreement
dated as of August 7, 1992 among the borrowers named therein, the financial
institutions signatory thereto and [ ], as agent.
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks in New York City or San Francisco are authorized or
required by law to close.
"Capitalized Lease Obligations" means, in relation to any Person,
obligations for the payment of rent for any real or personal property under
leases or agreements to lease that, in accordance with GAAP, have been or
should be capitalized on the books of the lessee and, for purposes hereof, the
amount of any such obligation shall be the capitalized amount thereof
determined in accordance with GAAP.
"Ceiling Amount" shall have the meaning ascribed to such term in each
of the Kmart Credit Agreements.
"Closing Date" means the date on which all conditions precedent set
forth in Section 3.01 are satisfied or waived by all Banks.
"Collateral Agent" shall mean [ ].
"Collateral and Intercreditor Agreement" means that certain Collateral
and Intercreditor Agreement dated as of December 22, 1995 by and among (i) the
Collateral Agent, (ii)
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the Banks, (iii) [ ], as agent (x) for the financial institutions party to the
Three Year Credit Agreement, (y) for the financial institutions party
to the 364 Day Credit Agreement and (z) for the financial institutions party to
the Seasonal Credit Agreement and (iv) [ ], as agent (x) for the financial
institutions party to the Big Beaver I Credit Agreement, (y) for the financial
institutions party to the Big Beaver II Credit Agreement and (z) for the
financial institutions party to the Warehouse Facility Credit Agreement.
"Consolidated Net Worth" means as of the date of any determination
thereof, the consolidated net worth of the Borrower, determined in accordance
with GAAP; provided, however, that any gains or losses from the disposition of
any Specialty Retail Subsidiary (or from any write-downs of the Borrower's
investment in any Specialty Retail Subsidiary or in Builder's Square, Inc.,
Kmart Canada Ltd., Kmart CR a.s., Kmart SR a.s. and Kmart s.r.o. permitted
under the Financial Accounting Standards Board Statement No. 121 prior to any
such disposition) and any changes after the Closing Date in the foreign
currency translation adjustment account as presented in the Borrower's
financial statements (and in accordance with GAAP) shall be excluded from the
determination of Consolidated Net Worth.
"Contingent LC Indebtedness" means, at any time, (a) the aggregate
undrawn face amount of all outstanding Letters of Credit at such time, plus (b)
the aggregate undrawn face amount of any expired Letters of Credit under which
the beneficiary disputes the refusal of the issuing bank to honor a requested
draw thereunder for so long as such dispute shall not have been resolved (but
only to the extent of such dispute) plus (c) the aggregate undrawn face amount
of all Letters of Credit which have expired less than 21 days prior to such
time.
"Cross Facility Participation Purchase Price" shall have the meaning
ascribed to such term in Section 4.02.
"EBITDAR" means, for any applicable period, for the Borrower the
aggregate of the following, without duplication: (a) consolidated net income
for such period, plus (b) consolidated interest expense (net of any interest
income) for such period, plus (c) consolidated provision for taxes for such
period, plus (d) consolidated depreciation expense for such period, plus (e)
consolidated amortization expense for such period, plus (f) consolidated Rent
Expenses for such period, minus (or plus, as applicable) (g) on a consolidated
basis, any extraordinary gains (or plus extraordinary losses) for such period
(including any loss resulting from any write-downs of the Borrower's investment
in Builder's Square, Inc., Kmart
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Canada Ltd., Kmart CR a.s., Kmart SR a.s. or Kmart s.r.o. permitted under
the Financial Accounting Standards Board Statement No. 121), minus (or plus,
as applicable) (h) any gains (or plus any losses) attributable to the
Specialty Retail Subsidiaries for such period other than results of
operations in the ordinary course of business, plus (i) solely with respect
to the four fiscal quarters ending in October 1994, the $1.348 billion
restructuring charge recorded in the fourth fiscal quarter of the Borrower's
fiscal year ending January 26, 1994, minus (or plus, as applicable) (j) any
gains (or losses) realized from the sale of Kmart Canada Ltd. and each of
its Subsidiaries, Kmart CR a.s. (Czech operations), Kmart SR a.s. (Slovak
operations) and Kmart s.r.o. (servicer of Czech and Slovak operations).
"Effective Date" means December 22, 1995.
"Event of Default" means any of the events or circumstances specified
in Section 8.01.
"Existing Letters of Credit" means Existing Trade A Letters of Credit,
Existing Trade B Letters of Credit and Existing Standby Letters of Credit.
"Existing Trade A Letters of Credit" means with respect to each Trade A
Bank, the Trade Letters of Credit issued by such Trade A Bank and outstanding
as of the Effective Date in the aggregate outstanding face amount set forth
beside the name of such Trade A Bank on Exhibit A hereto.
"Existing Trade B Letters of Credit" means with respect to each Trade B
Bank, the Trade Letters of Credit issued by such Trade B Bank and outstanding
as of the Effective Date in the aggregate outstanding face amount set forth
beside the name of such Trade B Bank on Exhibit B hereto.
"Existing Standby Letters of Credit" means with respect to each Standby
Bank, the Standby Letters of Credit issued by such Standby Bank and outstanding
as of the Effective Date in the aggregate outstanding face amount set forth
beside the name of such Standby Bank on Exhibit C hereto.
"Federal Funds Rate" shall have the meaning ascribed to such term in
the Three Year Credit Agreement as in effect on the date hereof.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial
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Accounting Standards Board or in such other statements by such other entity
as may be in general use by significant segments of the United States
accounting profession, which are applicable to the circumstances as of the
date of determination.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, or any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.
"Guaranty Obligation" means, as applied to any Person, any obligation,
direct or indirect, of that Person guaranteeing any Indebtedness of any other
Person, and, without limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such Person:
(i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness (whether arising by agreement
to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or
otherwise); or
(ii) entered into for the purpose of assuring in any other
manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in
part);
provided, that the term Guaranty Obligation shall not include:
(a) endorsements for collection or deposit in the ordinary course of
business;
(b) obligations that are not required in accordance with GAAP
to be included in the financial statements of such Person or the footnotes
thereto; or
(c) "unconditional purchase obligations" (including take-or-pay
contracts) as defined in and as required to be disclosed pursuant to
Statement of Financial Accounting Standards No. 47 and the related
interpretations, as the same may be amended from time to time.
"Indebtedness" of any Person means at any date without duplication,
(a) all obligations of such Person for borrowed money;
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(b) all obligations of such Person evidenced by bonds, debentures,
notes or similar instruments;
(c) all obligations of such Person to pay the deferred purchase price
of property or services, except trade accounts payable and other expenses
and accounts payable arising in the ordinary course of business;
(d) all reimbursement obligations with respect to letters of credit
and bankers' acceptances except ordinary trade credits;
(e) all Indebtedness of others secured by a Lien on any asset of such
Person whether or not such Indebtedness is assumed by such Person;
(f) all obligations (to the extent capitalized for accounting
purposes) of such Person as lessee under any lease of any property by that
Person as lessee which, in conformity with GAAP, is accounted for as a
capital lease on the balance sheet of that Person; and
(g) all Guaranty Obligations of such Person.
"Insolvency Proceeding" means (a) any case, action or proceeding before
any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up
or relief of debtors, including the commencement of a voluntary case under the
federal bankruptcy laws, or (b) any general assignment for the benefit of
creditors, composition, marshalling of assets for creditors or other, similar
arrangement in respect of its creditors generally or any substantial portion of
its creditors; in each case (a) and (b) undertaken under United States federal,
State or foreign law.
"Issuance Date" means the date on which a Letter of Credit is issued.
"Kmart Credit Agreements" means, collectively: (a) the Three Year
Credit Agreement, (b) the 364 Day Credit Agreement, (c) the Seasonal Credit
Agreement, (d) the Big Beaver I Credit Agreement, (e) the Big Beaver II Credit
Agreement and (f) the Warehouse Facility Credit Agreement; in each case as
amended through the date hereof and as further amended, restated, supplemented
or modified from time to time.
"Kmart Credit Agreement Banks" means the financial institutions party
to the Kmart Credit Agreements.
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"Kmart Pledge Agreement" means that certain Kmart Pledge Agreement
dated as of December 22, 1995 by the Borrower in favor of the Collateral Agent.
"L/C Letter Agreement" means that certain letter agreement dated as of
December 22, 1995 pursuant to which the Banks agreed to issue and extend
Letters of Credit, and the issuance terms of which have been definitively
documented by this Agreement.
"Letters of Credit" means Existing Letters of Credit and Letters of
Credit issued pursuant to this Agreement and the L/C Letter Agreement.
"Lien" means any mortgage, deed of trust, pledge, charge, encumbrance,
lien (statutory or other) or security interest of any nature whatsoever
(including those created by, arising under or evidenced by any conditional sale
or other title retention agreement), and any assignment or deposit arrangement
intended as or having the effect of security.
"Loan Documents" means this Agreement, the Letters of Credit, all
reimbursement agreements in respect of Letters of Credit, and the Security
Documents.
"Material Adverse Effect" means a material adverse change in, or
material adverse effect upon, (a) the business, financial condition,
operations, assets or prospects of the Borrower, or of the Borrower and its
Subsidiaries taken as a whole, or (b) the Borrower's ability to perform its
obligations under this Agreement or any of the Loan Documents or (c) the
validity or enforceability of this Agreement or any of the Loan Documents;
provided, however, that any past or future reduction in the Borrower's credit
rating or decline in the market price of the Borrower's stock shall not of
themselves be deemed to constitute a Material Adverse Effect.
"Maximum Standby L/C Commitment Amount" means, with respect to each
Standby Bank, the aggregate undrawn face amount of Existing Standby Letters of
Credit less, without duplication, the aggregate of (i) twenty percent (20%) of
the face amount of each Existing Standby Letter of Credit which is paid to the
beneficiary thereof, extended or renewed, (ii) the face amount (or portion
thereof) of Existing Standby Letters of Credit which expire undrawn or unused
due to a reduction in or elimination of the amount of the underlying obligation
or expire undrawn or unused and are not replaced by a standby letter of credit
in respect of the same underlying obligation and (iii) concurrent with the
making after the Effective Date of any principal payment under the Kmart
Credit Agreements to the
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Kmart Credit Agreements Banks which permanently reduces the commitments of
such institutions or the Ceiling Amounts, an amount equal to such payment
multiplied by a fraction, the numerator of which equals the Maximum Standby
L/C Commitment Amount at such time (and before giving effect to such
payment and reduction) and the denominator of which equals the aggregate
amount of the Ceiling Amounts under the Kmart Credit Agreements at such
time (and before giving effect to such payment and reduction).
"Maximum Trade A L/C Commitment Amount" means, with respect to each
Trade A Bank, the aggregate undrawn face amount of Existing Trade A Letters of
Credit less, without duplication, the aggregate of (i) twenty percent (20%) of
the face amount of each Existing Trade A Letter of Credit which is paid to the
beneficiaries thereof or in respect of which amounts are paid directly to the
beneficiaries by Kmart, (ii) the face amount (or portion thereof) of Existing
Trade A Letters of Credit which expire undrawn or unused (except with respect
to Existing Trade A Letters of Credit as to which the beneficiary is paid
directly by Kmart) and (iii) concurrent with the making after the Effective
Date of any principal payment under the Kmart Credit Agreements to the Kmart
Credit Agreement Banks which permanently reduces the commitment of such
institutions or the Ceiling Amounts, an amount equal to such payment multiplied
by a fraction, the numerator of which equals the Maximum Trade A L/C Commitment
Amount at such time (and before giving effect to such payment and reduction)
and the denominator of which equals the aggregate amount of the Ceiling Amounts
under the Kmart Credit Agreements at such time (and before giving effect to
such payment and reduction).
"Maximum Trade B L/C Commitment Amount" means, with respect to each
Trade B Bank, the aggregate undrawn face amount of Existing Trade B Letters of
Credit less, without duplication, the aggregate of (1) the face amount (or
portion thereof) of Existing Trade B Letters of Credit which expire undrawn or
unused (except with respect to Existing Trade B Letters of Credit as to which
the beneficiary is paid directly by Kmart) and (ii) concurrent with the making
after the effective date of any principal payment under the Kmart Credit
Agreements to the Kmart Credit Agreement Banks which permanently reduces the
commitments of such institutions or the Ceiling Amounts, an amount equal to
such payment multiplied by a fraction, the numerator of which equals the
Maximum Trade B L/C Commitment Amount at such time (and before giving effect to
such payment and reduction) and the denominator of which equals the aggregate
amount of the Ceiling Amounts under the Kmart Credit Agreements at such time
(and before giving effect to such payment and reduction).
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"New Indebtedness" means Indebtedness incurred by the Borrower or a
Subsidiary after the Restructuring Effective Date other than (i) any
Indebtedness under the Kmart Credit Agreements, (ii) Indebtedness under or
Indebtedness refunding or refinancing the Real Estate Debt or (iii)
Indebtedness refunding or refinancing unsecured Indebtedness of the Borrower
outstanding on the Restructuring Effective Date. Indebtedness outstanding
under this Agreement shall constitute New Indebtedness.
"Obligations" means all Contingent LC Indebtedness, Unpaid
Reimbursement Obligations and other liabilities (if any), whether actual or
contingent, of the Borrower in respect of Letters of Credit and all other
Indebtedness, advances, debts, liabilities, obligations, covenants and duties
owing by the Borrower to any Bank, the Agent, or to any other Person required
to be indemnified under any Loan Document, of any kind or nature, present or
future, whether or not evidenced by any note, guaranty or other instrument,
arising under this Agreement or under any other Loan Document, whether direct
or indirect (including those acquired by assignment), absolute or contingent,
due or to become due, now existing or hereafter arising and however acquired.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, estate,
unincorporated association, joint venture or Governmental Authority or other
entity.
"Potential Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or otherwise
remedied) constitute an Event of Default.
"Reference Rate" shall have the meaning ascribed to such term in the
Three Year Credit Agreement as in effect on the date hereof.
"Reimbursement Obligation" means Kmart's obligation to reimburse a Bank
on account of any drawing under any Letter of Credit, as provided in Section
2.02, and as provided in any separate reimbursement agreements between Kmart
and such Bank.
"Required LC Issuance Banks" means, as of any date, Banks holding at
least fifty-one percent (51%) of the aggregate of (i) the Maximum Trade A L/C
Commitment Amounts, (ii) the Maximum Trade B L/C Commitment Amounts and (iii)
the Maximum Standby L/C Commitment Amounts.
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"Scheduled Assets" means the assets of the Borrower identified on
Schedule 1.01 hereto.
"Seasonal Credit Agreement" means the revolving credit facility
evidenced by that certain Seasonal Credit Agreement dated as of October 5, 1995
among Kmart, [ ], as documentation agent thereunder, and the financial
institutions signatory thereto.
"Security Documents" means the Kmart Pledge Agreement, the Collateral
and Intercreditor Agreement and all other agreements, instruments or contracts
in respect of which the Collateral Agent, any Bank or any nominee, agent or
representative thereof shall have any rights, liens or other interests as
security for the payment or performance of all or any part of the Obligations.
"Standby Banks" means each Bank listed on Exhibit C hereto.
"Standby Commitment Percentage" shall have the meaning ascribed to such
term in Section 4.01(b).
"Standby Letter of Credit" means standby letters of credit issued by a
Standby Bank.
"Subsidiary" means any corporation of which stock having by the terms
thereof ordinary voting power to elect at least a majority of the board of
directors of said corporation is at the time directly or indirectly owned by
the Borrower or by the Borrower and one or more Subsidiaries or by one or more
Subsidiaries.
"Termination Date" means February 28, 1997.
"364 Day Credit Agreement" means the revolving credit facility
evidenced by that certain 364 Day Credit Agreement dated as of October 5, 1995
among the Borrower, [ ], as documentation agent thereunder, and the financial
institutions signatory thereto.
"Three Year Credit Agreement" means the revolving credit facility
evidenced by that certain Three Year Credit Agreement dated as of October 7,
1994 among the Borrower, [ ], as documentation agent thereunder, and the
financial institutions signatory thereto.
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"Titled Letters of Credit" shall have the meaning ascribed to such term
in Section 2.01(b)(ii).
"Trade A Banks" means each Bank listed on Exhibit A hereto.
"Trade A Letters of Credit" means Trade Letters of Credit issued by the
Trade A Banks.
"Trade B Banks" means each Bank listed on Exhibit B hereto.
"Trade B Commitment Percentage" shall have the meaning ascribed to such
term in Section 4.01(a).
"Trade B Letters of Credit" means Trade Letters of Credit issued by the
Trade B Banks.
"Trade Letters of Credit" means a trade or commercial Letter of Credit
issued by a Trade A Bank or a Trade B Bank.
"Trigger Date" means the earliest to occur of (w) the date any
Insolvency Proceeding is commenced by the Borrower, (x) any Insolvency
Proceeding shall have been commenced against the Borrower and an order for
relief shall be entered therein or such Insolvency Proceeding shall not have
been dismissed within sixty (60) days after commencement thereof, (y) the date
on which any of the loans under the Kmart Credit Agreements shall be declared
or shall deemed to be immediately due and payable (except with respect to the
failure to pay when due the principal amount under the credit agreement
described in clause (d) of the definition of Kmart Bank Credit Agreements to
the extent such failure is the subject of an effective forbearance agreement)
and (z) October 3, 1997.
"Unpaid Reimbursement Obligation" means any Reimbursement Obligation
for which Kmart has not reimbursed the issuing Bank.
"Warehouse Facility Credit Agreement" means the credit facilities
evidenced by that certain Warehouse Facility Credit Agreement dated as of
October 7, 1994 among the Borrower, the other borrowers named therein, [ ],
as documentation agent thereunder, and the financial institutions signatory
thereto.
Section 1.02 Other Definitional Provisions.
(a) Defined Terms. Unless otherwise specified herein or therein, all
terms defined in this Agreement shall
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have such defined meanings when used in any certificate or other document
made or delivered pursuant hereto. The meaning of defined terms shall be
equally applicable to the singular and plural forms of the defined terms.
(b) The Agreement. The words "hereof", "herein", "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, schedule and exhibit references are to this Agreement unless otherwise
specified.
(c) Certain Common Terms.
1. The term "documents" includes any and all instruments, documents,
agreements, certificates, indentures, notices and other writings, however
evidenced.
2. The term "including" is not limiting and means "including without
limitation."
(d) Performance; Time. Whenever any performance obligation hereunder
(other than a payment obligation) shall be stated to be due or required to be
satisfied on a day other than a Business Day, such performance shall be made or
satisfied on the next succeeding Business Day. In the computation of periods
of time from a specified date to a later specified date, the word "from" means
"from and including"; the words "to" and "until" each mean "to but excluding",
and the word "through" means "to and including". If any provision of this
Agreement refers to any action taken or to be taken by any Person, or which
such Person is prohibited from taking, such provision shall be interpreted to
encompass any and all means, direct or indirect, of taking, or not taking, such
action.
(e) Contracts. Unless otherwise expressly provided herein, references
to agreements and other contractual instruments shall be deemed to include all
subsequent amendments and other modifications thereto, but only to the extent
such amendments and other modifications are not prohibited by the terms of this
Agreement.
(f) Laws. References to any statute or regulation are to be construed
as including all statutory and regulatory provisions consolidating, amending or
replacing the statute or regulation.
(g) Captions. The captions and headings of this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
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Section 1.03 Accounting Principles.
(a) Unless the context otherwise clearly requires, all accounting
terms not expressly defined herein shall be construed, and all financial
computations required under this Agreement shall be made, in accordance with
GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter" refer to
such fiscal periods of the Borrower.
ARTICLE II
ISSUANCE OF LETTERS OF CREDIT
Section 2.01 Amendment of Issuance Terms and Conditions. Provided
that no Event of Default has occurred and is continuing and provided further
that borrowings and letter of credit issuances are not unavailable under the
Three Year Credit Agreement as a result of a "Potential Default" thereunder,
and subject to the other conditions to the issuance of a Letter of Credit set
forth in Section 3.02 hereof, each Bank agrees that it will continue to issue
Letters of Credit at the request of Kmart, subject to the following terms and
conditions and also subject to the customary operating procedures instituted by
each Bank with respect to the issuance of letters of credit:
(a) Trade A Banks. After the date hereof, until the Termination Date,
each Trade A Bank agrees to issue Trade Letters of Credit payable upon
presentation of sight drafts from time to time at the request and for the
account of Kmart; provided that after giving effect to any such issuance,
the aggregate undrawn face amount of outstanding Trade A Letters of Credit
issued by such Bank shall not exceed such Bank's Maximum Trade A L/C
Commitment Amount less the Unpaid Reimbursement Obligation to such Trade A
Bank. If at any time, the aggregate face amount of outstanding Trade A
Letters of Credit issued by any Trade A Bank exceeds such Trade A Bank's
Maximum Trade A L/C Commitment Amount by reason of reductions in the Maximum
Trade A L/C Commitment Amount pursuant to clauses (ii) and (iii) of the
definition thereof (after giving effect to such reduction), then Kmart shall
concurrently provide such Bank with cash collateral for the Reimbursement
Obligations to such Trade A Bank in an amount equal to the difference
between the Maximum Trade A L/C Commitment Amount (as so reduced) and the
aggregate undrawn face amount of all Trade A Letters of Credit issued by
such
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Trade A Bank and outstanding at such time, pursuant to a cash collateral
agreement reasonably acceptable to such Trade A Bank. The Trade A Banks
also agree that amendments and/or extensions will continue to be made to
Trade A Letters of Credit in accordance with customary past practices,
subject to the other provisions of this Agreement. Each Trade A Letter
of Credit shall have an expiry date no later than 120 days from the date of
issuance. No Trade A Letter of Credit shall have an expiry date after the
Termination Date, unless, with the consent of such Trade A Bank, Kmart
agrees in writing, at the time of issuance thereof, to provide on the
Termination Date cash collateral in an amount equal to the aggregate undrawn
face amount of such Trade A Letter of Credit, pursuant to a cash collateral
agreement reasonably acceptable to such Trade A Bank.
(b) Trade B Banks.
(i) Commitment to Issue. After the date hereof, until the
Termination Date, each Trade B Bank agrees to issue Trade Letters of Credit
payable upon presentation of sight drafts from time to time at the request
and for the account of Kmart; provided that after giving effect to any such
issuance, the aggregate undrawn face amount of outstanding Trade B Letters
of Credit issued by such Bank shall not exceed such Bank's Maximum Trade B
L/C Commitment Amount less the Unpaid Reimbursement Obligation to such Trade
B Bank. If at any time, the aggregate face amount of outstanding Trade B
Letters of Credit issued by any Trade B Bank exceeds such Trade B Bank's
Maximum Trade B L/C Commitment Amount by reason of reductions in the Maximum
Trade B L/C Commitment Amount pursuant to clauses (i) and (ii) of the
definition thereof (after giving effect to such reduction), then Kmart shall
concurrently provide such Bank with cash collateral for the Reimbursement
Obligations to such Bank in an amount equal to the difference between the
Maximum Trade B L/C Commitment Amount (as so reduced) and the aggregate
undrawn face amount of all Trade B Letters of Credit issued by such Trade B
Bank and outstanding at such time, pursuant to a cash collateral agreement
reasonably acceptable to such Trade B Bank. The Trade B Banks also agree
that amendments and/or extensions will continue to be made to Trade B
Letters of Credit in accordance with customary past practices, subject to
the other provisions of this Agreement. Each Trade B Letter of Credit shall
have an expiry date no later than 120 days from the date of issuance. No
Trade B Letter of Credit shall have an expiry date after the Termination
Date, unless, with the consent of such
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Trade B Bank, Kmart agrees in writing, at the time of issuance
thereof, to provide on the Termination Date cash collateral in an amount
equal to the aggregate undrawn face amount of such Trade B Letter of Credit,
pursuant to a cash collateral agreement acceptable to such Trade B Bank.
(ii) Titled Letters of Credit. Notwithstanding any other term or
condition of this Agreement, at the time of issuance of each Trade B Letter
of Credit, after giving effect to such issuance, Kmart shall have secured
its Reimbursement Obligations in respect of Titled Letters of Credit by
pledging (pursuant to customary documentation in form and substance
reasonably satisfactory to such Trade B Bank) to such Trade B Bank all
shipping documents, warehouse receipts, policies or certificates of
insurance and other documents or instruments accompanying or relating to
drafts to be drawn under Titled Letters of Credit. "Titled Letters of
Credit" shall mean an aggregate face amount of Trade B Letters of Credit
issued after the Effective Date equal to thirty five percent (35%) (or as
close to 35% as denominations of such Letters of Credit permit) of the
aggregate face amount of the Existing Trade B Letters of Credit of such
Trade B Bank which are paid to the beneficiaries thereof or in respect of
which amounts are paid directly to the beneficiaries by Kmart. Kmart agrees
that all bills of lading and, to the extent applicable, other documents
thereunder, relating to the Titled Letters of Credit shall be negotiable and
shall be drawn to the order of the Trade B Bank issuing the Titled Letters
of Credit in question, and no Titled Letters of Credit shall provide for
"air delivery".
(c) Standby Banks. After the date hereof, until the Termination Date,
each Standby Bank agrees to issue Standby Letters of Credit supporting
obligations comparable to those obligations underlying Existing Standby
Letters of Credit issued by such Standby Bank and extend Existing Standby
Letters of Credit from time to time at the request and for the account of
Kmart; provided that after giving effect to any such issuance or extension,
the aggregate undrawn face amount of outstanding Standby Letters of Credit
issued by such Bank shall not exceed such Bank's Maximum Standby L/C
Commitment Amount less the Unpaid Reimbursement Obligation to such Standby
Bank. If at any time, the aggregate face amount of outstanding Standby
Letters of Credit issued by any Standby Bank exceeds such Standby Bank's
Maximum Standby L/C Commitment Amount by reason of reductions in the Maximum
Standby L/C Commitment
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Amount pursuant to clauses (ii) and (iii) of the definition thereof (after
giving effect to such reduction), then Kmart shall concurrently provide such
Bank with cash collateral for the Reimbursement Obligations to such Bank in
an amount equal to the difference between the Maximum Standby L/C Commitment
Amount (as so reduced) and the aggregate undrawn face amount of all Standby
Letters of Credit issued by such Standby Bank at such time, pursuant to
a cash collateral agreement reasonably acceptable to such Bank. If Kmart
requests a Standby Bank to extend an outstanding Standby Letter of Credit
and such extension would result in the aggregate undrawn face amount of
outstanding Standby Letters of Credit issued by such Standby Bank exceeding
such Bank's Maximum Standby L/C Commitment Amount less the Unpaid
Reimbursement Obligation to such Standby Bank, then, such extension shall be
conditioned on Kmart having provided cash collateral to the issuing Standby
Bank in an amount equal to such excess, pursuant to a cash collateral
agreement reasonably acceptable to such Standby Bank. Notwithstanding
anything else to the contrary contained herein, a Standby Bank shall not be
required to issue or extend a Standby Letter of Credit if after giving
effect to the issuance thereof, the aggregate undrawn face amounts of all
Standby Letters of Credit of such Standby Bank plus any Unpaid Reimbursement
Obligations exceeds such Standby Bank's Maximum Standby L/C Commitment
Amount as of the Effective Date. The Standby Banks also agree that
amendments and/or extensions will continue to be made to Standby Letters of
Credit in accordance with customary past practices, subject to the other
provisions of this Agreement. Each Standby Letter of Credit shall have an
expiry date no later than one year from the date of issuance. In addition,
no Standby Letter of Credit shall have an expiry date after the Termination
Date, unless, with the consent of such Standby Bank, Kmart agrees in
writing, at the time of issuance thereof, to provide on the Termination Date
cash collateral in an amount equal to the aggregate undrawn face amount of
such Standby Letters of Credit, pursuant to a cash collateral agreement
acceptable to such Standby Bank. If such Standby Letter of Credit is not so
extended and is drawn by the beneficiary thereof, then pursuant to the
provisions of Section 2.02 the Reimbursement Obligation of Kmart with
respect thereto shall mature on February 28, 1997.
Section 2.02 Reimbursement Obligations. The Borrower agrees to
reimburse each Bank promptly upon demand, in immediately available funds, for
the amount of each drawing or other payment under a Letter of Credit and for
the amount of
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any taxes, and other customary or otherwise agreed to fees, charges or
other costs and expenses incurred by such Bank in connection with any
payment in respect of such Letter of Credit. In addition to the
Reimbursement Obligation set forth in the preceding sentence, the Borrower
shall comply with the terms, conditions and procedures set forth in any and
all individual reimbursement agreements between the Borrower and such Bank.
All Unpaid Reimbursement Obligations shall bear interest at a rate per
annum equal to the greater of (i) the Reference Rate plus one percent
(1.0%) (or, from and after two days after demand is made, at the Reference
Rate plus three percent (3.0%)) or (ii) the interest rate provided for in
the individual reimbursement agreements between the Borrower and such Bank.
If any Standby Letter of Credit is drawn as a result of not being extended
past the Termination Date then (i) such Unpaid Reimbursement Obligation
shall not be due and payable until February 28, 1997; provided that the
Unpaid Reimbursement Obligation shall bear interest per annum (a) from the
period beginning with the date of drawing until February 28, 1997 at the
greater of (i) the Reference Rate plus one percent (1.0%) or (ii) the
interest rate provided for in the individual reimbursement agreements
between the Borrower and the issuing Bank and (b) from and after February
28, 1997 until paid at the greater of (i) the Reference Rate plus three
percent (3.0%) or (ii) the interest rate provided for in the individual
reimbursement agreements between the Borrower and the issuing Bank in
respect of obligations past due.
Section 2.03 Obligations Unconditional. The obligation of the
Borrower to reimburse a Bank for drawings made under any Letter of Credit
issued by it and the obligations of each Bank under Section 4.01 with respect
thereto shall be unconditional and irrevocable and shall be paid strictly in
accordance with the terms of this Agreement under all circumstances, including
the following circumstances:
(i) any lack of validity or enforceability of such Letter of
Credit;
(ii) the existence of any claim, setoff, defense or other right
which the Borrower or any of its affiliates may have at any time against a
beneficiary or any transferee of such Letter of Credit (or any Persons for
which any such beneficiary or transferee may be acting), any Bank or any
other Person, whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction (including any underlying
transaction between the Borrower or one of its Subsidiaries and the
beneficiary of such Letter of Credit);
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(iii) any draft, demand, certificate or any other document
presented under such Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(iv) payment by the Bank under such Letter of Credit against
presentation of a demand, draft or certificate or other document which does
not comply with the terms of such Letter of Credit;
(v) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing; or
(vi) the fact that an Event of Default or a Potential Default
shall have occurred and be continuing.
Section 2.04 Indemnification. In addition to amounts payable as
elsewhere provided in this Agreement, the Borrower hereby agrees to indemnify
and hold harmless, each Bank from and against any and all actions, suits,
proceedings, liabilities, damages, or other claims of any kind or nature
whatsoever which may be made by or asserted against a Bank as a result of (i)
the issuance of the Letters of Credit, other than as a result of the gross
negligence, bad faith or willful misconduct of the Bank or (ii) the failure of
a Bank to honor a drawing under any Letter of Credit as a result of any act or
omissions, whether rightful or wrongful, of any present or future de jure or de
facto government or Governmental Authority (all such acts or omissions herein
called "Government Acts"). As between the Borrower and each Bank, the Borrower
assumes all risks of the acts and omissions of, or misuse of the Letters of
Credit issued by a Bank by, the respective beneficiaries of such Letters of
Credit. In furtherance and not in limitation of the foregoing, a Bank shall
not be responsible: (i) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in
connection with the application for and issuance of or any drawing under such
Letters of Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the validity
or sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any such Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (iii) for failure of the beneficiary of
any such Letter of Credit to comply fully with conditions required in order to
draw upon such Letter of Credit; (iv) for errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether
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or not they be in cipher (v) for errors in interpretation of technical terms;
(vi) for any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any such Letter of Credit or of the
proceeds thereof; (vii) for the misapplication by the beneficiary of any such
Letter of Credit or the proceeds of any drawing under such Letter of Credit;
and (viii) for any consequences arising from causes beyond the control of a
Bank (including any Government Acts). None of the above shall affect,
impair, or prevent the vesting of any Bank's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by a Bank under
or in connection with the Letters of Credit issued by it or the related
certificates, if taken or omitted in good faith, shall not put the Bank under
any resulting liability to the Borrower. Notwithstanding anything to the
contrary contained in this Agreement, the Borrower shall have no obligation to
indemnify a Bank in respect of any liability incurred by a Bank arising solely
out of the gross negligence or willful misconduct of the Bank. The right of
indemnification in the first sentence of the first paragraph of this Section
2.04 shall not prejudice any rights that the Borrower may otherwise have
(subject to the other provisions of this Agreement) against a Bank with respect
to a Letter of Credit issued hereunder. In addition, and without limiting the
generality of Article IX hereof, the Agent shall not (i) be responsible in any
manner to any of the Banks for any recital, statement, representation or
warranty by the Borrower (or any affiliate or agent thereof) contained in any
schedule, report, statement or other document referred to or provided herein or
received by the Agent under or in connection with this Agreement or any Loan
Document, or (ii) be responsible in any manner to the Borrower for any recital,
statement, representation or warranty by any Bank (or any affiliate or agent
thereof) contained in any schedule, report, statement or other document
referred to or provided herein or received by the Agent under or in connection
with this Agreement or any Loan Document. The Agent shall not be under any
obligation to any Bank or to the Borrower 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.
Section 2.05 Fees. Concurrent with such Bank's execution hereof,
Kmart agrees to pay (i) each Trade A Bank and each Trade B Bank an extension
fee equal to 1% times 80% of the face amount of the Existing Trade A Letters of
Credit and 1% of the face amount of the Existing Trade B Letters of Credit, as
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applicable, issued by it and (ii) each Standby Bank an extension fee equal to
1% times 80% of the face amount of the Existing Standby Letters of Credit
issued by it. Kmart shall pay a letter of credit fee (the "Letter of Credit
Fees") to each Bank, quarterly in arrears, based on the Average L/C
Outstandings in an amount equal to (x) two percent (2.0%) per annum in
respect of Letters of Credit existing as of the Effective Date and (y) three
and one-half percent (3.5%) per annum in respect of Letters of Credit issued
or extended after the Effective Date. Kmart shall also pay to each Bank such
other fees, charges, taxes and expenses as are customarily charged by such
Bank in connection with the issuance, administration and amendment of letters
of credit.
Section 2.06 Certain Allocation Considerations. To the fullest extent
practicable (taking into account, among other things, the expiration date of
such required letters of credit and the opportunity to obtain letters of credit
past February 28, 1997 by cash collateralizing Reimbursement Obligations),
Kmart agrees to satisfy its requirements for trade letters of credit and
standby letters of credit by requesting Trade Letters of Credit from the Trade
A Banks and the Trade B Banks pursuant to the commitment established by
Sections 2.01(a) and 2.01(b) hereof and Standby letters of Credit from the
Standby Banks pursuant to the commitment established by Section 2.01(c) hereof
prior to utilizing any other trade letter of credit facility or standby letter
of credit facility, as the case may be, including pursuant to the facility
under the Three Year Credit Agreement. Kmart agrees to request the issuance of
Trade Letters of Credit from particular Trade A Banks and Trade B Banks and
Standby Letters of Credit from particular Standby Banks in amounts consistent
with, as applicable, their relative Maximum Trade A L/C Commitment Amounts,
Maximum Trade B L/C Commitment Amounts or Maximum Standby L/C Commitment
Amounts to the extent practicable and equitably among the Banks.
Section 2.07 Treatment of Cash Collateral. Cash collateral provided
to any Bank hereunder shall be granted exclusively to such Bank and shall not
be shared with any other Bank and it is further agreed and acknowledged by the
parties hereto that the exercise of rights by a Bank in respect of cash
collateral shall not be considered to be the exercise of the right of setoff.
Each Bank agrees that any cash collateral supporting Letters of Credit issued
hereunder or under the L/C Letter Agreement will be returned to Kmart to the
extent (i) such Letters of Credit are drawn and Kmart reimburses such Bank for
such drawn amount and there are no other Unpaid Reimbursement Obligations at
such time, (ii) such Letters of Credit have been expired more than 21 days,
(iii) Kmart directly pays the
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beneficiary thereunder and returns such Letter of Credit as required under
Section 2.08 or (iv) there are no disputes with respect to the failure of a
Bank to honor a draw under a Letter of Credit. All funds in a cash
collateral account shall be under the exclusive domain and control of the
Bank.
Section 2.08 Letters of Credit Paid Directly by Kmart. In the event
that Kmart directly pays any beneficiary of a Letter of Credit, it shall
promptly notify the issuing Banks and shall return to such Bank the Letter of
Credit held by such beneficiary and paid directly by Kmart.
ARTICLE III
ISSUANCE OF LETTERS OF CREDIT CONDITIONS
Section 3.01 Conditions to Effectiveness of This Agreement. The
occurrence of the Closing Date and the binding effect of this Agreement on each
Bank are subject to the condition that each Bank shall have received all fees
required to be paid to it hereunder and the Agent shall have received on or
before the Closing Date all of the following, in form and substance
satisfactory to each Bank:
(a) Issuance Agreement. This Agreement executed by the Borrower and
each of the Banks.
(b) Security Documents. Each of the Security Documents executed by
the Borrower, the Collateral Agent and the other parties thereto.
(c) Bylaws; Resolutions; Incumbency.
(i) Copies of the bylaws of the Borrower and of the
resolutions of the board of directors of the Borrower approving and
authorizing the execution, delivery and performance by the Borrower of
this Agreement and the other Loan Documents to be delivered hereunder,
and authorizing the extensions of credit contemplated hereby, each
certified as of the Closing Date by the Secretary or an Assistant
Secretary of the Borrower; and
(ii) A certificate of the Secretary or Assistant Secretary of
the Borrower certifying the names and true signatures of its respective
officers authorized to execute and deliver and perform, as applicable,
this Agreement and all other Loan Documents and notices to be delivered
by it hereunder.
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(d) Articles of Incorporation. (i) A copy of the Borrower's Articles
of Incorporation as in effect on the Closing Date, including any amendments
thereto, certified by the Michigan Department of Commerce, and (ii) good
standing certificates for the Borrower from the Michigan Department of
Commerce and from the Secretaries of State of California and New York, each
dated not more than ten (10) days prior to the Closing Date.
(e) Legal Opinions. An opinion of internal counsel and of outside
counsel reasonably acceptable to the Agent in favor of the Banks in form and
substance acceptable to the Agent with respect to (a) the legal existence
and good standing of the Borrower, (b) the authority of the Borrower to
enter into this Agreement and the other Loan Documents and the due execution
and delivery thereof, (c) that the obligations of the Borrower under this
Agreement and the other Loan Documents are legal, valid, binding and
enforceable in accordance with their terms (subject to customary
exceptions), (d) noncontravention with applicable securities laws and other
laws, rules and regulations applicable to the Borrower, (e) perfection and
priority of the liens granted under the Security Documents and (f) such
other matters as the Agent may reasonably request.
(f) Certificate. A certificate signed by a Responsible Officer of the
Borrower, dated as of the Closing Date, stating (which statement shall be
true and correct) that:
(i) the representations and warranties of the Borrower contained
in Article V are true and correct on and as of such date, as though made on
and as of such date;
(ii) no Potential Default or Event of Default exists as of the
date of such certificate (except to the extent referenced in that certain
letter agreement dated December 22, 1995 among the Borrower and the financial
institutions party thereto);
(ii) no Material Adverse Effect has occurred since the Effective
Date;
(iv) no default has occurred and is continuing in respect of
any Indebtedness of the Borrower and its Subsidiaries with an aggregate
principal amount in excess of $50,000,000 (except with respect to the
failure to pay when due the principal amount under the credit agreement
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described in clause (d) of the definition of Kmart Bank Credit Agreements
which failure is currently the subject of a forbearance agreement by 85% of
the financial institutions party thereto); and
(v) all consents and approvals required to consummate the
transactions contemplated by this Agreement have been obtained or waived.
(g) Amendments to Other Credit Facilities. The Agent shall have
received evidence reasonably satisfactory to it that (i) each of the
agreements in respect of the Real Estate Debt has been amended on
substantially the terms and conditions set forth in the Agreement in
Principle dated as of December 18, 1995 and otherwise in form and substance
reasonably satisfactory to the Agent, (ii) amendments to the Three Year
Credit Agreement and the 364 Day Credit Agreement shall have been executed
and delivered by the "Required Banks" thereunder, (iii) amendments to the
Seasonal Credit Agreement shall have been executed and delivered by all of
the "Banks" thereunder, (iv) an amendment to the Warehouse Facility Credit
Agreement shall have been executed and delivered by the "Required Banks"
thereunder, (v) an amendment to, or a forbearance agreement in respect of,
the Big Beaver I Credit Agreement shall have been executed and delivered by
financial institutions party thereto holding at least 85% of the outstanding
loans thereunder, (vi) an amendment to the Big Beaver II Credit Agreement
shall have been executed and delivered by the "Required Banks" thereunder;
each on substantially the terms and conditions set forth in that certain
Summary of Indicative Terms dated December 17, 1995.
(h) Other Documents. Such other approvals, opinions or documents as
any Bank may have reasonably requested.
Section 3.02 Conditions to All Letter of Credit Issuances. The
obligation of any Bank to issue or extend a Letter of Credit hereunder is
subject to the satisfaction of the following conditions precedent on the
relevant Issuance Date:
(a) Continuation of Representations and Warranties. The
representations and warranties made by the Borrower contained in
Article V shall be true and correct on and as of such Issuance Date with the
same effect as if made on and as of such Issuance Date (except to the
extent such representations and warranties expressly refer to an earlier
date, in which case they shall be true and correct as of such earlier date).
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(b) No Existing Default. No Event or Default shall exist or shall
result from such issuance of such Letter of Credit (except to the extent
referenced in that certain letter agreement dated December 22, 1995 among
the Borrower and the financial institutions party thereto).
(c) No Failure to Issue and Lend Under Three Year Credit Agreement.
Borrowings and letter of credit issuances are not unavailable under the
Three Year Credit Agreement as a result of a "Potential Default" thereunder.
(d) No Unpaid Reimbursement Obligations. There shall not be any
Unpaid Reimbursement Obligations to any of the Banks for a period in excess
of two (2) Business Days after demand therefor.
(e) Titled Letters of Credit. With respect to the issuance of Letters
of Credit by a Trade B Bank, the Borrower shall have complied with the
condition in Section 2.01(b)(ii) for Titled Letters of Credit.
Each request for the issuance of a Letter of Credit shall constitute a
representation and warranty by the Borrower, as of the date of each such
request and as of the Issuance Date re lating thereto, that the conditions
in this Section 3.02 are satisfied.
ARTICLE IV
ADJUSTMENTS
Section 4.01 Participations by Trade B Banks and Standby Banks in
Letters of Credit.
(a) Trade B Banks. Upon the occurrence of a Trigger Date, each Trade
B Bank shall be deemed to have irrevocably purchased, without regard to the
occurrence of any Potential Default or Event of Default or any other condition
precedent whatsoever, a risk participation in a portion of each outstanding
Trade B Letter of Credit of each other Trade B Bank in an amount equal to the
face amount of such outstanding Trade B Letter of Credit times a fraction, the
numerator of which is such participating Trade B Bank's Maximum Trade B L/C
Commitment Amount on the Trigger Date and the denominator of which is the
aggregate Maximum Trade B L/C Commitment Amount of all Trade B Banks on the
Trigger Date (the percentage equivalent to such fraction, the "Trade B
Commitment Percentage"). Each Trade B Bank that has issued Trade B Letters of
Credit that are outstanding upon the occurrence of a Trigger Date shall be
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deemed to have sold risk participations in such outstanding Trade B Letters
of Credit to each other Trade B Bank in the amounts contemplated by the
preceding sentence. On and after the occurrence of the Trigger Date, in
the event that the Borrower shall fail to reimburse a Trade B Bank as
provided in Section 2.02 in an amount equal to the amount of any drawing
honored by a Trade B Bank under a Trade B Letter of Credit issued by it in
accordance with the terms hereof, such Trade B Bank shall promptly notify
each other Trade B Bank of the unreimbursed amount of such drawing and of
such other Trade B Bank's respective participation therein in accordance
with the first sentence of this Section 4.01(a). Each such participating
Trade B Bank shall make available to the issuing and unreimbursed Trade B
Bank in immediately available funds, not later than 1:00 p.m. (New York
City time) on the Business Day after the date such Trade B Bank is so
notified, an amount equal to (i) such unreimbursed drawing multiplied by
(ii) such Trade B Bank's Trade B Commitment Percentage. In the event and
to the extent that an issuing Trade B Bank receives any reimbursement or
repayment for drawings honored by such issuing Trade B Bank (including by
the application of cash collateral or other collateral), the issuing Trade
B Bank shall distribute to each other Trade B Bank which has paid all
amounts payable by it under this Section 4.01(a), such other Trade B Bank's
Trade B Commitment Percentage of all such reimbursements or payments. In
the event that any Trade B Bank fails to make available to the issuing
Trade B Bank the amount of such Bank's participation in accordance with
this Section 4.01(a), (a) the issuing Trade B Bank shall be entitled to
recover such amount on demand with interest (i) for the first two Business
Days after notification at the Federal Funds Rate and (ii) thereafter, at
the Reference Rate plus one percent (1%) and (b) the issuing Trade B Bank
may withhold distributions of payments and reimbursements or exercise any
other available remedies.
(b) Standby Banks. Upon the occurrence of a Trigger Date, each
Standby Bank shall be deemed to have irrevocably purchased, without regard to
the occurrence of any Potential Default or Event of Default or any other
condition precedent whatsoever, a risk participation in a portion of each
outstanding Standby Letter of Credit (and in fees to accrue with respect
thereto) of each other Standby Bank in an amount equal to the face amount of
such outstanding Standby Letter of Credit times a fraction, the numerator of
which is such participating Standby Bank's Maximum Standby L/C Commitment
Amount on the Trigger Date and the denominator of which is the aggregate
Maximum Standby L/C Commitment Amount of all Standby Banks on the Trigger Date
(the percentage equivalent to such fraction, the "Standby Commitment
Percentage"). Each Standby Bank that has issued Standby Letters of Credit that
are outstanding upon
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the occurrence of a Trigger Date shall be deemed to have sold risk
participations in such outstanding Standby Letters of Credit to each other
Standby Bank in the amounts contemplated by the preceding sentence. On and
after the occurrence of a Trigger Date, in the event that the Borrower
shall fail to reimburse a Standby Bank as provided in Section 2.02 in an
amount equal to the amount of any drawing honored by a Standby Bank under a
Standby Letter of Credit issued by it in accordance with the terms hereof,
such Standby Bank shall promptly notify each other Standby Bank of the
unreimbursed amount of such drawing and of such other Standby Bank's
respective participation therein in accordance with the first sentence of
this Section 4.01(b). Each such participating Standby Bank shall make
available to the issuing and unreimbursed Standby Bank in immediately
available funds, not later than 1:00 p.m. (New York City time) on the
Business Day after the date such Standby Bank is so notified, an amount
equal to (i) such unreimbursed drawing multiplied by (ii) such Standby
Bank's Standby Commitment Percentage. In the event and to the extent that
an issuing Standby Bank receives any reimbursement or repayment for
drawings honored by such issuing Standby Bank (including by the application
of cash collateral or other collateral), the issuing Standby Bank shall
distribute to each other Standby Bank which has paid all amounts payable by
it under this Section 4.01(b) such other Standby Bank's Standby Commitment
Percentage of all such reimbursements or payments. In the event that any
Standby Bank fails to make available to the issuing Standby Bank the amount
of such Standby Bank's participation in accordance with this Section
4.01(b), the issuing Standby Bank shall be entitled to recover such amount
on demand with interest (i) for the first two Business Days after
notification at the Federal Funds Rate and (ii) thereafter, at the
Reference Rate plus one percent (1%) and (b) the issuing Standby Bank may
withhold distributions of payments and reimbursements or exercise any other
available remedies.
(c) Reservations of Rights. Nothing in this Section 4.01 shall be
deemed to prejudice the right of any Bank to recover from the issuing Bank any
amount made available by such Bank to such issuing Bank pursuant to this
Section 4.01 in the event that it is finally determined by a court of competent
jurisdiction that the payment by such issuing Bank with respect to a Letter of
Credit constituted gross negligence or willful misconduct on the part of such
issuing Bank.
(d) Administration. Solely as an accommodation (and not for the
purpose of creating any obligations not specifically set forth in the other
provisions hereof), the Agent may keep records of the participations purchased
and sold pursuant to, and administer the provisions of, this Section 4.01.
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Section 4.02 Purchases upon the Occurrence of a Trigger Date. Upon
the occurrence of a Trigger Date, each Trade A Bank and each Standby Bank shall
promptly purchase in immediately available funds, without regard to the
occurrence of any Potential Default or Event of Default or any other condition
precedent whatsoever, a participation in a portion of the Aggregate Credit
Exposure in an amount (the "Cross Facility Participation Purchase Price") equal
to (1) such Bank's Adjusted Availability minus (ii) the product of (A) such
Bank's Adjusted Availability times (B) a fraction, the numerator of which is
the sum or such Bank's Maximum Trade A L/C Commitment Amount, if any, and such
Banks Maximum Standby L/C Commitment Amount, if any, and the denominator of
which is the sum of (x) such Bank's Maximum Trade A L/C Commitment Amount, if
any, and such Bank's Maximum Standby L/C Commitment Amount, if any, and (y) the
Aggregate Credit Exposure. Each Kmart Credit Agreement Bank is a third-party
beneficiary of this Section 4.02.
Section 4.03 Administration of Cross Facility Participation Mechanics.
The required Cross Facility Participation Purchase Price shall be determined by
the Agent which determination shall be conclusive and binding in the absence of
manifest error. The Agent shall keep records of participations purchased
pursuant to Section 4.02 and related matters which records shall be conclusive
and binding in the absence of manifest error. Promptly after notification by
the Agent, each Trade A Bank and Standby Bank shall transfer in cash the Cross
Facility Participation Purchase Price to the Agent or to the particular Kmart
Credit Agreement Bank(s) (or its agent under the relevant facility) as the
Agent may direct. The Agent shall transfer the applicable portion of the Cross
Facility Participation Purchase Price which it receives to the appropriate
Kmart Credit Agreement Bank (or to the agent under the relevant facility);
provided that the Agent may hold in escrow (or in a noninterest bearing account
in the name of the Agent) that portion of the Cross Facility Participation
Purchase Price allocable to contingent obligations included in the Aggregate
Credit Exposure; and provided further that the Agent may condition the transfer
to a Kmart Credit Agreement Bank (or to the agent under the relevant facility)
of any portion of the Cross Facility Participation Purchase Price on the
execution of customary agreements to evidence the purchase of a participation.
Participations shall be allocated ratably among each Kmart Credit Agreement
Bank and the different types of obligations in respect of the Aggregate Credit
Exposure, including among contingent letter of credit obligations and funded
debt. On a date or dates selected by the Agent after the Trigger Date, but no
more frequently than once every one hundred twenty (120) days, the Agent may
recalculate the appropriate Cross Facility Participation Purchase Price based
upon, among other relevant
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events, changes in the Maximum Trade A L/C Commitment Amount or Maximum
Standby L/C Commitment Amount after the Trigger Date, the expiration without
drawing of letters of credit included in the Aggregate Credit Exposure and
other events which lead to an increase or decrease in the Aggregate Credit
Exposure or the Adjusted Availability. In the event of any such
recalculation, each Trade A Bank and Standby Bank shall transfer in
immediately available funds to the particular Kmart Credit Agreement Banks (or
its agent under the relevant facility) as the Agent may direct the amount
designated by the Agent to take account of such recalculation or the Agent
shall transfer to a Trade A Bank or Standby Bank the appropriate amount of any
amounts that may be held in escrow (or in a noninterest bearing account in the
name of the Agent) or amounts obtained from the Kmart Credit Agreement Banks.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to each Bank that:
Section 5.01 Organization and Good Standing. The Borrower is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, and is duly qualified to do
business and is in good standing in each additional jurisdiction where failure
to so qualify would have an effect which, when taken together with the
simultaneous effect of failure to qualify in any other jurisdictions, would in
the aggregate have a Material Adverse Effect.
Section 5.02 Authorization; No Contravention. The execution, delivery
and performance of this Agreement and the other Loan Documents by the Borrower
are within its corporate powers, have been duly authorized by all necessary
corporate action, and are not in contravention of any requirement of law or of
the terms of the Borrower's articles of incorporation or by-laws, or of any
agreement, undertaking, contract or other obligation to which the Borrower is a
party or by which it is bound.
Section 5.03 Consents and Approvals. No consent, waiver, approval,
notification of, or registration or filing with, any Governmental Authority or
any non-governmental Person is required in connection with the execution and
delivery by the Borrower of this Agreement or the other Loan Documents or the
extension of credit support to the Borrower hereunder or in
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connection with the consummation of any transaction contemplated hereby.
Section 5.04 Binding Effect. This Agreement and all of the other Loan
Documents are valid, binding and enforceable against the Borrower in accordance
with the terms thereof (subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws relating to
or affecting the enforcement of creditors' rights and general equitable
principles which may limit the right to obtain the remedy of specific
performance of executory covenants and other equitable remedies).
Section 5.05 Litigation. No litigation or governmental proceeding is
pending or, to the knowledge of the Borrower, threatened, against the Borrower
for which sufficient provision has not been made in the financial statements of
the Borrower and which could have a material adverse effect on the Borrower's
condition or business, financial or otherwise, or which purport to affect or
pertain to this Agreement or any of the transactions contemplated hereby.
Section 5.06 Financial Statements. The balance sheet and the related
statements of income, stockholders' equity and cash flows of the Borrower and
its Subsidiaries contained in the quarterly report of the Borrower filed with
the U.S. Securities and Exchange Commission (the "SEC") on Form 10-Q for the
quarter ended October 25, 1995 are complete and accurate in all material
respects and present fairly the financial condition of the Borrower and its
Subsidiaries as of the dates of such statements and the results of their
operations for the periods covered thereby, in accordance with GAAP,
consistently applied.
Section 5.07 Use of Proceeds; Margin Regulations. After applying the
proceeds of any extensions of credit hereunder, not more than 25% of the value
of the assets of the Borrower and its Subsidiaries will consist of "margin
stock" as such term is defined in Regulation G, T, U or X of the Federal
Reserve Board. The Borrower is not generally engaged in the business of
purchasing or selling margin stock or extending credit for the purpose of
purchasing or carrying margin stock.
Section 5.08 No Default. No Event of Default exists or would result
from the effectiveness of this Agreement or from the incurring of any
obligations as a result of the issuance or extension of any Letter of Credit
and borrowings and letter of credit issuances are not unavailable under the
Three Year Credit Agreement as a result of a "Potential Default" thereunder.
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Section 5.09 Taxes. The Borrower has filed all Federal and other
material tax returns and reports required to be filed, and has paid all Federal
and other material taxes, assessments, fees and other governmental charges
levied or imposed upon it or its properties, income or assets otherwise due and
payable, except those which are being contested in good faith by appropriate
proceedings and for which adequate reserves have been provided in accordance
with GAAP. There is no proposed tax assessment against the Borrower that
could, if made, have a Material Adverse Effect.
Section 5.10 Insurance. The properties and business of the Borrower
are insured in such amounts, with such deductibles and covering such risks as
are customarily carried by similar companies of comparable size engaged in
similar businesses and owning or operating similar properties in localities
where the Borrower operates.
Section 5.11 Compliance With Laws. The Borrower is in compliance with
all applicable laws, rules and regulations (including environmental laws,
rules and regulations and the Employee Retirement Income Security Act of 1976,
as amended, and all regulations thereunder) except where the failure to be in
such compliance could not reasonably be expected to have a Material Adverse
Effect.
ARTICLE VI
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, so long as any Bank shall have
any commitment to issue or extend Letters of Credit hereunder, and for as long
as any Letters of Credit are outstanding or there are any Unpaid Reimbursement
Obligations:
Section 6.01 Payment of Taxes. The Borrower will pay, when due, all
taxes assessed against the Borrower or its property and all other claims which
may become a Lien upon any of its property, except to the extent that (a) the
same are being contested in good faith by appropriate proceedings, and (b)
adequate reserves for payment thereof have been established in accordance with
GAAP.
Section 6.02 Insurance. The Borrower shall maintain insurance with
respect to its properties and business in such amounts, with such deductibles
and covering such risks as are customarily carried by similar companies of
comparable size
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engaged in similar businesses and owning or operating similar properties in
localities where the Borrower operates.
Section 6.03 Preservation of Corporate Existence, Etc. The Borrower
shall:
(a) preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its state or jurisdiction of
incorporation; and
(b) preserve and maintain in full force and effect all governmental
rights, privileges, qualifications, permits, licenses and franchises
necessary or desirable in the normal conduct of its business except in
connection with transactions permitted by Section 7.01 and dispositions of
assets permitted by Section 7.02.
Section 6.04 Maintenance of Property. The Borrower shall maintain and
preserve all its property which is used or useful in its business in good
working order and condition, ordinary wear and tear excepted, and make all
necessary repairs thereto and renewals and replacements thereof except where
the failure to do so could not reasonably be expected to have a Material
Adverse Effect, and except as permitted by Section 7.02.
Section 6.05 Compliance with Laws. The Borrower shall comply in all
material respects with all Requirements of Law of any Governmental Authority
having jurisdiction over it or its business, except such as may be contested in
good faith or as to which a bona fide dispute may exist.
Section 6.06 Books and Records; Other Information. The Borrower shall
maintain proper books of record and account in which full, true and correct
entries in conformity with GAAP consistently applied shall be made of all
financial transactions and matters involving the assets and business of the
Borrower, and will provide to each Banks such other information as they may
reasonably request and which is reasonably available to the Borrower or can be
reasonably computed from the Borrower's books and records.
Section 6.07 Financial Information. The Borrower shall deliver to each
Bank:
(a) within sixty (60) days after the end of each of the first three
(3) fiscal quarters of the Borrower, copies of (i) the consolidated balance
sheet of the Borrower and its Subsidiaries as of the end of such quarter,
(ii) the consolidated statement of income of the Borrower and
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its Subsidiaries for such quarter and for the period from the end of the
most recent fiscal year of the Borrower through the end of such quarter,
(iii) the consolidated statement of cash flows of the Borrower and
its Subsidiaries for the period from the end of the most recent fiscal year
of the Borrower through the end of such quarter, all prepared in accordance
with GAAP and certified by a Responsible Officer as being a fair statement
of results for the periods covered thereby, subject to ordinary year-end
audit adjustments;
(b) concurrently with the delivery of the financial statements
referred to in Sections 6.07(a) and (c), a certificate duly completed and
executed by a Responsible Officer, as to compliance by the Borrower with the
covenants contained in Sections 7.04 and 7.05 hereof, and stating that no
Potential Default or Event of Default then exists (or, if any should then
exist, identifying the same and stating any actions being taken by the
Borrower with respect thereto);
(c) within one hundred twenty (120) days after the end of each fiscal
year of the Borrower, copies of (i) the consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such fiscal year, (ii) the
consolidated statement of income of the Borrower and its Subsidiaries for
such fiscal year, and (iii) the consolidated statement of cash flows of the
Borrower and its Subsidiaries for such fiscal year, setting forth in each
case in comparative form the corresponding figures for the previous fiscal
year, all in reasonable detail and prepared in accordance with GAAP and
certified by a nationally recognized independent public accounting firm;
(d) the financial statements, certificates, schedules, documents and
other information set forth on Schedule 6.07 within the time periods
therein specified; and
(e) promptly, copies of all financial statements and reports that the
Borrower sends to its shareholders and copies of all Forms 10K, 10Q and 8K
that the Borrower files with the SEC.
Section 6.08 Notices. The Borrower shall notify each Bank promptly,
but not later than three (3) Business Days after the Borrower becomes aware
thereof, of the occurrence of:
(i) any Event of Default;
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(ii) any Potential Default or the existence of a condition in which
the lenders under the Three Year Credit Agreement are not making available
borrowings and letters of credit as a result of a "Potential Default"
thereunder;
(iii) any Material Adverse Effect or any event or other development
which could have a Material Adverse Effect; or
(iv) any Reportable Event.
Section 6.09 Maintenance of Deposits. The Borrower shall at all times
maintain with one or more financial institutions that are members of the Kmart
Bank Group and that are party to the Bank Setoff Sharing Agreement cash and
Cash Equivalents on deposit (the "Deposits") in an aggregate amount not less
than the lesser of (a) the Deposit Threshold and (b) the total amount of all
cash and Cash Equivalents of the Borrower and its Subsidiaries (other than cash
and Cash Equivalents maintained at Kmart Canada Ltd. and its subsidiaries or at
Kmart CR a.s. (Czech operations) in the ordinary course of business,
consistent with past practices) at such time (the "Required Deposit Amount");
provided, that any amounts maintained in store depository accounts with
depository institutions which are not members of the Kmart Bank Group as
required by the Borrower's business operations in the normal course of business
consistent with past practices shall not be considered cash or Cash Equivalents
for the purposes of clause (b) of this Section 6.09.
Section 6.10 Most Favored Lender Status. If the Borrower, any
Subsidiary or any obligor under the Real Estate Debt shall at any time,
directly or indirectly, amend, restate or otherwise modify any of the Real
Estate Debt Documents, in any manner which would have the effect of (i) adding
any new or additional covenants or defaults applicable to the Borrower or any
Subsidiary, (ii) amending in a manner more beneficial to the holders of such
Real Estate Debt or in a manner more onerous to the Borrower, any Subsidiary or
any obligor under the Real Estate Debt, any covenant or default applicable to
the Borrower or any Subsidiary under such Real Estate Debt or (iii) otherwise
enhancing the rights and benefits of any holder of the Real Estate Debt against
the Borrower or any Subsidiary, then, in each such event, the Borrower shall
concurrently enter into or cause to be entered into such amendments to this
Agreement and such other documents and instruments, in form and substance
reasonably satisfactory to the Required LC Issuance Banks, as shall be
necessary to afford the Banks the same or equivalent benefits and rights as
such amendments to, or other agreements in respect of, the Real Estate Debt
Documents afford
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the holders of the Real Estate Debt; provided that any such new or additional
covenants or defaults, amended covenants or defaults, or enhanced rights and
benefits shall be deemed automatically incorporated herein by reference in the
event such modifications are made to the Real Estate Debt Documents without
the Borrower entering into concurrent amendments as required by this Section
6.09.
ARTICLE VII
NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long as any Bank shall have
any commitment to issue or extend Letters of Credit hereunder, and for as long
as any Letters of Credit are outstanding or there are any Unpaid Reimbursement
Obligations:
Section 7.01 Consolidations and Mergers. The Borrower shall not merge
or consolidate with any other Person, unless:
(a) the successor formed by or resulting from such consolidation or
merger is the Borrower or a Subsidiary of the Borrower (and, if the survivor
is a Subsidiary of the Borrower, such Subsidiary shall affirm the Borrower's
Obligations under the Loan Documents in writing); and
(b) no Event of Default or Potential Default shall have occurred and
then be continuing or would arise after giving effect thereto.
Section 7.02 Disposition of Assets. The Borrower shall not, directly
or indirectly, sell, assign, lease, convey, transfer or otherwise dispose of
(whether in one or a series of transactions) any property (including accounts
and notes receivable, with or without recourse) or enter into any agreement to
do any of the foregoing except:
(a) dispositions of inventory, or used, worn-out or surplus equipment,
all in the ordinary course of business;
(b) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to
the purchase price of such replacement equipment;
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(c) dispositions of inventory or equipment by the Borrower to any
Subsidiary pursuant to reasonable business requirements;
(d) dispositions of Scheduled Assets; and
(e) other dispositions of assets having, in any fiscal year of the
Borrower, an aggregate book value not exceeding 10% of the Borrower's
consolidated total assets as of the end of the most recently ended fiscal
year of the Borrower, as reflected in the Borrower's balance sheet contained
in its audited financial statements for such fiscal year;
provided, however, that this Section 7.02 shall not be deemed to
prohibit the sale of all, substantially all, or a part of the capital stock
or of all, substantially all, or a part of the assets of any Specialty
Retail Subsidiary of the Borrower, even if such an entity is no longer a
Subsidiary of the Borrower, if (A) (x) consideration received is equal to
the fair market value (as reasonably determined by the Borrower) or (y) the
Borrower's board of directors reasonably deems such transaction to be
necessary by reason of applicable laws, regulations or governmental
policies applicable to the Borrower and (B) the consideration is treated in
the manner required by the Security Documents to the extent such capital
stock or assets is pledged thereunder.
Section 7.03 Limitation on Liens. The Borrower shall not, and shall
not permit any Subsidiary (other than Liens granted by Kmart Canada Ltd. and
its subsidiaries or by Kmart CR a.s. (Czech operations) on such Person's assets
prior to the Restructuring Effective Date) to, create, incur or suffer to exist
any Lien on any assets of the Borrower or any such Subsidiary whether now owned
or hereafter acquired; provided, however, that such restriction shall not apply
with respect to any of the following types of Liens:
(a) Liens for taxes not delinquent or being contested in good faith;
(b) Liens created and deposits made in connection with workers'
compensation, unemployment insurance and other social security legislation,
or to secure the performance of bids, tenders, contracts (other than for the
repayment of borrowed money), statutory obligations, surety and appeal bonds
and other similar obligations incurred in the ordinary course and Liens
securing obligations to mechanics, materialmen bailees, warehousemen and
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similar Liens arising under operation of law and incurred in the
ordinary course of business;
(c) purchase money mortgages (including vendors' rights under purchase
or land contracts or under other agreements whereby title or another
interest is retained by the vendor for the purpose of securing the purchase
price thereof) on property acquired or constructed after the Restructuring
Effective Date, or the acquisition after the Restructuring Effective Date of
property subject to such a Lien which is limited to such property and was
not created in anticipation of such acquisition;
(d) mortgages, security interests and Liens on assets of the
Borrower or any Subsidiary existing on the Restructuring Effective Date, and
set forth on Schedule 7.03, which secure any Indebtedness of the Borrower or
any such Subsidiary, or any refundings or extensions for an amount not
exceeding the principal amount of such Indebtedness so long as such
refundings or extensions are secured only by the same property or assets;
(e) Liens on property of the Borrower or any Subsidiary created
concurrently with the release of existing Liens on other property of the
Borrower or any such Subsidiary, as provided under the Real Estate Debt
Documents, but only (i) if such substitution is one of several alternative
actions available to the obligor under such Real Estate Debt, of which such
obligor must choose one, following the occurrence of a condemnation,
casualty or eminent domain event, or upon the existence of an environmental
condition or (ii) in respect of a substitution of collateral resulting from
the single store collateral substitution obligation existing on the
Restructuring Effective Date and resulting from a store closing in
September, 1995 with respect to the Deal 2 Notes (as defined in the
Restructuring and Repurchase Agreement); provided that the fair market value
of the property subject to any such Lien permitted under clause (i) hereof
does not exceed one hundred ten percent (110%) of the fair market value of
the property as to which a Lien is concurrently being released (the fair
market value of the property being relieved of such Lien being determined
immediately prior to the occurrence of such casualty or condemnation or
eminent domain event, or the discovery of such environmental condition, or
the occurrence of such store closing);
(f) Liens on Deposits in favor of the Kmart Bank Group and liens on
cash balances of Kmart Canada Ltd. and
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its subsidiaries or Kmart CR a.s. (Czech operations) maintained in the
ordinary course of business, consistent with past practices in favor of the
lenders to such entities and Liens on monies held in the Paydown Trust
Account (as defined in the Restructuring and Repurchase Agreement) in favor
of the holders of the Real Estate Debt;
(g) Liens on the assets of Kmart Canada Ltd. and its subsidiaries or
Kmart CR a.s. (Czech operations) to secure New Indebtedness incurred by such
Persons and Liens to secure New Indebtedness of the Borrower and its other
Sub sidiaries (including, without limitation, New Indebtedness incurred
pursuant to this Agreement); provided that such Liens to secure New
Indebtedness shall encumber only
(i) noncurrent assets including, without limitation, Scheduled
Assets (or cash collateral pledged to secure the Indebtedness
under this Agreement in substitution of a Lien on noncurrent assets);
and
(ii) documents of title relating to Titled Letters of Credit:
provided further that no such Lien shall be permitted under this clause
(g) to secure any unsecured Indebtedness of the Borrower or any Subsidiary
outstanding on the Restructuring Effective Date or any refundings or
extension thereof;
(h) easements, rights-of-way, zoning and similar restrictions and
other similar charges or encumbrances not interfering in any material
respect with the ordinary conduct of the business of the Borrower and its
Subsidiaries;
(i) Liens on cash collateral to secure the Borrower's reimbursement
obligations under Letters of Credit issued pursuant to this Agreement to the
extent provided for herein; and
(j) Liens on cash collateral to secure the Borrower's reimbursement
obligations under two standby letters of credit issued by Bankers Trust
Company after the Restructuring Effective Date in an aggregate amount that
shall not exceed the lesser of (x) 105% of the outstanding face amount
thereof or (y) $25,000,000.
Section 7.04 EBITDAR Coverage Ratio. The Borrower shall not permit
its ratio of
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(a) EBITDAR (measured as of the end of any fiscal quarter for the
four-fiscal-quarters then ended) to
(b) the sum of (i) consolidated net interest expense for such four
fiscal quarter period plus (ii) consolidated Rent Expense for such four
fiscal quarter period
to be less than 1.50 to 1.00.
Section 7.05 Consolidated Net Worth. The Borrower shall not permit
its Consolidated Net Worth at any time to be less than Four Billion Five
Hundred Million Dollars ($4,500,000,000).
Section 7.06 Restricted Payments. The Borrower shall not, nor shall
it permit any Subsidiary to, declare, order, make or pay, or set aside any sum
for, any Restricted Payment, except that (a) any Subsidiary may declare and pay
dividends to the Borrower, (b) the Borrower may pay dividends in respect of its
common stock which were declared prior to December 31, 1995 and (c) the
Borrower may declare and pay dividends in respect of its preferred stock issued
and outstanding as of the Effective Date until such time as the Borrower shall
have declined any bona fide offer from any holder of any such preferred stock
to convert or enter into an agreement to convert such preferred stock into
common stock of the Borrower.
Section 7.07 Payment of Indebtedness. (a) During the period from
December 17, 1995 through February 28, 1997, the Borrower shall not, nor
shall it permit any Subsidiary (other than payments by Kmart Canada, Ltd. or
its subsidiaries or by Kmart CR a.s. (Czech operations) in respect of such
Person's respective Indebtedness in existence as of the Restructuring Effective
Date or New Indebtedness incurred by such Persons in the ordinary course of
business, consistent with past practices) to, directly or indirectly, make any
principal payment, in respect of any Real Estate Debt or any other Indebtedness
(including by way of purchase, refinancing, defeasance or other direct or
indirect transfer of cash consideration to the holders thereof; provided that
the Borrower may exchange any of its outstanding Indebtedness for money
borrowed for shares of its capital stock and make cash payments to the holders
of such Indebtedness in respect of fractional shares in connection with such
exchange) other than (i) scheduled payments on the Real Estate Debt set forth
on Schedule 7.07 and capital lease payments relating to stores securing the
Real Estate Debt in an amount not to exceed $9,000,000 in the aggregate, (ii)
scheduled payments of other mortgage indebtedness in existence as of the
Restructuring Effective Date in an amount not to exceed $12,000,000 in the
aggregate, (iii) payments made pursuant to guaranties of existing leases of
former Subsidiaries of the Borrower; provided; that such payments may only be
made with respect to rents so guaranteed as and when the same may become due in
the ordinary course (and not on any accelerated rents that may become due as a
result of a default on the underlying lease), (iv) payments made with respect
to Spin-Off Tenant Put Options (as defined in the Restructuring and Repurchase
Agreement as in effect on the Restructuring Closing Date), (v) ratable payments
of principal of the Real Estate Debt concurrently with the making of any
payments or reduction of commitments and ceiling amounts in respect of the
Indebtedness under the Kmart Credit Agreements or other Real Estate Debt, to
the extent required pursuant to
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Sections 2.2, 2.3 or 2.5 of the Restructuring and Repurchase Agreement
as in effect on the Restructuring Closing Date, (vi) ratable payments of
principal under any of the Kmart Credit Agreements concurrently with the
making of any prepayments or reduction of commitments under other of the
Kmart Credit Agreements to the extent required pursuant to the terms of the
Kmart Credit Agreements, (vii) regular, ordinary course payments of
Capitalized Lease Obligations in amounts consistent with past practices,
(viii) payments in respect of the termination of leases to the extent that the
Borrower believes that such payments provide a substantial benefit to the
Borrower (provided that such lease termination payments do not exceed the
lesser of (a) One Hundred Million Dollars ($100,000,000) in the aggregate
in any fiscal year of the Borrower and (b) One Hundred Twenty-Five Million
Dollars ($125,000,000) for all such payments, (ix) repayment of Indebtedness
secured by Liens on real property in connection with the sale or other
disposition of such real property provided that the Borrower or such
Subsidiary receives net cash proceeds from such sale or disposition in
excess of the Indebtedness required to be repaid, (x) mandatory principal
payments under the Big Beaver Credit Facilities and the Warehouse Facility
Credit Agreement as a result of project dispositions or project
refinancings, (xi) principal payments on the February 28, 1997 scheduled
maturity of the Seasonal Credit Agreement and the Big Beaver Credit
Facilities, (xii) payments in respect of New Indebtedness, (xiii) payments of
reimbursement obligations under letters of credit issued hereunder and
under the Three Year Credit Agreement and (xiv) other payments of principal
in respect of Indebtedness in an aggregate amount that shall not exceed the
lesser of (a) Fifty Million Dollars ($50,000,000) in any fiscal year of the
Borrower and (b) Seventy-Five Million Dollars ($75,000,000) in the aggregate
for all such payments, but only with respect to Indebtedness other than (1)
Real Estate Debt and (2) Indebtedness under the Kmart Credit Agreements.
(b) During the period from December 17, 1995 through October 3, 1997,
the Borrower shall not, nor shall it permit any Subsidiary (other than payments
by Kmart Canada, Ltd. or its subsidiaries or by Kmart CR a.s. (Czech
operations) in respect of such Person's respective Indebtedness in
existence as of the Restructuring Effective Date or New Indebtedness incurred by
such Person in the ordinary course of business, consistent with past practices)
to, directly or indirectly, make any principal payment in respect of any Real
Estate Debt or any other Indebtedness (including by way of purchase,
refinancing, defeasance or other direct or indirect transfer of cash
consideration to the holders thereof; provided that the Borrower may exchange
any of its outstanding Indebtedness for money borrowed for shares of its
capital stock and make cash payments to the holders of such Indebtedness in
respect of fractional shares) other than (i) scheduled principal payments on
such Indebtedness, (ii) repayments of Indebtedness of the type permitted under
Sections 7.07(a)(iii), (iv), (v), (vi), (ix), (x), (xii) and (xiii), (ii)
payments in respect of the termination of leases to the extent that the
Borrower believes that such payments provide a substantial benefit to the
Borrower, provided that such lease termination payments do not exceed the
lesser of (a) One Hundred Million Dollars ($100,000,000) in the aggregate in
any fiscal year of the Borrower and (b) One Hundred Twenty Five Million Dollars
($125,000,000) in the aggregate for all such payments and (iii) other payments
of principal in respect of Indebtedness in an aggregate amount that shall not
exceed the lesser of (a) Fifty Million Dollars ($50,000,000) in the aggregate
in any fiscal year of the Borrower and (b) Seventy Five Million Dollars
($75,000,000) in the aggregate for all such payments, but only with respect to
Indebtedness other than (1) Real Estate Debt and (2) Indebtedness under the
Kmart Credit Agreements.
ARTICLE VIII
EVENTS OF DEFAULT
Section 8.01 Event of Default. Any of the following shall constitute
an "Event of Default":
(a) Non-Payment of Reimbursement Obligations. The Borrower fails to
pay, when and as required to be paid herein or under any Loan Document, any
Reimbursement Obligation and such default shall continue unremedied for a
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period of two (2) Business Days after the date upon which notice thereof
is received by the Borrower from any Bank;
(b) Non-Payment of Interest or Fees. The Borrower fails to pay, when
and as required to be paid herein or under any other Loan Document, any
interest or any fees payable hereunder and such default shall continue
unremedied for a period of five (5) Business Days after the date upon which
notice thereof is received by the Borrower from any Bank;
(c) Specific Defaults. The Borrower fails to perform or observe any
term, covenant or agreement contained in Section 6.02, 6.03, 6.08(i), 6.09,
6.10, 7.01, 7.02, 7.03, 7.06 or 7.07;
(d) Other Defaults. The Borrower fails to perform or observe any
other term or covenant contained in this Agreement and such default shall
continue unremedied for a period of thirty (30) days after the date upon
which written notice thereof is given to the Borrower by any Bank;
(e) Representation or Warranty. Any representation or warranty by the
Borrower made or deemed made herein proves to have been inaccurate or untrue
in any material respect on or as of the date made or deemed made;
(f) Cross Default; Cross-Acceleration. (i) The Borrower or any
Subsidiary fails to make any payment of principal or interest or fees
under any of the Other Credit Facilities or the Three Year Credit Agreement
when due after taking into account any application of grace periods, or
(ii) by reason of any action taken by the Borrower or any Subsidiary with
the intent and capacity promptly to satisfy any obligation of the Borrower
or any Subsidiary resulting therefrom, including, without limitation, the
calling for payment by the Borrower of any of its Indebtedness or the
termination by the Borrower of any of its guaranty obligations, any
Indebtedness shall mature or be declared due and payable prior to its stated
maturity and such Indebtedness shall remain unpaid for a period of two (2)
Business Days thereafter, or (iii) the Borrower or any Subsidiary fails to
perform or observe any condition or covenant or any other event shall occur
or condition exist (other than with respect to matters described under
clause (ii) immediately preceding) relating to Indebtedness (other than
Indebtedness under the Other Credit Facilities or the Three Year Credit
Agreement) having an aggregate principal amount (including undrawn
committed or available amounts) of more than Fifty Million Dollars
($50,000,000) if the effect of any such failure, event or
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condition is to cause such Indebtedness to be declared to be due and payable
or otherwise become due and payable prior to its stated maturity, (iv) the
Borrower or any Subsidiary fails to pay any such other Indebtedness
described in clause (iii) in full at its stated maturity (except for any
such Indebtedness under that certain Loan Agreement dated as of January
21, 1992 among the borrowers named therein, the financial institutions
signatory thereto and [ ], as Managing Agent, for so long as any
forbearance agreement contained in the "Fourth Amendment to Loan
Agreement and Limited Forbearance" dated as of the Effective Date as in
effect as of the Effective Date in respect of such Indebtedness remains in
full force and effect) or (v) there shall occur a "Triggering Event" (as
defined in the Restructuring and Repurchase Agreement) or all or any portion
of any Real Estate Debt shall otherwise mature or be declared or otherwise
become due and payable prior to October 3, 1997 (except for principal
payments permitted in Section 7.07);
(g) ERISA. The occurrence of a Reportable Event which the PBGC deems
grounds to terminate any employee pension benefit plan or for the
appointment of a trustee to administer such plan and such Reportable Event
is not corrected and such determination by the PBGC is not revoked within
thirty (30) days after notice thereof; or the institution of proceedings by
the PBGC to terminate any such plan; or the appointment of a trustee to
administer any such plan;
(h) Monetary Judgments. A final judgment or judgments in excess of
Fifty Million Dollars ($50,000,000) shall be entered against the Borrower by
a court of record and not discharged in accordance with its terms or, within
sixty (60) days from the date of entry thereof, stayed from execution and
(within said period of sixty (60) days or such longer period during which
execution of such judgment(s) shall have been stayed) appeal taken therefrom
and execution thereof stayed during such appeal;
(i) Insolvency; Voluntary Proceedings. The Borrower (i) generally
fails to pay, or admits in writing its inability to pay, its debts as they
become due, subject to applicable grace periods, if any, whether at stated
maturity or otherwise; (ii) voluntarily ceases to conduct its business in
the ordinary course; (iii) commences any Insolvency Proceeding with respect
to itself; or (iv) takes any action to effectuate or authorize any of the
foregoing;
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(j) Involuntary Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Borrower, or any writ,
judgment, warrant of attachment, execution or similar process, is issued or
levied against a substantial part of the Borrower's properties, and any such
proceeding or petition is not dismissed, or such writ, judgment, warrant of
attachment, execution or similar process is not released, vacated or fully
bonded within 60 days after commencement, filing or levy; (ii) the Borrower
admits the material allegations of a petition against it in any Insolvency
Proceeding, or an order for relief is entered in any Insolvency Proceeding;
or (iii) the Borrower acquiesces in the appointment of a receiver, trustee,
custodian, conservator, liquidator, mortgagee in possession (or agent
therefor), or other similar Person for itself or a substantial portion of
its business;
(k) Payments on Real Estate Debt. The Borrower or any Subsidiary
shall make or permit to be made (either voluntarily or otherwise) any
principal payment to any holder of any Real Estate Debt and shall fail to
make a concurrent repayment of the obligations under the Kmart Credit
Agreements to the extent required thereunder;
(l) Unreimbursed Put Payments. There shall have occurred the
expiration of ten (10) days after the satisfaction of the following
conditions:
(i) the exercise of a Spin-Off Tenant Put Option against the
Borrower by any Spin-Off Creditor and
(ii) the expiration of the one hundred twenty (120) day period
following the payment by the Borrower of the Purchase Amount in respect
of such exercise, if, upon such expiration, the aggregate amount of
Unreimbursed Put Payments (after giving effect to all amounts received
by the Borrower from (i) the sale or other disposition of the relevant
tendered securities and/or any asset or assets securing the same and
(ii) any other Person that is obligated, directly or indirectly, in
respect of the relevant Spin-Off respect thereto) in respect of (1)
such exercise and (2) all Spin-Off Tenant Put Options which have been
exercised at any time prior to the commencement of such 120-day period,
exceeds Fifteen Million Dollars ($15,000,000).
For purposes of this Section 8.01(1), the terms "Spin-Off Tenant Put
Option", "Spin-Off Creditor", "Purchase
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Amount", and "Unreimbursed Put Payments" shall have the meanings ascribed
to such terms in the Restructuring and Repurchase Agreement as in effect on
the Restructuring Closing Date (including as such terms are further defined
by reference to any other agreements), and not as such terms or other
agreements may subsequently be amended or otherwise modified; or
(m) Breach of Financing Agreements. The Borrower or any Subsidiary
shall fail to perform or observe any term, covenant or agreement with
respect to any New Indebtedness having an aggregate principal amount of more
than Fifty Million Dollars ($50,000,000), and such default shall continue
unremedied or unwaived, or the term or covenant in respect of such failure
shall not have been amended, as the case may be, within forty-five (45) days
after the first date upon which any holder or holders thereof (or any
representative of such holder(s)) shall have the right, on account of such
failure and after giving effect to any required notice and the lapse of any
applicable cure periods, to declare such Indebtedness to be im mediately
due and payable.
Section 8.02 Remedies. If any Event of Default has occurred and is
continuing, the Agent shall, at the request of the Required LC Issuance Banks
or may, with the consent of, the Required LC Issuance Banks:
(a) declare the commitment of each Bank to issue or extend Letters of
Credit to be terminated, whereupon all such commitments shall forthwith be
terminated;
(b) declare all amounts owing or payable hereunder or under any other
Loan Document to be immediately due and payable; without presentment,
demand, protest or other notice of any kind, all of which are hereby
expressly waived by the Borrower; and
(c) exercise on behalf of itself and the Banks all rights and remedies
available to it and the Banks under the Loan Documents or applicable law;
provided that upon the occurrence of any event specified in Section 8.01(i)
or 8.01(j) above (upon the expiration of the 60-day period mentioned
therein if applicable), the commitment of each Bank to issue or extend
letters of credit shall automatically terminate and all amounts due
hereunder or under any of the Loan Documents shall automatically become due
and payable without further act of any Bank.
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In addition to the foregoing, following the occurrence and during the
continuance of an Event of Default, so long as any Letter of Credit has not
been fully drawn and has not been cancelled or expired by its terms, upon
demand by any Bank, the Borrower shall deposit in a cash collateral account for
the benefit of such Bank, pursuant to documentation acceptable to such Bank,
cash in an amount equal to the aggregate undrawn face amount of all outstanding
Letters of Credit (other than those for which full cash collateral has already
been provided) issued by such Bank and all fees and other amounts due or which
may become due with respect thereto. The Borrower shall have no control over
funds in any such cash collateral account, which funds shall be invested from
time to time in certificates of deposit and other cash equivalents having a
maturity not exceeding thirty days. Such funds shall be promptly applied by
the relevant Bank to reimburse such Bank for drawings under such Letters of
Credit, and if there are insufficient funds available to reimburse the Bank for
all such drawings, then such funds shall be applied ratably in accordance with
the face amounts of the related Letters of Credit. Such funds, if any,
remaining in a cash collateral account following the later of (i) the payment
of all obligations hereunder and all Reimbursement Obligations in full or (ii)
the termination of all Events of Default shall, unless the Bank is otherwise
directed by a court of competent jurisdiction, be promptly paid over to the
Borrower.
Section 8.03 Rights Not Exclusive. The rights provided for in this
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other rights, powers, privileges or remedies provided by law or in equity,
or under any other instrument, document or agreement now existing or hereafter
arising.
ARTICLE IX
THE AGENT
Section 9.01 Appointment and Authorization. Each Bank hereby
irrevocably (except as otherwise set forth in Section 9.09) appoints,
designates and authorizes the Agent to take such action on its behalf under the
provisions of this Agreement and each other Loan Document and to exercise such
powers and perform such duties as are expressly delegated to it by the terms of
this Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the Agent
shall not have any duties or responsibilities, except
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those expressly set forth herein, nor shall the Agent have or be deemed to
have any fiduciary relationship with any Bank, 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 Agent.
Section 9.02 Delegation of Duties. The Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-infact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects with reasonable care.
Section 9.03 Liability of Agent-Related Persons. No Agent-Related
Persons shall (i) be liable for any action taken or omitted to be taken by any
of them under or in connection with this Agreement or any other Loan Document
or the transactions contemplated hereby (except for its own gross negligence or
willful misconduct), or (ii) be responsible in any manner to any of the Banks
for any recital, statement, representation or warranty made by the Borrower or
any Subsidiary or Affiliate of the Borrower, or any officer thereof, contained
in this Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other Loan Document,
or the validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or any other Loan Document, or for any failure of the Borrower
or any other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Bank
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 or any
of the Borrower's Subsidiaries or Affiliates.
Section 9.04 Reliance by Agent.
(a) The Agent shall be entitled to rely, and shall be fully protected
in relying, upon any writing, resolution, notice, consent, certificate,
affidavit, letter, telegram, facsimile, telex or telephone message, statement
or other document or conversation believed by it to be genuine and correct and
to have been signed, sent or made by the proper Person or Persons, and upon
advice and statements of legal counsel (including counsel to the Borrower),
independent accountants and other experts selected by the Agent. The Agent
shall be fully justified in failing or refusing to take any action under this
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Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Required LC Issuance Banks as it deems
appropriate and, if it so requests, it shall first be indemnified to its
satisfaction by the Banks against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such
action. The Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement or any other Loan Document in
accordance with a request or consent of all of the Banks or the Required LC
Issuance Banks, as applicable, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 3.01, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with each
document or other matter either sent by the Agent to such Bank for consent,
approval, acceptance or satisfaction or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Bank.
Section 9.05 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Potential Default or Event of
Default, or of the occurrence of any Trigger Date, unless the Agent shall have
received written notice from a Bank or the Borrower referring to this
Agreement, describing such Potential Default or Event of Default and stating
that such notice is a "notice of default" or "notice of trigger date". The
Agent will notify the Banks of its receipt of any such notice. The Agent shall
take such action with respect to such Potential Default or Event of Default as
shall be requested by the Required LC Issuance Banks in accordance with Article
VIII; provided, however, that unless and until the Agent has received any such
request, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Potential Default or
Event of Default as it shall deem advisable or in the best interest of the
Banks.
Notwithstanding anything in this Agreement or any Loan Agreement to the
contrary, the Agent shall not have any liability to any of the Banks or any of
the Kmart Credit Agreement Banks for any acts or omissions in connection with
the matters contemplated by Article IV of this Agreement other than for acts or
omissions affirmatively taken in bad faith.
Section 9.06 Credit Decision. Each Bank expressly acknowledges that
none of the Agent-Related Persons has made any representation or warranty to it
and that no act by the
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Agent hereinafter taken, including any review of the affairs of the
Borrower and its Subsidiaries shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Bank. Each
Bank represents to the Agent that it has, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial
and other condition and creditworthiness of the Borrower and its
Subsidiaries, and all applicable bank regulatory laws relating to the
transactions contemplated hereby and made its own decision to enter into
this Agreement and extend credit to the Borrower hereunder. Each Bank also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit
analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such
investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly herein required to be furnished to the Banks by the
Agent, the Agent shall not have any duty or responsibility to provide any
Bank with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Borrower which may come into the possession of any
of the Agent-Related Persons.
Section 9.07 Indemnification. Whether or not the transactions
contemplated hereby are consummated, the Banks shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Borrower and without limiting the obligation of the Borrower to do so), pro
rata (as determined in accordance with their respective percentages of the
aggregate issuance commitments hereunder) from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses and disbursements of any kind whatsoever which may at
any time (including at any time following the reimbursement of any drawing
under a Letter of Credit) be imposed on, incurred by or asserted against any
such Person any way relating to or arising out of this Agreement or any
document contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by any such
Person under or in connection with any of the foregoing; provided, however,
that no Bank shall be liable for the payment to the Agent-Related Persons of
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting solely
from
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such Person's gross negligence or willful misconduct. Without limitation
of the foregoing, each Bank shall reimburse the Agent upon demand for its
ratable share of any costs or out-of-pocket expenses (including Attorney
Costs) incurred by the Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice
in respect of rights or responsibilities under, this Agreement, any other
Loan Document, or any document contemplated by or referred to herein to the
extent that the Agent is not reimbursed for such expenses by or on behalf
of the Borrower. The obligation of the Banks in this Section 9.07 shall
survive the payment of all obligations hereunder or under any Loan Document
and the resignation or replacement of the Agent.
Section 9.08 Agent in Individual Capacity. The Agent and its
Affiliates may make loans to, issue letters of credit for the account of,
accept deposits from, acquire equity interests in and generally engage in any
kind of banking, trust, financial advisory, underwriting or other business with
the Borrower and its Affiliates as though [ ] were not the Agent hereunder and
without notice to or consent of the Banks. The Banks acknowledge that,
pursuant to such activities, [ ] or its Affiliates may receive information
regarding the Borrower or its Subsidiaries and Affiliates (including
information that may be subject to confidentiality obligations in favor of the
Borrower or such Subsidiary or Affiliate) and acknowledge that the Agent shall
be under no obligation to provide such information to them. With respect to
its Loans, the Agent shall have the same rights and powers under this Agreement
as any other Bank and may exercise the same as though it were not the
Administrative Agent and the terms "Bank" and "Banks" shall include [ ] in
its individual capacity.
Section 9.09 Successor Agent. The Agent may, and at the request of
the Required LC Issuance Banks shall, resign as Agent, upon thirty days' notice
to the Banks and the Borrower. If the Agent resigns under this Agreement, the
Required LC Issuance Banks shall appoint from among the Banks a successor Agent
which successor Agent shall be subject to the reasonable approval of the
Borrower, provided no Event of Default or Potential Event of Default then
exists. If no successor Agent is appointed prior to the effective date of the
resignation of the resigning Agent, the Agent may appoint, after consulting
with the Banks and subject to the approval of the Borrower, a successor Agent
from among the Banks. Upon the acceptance of its appointment as successor
Agent hereunder, such successor Agent
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shall succeed to all the rights, powers and duties of the retiring Agent
and the term "Agent" shall mean such successor Agent and the retiring
Agent's appointment, rights, powers and duties in such capacity shall be
terminated. After any retiring Documentation Agent's resignation hereunder
as Documentation Agent, the provisions of this Article IX and the other
provisions of this Agreement shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was the Agent under this
Agreement. If no successor Agent has accepted appointment as Agent by the
date which is thirty days following a retiring Agent's notice of
resignation, the retiring Agent's notice of resignation shall nevertheless
thereupon become effective and the Banks shall perform all of the duties of
the Agent until such time, if any, as the Required LC Issuance Banks
appoint a successor Agent as provided for above.
ARTICLE X
MISCELLANEOUS
Section 10.01 Amendments and Waivers. No amendment or waiver of any
provision of this Agreement, and no consent with respect to any departure by
the Borrower therefrom, shall be effective unless the same shall be in writing
and signed by the Required LC Issuance Banks, and then such waiver shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no such waiver, amendment, or consent shall,
unless in writing and signed by all the Banks, do any of the following:
(a) increase the Maximum Standby L/C Commitment Amount, the
Maximum Trade A L/C Commitment Amount or the Maximum Trade B L/C Commitment
Amount of any Bank or amend the definitions of such terms in any manner
which would result in any such amount being greater at any time than what it
would be absent such amendment;
(b) postpone or delay any date fixed for any payment of principal,
interest, fees or other amounts due hereunder including the payment of any
Reimbursement Obligation;
(c) amend the definitions of Adjusted Availability, Availability,
Required LC Issuance Banks, Titled Letters of Credit or Trigger Date;
(d) extend the Termination Date; and
(e) amend Sections 4.01, 4.02, 4.03 or 10.01;
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provided, further, that no such waiver, amendment, or consent shall reduce
the rate of interest or fees payable to a Bank without the written and
signed consent of such Bank and provided, further, that no amendment, waiver
or consent shall, unless in writing and consented to and signed by the
Agent, in addition to the Required LC Issuance Banks or all of the Banks, as
the case may be, affect the rights or duties of the Agent under this
Agreement or any other Loan Document.
Section 10.02 Notices.
(a) All notices, requests and other communications provided for
hereunder shall be in writing (including, unless the context expressly
otherwise provides, by facsimile transmission) and mailed, faxed, or delivered,
(i) if to the Borrower, to its address specified on the signature pages hereof;
(ii) if to any Bank or to the Agent, to its address specified on the signature
pages hereof or otherwise indicated in a written notice to the other parties
hereto; or (iii) as to any party to such other address as shall be designated
by such party in a written notice to the other parties.
(b) All such notices and communications shall, when transmitted by
overnight delivery or by facsimile, be effective when delivered for overnight
delivery or transmitted by facsimile (to be promptly confirmed by sender by
telephone), respectively, or if delivered, upon delivery.
Section 10.03 No Waiver. No failure to exercise and no delay in
exercising, on the part of any Bank, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power
or privilege.
Section 10.04 Costs and Expenses. The Borrower shall, whether or not
the transactions contemplated hereby shall be consummated:
(a) pay or reimburse each Bank and the Agent on demand for all costs
and expenses incurred by such Bank or the Agent in connection with the
development, preparation, delivery, administration and execution of the L/C
Letter Agreement, this Agreement, any other Loan Document and any amendment,
supplement, waiver or modification to this
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Agreement, any Loan Document or any other documents prepared in connection
herewith or therewith, and the consummation of the transactions contemplated
hereby and thereby, including the Attorney Costs incurred by it with
respect thereto (including, but not limited to, the fees and expenses of
Wachtell, Lipton, Rosen & Katz, special counsel to the Banks and the
Attorney Costs of each Bank in connection with the execution and delivery of
this Agreement;
(b) pay or reimburse each Bank and the Agent on demand for all
reasonable costs and expenses incurred by them in connection with the
enforcement, attempted enforcement, or preservation of any rights or
remedies (including in connection with any "workout" or restructuring
regarding the Borrower's Indebtedness or any Event of Default or Potential
Default) under this Agreement, any other Loan Document, and any such other
documents, including Attorney Costs incurred by any Bank and the Agent; and
(c) pay or reimburse the Banks, the Agent or Wachtell, Lipton, Rosen &
Katz on demand for all fees and expenses incurred by any consultant,
accountant, advisor or other professional that may be retained by the Banks,
the Agent or Wachtell, Lipton, Rosen & Katz after the date hereof in
connection with this Agreement or the Borrower's financial condition or any
actual or contemplated workout of the Borrower's financial obligations.
Section 10.05 Indemnity. The Borrower agrees to indemnify and hold
harmless the Banks, the Agent, and each director, officer, employee, attorney
or agent of each of them (each, an "Indemnified Person") from and against any
and all actions, suits, proceedings, damages, liabilities or expenses of any
kind or nature whatsoever which may be incurred by or asserted against any such
Indemnified Person by reason of this Agreement, any Letter of Credit or other
Loan Document or any transaction contemplated hereby; provided, that no
Indemnified Person shall be indemnified with respect to such party's breach,
default, gross negligence or bad faith in performing its duties and obligations
under this Agreement. Any Indemnified Person seeking indemnification pursuant
hereto with respect to a third party claim must give the Borrower timely notice
of any such claim and cooperate in the defense thereof, and the Borrower shall
have the right to control the defense thereof and, if the same shall not
involve any payment or performance by the Indemnified Person, settlement of
such claim.
Section 10.06 Successors and Assigns. Subject to Section 10.07
hereof, the provisions of this Agreement shall be
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binding upon and inure to the benefit of the parties hereto 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 Bank.
Section 10.07 Assignments, Participations, Etc.
(a) Any Bank may, with the written consent of the Borrower, which
consents shall not be unreasonably withheld, at any time assign and delegate to
one or more Eligible Assignees (provided that no written consent of the
Borrower or the Agent shall be required in connection with any assignment and
delegation by a Bank to a Bank Affiliate of such Bank or to any other Bank)
(each an "Assignee") all, or any part of, its rights and obligations hereunder
and under the other Loan Documents; provided, however, that the Borrower may
continue to deal solely and directly with such Bank in connection with the
interest so assigned to an Assignee until written notice of such assignment in
form and substance reasonably satisfactory to the Borrower, together with
payment instructions, addresses and related information with respect to the
Assignee, shall have been given to the Borrower, the Agent and the Collateral
Agent; provided further that such Assignee shall accept the terms of this
Agreement (including the obligations under Article IV) and the Security
Documents pursuant to agreements reasonably acceptable to each of the other
Banks party hereto and shall deliver a copy of such agreements to the Borrower.
(b) From and after the date that the assignor Bank notifies the
Borrower and each other Bank that the requirements of Section 10.07(a) are
satisfied (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it, shall
have the rights and obligations of a Bank hereunder the Loan Documents, and
(ii) the assignor Bank shall, to the extent that rights and obligations
hereunder have been assigned by it, relinquish its rights and be released from
its additional obligations hereunder.
Section 10.08 Notification of Addresses. Each Bank shall notify the
Borrower in writing of any changes in the address to which notices to the Bank
should be directed, of payment instructions in respect of all payments to be
made to it hereunder and of such other administrative information as the
Borrower shall reasonably request.
Section 10.09 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement in any
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number of separate counterparts, each of which, when so executed, shall be
deemed an original, and all of said counterparts taken together shall be
deemed to constitute but one and the same instrument.
Section 10.10 Severability. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
Section 10.11 No Third Parties Benefited. Except as otherwise
indicated, this Agreement is made and entered into for the sole protection and
legal benefit of the Borrower and the Banks and their permitted successors and
assigns, and no other Person shall be a direct or indirect legal beneficiary
of, or have any direct or indirect cause of action or claim in connection with,
this Agreement or any of the other Loan Documents. The provisions of Section
4.03 shall be directly enforceable by each of the Kmart Credit Agreement Banks.
Section 10.12 Governing Law and Jurisdiction.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICTS OF LAW
PROVISIONS THEREOF); PROVIDED THAT THE BORROWER, THE AGENT AND THE BANKS SHALL
RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWER, THE AGENT AND THE BANKS
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE JURISDICTION OF
THOSE COURTS. EACH OF THE BORROWER, THE AGENT AND THE BANKS IRREVOCABLY WAIVES
ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE BORROWER, THE AGENT AND THE
BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS,
WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
Section 10.13 Waiver of Jury Trial. THE BORROWER, THE AGENT AND THE
BANKS EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE
OTHER LOAN
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DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE BORROWER, THE AGENT AND
THE BANKS EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED
BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS
WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER
PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY
PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS.
Section 10.14 Entire Agreement. This Agreement, together with the
other Loan Documents, embodies the entire agreement, and understanding among
the Borrower and the Banks, and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof, provided that nothing herein shall
affect the Borrower's obligations under the L/C Letter Agreement and any other
arrangements made with respect to the payment by the Borrower of (or any
indemnification for) any fees, costs or expenses payable to or incurred (or to
be incurred) by or on behalf of any of the Banks or the Agent.
Section 10.15 Reaffirmation of Existing Obligations. Nothing
contained in this Agreement shall alter, delay, impair, extend or affect any
reimbursement or other obligation of Kmart to any Bank hereunder in respect of
any Trade Letter of Credit or Standby Letter of Credit. Kmart hereby reaffirms
its obligations set forth in such reimbursement and other documents previously
delivered by Kmart in favor of the Banks, except to the extent expressly
superseded by this Agreement. Nothing contained in this Agreement shall limit
the rights of any Bank to enforce its remedies under the Uniform Commercial
Code or the Uniform Customs and Practice for Documentary Credits.
[signature pages to follow]
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IN WITNESS WHEREOF, Kmart, the Agent and the Banks have executed this
Agreement as of the date first above written.
KMART CORPORATION
By: ____________________________
Name: __________________________
Address:
Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084-3163
Attn: Treasurer
Facsimile: (810) 643-5398
Telephone: (810) 643-1000
[Letter of Credit Issuance Agreement Signature Pages]
<PAGE> 126
AMENDMENT NO. 1 TO 364 DAY CREDIT AGREEMENT
This Amendment No. 1 TO 364 DAY CREDIT AGREEMENT (this "Amendment
Agreement") is entered into as of December 22, 1995 by and among Kmart
Corporation (the "Company"), the undersigned financial institutions (the
"Banks") and [ ], as Documentation Agent (the "Agent").
W I T N E S S E T H:
WHEREAS, the Company, the Banks and the Agent entered into that certain
364 Day Credit Agreement dated as of October 5, 1995 (as amended, restated,
modified, or supplemented and as in effect from time to time, the "Credit
Agreement"); and
WHEREAS, the Company has requested that the Credit Agreement be amended in
certain respects as set forth herein, and the Banks and the Agent are agreeable
to the same, subject to the terms and conditions herein set forth;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. Defined Terms. Capitalized terms used herein and not otherwise defined
herein shall have the meanings attributed to such terms in the Credit
Agreement, as amended hereby.
2. Amendments to Credit Agreement.
2.1 Section 1.01 of the Credit Agreement is hereby amended by (a) amending
and restating the definitions of "Consolidated Net Worth", "EBITDAR", "Interest
Payment Date", "Interest Period", "Material Adverse Effect", "Other Credit
Facilities", "Termination Date" and "Type" in their entirety to read as
follows:
"Consolidated Net Worth" means as of the date of any determination
thereof, the consolidated net worth of the Company, determined in accordance
with GAAP; provided, however, that any gains or losses from the disposition of
any Specialty Retail Subsidiary (or from any write-downs of the Company's
investment in any Specialty Retail Subsidiary or in Builder's Square, Inc.,
Kmart Canada, Ltd., Kmart CR a.s., Kmart SR a.s. and Kmart s.r.o. permitted
under the Financial Accounting Standards Board Statement No. 121 prior to any
such disposition)
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and any changes after the Closing Date in the foreign currency translation
adjustment account as presented in the Company's financial statements (and in
accordance with GAAP) shall be excluded from the determination of Consolidated
Net Worth.
"EBITDAR" means, for any applicable period, for the Company the aggregate
of the following, without duplication: (a) consolidated net income for such
period, plus (b) consolidated interest expense (net of any interest income) for
such period, plus (c) consolidated provision for taxes for such period, plus
(d) consolidated depreciation expense for such period, plus (e) consolidated
amortization expense for such period, plus (f) consolidated Rent Expenses for
such period, minus (or plus, as applicable) (g) on a consolidated basis, any
extraordinary gains (or plus extraordinary losses) for such period (including
any loss resulting from any write-downs of the Company's investment in
Builder's Square, Inc., Kmart Canada, Ltd., Kmart CR a.s., Kmart SR a.s. or
Kmart s.r.o. permitted under the Financial Accounting Standards Board Statement
No. 121), minus (or plus, as applicable) (h) any gains (or plus any losses)
attributable to the Specialty Retail Subsidiaries for such period other than
results of operations in the ordinary course of business, plus (i) solely with
respect to the four fiscal quarters ending in October 1994, the $1.348 billion
restructuring charge recorded in the fourth fiscal quarter of the Company's
fiscal year ending January 26, 1994, minus (or plus, as applicable) (j) any
gains (or losses) realized from the sale of Kmart Canada Ltd. and each of its
Subsidiaries, Kmart CR a.s. (Czech operations), Kmart SR a.s. (Slovak
operations) and Kmart s.r.o. (servicer of Czech and Slovak operations).
"Interest Payment Date" means, with respect to any LIBOR Loan, the last
day of each Interest Period applicable to such Loan, and, with respect to any
Reference Rate Loan, the last Business Day of each calendar quarter and the
Termination Date; provided, that if any Interest Period for a LIBOR Loan
exceeds three months, the date which falls three months after the beginning of
such Interest Period shall also be an Interest Payment Date.
"Interest Period" means with respect to any LIBOR Loan, the period
commencing on the Business Day the LIBOR Loan is disbursed or continued (or on
the Conversion Date on which any Loan is converted to a LIBOR Loan) and ending
on the date one, two, three or six months thereafter, as selected by the
Company in its Notice of Borrowing or Notice of Conversion/Continuation;
provided, that:
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(i) if any Interest Period would otherwise end on a day which is not
a Business Day, that Interest Period shall be extended to the next
succeeding Business Day unless, in the case of a LIBOR Loan, 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;
(ii) any Interest Period pertaining to a LIBOR Loan 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 the calendar month
which is one, two, three or six months, as the case may be, after the
calendar month in which such Interest Period began; and
(iii) no Interest Period for any Loan shall extend beyond the
Termination Date.
"Material Adverse Effect" means a material adverse change in, or
material adverse effect upon, (a) the business, financial condition,
operations, assets or prospects of the Company, or of the Company and its
Subsidiaries taken as a whole, or (b) the Company's ability to perform its
obligations under this Agreement or the Loan Documents, or (c) the validity or
enforceability of this Agreement or any other Loan Document; provided, however,
that any past or future reduction in the Company's credit rating or decline in
the market price of the Company's stock shall not of themselves be deemed to
constitute a Material Adverse Effect.
"Other Credit Facilities" means, collectively: (a) the Seasonal Credit
Facility, (b) the Three Year Credit Facility; and (c) the Warehouse Facility
Credit Agreement.
"Termination Date" means the earlier to occur of
(a) October 3, 1997; and
(b) the date on which the Commitments shall terminate in accordance
with the provisions of this Agreement.
"Type" means, with respect to any Loan, its nature as a Reference
Rate Loan or a LIBOR Loan;
(b) deleting the definitions of "CD Rate", "CD Rate Loan", "Extended
Termination Date", "Extension Confirmation Date", "Extension Confirmation
Notice", and "Extension Request"
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in their entirety; and (c) adding the definitions of "Bank Setoff Sharing
Agreement", "Big Beaver Credit Facilities", "Capitalized Lease Obligations",
"Cash Equivalents", "Ceiling Amount", "Deposits", "Deposit Threshold", "Kmart
Bank Group", "Letter of Credit Issuance Agreement", "New Indebtedness", "Real
Estate Debt", "Real Estate Debt Documents", "Required Deposit Amount",
"Restricted Payment", "Restructuring and Repurchase Agreement", "Restructuring
Closing Date", "Restructuring Effective Date", "Scheduled Assets", "Seasonal
Credit Facility", "Set-Off and Sharing Agreement", "Three Year Credit Facility"
and "Warehouse Facility Credit Agreement" as follows:
"Bank Setoff Sharing Agreement" means that certain Bank Setoff Sharing
Agreement dated as of the Restructuring Effective Date among the Banks party
thereto, the Company and [ ], as agent.
"Big Beaver Credit Facilities" means the revolving credit facilities
evidenced by: (a) that certain Loan Agreement dated as of January 21, 1992
among the borrowers named therein, the financial institutions signatory thereto
and [ ], as Managing Agent ("Big Beaver I Credit Facility"),
and (b) that certain Loan Agreement dated as of August 7, 1992 among the
borrowers named therein, the financial institutions signatory thereto, and
[ ], as Agent ("Big Beaver II Credit Facility").
"Capitalized Lease Obligations" means, in relation to any Person,
obligations for the payment of rent for any real or personal property under
leases or agreements to lease that, in accordance with GAAP, have been or
should be capitalized on the books of the lessee and, for purposes hereof, the
amount of any such obligation shall be the capitalized amount thereof
determined in accordance with GAAP.
"Cash Equivalents" means investments substantially of the type described
on Schedule 1.01(c) hereof.
"Ceiling Amount" means, at any time of determination, seven hundred
million dollars ($700,000,000) less the aggregate amount of payments made in
respect of the Loans after the Restructuring Effective Date pursuant to Section
2.07(b), as such amount may be increased from time to time with the written
consent of all of the Banks.
"Deposits" has the meaning specified in Section 6.09.
"Deposit Threshold" means, at any time, the sum of (a) $400,000,000 plus
(b) an amount equal to (i) the increase
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in the fair market value (as determined based on appraisals satisfactory to the
Documentation Agent) of collateral securing the Real Estate Debt arising from
the substitution of collateral after the Restructuring Effective Date to the
extent permitted by Section 7.03(e) upon an event of casualty, condemnation or
eminent domain event, or upon the existence of an environmental condition (but
in any event excluding a substitution of collateral resulting from the single
store collateral substitution obligation existing on the Restructuring
Effective Date and resulting from a store closing in September, 1995 with
respect to the Deal 2 Notes (as defined in the Restructuring and Repurchase
Agreement)), to the extent such substitution is permitted under the Real Estate
Debt Documents as in effect as of the Restructuring Closing Date, multiplied by
a fraction, the numerator of which is equal to the sum of the outstanding
obligations under this Agreement, the Other Credit Facilities and the Big
Beaver Credit Facilities at the time of such substitution and the denominator
of which is equal to the Real Estate Debt outstanding at the time of such
substitution, less (ii) the fair market value (as determined based on
appraisals satisfactory to the Documentation Agent) of any property pledged to
secure the outstanding obligations under this Agreement, the Other Credit
Facilities and the Big Beaver Credit Facilities concurrently with such pledge
of substituted collateral to the holders of the Real Estate Debt.
"Kmart Bank Group" means the lending institutions from time to time party
to one or more of this Agreement, the Other Credit Facilities and the Big
Beaver Credit Facilities.
"Letter of Credit Issuance Agreement" means that certain Letter of Credit
Issuance Agreement dated as of the Restructuring Closing Date between the
Company and certain banks, pursuant to which such banks agreed to issue trade
letters of credit and standby letters of credit on the terms and subject to the
conditions provided for therein.
"New Indebtedness" means Indebtedness incurred by the Company or any of
its Subsidiaries after the Restructuring Effective Date other than (i) any
Indebtedness under this Agreement, the Other Credit Facilities or the Big
Beaver Credit Facilities, (ii) Indebtedness under or Indebtedness refunding or
refinancing the Real Estate Debt or (iii) Indebtedness refunding or refinancing
unsecured Indebtedness of the Company outstanding on the Restructuring
Effective Date. Indebtedness outstanding under the Letter of Credit Issuance
Agreement shall constitute New Indebtedness.
"Real Estate Debt" means the Indebtedness outstanding under the agreements
listed on Schedule 1.01(a) hereto.
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"Real Estate Debt Documents" means the Restructuring and Repurchase
Agreement and the documents and instruments relating to the Real Estate Debt,
as in effect as of the Restructuring Effective Date, including the related note
purchase agreements, indentures, trust agreements, put agreements, promissory
notes, mortgages, deeds of trust, leases and other security documents and the
documents described as the "Existing Transaction Documents" in the
Restructuring and Repurchase Agreement.
"Required Deposit Amount" has the meaning specified in Section 6.09.
"Restricted Payment" means, with respect to any Person, (a) any dividend
or other distribution, direct or indirect, or the incurrence of any liability
to make any other payment or distribution of cash or other property or assets
in respect of such Person's capital stock (which shall include, without
limitation, preferred stock, common stock, options, warrants or any other
equity security), (b) any payment on account of the purchase, prepayment,
conversion, exchange, redemption, retirement, surrender or acquisition of such
Person's capital stock or any other payment or distribution made in respect
thereof, either directly or indirectly, and (c) any purchase or other
acquisition or payment in respect of any option, warrant or other right to
acquire any of or any interest in such Person's capital stock; provided, that
"Restricted Payment" shall not include (i) any dividend payable solely in
shares of its capital stock, (ii) any purchase or exchange of existing employee
stock options for consideration consisting solely of new employee stock options
or (iii) any purchase of capital stock or options to acquire the same from
directors, officers and employees of the Company and its Subsidiaries
consistent with past practices in connection with ordinary course employment
and severance arrangements and in an aggregate amount that shall not exceed
$5,000,000 for all such purchases pursuant to this clause (iii).
"Restructuring Closing Date" means the date upon which each of the
conditions precedent set forth in Section 4 of that certain Amendment No. 1 to
364 Day Credit Agreement dated as of December 22, 1995 by and among the
Company, the Banks and the Documentation Agent have been satisfied.
"Restructuring and Repurchase Agreement" means that certain Restructuring
and Repurchase Agreement dated as of December 22, 1995 by and among the
Company, certain holders of the Real Estate Debt parties thereto and certain
other Persons parties thereto.
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"Restructuring Effective Date" means December 22, 1995.
"Scheduled Assets" means the assets of the Company identified on Schedule
1.01(b) hereto.
"Seasonal Credit Facility" means the revolving credit facility evidenced
by that certain Seasonal Credit Agreement dated as of October 5, 1995 among the
Company, [ ], as documentation agent thereunder, and the financial
institutions signatory thereto.
"Set-off and Sharing Agreement" means that certain Set-Off and Sharing
Agreement dated as of the Restructuring Closing Date among the holders of the
Real Estate Debt and the institutions in the Kmart Bank Group party thereto.
"Three Year Credit Facility" means the revolving credit facility evidenced
by that certain Three Year Credit Agreement dated as of October 7, 1994 among
the Company, [ ], as documentation agent thereunder, and the financial
institutions signatory thereto.
"Warehouse Facility Credit Agreement" means the credit facilities
evidenced by that certain Warehouse Facility Credit Agreement dated as of
October 7, 1994 among the Company, the other borrowers named therein, [ ]
as documentation agent thereunder, and the financial institutions signatory
thereto.
2.2 Article II of the Credit Agreement is hereby amended as follows:
(a) Section 2.01 is hereby amended and restated in its entirety to
read as follows:
2.01 Amounts and Terms of Commitments. Each Bank severally agrees,
on the terms and conditions hereinafter set forth, and upon request by
the Company, to make Loans in Dollars to the Company from time to time on
any Business Day during the period from the Closing Date to the Current
Commitment Termination Date, in an aggregate principal amount not to
exceed at any time outstanding the amount set forth opposite the Bank's
name in Schedule 2.01 (such amount as the same may be reduced pursuant to
Section 2.05 or Section 2.07 or as a result of one or more assignments
pursuant to Section 10.08, being herein referred to as a Bank's
"Commitment"); provided, that, after giving effect to any Borrowing, the
aggregate principal amount of all outstanding Loans shall not exceed the
Aggregate Commitment; and provided further that without the prior written
consent of all of the Banks, after giving effect to any Borrowing, the
aggregate principal
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amount of all outstanding Loans shall not exceed the Ceiling Amount.
Within the limits of each Bank's Commitment (and subject in all cases to
the requirement that after giving effect to any Borrowing, the aggregate
principal amount of all outstanding Loans shall not exceed the Ceiling
Amount without the consent of all of the Banks), and subject to the other
terms and conditions hereof, the Company may borrow under this Section
2.01, prepay pursuant to Section 2.06 and reborrow pursuant to this
Section 2.01. On the Current Commitment Termination Date, the Aggregate
Commitment shall be terminated, the outstanding principal amount of the
Loans shall be frozen, and such amount shall become a term loan which is
due and payable on the Termination Date. Amounts repaid or prepaid
following the Current Commitment Termination Date may not be reborrowed.
(b) Section 2.03 is hereby amended by deleting paragraph
(a) thereof in its entirety and replacing it with the following:
(a) Each Borrowing shall be made upon the irrevocable request
of the Company by a facsimile to the Documentation Agent (which
shall be confirmed promptly by a telephone call) in the form of a
Notice of Borrowing which facsimile must be received by the
Documentation Agent prior to 11:00 a.m. (New York City time) (i)
three (3) Business Days prior to the requested borrowing date, in
the case of LIBOR Loans, and (ii) on the requested borrowing date,
in the case of Reference Rate Loans, specifying:
(A) the amount of the Borrowing, which shall be in an
aggregate minimum principal amount of Ten Million Dollars
($10,000,000) or any multiple of Five Million Dollars
($5,000,000) in excess thereof;
(B) the requested borrowing date, which shall be a
Business Day;
(C) whether the Borrowing is to be comprised of LIBOR
Loans or Reference Rate Loans; and
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(D) if the Borrowing is to be comprised of LIBOR Loans,
the duration of the initial Interest Period applicable to
such Loans. If the Notice of Borrowing shall fail to
specify the duration of the initial Interest Period for any
LIBOR Loans the Company shall be deemed to have elected an
Interest Period of one month;
provided, however, that with respect to any Borrowing to be made on
the Closing Date, a Notice of Borrowing shall be delivered to the
Documentation Agent not later than 11:00 a.m. (New York City time)
on the Closing Date (such Borrowing will consist of Reference
Rate Loans only); provided, further, that no Borrowing shall be made
without the prior written consent of all of the Banks if after
giving effect to any such Borrowing, the aggregate principal amount
of all Loans would exceed the Ceiling Amount.
(c) Paragraphs (a) through (d) of Section 2.04 are hereby deleted in
their entirety and replaced with the following:
(a) The Company may upon notice to the Documentation Agent in
accordance with Section 2.04(b):
(i) elect to convert, as of any Business Day, any Reference
Rate Loans (or any part thereof in an aggregate amount not less
than Ten Million Dollars ($10,000,000), or that is in an integral
multiple of Five Million Dollars ($5,000,000) in excess thereof)
(or such other outstanding principal amount of such Loan as may
result from mandatory prepayments of such Loan hereunder) into
LIBOR Loans; or
(ii) elect to convert, as of the last day of any Interest
Period, any LIBOR Loans maturing on such day (or any part thereof
in an aggregate amount not less than Ten Million Dollars
($10,000,000), or that is in an integral multiple of Five Million
Dollars ($5,000,000) in excess thereof) (or such other outstanding
principal amount of such Loan as may result from mandatory
prepayments of such Loan hereunder) into Reference Rate Loans; or
(iii) elect to continue as of the last day of any Interest
Period (a "Continuation Date") any LIBOR Loans maturing on such day
(or any part thereof in an aggregate amount not less than Ten
Million Dollars ($10,000,000), or that is in an integral multiple
of
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Five Million Dollars ($5,000,000) in excess thereof) (or such
other outstanding principal amount of such Loan as may result from
mandatory prepayments of such Loan hereunder);
provided, that if the aggregate amount of all LIBOR Loans comprised in
any Borrowing shall have been or would be reduced, by payment,
prepayment, or conversion of part thereof, to an amount less than Ten
Million Dollars ($10,000,000), such LIBOR Loans shall automatically
convert into Reference Rate Loans, on and as of the end of applicable
Interest Period.
(b) If the Company desires to convert or continue any Loan pursuant
to Section 2.04(a), it shall irrevocably request a conversion or
continuation by a facsimile (confirmed promptly by telephone) of a Notice
of Conversion/Continuation to be received by the Documentation Agent not
later than 11:00 a.m. (New York time) at least (i) three (3) Business
Days in advance of the Conversion Date or Continuation Date, if the Loans
are to be converted into or continued as LIBOR Loans and (ii) on the same
Business Day as the Conversion Date, if the Loans are to be converted
into Reference Rate Loans, specifying:
(A) the proposed Conversion Date or Continuation Date;
(B) the aggregate amount of Loans to be converted or
continued;
(C) the nature of the proposed conversion or continuation; and
(D) the duration of the requested Interest Period, if the
Loans are to be converted into or continued as LIBOR Loans.
(c) If prior to the time set forth in Section 2.04(b), (i) the
Company has failed to give a timely Notice of Conversion/Continuation
with respect to such LIBOR Loans or (ii) the Company has failed to select
a new Interest Period to be applicable to such LIBOR Loans, the Company
shall be deemed to have elected to convert such Loans into Reference
Rate Loans effective as of the expiration of the applicable Interest
Period.
(d) During the existence of a Potential Default or Event of Default,
unless the Required Banks otherwise
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agree, the Company may not elect to have a Loan be converted into or
continued as a LIBOR Loan pursuant to Section 2.04.
(d) Section 2.06 is hereby amended and restated in its entirety to
read as follows:
2.06 Optional Prepayments of Loans. Subject to Section 3.05, the
Company may at any time or from time to time, upon at least five (5)
Business Days' notice to the Documentation Agent prepay LIBOR Loans or
upon at least one Business Day's notice to the Documentation Agent prepay
Reference Rate Loans, in whole or in part, in minimum amounts of Ten
Million Dollars ($10,000,000) or in multiples of Five Million Dollars
($5,000,000) in excess thereof. Such notice of prepayment shall specify
the date and amount of such prepayment and whether such prepayment is of
Reference Rate Loans or LIBOR Loans. Such notice shall not thereafter be
revocable by the Company, and the Documentation Agent will promptly
notify each Bank thereof and of such Bank's Commitment Percentage of such
prepayment. If such notice is given, the Company shall make such
prepayment and the payment amount specified in such notice shall be due
and payable on the date specified therein, together with accrued interest
to each such date on the amount prepaid and the amounts required pursuant
to Section 3.05.
(e) Section 2.07 is hereby amended and restated in its entirety to
read as follows:
2.07 Repayment.
(a) Termination Date. The Company shall repay the aggregate
outstanding principal amount of the Loans on the Termination Date.
(b) Mandatory Commitments Reductions and Prepayments. The Company
shall make a permanent reduction in the Aggregate Commitment and to the
Ceiling Amount, concurrently with the making of any principal payment with
respect to the Real Estate Debt (except to the extent that such payment to
the holders of the Real Estate Debt was triggered by (x) a mandatory
prepayment pursuant to this Section 2.07(b) or (y) a prepayment under the
Big Beaver Credit Facilities or the Other Credit Facilities which results
in a ratable reduction of the Aggregate Commitment and the Ceiling Amount
in accordance with the next sentence of this Section 2.07(b)), in
an amount (the "RE Reduction Amount") equal to such payment multiplied by
a fraction,
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the numerator of which equals the Ceiling Amount (as in effect immediately
prior to such prepayment of principal in respect of the Real Estate Debt)
and the denominator of which equals the aggregate amount outstanding under
the Real Estate Debt immediately prior to such payment. In addition, the
Company shall make a permanent reduction in the Aggregate Commitment and
to the Ceiling Amount, concurrently with the making of any principal
payment in respect of the Big Beaver Credit Facilities or the Other Credit
Facilities (other than (i) mandatory prepayments under the Big Beaver
Credit Facilities or the Warehouse Facility Credit Agreement as a result
of a project disposition or project refinancing, (ii) principal payments
due on February 28, 1997 under the Seasonal Credit Facility and the Big
Beaver Credit Facilities and (iii) prepayments under the Other Credit
Facilities and the Big Beaver Credit Facilities required as a result of
prepayments under the Real Estate Debt or under this Agreement) in an
amount, (the "Bank Reduction Amount") equal to such payment multiplied by
a fraction, the numerator of which equals the Ceiling Amount (as in effect
immediately prior to such prepayment of principal under either of the Big
Beaver Credit Facilities or any such Other Credit Facility) and the
denominator of which equals the aggregate amount outstanding under the
facility receiving the payment immediately prior to the making of such
payment. Concurrently with each such reduction, the Company shall
ratably prepay the outstanding Loans in an amount equal to the RE
Reduction Amount or the Bank Reduction Amount, as the case may be,
together with accrued interest to such date on the amount prepaid and the
amounts required pursuant to Section 3.05. Such prepayment amount shall
ratably reduce the outstanding Loans of each Bank. Any reduction of the
Aggregate Commitment shall be applied to each Bank's Commitment pro rata
in accordance with such Bank's relevant Commitment Percentage.
Furthermore, if, for any reason, the aggregate principal amount of all
outstanding Loans exceeds the Ceiling Amount, then, unless all of the
Banks consent otherwise in writing, the Company shall immediately prepay
the Loans in the amount of such excess.
(f) Section 2.08 is hereby amended and restated in its entirety to read as
follows:
2.08 Interest.
(a) Subject to Sections 2.08(c) and 2.08(d), each Loan shall bear
interest on the outstanding principal amount thereof from the date when
made until paid in full,
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at the option of the Company as set forth in its Notice of Borrowing or
Notice of Conversion/Continuation,
(i) if such Loan is a Reference Rate Loan, at a rate per annum
equal to the Reference Rate plus one percent (1.0%) (such interest
margin being subject to increase pursuant to Section 7.08 hereof);
and
(ii) if such Loan is a LIBOR Loan, at a rate per annum equal
to the sum of LIBOR plus two percent (2.0%) (such interest margin
being subject to increase pursuant to Section 7.08 hereof).
(b) Interest on each Loan shall be payable in arrears on each
applicable Interest Payment Date. Interest shall also be payable on the
date of any prepayment of Loans for the portion of the Loans so prepaid
and, in the case of conversion of any Reference Rate Loan, on the date of
conversion thereof into a LIBOR Loan.
(c) During the continuation of any Event of Default or after
acceleration, the Company shall pay, on demand, interest (after as well
as before judgment) on the principal amount of all Loans then
outstanding, at a rate per annum which is determined by increasing the
rate of interest then in effect by two percent (2.0%) per annum;
provided, however, that, on and after the expiration of the Interest
Period applicable to any LIBOR Loan on the date of occurrence of such
Event of Default or acceleration, the principal amount of such Loan
shall, during the continuation of such Event of Default or acceleration,
bear interest at a rate per annum equal to the Reference Rate plus three
percent (3.0%).
(d) Anything herein to the contrary notwithstanding, the obligations
of the Company hereunder shall be subject to the limitation that payments
of interest shall not be required, for any period for which interest is
computed hereunder, to the extent (but only to the extent) that
contracting for or receiving such payment by any Bank would be contrary
to the provisions of any law applicable to such Bank limiting the highest
rate of interest which may be lawfully contracted for, charged or
received by such Bank, and in such event the Company shall pay such Bank
interest at the highest rate permitted by applicable law.
(g) Section 2.10 is hereby amended by (i) replacing the phrase "plus 2%"
at the end of paragraph (a) thereof with the phrase "plus three percent
(3.0%)", (ii) deleting
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the reference to ", the CD Rate" in paragraph (b) thereof and (iii)
deleting the reference to "and the CD Rate" in paragraph (d) thereof.
(h) Section 2.12 is hereby amended by deleting the reference to "or CD
Rate Loans" in paragraph (a) thereof.
(i) Section 2.13 is hereby amended by amending and restating subsection
(c) to read as follows:
(c) Except as set forth in Section 10.09, nothing herein shall
require any Bank to exercise any right of set-off or similar rights or
shall affect the right of any Bank to exercise, and retain the benefits
of exercising any such right with respect to any other indebtedness or
obligation of the Company.
(j) Section 2.14 is hereby amended by amending and restated to read
as follows:
2.14 Current Commitments. The "Current Commitment Termination
Date" shall mean October 3, 1996.
2.3 Article III of the Credit Agreement is hereby amended as follows:
(a) Section 3.02 is hereby deleted in its entirety and replaced with
the following:
3.02 Inability to Determine Rates. If and to the extent that
market or other conditions existing in the London interbank market
relevant to LIBOR Loans make it impossible or impracticable for the Banks
to make such Loans, then the obligations of the Banks to make LIBOR Loans
and the right of the Company to originate, continue or convert any Loan
as or to a LIBOR Loan shall be suspended until the circumstances giving
rise to such suspension shall no longer exist.
Upon receipt from the Documentation Agent of a notice of the Banks'
inability to make, convert or continue the requested Loan due to any of
the reasons referred to above, notwithstanding anything in this Agreement
to the contrary, the Company may revoke any Notice of Borrowing or Notice
of Conversion/Continuation then submitted by it. If the Company does not
revoke such notice relating to a LIBOR Loan, the Banks shall, with
respect to such LIBOR Loan only, make or convert such Loan in the amount
specified in the applicable notice submitted by the Company,
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but such Loan shall be made as or converted into a Reference Rate Loan
instead of a LIBOR Loan. Except as provided in the immediately preceding
sentence, if, notwithstanding the provisions of this Section 3.02, any
Bank has made available to the Company its Commitment Percentage of any
such proposed Loan, then the Company shall immediately repay the amount
so made available to it by such Bank, together with accrued interest
thereon, if any.
(b) Section 3.03 is hereby amended by deleting the paragraph following
clause (iii) of paragraph (a) in its entirety and replacing it with the
following:
and the result of any of the foregoing is to increase the cost to such
Bank or to reduce the amount of any sum receivable by such Bank with
respect to making or maintaining any LIBOR Loan by an amount reasonably
deemed by such Bank to be material, then the Company shall from time to
time, upon written demand by such Bank, pay to such Bank additional
amounts sufficient to compensate such Bank for any such increased cost or
reduced sum receivable to the extent resulting from outstanding LIBOR
Loans and not compensated in connection with the computation of LIBOR.
(c) Section 3.04 is hereby amended by deleting the reference to "or CD
Rate Loan" in paragraph (c) thereof.
(d) Section 3.05 is hereby amended by deleting the reference to "or a CD
Rate Loan" in each of paragraphs (b) and (c) thereof.
2.4 Article VI of the Credit Agreement is hereby amended as follows:
(a) Section 6.07 is hereby amended by (i) deleting the word "and" at
the end of paragraph (c), (ii) renumbering paragraph (d) as paragraph (e)
and (iii) adding the following new clause (d) as follows:
"(d) the financial statements, certificates, schedules, documents
and other information set forth on Schedule 6.07 within the time
periods therein specified; and"
(b) New Sections 6.09 and 6.10 are hereby added as follows:
6.09 Maintenance of Deposits. The Company shall at all times
maintain with one or more financial institutions that are members of the
Kmart Bank Group and that are party to the Bank Setoff Sharing Agreement
cash and Cash
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Equivalents on deposit (the "Deposits") in an aggregate amount not less
than the lesser of (a) the Deposit Threshold and (b) the total amount of
all cash and Cash Equivalents of the Company and its Subsidiaries (other
than cash and Cash Equivalents maintained at Kmart Canada, Ltd. and its
subsidiaries or at Kmart CR a.s. (Czech operations) in the ordinary
course of business, consistent with past practices) at such time (the
"Required Deposit Amount"); provided, that any amounts maintained in
store depository accounts with depository institutions which are not
members of the Kmart Bank Group as required by the Company's business
operations in the normal course of business consistent with past
practices shall not be considered cash or Cash Equivalents for the
purposes of clause (b) of this Section 6.09.
6.10 Most Favored Lender Status. If the Company, any Subsidiary or
any obligor under the Real Estate Debt shall at any time, directly or
indirectly, amend, restate or otherwise modify any of the Real Estate
Debt Documents, in any manner which would have the effect of (i) adding
any new or additional covenants or defaults applicable to the Company or
any Subsidiary, (ii) amending in a manner more beneficial to the holders
of such Real Estate Debt or in a manner more onerous to the Company, any
Subsidiary or any obligor under the Real Estate Debt, any covenant or
default applicable to the Company or any Subsidiary under such Real
Estate Debt or (iii) otherwise enhancing the rights and benefits of any
holder of the Real Estate Debt against the Company or any Subsidiary,
then, in each such event, the Company shall concurrently enter into or
cause to be entered into such amendments to this Agreement and such other
documents and instruments, in form and substance reasonably satisfactory
to the Required Banks, as shall be necessary to afford the Banks the same
or equivalent benefits and rights as such amendments to, or other
agreements in respect of, the Real Estate Debt Documents afford the
holders of the Real Estate Debt; provided that any such new or additional
covenants or defaults, amended covenants or defaults, or enhanced rights
and benefits shall be deemed automatically incorporated herein by
reference in the event such modifications are made to the Real Estate
Debt Documents without the Company entering into concurrent amendments as
required by this Section 6.10.
2.5 Article VII of the Credit Agreement is hereby amended as
follows:
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(a) Section 7.02 is hereby amended and restated in its entirety to
read as follows:
7.02 Disposition of Assets. The Company shall not, directly
or indirectly, sell, assign, lease, convey, transfer or otherwise
dispose of (whether in one or a series of transactions) any property
(including accounts and notes receivable, with or without recourse)
or enter into any agreement to do any of the foregoing except:
(a) dispositions of inventory, or used, worn-out or surplus
equipment, all in the ordinary course of business;
(b) the sale of equipment to the extent that such equipment
is exchanged for credit against the purchase price of similar
replacement equipment, or the proceeds of such sale are
reasonably promptly applied to the purchase price of such
replacement equipment;
(c) dispositions of inventory or equipment by the Company
to any Subsidiary pursuant to reasonable business requirements;
(d) dispositions of Scheduled Assets; and
(e) other dispositions of assets having, in any fiscal year
of the Company, an aggregate book value not exceeding 10% of the
Company's consolidated total assets as of the end of the most
recently ended fiscal year of the Company, as reflected in the
Company's balance sheet contained in its audited financial
statements for such fiscal year;
provided, however, that this Section 7.02 shall not be deemed to prohibit
the sale of all, substantially all, or a part of the capital stock or of
all, substantially all, or a part of the assets of any Specialty Retail
Subsidiary of the Company, even if such an entity is no longer a
Subsidiary of the Company, if (x) consideration received is equal to the
fair market value (as reasonably determined by the Company), or (y) the
Company's board of directors deems such transaction to be necessary by
reason of applicable laws, regulations or governmental policies
applicable to the Company.
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(b) Section 7.03 is hereby amended and restated in its entirety to
read as follows:
7.03 Limitation on Liens. The Company shall not, and shall not
permit any Subsidiary (other than Liens granted by Kmart Canada Ltd. and
its subsidiaries or by Kmart CR a.s. on such Person's respective assets
prior to the Restructuring Effective Date) to, create, incur or suffer to
exist any Lien on any assets of the Company or any such Subsidiary
whether now owned or hereafter acquired; provided, however, that such
restriction shall not apply with respect to any of the following types of
Liens:
(a) Liens for taxes not delinquent or being contested in good
faith;
(b) Liens created and deposits made in connection with workers'
compensation, unemployment insurance and other social security
legislation, or to secure the performance of bids, tenders,
contracts (other than for the repayment of borrowed money),
statutory obligations, surety and appeal bonds and other similar
obligations incurred in the ordinary course and Liens securing
obligations to mechanics, materialmen, bailees, warehousemen and
similar Liens arising under operation of law and incurred in the
ordinary course of business;
(c) purchase money mortgages (including vendors' rights under
purchase or land contracts or under other agreements whereby title
or another interest is retained by the vendor for the purpose of
securing the purchase price thereof) on property acquired or
constructed after the Restructuring Effective Date, or the
acquisition after the Restructuring Effective Date of property
subject to such a Lien which is limited to such property and was
not created in anticipation of such acquisition;
(d) mortgages, security interests and Liens on assets of the
Company or any Subsidiary existing on the Restructuring Effective
Date, and set forth on Schedule 7.03, which secure any Indebtedness
of the Company or any such Subsidiary, or any refundings or
extensions for an amount not exceeding the principal amount of such
Indebtedness so long as such refundings or extensions are secured
only by the same property or assets;
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(e) Liens on property of the Company or any Subsidiary created
concurrently with the release of existing Liens on other property
of the Company or any such Subsidiary, as provided under the Real
Estate Debt Documents, but only (i) if such substitution is one of
several alternative actions available to the obligor under such
Real Estate Debt, of which such obligor must choose one, following
the occurrence of a condemnation, casualty or eminent domain event,
or upon the existence of an environmental condition or (ii) in
respect of a substitution of collateral resulting from the
single store collateral substitution obligation existing on the
Restructuring Effective Date and resulting from a store closing in
September, 1995 with respect to the Deal 2 Notes (as defined in the
Restructuring and Repurchase Agreement); provided that the fair
market value of the property subject to any such Lien permitted
under clause (i) hereof does not exceed one hundred ten percent
(110%) of the fair market value of the property as to which a Lien
is concurrently being released (the fair market value of the
property being relieved of such Lien being determined immediately
prior to the occurrence of such casualty or condemnation or eminent
domain event, or the discovery of such environmental condition, or
the occurrence of such store closing);
(f) Liens on Deposits in favor of the Kmart Bank Group and liens on
cash balances of Kmart Canada Ltd. and its subsidiaries or Kmart CR
a.s. (Czech operations) maintained in the ordinary course of
business, consistent with past practices in favor of the lenders to
such entities and Liens on monies held in the Paydown Trust Account
(as defined in the Restructuring and Repurchase Agreement) in favor
of the holders of the Real Estate Debt;
(g) Liens on the assets of Kmart Canada Ltd. and its subsidiaries
or Kmart CR a.s. (Czech operations) to secure New Indebtedness
incurred by such Persons and Liens to secure New Indebtedness
(including, without limitation, New Indebtedness incurred pursuant
to the Letter of Credit Issuance Agreement); provided that such
Liens to secure New Indebtedness shall encumber only
(i) noncurrent assets including, without limitation,
Scheduled Assets (or cash collateral pledged to secure the
Indebtedness under the
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Letter of Credit Issuance Agreement in substitution of a
Lien on noncurrent assets); and
(ii) in the case of the Letter of Credit Issuance
Agreement, documents of title relating to goods which are
the subject of trade letters of credit issued by the Trade B
Banks (as defined therein) and securing the Trade B Letters
of Credit (as defined therein) under the terms set forth in
such agreement as in effect on the Restructuring Closing
Date; provided that the percentage of the aggregate face
amount of all Trade B Letters of Credit that are so secured
shall not exceed thirty-five percent (35%) (or as close to
35% as practicable in light of the face amounts of Trade B
Letters of Credit that are drawn or paid as contemplated by
the Letter of Credit Issuance Agreement) of the Trade B
Letters of Credit issued by the Trade B Banks;
provided further that no such Lien shall be permitted under this
clause (g) to secure any unsecured Indebtedness of the Company or any
Subsidiary outstanding on the Restructuring Effective Date or any
refundings or extension thereof;
(h) easements, rights-of-way, zoning and similar restrictions
and other similar charges or encumbrances not interfering in any
material respect with the ordinary conduct of the business of the
Company and its Subsidiaries;
(i) Liens on cash collateral to secure the Company's
reimbursement obligations under letters of credit issued pursuant to
the Letter of Credit Issuance Agreement to the extent such cash
collateral is permitted under the terms thereof as in effect on the
Restructuring Closing Date; and
(j) Liens on cash collateral to secure the Company's
reimbursement obligations under two standby letters of credit issued
by [ ] after the Restructuring Effective Date in an
aggregate amount that shall not exceed the lesser of (x) 105% of the
outstanding face amount thereof or (y) $25,000,000.
(c) New sections 7.06, 7.07, 7.08 and 7.09 are hereby added as
follows:
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7.06 Restricted Payments. The Company shall not, nor shall it
permit any Subsidiary to, declare, order, make or pay, or set aside any
sum for, any Restricted Payment, except that (a) any Subsidiary may
declare and pay dividends to the Company, (b) the Company may pay
dividends in respect of its common stock which were declared prior to
December 31, 1995 and (c) the Company may declare and pay dividends in
respect of any of its preferred stock issued and outstanding as of the
Restructuring Effective Date until, for any particular shares of
preferred stock, such time as the Company shall have declined any bona
fide offer from any holder of any such preferred stock to convert or
enter into an agreement to convert such preferred stock into common stock
of the Company.
7.07 Payment of Indebtedness. (a) During the period from
December 17, 1995 through February 28, 1997, the Company shall not, nor
shall it permit any Subsidiary (other than payments by Kmart Canada, Ltd.
or its subsidiaries or by Kmart CR a.s. (Czech operations) in respect of
such Person's respective Indebtedness in existence as of the Restructuring
Effective Date or New Indebtedness incurred by such Persons in the
ordinary course of business, consistent with past practices) to, directly
or indirectly, make any principal payment, in respect of any Real Estate
Debt or any other Indebtedness (including by way of purchase,
refinancing, defeasance or other direct or indirect transfer of cash
consideration to the holders thereof; provided that the Company may
exchange any of its outstanding Indebtedness for money borrowed for
shares of its capital stock and make cash payments to the holders of such
Indebtedness in respect of fractional shares in connection with such
exchange) other than (i) scheduled payments on the Real Estate Debt set
forth on Schedule 7.07 and capital lease payments relating to stores
securing the Real Estate Debt in an amount not to exceed $9,000,000 in
the aggregate; provided that concurrently with making such payments, the
Company makes a ratable repayment of the Loans hereunder as required
pursuant to Section 2.07(b) hereof, (ii) scheduled payments of other
mortgage indebtedness in existence as of the Restructuring Effective Date
in an amount not to exceed $12,000,000 in the aggregate, (iii) payments
made pursuant to guaranties of existing leases of former Subsidiaries of
the Company; provided; that such payments may only be made with respect
to rents so guaranteed as and when the same may become due in the
ordinary course (and not on any accelerated rents that may become due as
a result of a default on the underlying lease), (iv) payments made with
respect to Spin-Off Tenant Put Options (as defined in the Restructuring
and Repurchase Agreement as in effect on the Restructuring Closing Date),
(v) ratable payments of principal of the Real Estate Debt concurrently
with the making of any payments or reduction of commitments and ceiling
amounts in respect of the Indebtedness under this Agreement, the Other
Credit Facilities or the Big Beaver Credit Facilities or other Real
Estate Debt, to the extent required pursuant to Sections 2.2 and 2.3 or
2.5 of the Restructuring and Repurchase Agreement as in effect on the
Restructuring Closing Date, (vi) ratable payments of principal of the
Other Credit Facilities and the Big Beaver Credit Facilities concurrently
with the making of any prepayments or reduction of commitments under this
Agreement, the Real Estate Debt, any of the Other
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Credit Facilities or the Big Beaver Credit Facilities to the extent
required pursuant to the terms of the Other Credit Facilities and the Big
Beaver Facilities as in effect on the Restructuring Closing Date, (vii)
regular, ordinary course payments of Capitalized Lease Obligations in
amounts consistent with past practices, (viii) payments in respect of the
termination of leases to the extent that the Company believes that such
payments provide a substantial benefit to the Company (provided that such
lease termination payments do not exceed the lesser of (a) One Hundred
Million Dollars ($100,000,000) in the aggregate in any fiscal year of the
Company and (b) One Hundred Twenty-Five Million Dollars ($125,000,000) in
the aggregate for all such payments), (ix) repayment of Indebtedness
secured by Liens on real property in connection with the sale or other
disposition of such real property provided that the Company or such
Subsidiary receives net cash proceeds from such sale or disposition in
excess of the Indebtedness required to be repaid, (x) mandatory principal
payments under the Big Beaver Credit Facilities and the Warehouse Facility
Credit Agreement as a result of project dispositions or project
refinancings, (xi) principal payments under this Agreement and principal
payments due on the February 28, 1997 scheduled maturity of the Seasonal
Credit Facility and the Big Beaver Credit Facilities, (xii) ratable
principal payments under this Agreement, the Other Credit Facilities and
the Big Beaver Credit Facilities in accordance with Section 7.09, (xiii)
payments in respect of New Indebtedness, (xiv) payments of reimbursement
obligations under letters of credit issued under the Letter of Credit
Issuance Agreement as in effect on the Restructuring Closing Date
(provided that such payments do not reduce the commitments thereunder
except to the extent provided under the Letter of Credit Issuance
Agreement as in effect on the Restructuring Closing Date) or under the
Three Year Credit Facility, and (xv) other payments of principal in
respect of Indebtedness in an aggregate amount that shall not exceed the
lesser of (a) Fifty Million Dollars ($50,000,000) in any fiscal year of
the Company and (b) Seventy-Five Million Dollars ($75,000,000) in the
aggregate for all such payments, but only with respect to Indebtedness
other than (1) Real Estate Debt and (2) Indebtedness under the Other
Credit Facilities and the Big Beaver Credit Facilities.
(b) During the period from December 17, 1995 through October
3, 1997, the Company shall not, nor shall it permit any Subsidiary (other
than payments by Kmart Canada, Ltd. or its subsidiaries or by Kmart CR
a.s. (Czech operations) in respect of such Person's respective
Indebtedness in existence as of the Restructuring Effective Date or New
Indebtedness incurred by such Person in the ordinary course of business,
consistent with past practices) to, directly or indirectly, make any
principal payment in respect of any Real Estate Debt or any other
Indebtedness (including by way of purchase, refinancing, defeasance or
other direct or indirect transfer of cash consideration to the holders
thereof; provided that the Company may exchange any of its outstanding
Indebtedness for money borrowed for shares of its capital stock and make
cash payments to the holders of such Indebtedness in respect of
fractional shares) other than (i) scheduled principal payments on such
Indebtedness, (ii) repayments of Indebtedness of the type permitted under
Sections 7.07(a)(iii), (iv), (v), (vi), (ix), (x), (xi), (xii), (xiii)
and (xiv), (ii) payments in respect of the termination of leases to the
extent that the Company believes that such payments provide a substantial
benefit to the Company, provided that such lease termination payments do
not exceed the lesser of (a) One Hundred Million Dollars ($100,000,000)
in the aggregate in any fiscal year of the Company and (b) One Hundred
Twenty- Five Million Dollars ($125,000,000) in the aggregate for all such
payments and (iii) other payments of principal in respect of Indebtedness
in an aggregate amount that shall not exceed the lesser of (a) Fifty
Million Dollars ($50,000,000) in the aggregate in any fiscal year of the
Company and (b) Seventy-Five Million Dollars ($75,000,000) in the
aggregate for all such payments, but only with respect to Indebtedness
other than (1) Real Estate Debt and (2) Indebtedness under the Other
Credit Facilities and the Big Beaver Credit Facilities.
7.08 Amendment of Real Estate Debt Documents. The Company
shall not, nor shall it permit any Subsidiary to amend, restate or
otherwise modify any of the documents relating to or governing any Real
Estate Debt in any manner which would, directly or indirectly, (a) provide
for
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an interest rate payable on such Real Estate Debt in excess of the
interest rate provided for in the Real Estate Debt Documents unless this
Agreement shall have been amended, concurrently with such increase in the
interest rate payable on such Real Estate Debt, to increase the interest
rates set forth herein by an amount equal to such excess, (b) provide for
the payment of any fees in addition to the fees payable under such Real
Estate Debt Documents (or provide for any increase in existing fees
payable thereunder) unless this Agreement shall have been amended,
concurrently with the agreement to pay such new or increased fees, to
provide for an equivalent fee to the Banks in a dollar amount equal to
such new fee (or the aggregate amount of any increase in existing fees)
multiplied by a fraction the numerator of which equals the Ceiling Amount
and the denominator of which equals the aggregate amount outstanding
under the Real Estate Debt at such time or (c) provide for any
clarification of any mortgagee's, tenant's or landlord's rights and
obligations under the federal bankruptcy code or similar law with respect
to ground leases or similar arrangements.
7.09 Ratable Payment of Bank Facilities. The Company shall not,
nor shall it permit any Subsidiary to, directly or indirectly, make any
principal payment in respect of the Big Beaver Credit Facilities or the
Other Credit Facilities (other than (i) mandatory prepayments under the
Big Beaver Credit Facilities or the Warehouse Facility Credit Agreement
as a result of a project disposition or project refinancing, (ii) ratable
payments of principal of the Other Credit Facilities and the Big Beaver
Credit Facilities concurrently with the making of any prepayments or
reduction of commitments under this Agreement, the Real Estate Debt, any
of the Other Credit Facilities or the Big Beaver Credit Facilities to the
extent required pursuant to the provisions of the Other Credit Facilities
and the Big Beaver Facilities as in effect on the Restructuring Closing
Date, which provision are substantially similar to Section 2.07(b)
hereof) and (iii) the scheduled principal payments due on February 28,
1997 under the Seasonal Credit Facility and the Big Beaver Credit
Facilities) unless the Company shall concurrently make a permanent
ratable reduction to the Aggregate Commitment and the Ceiling Amount
together with a repayment of the outstanding Loans to the extent required
by Section 2.07(b).
2.6 Article VIII of the Credit Agreement is hereby amended as
follows:
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(a) Paragraph (c) of Section 8.01 is hereby deleted in its entirety and
replaced with the following:
(c) Specific Defaults. The Company fails to perform or observe any
term, covenant or agreement contained in Sections 6.02, 6.03, 6.08(a),
6.09, 6.10, 7.01, 7.02, 7.03, 7.06, 7.07, 7.08 or 7.09; or
(b) Paragraph (f) of Section 8.01 is hereby deleted in its entirety and
replaced with the following:
(f) Cross Default; Cross-Acceleration. (i) the Company or any
Subsidiary fails to make any payment of principal or interest or fees
under any of the Other Credit Facilities when due after taking into
account any application of grace periods, or (ii) by reason of any action
taken by the Company or any Subsidiary with the intent and capacity
promptly to satisfy any obligation of the Company or any Subsidiary
resulting therefrom, including, without limitation, the calling for
payment by the Company of any of its Indebtedness or the termination by
the Company of any of its guaranty obligations, any Indebtedness shall
mature or be declared due and payable prior to its stated maturity and
such Indebtedness shall remain unpaid for a period of two (2) Business
Days thereafter, or (iii) the Company or any Subsidiary fails to perform
or observe any condition or covenant or any other event shall occur or
condition exist (other than with respect to matters described under
clause (ii) immediately preceding) relating to Indebtedness (other than
Indebtedness under the Other Credit Facilities) having an aggregate
principal amount (including undrawn committed or available amounts) of
more than Fifty Million Dollars ($50,000,000) if the effect of any such
failure, event or condition is to cause such Indebtedness to be declared
to be due and payable or otherwise become due and payable prior to its
stated maturity, (iv) the Company or any Subsidiary fails to pay any such
other Indebtedness described in clause (iii) in full at its stated
maturity (except for any such Indebtedness under that certain Loan
Agreement dated as of January 21, 1992 among the borrowers named therein,
the financial institutions signatory thereto and [ ],
as Managing Agent, for so long as any forebearance agreement contained in
the "Fourth Amendment to Loan
Agreement and Limited Forebearance" dated as of the Restructuring
Efffective Date as in effect as of the Restructuring Effective Date in
respect of such Indebtedness remains in full force and effect) or (v)
there shall occur a "Triggering Event" (as defined in the Restructuring
and Repurchase Agreement) or all or any portion of any Real Estate Debt
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shall otherwise mature or be declared or otherwise become due and payable
prior to October 3, 1997 (except for principal payments permitted in
Section 7.07); or
(c) Paragraph (h) of Section 8.01 is hereby deleted in its entirety and
replaced with the following:
(h) Monetary Judgments. A final judgment or judgments in excess of
Fifty Million Dollars ($50,000,000) shall be entered against the Company
by a court of record and not discharged in accordance with its terms or,
within sixty (60) days from the date of entry thereof, stayed from
execution and (within said period of sixty (60) days or such longer
period during which execution of such judgment(s) shall have been stayed)
appeal taken therefrom and execution thereof stayed during such appeal;
or
(d) Section 8.01 is further amended by (i) deleting the period at the end
of clause (j) and replacing it with "; or" and (ii) adding the following new
clauses (k) through (n) as follows:
(k) Payments on Real Estate Debt. The Company or any Subsidiary
shall make or permit to be made (either voluntarily or otherwise) any
principal payment to any holder of any Real Estate Debt and shall fail to
make a concurrent repayment of the Obligations to the extent required
pursuant to Section 2.07; or
(l) Unreimbursed Put Payments. There shall have occurred the
expiration of ten (10) days after the satisfaction of the following
conditions:
(i) the exercise of a Spin-Off Tenant Put Option against the
Company by any Spin-Off Creditor and
(ii) the expiration of the one hundred twenty (120) day period
following the payment by the Company of the Purchase Amount in
respect of such exercise, if, upon such expiration, the aggregate
amount of Unreimbursed Put Payments (after giving effect to all
amounts received by the Company from (i) the sale or other
disposition of the relevant tendered securities and/or any asset or
assets securing the same and (ii) any other Person that is obligated,
directly or indirectly, in respect of the relevant Spin-Off Tenant
Put Option or otherwise makes any payment with respect thereto) in
respect of (1) such exercise and (2) all Spin-Off Tenant Put Options
which have been exercised at any time
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prior to the commencement of such 120-day period, exceeds fifteen
million dollars ($15,000,000),
For purposes of this Section 8.01(l), the terms "Spin-Off Tenant Put
Option", "Spin-Off Creditor", "Purchase Amount", and "Unreimbursed Put
Payments" shall have the meanings ascribed to such terms in the
Restructuring and Repurchase Agreement as in effect on the Restructuring
Closing Date (including as such terms are further defined by reference to
any other agreements), and not as such terms or other agreements may
subsequently be amended or otherwise modified; or
(m) Breach of Financing Agreements. The Company or any Subsidiary
shall fail to perform or observe any term, covenant or agreement with
respect to any New Indebtedness having an aggregate principal amount of
more than Fifty Million Dollars ($50,000,000), and such default shall
continue unremedied or unwaived, or the term or covenant in respect of
such failure shall not have been amended, as the case may be, within
forty five (45) days after the first date upon which any holder or
holders thereof (or any representative of such holder(s)) shall have the
right, on account of such failure and after giving effect to any required
notice and the lapse of any applicable cure periods, to declare such
Indebtedness to be immediately due and payable;
(n) Underutilized Capacity Under Letter of Credit Issuance
Agreement. On any date on and after October 31, 1996, until February 28,
1997, (a) the sum of, without duplication, (i) the aggregate face amount
of the outstanding letters of credit on such date issued pursuant to the
Letter of Credit Issuance Agreement and that certain predecessor letter
agreement dated as of the Restructuring Effective Date and (ii) the
aggregate face amount of the Existing Trade A Letters of Credit, Existing
Trade B Letters of Credit and Existing Standby Letters of Credit (as such
terms are defined in the Letter of Credit Issuance Agreement) still
outstanding on such date minus (b) any such letters of credit that are
cash collateralized shall be less than the product of (i) eighty percent
(.80) and (ii) the sum of (x) the Maximum Trade A L/C Commitment Amounts,
(y) the Maximum Trade B L/C Commitment Amount and (z) the Maximum Standby
L/C Commitment Amounts (as such terms are defined in the Letter of Credit
Issuance Agreement as in effect on the Restructuring Closing Date), each
determined as of such date.
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2.7 Article IX of the Credit Agreement is hereby amended as follows:
(a) Section 9.03 is amended by replacing the parenthetical in clause (i)
thereof with the following parenthetical:
(except for its own gross negligence or willful misconduct)
2.8 Article X of the Credit Agreement is hereby amended as follows:
(a) Subsection (a) of 10.01 is hereby amended and restated to read as
follows:
(a) increase the Commitment of any Bank or the Ceiling Amount or
amend the definition of Ceiling Amount in any manner which would
result in the Ceiling Amount being greater at any time than it would be
absent such amendment;
(b) Paragraph (a) of Section 10.08 is hereby amended by (i) relettering
clause (D) thereof as clause (E) and adding the following new clause (D)
immediately following clause (C):
(D) such Assignee shall acknowledge in the Assignment and Acceptance or
otherwise in a written instrument that its rights and obligations with
respect to the sharing of setoff rights shall be subject to the terms of
the Bank Setoff Sharing Agreement.
(c) Paragraph (e) of Section 10.08 is hereby amended by adding the
following sentence at the end thereof:
Notwithstanding the foregoing, each Bank shall be permitted to sell the
participations referenced in Section 10.09 without compliance with the
foregoing provisions.
(d) Section 10.09 is hereby deleted in its entirety and replaced with the
following:
10.09 Set-off. In addition to any rights and remedies of the Banks
provided by law, if any of the Obligations shall have become due and
payable, each Bank is authorized at any time and from time to time,
without prior notice to the Company, any such notice being waived by the
Company to the fullest extent permitted by law, to set-off
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and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held by, and other indebtedness at any
time owing to or by, such Bank or any affiliate of such Bank to or for
the credit or the account of the Company against any and all Obligations
owing to such Bank (including without limitation Obligations owing to
such Bank by way of participations deemed purchased pursuant to the
second proviso of this sentence), and subject to the sharing provisions
of Section 2.13 and any other sharing arrangements agreed to by any of
the Banks (including the provisions of the Bank Setoff Sharing
Agreement), now or hereafter existing, irrespective of whether or not the
Documentation Agent or such Bank shall have made demand under this
Agreement or any Loan Document; provided, that to the extent that the
Company owes any amounts to such Bank other than the obligations owing
under this Agreement (including obligations under the Other Credit
Facilities and the Big Beaver Credit Facilities and obligations in
respect of other Indebtedness) at the time of such set-off, then such
Bank is authorized to and shall apportion and apply the amounts set-off
ratably based on the relative aggregate amounts owing under this
Agreement, the Other Credit Facilities and the Big Beaver Credit
Facilities to all of the lenders thereunder and the amount of such other
Indebtedness; provided, further, that to the extent that any Bank has
amounts available to be set-off in excess of the aggregate of all
outstanding obligations of the Company to such Bank under this Agreement
(an "Excess Setoff Amount") after making the apportionment and
application of set-off amounts described in the preceding proviso, then
(i) the other Banks and the lenders under the Other Credit Facilities and
the Big Beaver Credit Facilities, on a pro rata basis, shall be deemed
automatically for purposes of this Section 10.09 to have sold such Bank
and such Bank shall be deemed to have purchased a participation in the
obligations owing to such other Banks and such lenders thereunder in an
aggregate amount equal to the Excess Setoff Amount, (ii) such purchased
participation shall be deemed to be an Obligation for purposes of this
Agreement and (iii) such Bank shall be authorized to set off the Excess
Setoff Amount against such purchased participations. To the extent that
any Bank exercises its rights of set-off at a time when the aggregate
amount of the Deposits is in excess of the Required Deposit Amount, then
the amount set-off by such Bank shall be treated in accordance with the
Set-Off and Sharing Agreement. Each Bank agrees promptly to notify the
Company and the Documentation Agent after any set-off is made by such
Bank; provided, that the failure to give such notice shall not affect the
validity
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of such set-off and application. The rights of each Bank under this
Section 10.09 are in addition to the other rights and remedies (including
other rights of set-off) which such Bank may have.
(c) A new Section 10.17 is added as follows:
10.17 Termination of This Agreement. Upon (i) the payment in full
in cash of the outstanding principal amount of each Loan and all other
Obligations then due and payable and (ii) the mandatory or voluntary
permanent termination of the Commitments, this Agreement and all of the
provisions thereof (other than this Section 10.17, Article III, Section
2.13, Section 9.07, Section 10.04, Section 10.05 and any other provision
hereof which, by its terms, survive the termination of this Agreement and
the payment in full of the Obligations) shall terminate and shall be of
no further force or effect. In the event that any payment in respect of
the Obligations is avoided or otherwise rescinded, the Obligations and
this Agreement shall be immediately revived and reinstated and the
Company shall perform such acts as may be requested by the Banks to
consummate such revival and reinstatement.
2.9 The Schedules to the Credit Agreement are hereby amended by (a)
deleting Schedule 7.03 in its entirety and replacing it with Schedule 7.03 to
this Amendment Agreement, (b) adding Schedule 1.01(a), Schedule 1.01(b) and
Schedule 1.01 (c) thereto as set forth in Schedule 1.01(a), Schedule 1.01(b)
and Schedule 1.01(c) to this Amendment Agreement, (c) adding Schedule 6.07
thereto as set forth in Schedule 6.07 to this Amendment Agreement and (d)
adding Schedule 7.07 thereto as set forth in Schedule 7.07 to this Amendment
Agreement.
3. Company's Representations and Warranties. In order to induce the
Banks and the Agent to enter into this Amendment Agreement, the Company hereby
represents and warrants that as of the Restructuring Closing Date:
(a) the Company has the right, power and capacity and has been duly
authorized and empowered by all requisite corporate and shareholder
action to enter into, execute, deliver and perform this Amendment
Agreement and the Credit Agreement (as amended hereby);
(b) this Amendment Agreement and the Credit Agreement (as amended
hereby) constitutes the Company's legal, valid and binding obligation,
enforceable against the Company in accordance with its terms, except as
enforcement thereof may be subject to the effect of any applicable
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bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and general principles of equity
(regardless of whether such enforcement is sought in a proceeding in
equity or at law or otherwise);
(c) the Company's execution and delivery of this Amendment
Agreement and the performance of this Amendment Agreement and the Credit
Agreement (as amended hereby) do not and will not violate its articles of
incorporation or bylaws or any law, rule, regulation, order, writ,
judgment, decree or award applicable to it or any contractual provision
to which it is a party or to which it or any of its property is subject;
(d) no authorization or approval or other action by, and no notice
to or filing or registration with, any governmental authority or
regulatory body (other than those which have been obtained and are in
force and effect) is required in connection with its execution, delivery
and performance of this Amendment Agreement and the Credit Agreement (as
amended hereby);
(e) no Event of Default or Potential Default (except to the extent
referenced in that certain letter agreement dated December 22, 1995 among
the Company and the financial institutions thereto (the "Forebearance
Agreement") has occurred and is continuing under the Credit Agreement (as
amended hereby) or would exist after giving effect to the transactions
contemplated by this Amendment Agreement;
(f) Except as disclosed in writing to each of the Banks, since
December 22, 1995, there has been no change in the financial condition,
operations, business, properties or prospects of the Company or any
Subsidiary except changes that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect (as defined in
Section 2.1(a) of this Amendment Agreement). There is no fact known to
the Company that could reasonably be expected to have a Material Adverse
Effect (as defined in Section 2.1(a) of this Amendment Agreement) that
has not been set forth in writing to each of the Banks; and
(g) The representations and warranties made by the Company contained
in Article V of the Credit Agreement are true and correct in all material
respects (except to the extent such representations and warranties
expressly refer to an earlier date, in which case they shall be true and
correct as of such earlier date).
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The Company agrees and acknowledges that the representations and warranties set
forth in this Section 3 shall be considered to be representations and
warranties deemed made under the Credit Agreement for purposes of the Event of
Default set forth in Section 8.01(e) of the Credit Agreement.
4. Conditions to Effectiveness. The effectiveness of this Amendment
Agreement is specifically subject to the satisfaction of the following
conditions precedent or concurrent:
(a) No Defaults; Representations and Warranties True. No Potential
Default or Event of Default (except to the extent referenced in the
Forebearance Agreement) under the Credit Agreement (as amended hereby)
shall have occurred and be continuing. The representations and
warranties set forth in Section 3 of this Amendment Agreement shall be
true and correct.
(b) Execution of Amendment. The Company and the Required Banks
shall have duly executed and delivered to the Agent a counterpart of
this Amendment Agreement.
(c) Incremental Interest. The Company shall have paid to the Agent
for the account of each Bank under the Credit Agreement, an amount equal
to the difference between (A) the interest paid to such Bank with respect
to the outstanding Loans from December 22, 1995 through the date of
effectiveness of this Amendment Agreement and (B) the interest that would
have been payable with respect to such Loans had this Amendment Agreement
become effective on December 22, 1995. The Company agrees and
acknowledges that such incremental interest shall be deemed to be fees
and interest required to be paid under the Credit Agreement pursuant to
the Event of Default in Section 8.01(b) of the Credit Agreement.
(d) Other Amendments. The Agent shall have received evidence
reasonably satisfactory to it that (i) each of the agreements listed on
Schedule 1.01(a) hereto has been amended on substantially the terms and
conditions set forth in the Agreement in Principle dated as of December
18, 1995 and otherwise in form and substance reasonably satisfactory to
the Agent, (ii) amendments to the agreements evidencing the Other Credit
Facilities reflecting the provisions of the Forebearance Agreement and
the attached Summary of Indicative Terms dated 12/17/95 (the "Term
Sheet") shall have been executed and delivered by the "Required Banks"
thereunder, (iii) an amendment to the Seasonal Credit Facility reflecting
the provisions of the Forebearance Agreement and the Term Sheet shall
have been
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executed and delivered by each "Bank" thereunder, (iv) an amendment to,
or a forbearance agreement in respect of, the Loan Agreement dated as of
January 21, 1992 among the borrowers named therein, the financial
institutions signatory thereto and [ ], as Managing Agent, as amended
through the date hereof and as further amended, restated, supplemented or
modified from time to time reflecting the provisions of the Forebearance
Agreement and Term Sheet shall have been executed and delivered by
financial institutions party thereto holding at least 85% of the
outstanding loans thereunder, and (v) an amendment to the Loan Agreement
dated as of August 7, 1992 among the borrowers named therein, the
financial institutions signatory thereto, and [ ], as Agent, as amended
through the date hereof, reflecting the provisions of the Forebearance
Agreement and the Term Sheet shall have been executed and delivered by
the "Required Banks" thereunder; each on substantially, the terms and
conditions set forth in the Term Sheet. Each of the undersigned Banks
agrees and acknowledges that their execution and delivery of a
counterpart of this Amendment Agreement shall be also deemed to be the
execution and delivery by such Bank of the amendments to the Other Credit
Facilities contemplated by clause (ii) above for purposes of ascertaining
whether such amendments were executed and delivered by the "Required
Banks" under the Other Credit Facilities.
(e) Letter of Credit Facility; Setoff Sharing Agreement. The
Letter of Credit Issuance Agreement dated as of the date hereof among
the Borrower, the financial institutions signatory thereto and [ ], as
agent and the related collateral proceeds sharing agreement among such
financial institutions shall each have become effective. The Bank Setoff
Sharing Agreement shall have been executed and delivered by all Banks in
which the Company shall have on deposit cash and Cash Equivalents.
(f) Payment of Expenses. The Company shall have paid all invoiced
fees and expenses referenced in Section 5(a) hereof and Section 10.04 of
the Credit Agreement.
(g) Opinion of Counsel. The Agent shall have received an opinion
of internal counsel and of reasonably acceptable outside counsel and the
Company's general counsel in favor of the Banks in form and substance
acceptable to the Agent with respect to (a) the legal existence and good
standing of the Company, (b) the authority of the Company to enter into
this Amendment Agreement and the due
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execution and delivery thereof, (c) that the obligations of the Company
under the Amendment Agreement are legal, valid, binding and enforceable
in accordance with their terms (subject to customary exceptions), (d)
noncontravention with applicable securities laws and other laws, rules
and regulations and material agreements applicable to the Company and
material agreements, and (e) such other matters as the Agent may
reasonably request.
5. Miscellaneous. The parties hereto hereby further agree as
follows:
(a) Costs, Expenses and Taxes. The Company hereby agrees to pay all
reasonable fees, costs and expenses of the Agent and [ ] incurred in
connection with the negotiation, preparation and execution of this
Amendment Agreement and the transactions contemplated hereby, and in
connection with any future amendment, modification or consents of or in
respect of the Credit Agreement (whether or not adopted), including,
without limitation, the reasonable fees and expenses of each of Winston &
Strawn and Wachtell, Lipton, Rosen & Katz ("Wachtell, Lipton"), counsel
to the Agent and the Banks. Without limiting the generality of the
foregoing, the Company hereby agrees to pay, upon receipt thereof, each
statement for reasonable fees and expenses of (i) Wachtell, Lipton and
(ii) any other advisor, counselor, consultant or accountant retained by
Wachtell, Lipton, the Banks collectively or the Agent, rendered after the
date hereof (x) relating to the ongoing evaluation of the rights and
status of the Banks with respect to the matters contemplated by this
Amendment Agreement and the rendering of advice to the Banks with respect
thereto, (y) relating to any amendments, waivers or consents requested by
the Company (whether or not adopted) pursuant to the provisions hereof or
of any Loan Document or (z) relating to any work-out or restructuring of
Indebtedness of the Company after December 22, 1995. The Company agrees
to reasonably cooperate with and provide information reasonably requested
by any advisor, accountant, counselor, consultant or accountant retained
by the Banks, the Agent or Wachtell, Lipton. The Company also agrees to
pay all reasonable fees and expenses (including any Attorney Costs) of
each of the Banks in connection with this Amendment Agreement and the
Forebearance Agreement.
(b) Counterparts. This Amendment Agreement may be executed in one
or more counterparts, each of which, when executed and delivered, shall
be deemed to be an original
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and all of which counterparts, taken together, shall constitute but
one and the same document with the same force and effect as if the
signatures of all of the parties were on a single counterpart, and it
shall not be necessary in making proof of this Amendment Agreement to
produce more than one (1) such counterpart.
(c) Headings. Headings used in this Amendment Agreement are for
convenience of reference only and shall not affect the construction of
this Amendment Agreement.
(d) Integration. This Agreement and the Credit Agreement (as
amended hereby) constitute the entire agreement among the parties hereto
with respect to the subject matter hereof.
(e) Governing law. THIS AMENDMENT AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS AND
DECISIONS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO CONFLICT OF LAWS
PRINCIPLES).
(f) Binding Effect. This Amendment Agreement shall be binding upon
and inure to the benefit of and be enforceable by the Company, the Agent
and the Banks and their respective successors and permitted assigns.
This Amendment Agreement shall not be construed so as to confer any right
or benefit upon any Person other than the Company, the Agent and the
Banks and their respective successors and permitted assigns.
(g) Amendment; Waiver; Status as Loan Document. The parties hereto
agree and acknowledge that nothing contained in this Amendment Agreement
in any manner or respect limits or terminates any of the provisions of
the Credit Agreement other than as expressly set forth herein and further
agree and acknowledge that the Credit Agreement (as amended hereby)
remains and continues in full force and effect and is hereby ratified and
confirmed. Except to the extent expressly set forth herein, the
execution, delivery and effectiveness of this Amendment Agreement shall
not operate as a waiver of any rights, power or remedy of the Banks or
the Agent under the Credit Agreement or constitute a waiver of any
provision of the Credit Agreement. No delay on the part of any Bank or
the Agent in exercising any of their respective rights, remedies, powers
and privileges under the Credit Agreement or partial or single exercise
thereof, shall constitute a waiver thereof. None of the terms and
conditions of this Amendment Agreement may be changed, waived, modified
or varied in any manner whatsoever, except in accordance with
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Section 10.01 of the Credit Agreement. The parties hereto agree that
this Amendment Agreement shall constitute a Loan Document for purposes of
the Credit Agreement.
(h) Authorization Relating to Collateral and Intercreditor
Agreement. Each of the Banks hereby authorizes the Agent to (i) execute
the Collateral and Intercreditor Agreement dated as of the date hereof
and relating to the sharing of collateral pledged to secure Indebtedness
under the Letter of Credit Issuance Agreement among the financial
institutions party to the Letter of Credit Issuance Agreement and the
agents under the Other Credit Facilities (including the Agent) and the
Big Beaver Credit Facilities and (ii) distribute any amount received
pursuant to the sharing provisions thereof in the manner contemplated by
Section 2.11 of the Credit Agreement.
[Balance of page left intentionally blank; signature pages follow.]
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IN WITNESS WHEREOF, the Company, the Agent and the Banks have executed
this Amendment Agreement as of the date first above written.
KMART CORPORATION
By: _________________________
Title:_______________________
[364 Day Signature Pages]
<PAGE> 162
AMENDMENT NO. 1 TO THREE YEAR CREDIT AGREEMENT
This Amendment No. 1 to Three Year Credit Agreement (this "Amendment
Agreement") is entered into as of December 22, 1995 by and among Kmart
Corporation (the "Company"), the undersigned financial institutions (the
"Banks") and [ ], as Documentation Agent (the "Agent").
W I T N E S S E T H:
WHEREAS, the Company, the Banks and the Agent entered into that certain
Three Year Credit Agreement dated as of October 7, 1994 (as amended, restated,
modified, or supplemented and in effect from time to time, the "Credit
Agreement"); and
WHEREAS, the Company has requested that the Credit Agreement be amended in
certain respects as set forth herein, and the Banks and the Agent are agreeable
to the same, subject to the terms and conditions herein set forth;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. Defined Terms. Capitalized terms used herein and not otherwise defined
herein shall have the meanings attributed to such terms in the Credit
Agreement, as amended hereby.
2. Amendments to Credit Agreement.
2.1 Section 1.01 of the Credit Agreement is hereby amended by
(a) amending and restating the definitions of "Committed Borrowing", "Committed
Loan", "Competitive Bid Commitment Sublimit", "Consolidated Net Worth",
"EBITDAR", "Interest Payment Date", "Interest Period", "Material Adverse
Effect", "Other Credit Facilities", "Termination Date" and "Type" in their
entirety to read as follows:
"Committed Borrowing" means a borrowing consisting of Committed
Loans made on the same day by the Banks ratably according to their
respective Commitment Percentages and, in the case of LIBOR Committed
Loans, having the same Interest Period.
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"Committed Loan" means a Loan under Section 2.01, and may be a LIBOR
Committed Loan or a Reference Rate Committed Loan.
"Competitive Bid Commitment Sublimit" means an aggregate amount
equal to five hundred million dollars ($500,000,000); provided that after
the Restructuring Effective Date, such amount shall be zero (0).
"Consolidated Net Worth" means as of the date of any determination
thereof, the consolidated net worth of the Company, determined in
accordance with GAAP; provided, however, that any gains or losses from
the disposition of any Specialty Retail Subsidiary (or from any
write-downs of the Company's investment in any Specialty Retail
Subsidiary or in Builder's Square, Inc., Kmart Canada, Ltd., Kmart CR
a.s., Kmart SR a.s. and Kmart s.r.o. permitted under the Financial
Accounting Standards Board Statement No. 121 prior to any such
disposition) and any changes after the Closing Date in the foreign
currency translation adjustment account as presented in the Company's
financial statements (and in accordance with GAAP) shall be excluded
from the determination of Consolidated Net Worth.
"EBITDAR" means, for any applicable period, for the Company the
aggregate of the following, without duplication: (a) consolidated net
income for such period, plus (b) consolidated interest expense (net of
any interest income) for such period, plus (c) consolidated provision for
taxes for such period, plus (d) consolidated depreciation expense for
such period, plus (e) consolidated amortization expense for such period,
plus (f) consolidated Rent Expenses for such period, minus (or plus, as
applicable) (g) on a consolidated basis, any extraordinary gains (or plus
extraordinary losses) for such period (including any loss resulting from
any write-downs of the Company's investment in Builder's Square, Inc.,
Kmart Canada, Ltd., Kmart CR a.s., Kmart SR a.s. or Kmart s.r.o.
permitted under the Financial Accounting Standards Board Statement No.
121), minus (or plus, as applicable) (h) any gains (or plus any losses)
attributable to the Specialty Retail Subsidiaries for such period other
than results of operations in the ordinary course of business, plus (i)
solely with respect to the four fiscal quarters ending in October 1994,
the $1.348 billion restructuring charge recorded in the fourth fiscal
quarter of the Company's fiscal year ending January 26, 1994, minus (or
plus, as applicable) (j) any gains (or losses) realized from the sale of
Kmart Canada Ltd. and each of its Subsidiaries, Kmart
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CR a.s. (Czech operations), Kmart SR a.s. (Slovak operations) and Kmart
s.r.o. (servicer of Czech and Slovak operations).
"Interest Payment Date" means, with respect to any LIBOR Loan or
Absolute Rate Bid Loan, the last day of each Interest Period applicable
to such Loan, and, with respect to any Reference Rate Committed Loan, the
last Business Day
of each calendar quarter and the Termination Date; provided, that if any
Interest Period for a LIBOR Loan (other than a LIBOR Bid Loan) exceeds
three months, the date which falls three months after the beginning of
such Interest Period shall also be an Interest Payment Date.
"Interest Period" means: (a) with respect to any LIBOR Loan, the
period commencing on the Business Day the LIBOR Loan is disbursed or
continued (or on the Conversion Date on which any Loan is converted to a
LIBOR Committed Loan) and ending on the date one, two, three or six
months thereafter, as selected by the Company in its Notice of Borrowing,
Competitive Bid Request or Notice of Conversion/Continuation; and (b)
with respect to any Absolute Rate Bid Loan, a period of not less than 7
days nor more than 183 days, as selected by the Company in its
Competitive Bid Request;
provided, that:
(i) if any Interest Period would otherwise end on a day which
is not a Business Day, that Interest Period shall be extended to
the next succeeding Business Day unless, in the case of a LIBOR
Loan, 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;
(ii) any Interest Period pertaining to a LIBOR Loan 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 the calendar month which is one, two,
three or six months, as the case may be, after the calendar month
in which such Interest Period began; and
(iii) no Interest Period for any Loan shall extend beyond the
Termination Date.
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"Material Adverse Effect" means a material adverse change in, or
material adverse effect upon, (a) the business, financial condition,
operations, assets or prospects of the Company, or of the Company and its
Subsidiaries taken as a whole, or (b) the Company's ability to perform
its obligations under this Agreement or the Loan Documents, or (c) the
validity or enforceability of this Agreement or any other Loan Document;
provided, however, that any past or future reduction in the Company's
credit rating or decline in the market price of the Company's stock shall
not of themselves be deemed to constitute a Material Adverse Effect.
"Other Credit Facilities" means, collectively: (a) the 364 Day
Credit Facility, (b) the Seasonal Credit Facility; and (c) the Warehouse
Facility Credit Agreement.
"Termination Date" means the earlier to occur of
(a) October 3, 1997; and
(b) the date on which the Commitments shall terminate in accordance
with the provisions of this Agreement.
"Type" means, with respect to any Committed Loan, its nature as a
Reference Rate Committed Loan or a LIBOR Committed Loan.
and (b) deleting the definitions of "CD Rate" and "CD Rate Committed Loan" in
their entirety;
and (c) adding the definitions of "Bank Setoff Sharing Agreement", "Big Beaver
Credit Facilities", "Capitalized Lease Obligations", "Cash Equivalents",
"Ceiling Amount", "Deposits", "Deposit Threshold", "Facing Agreement", "Kmart
Bank Group", "Letter of Credit Issuance Agreement", "New Indebtedness", "Real
Estate Debt", "Real Estate Debt Documents", "Required Deposit Amount",
"Restricted Payment", "Restructuring and Repurchase Agreement", "Restructuring
Closing Date", "Restructuring Effective Date", "Scheduled Assets", "364 Day
Credit Facility", "Seasonal Credit Facility", "Set-Off and Sharing Agreement"
and "Warehouse Facility Credit Agreement" as follows:
"Bank Setoff Sharing Agreement" means that certain Bank Setoff
Sharing Agreement dated as of the Restructuring Effective Date among the
Banks party thereto, the Company and [ ], as agent.
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"Big Beaver Credit Facilities" means the revolving credit facilities
evidenced by: (a) that certain Loan Agreement dated as of January 21,
1992 among the borrowers named therein, the financial institutions
signatory thereto and [ ], as Managing Agent (the "Big
Beaver I Credit Facility"), (b) that certain Loan Agreement dated as of
August 7, 1992 among the borrowers named therein, the financial
institutions signatory thereto, and [ ], as Agent (the
"Big Beaver II Credit Facility").
"Capitalized Lease Obligations" means, in relation to any Person,
obligations for the payment of rent for any real or personal property
under leases or agreements to lease that, in accordance with GAAP, have
been or should be capitalized on the books of the lessee and, for
purposes hereof, the amount of any such obligation shall be the
capitalized amount thereof determined in accordance with GAAP.
"Cash Equivalents" means investments substantially of the type
described on Schedule 1.01(c) hereof.
"Ceiling Amount" means, at any time of determination, one billion,
one hundred million dollars ($1,100,000,000) less the aggregate amount of
payments made in respect of the Loans after the Restructuring Effective
Date pursuant to Section 2.09(c), as such amount may be increased from
time to time with the written consent of all of the Banks.
"Deposits" has the meaning specified in Section 6.09.
"Deposit Threshold" means, at any time, the sum of (a) $400,000,000
plus (b) an amount equal to (i) the increase in the fair market value (as
determined based on appraisals satisfactory to the Documentation Agent)
of collateral securing the Real Estate Debt arising from the substitution
of collateral after the Restructuring Effective Date to the extent
permitted by Section 7.03(e) upon an event of casualty, condemnation or
eminent domain event, or upon the existence of an environmental condition
(but in any event excluding a substitution of collateral resulting from
the single store collateral substitution obligation existing on the
Restructuring Effective Date and resulting from a store closing in
September, 1995 with respect to the Deal 2 Notes (as defined in the
Restructuring and Repurchase Agreement)), to the extent such substitution
is permitted under the Real Estate Debt Documents as in effect as of the
Restructuring Closing Date, multiplied by a fraction, the numerator of
which is equal
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to the sum of the outstanding obligations under this Agreement, the Other
Credit Facilities and the Big Beaver Credit Facilities at the time of
such substitution and the denominator of which is equal to the Real
Estate Debt outstanding at the time of such substitution, less (ii) the
fair market value (as determined based on appraisals satisfactory to the
Documentation Agent) of any property pledged to secure the outstanding
obligations under this Agreement, the Other Credit Facilities and the Big
Beaver Credit Facilities concurrently with such pledge of substituted
collateral to the holders of the Real Estate Debt.
"Facing Agreement" means that certain letter agreement dated January
17, 1996 between the Company and certain Banks party thereto that agreed
to act as a Facing Agents in respect of one or more Trade Letters of
Credit to be issued in accordance with Section 2.16 hereof.
"Kmart Bank Group" means the lending institutions from time to time
party to one or more of this Agreement, the Other Credit Facilities and
the Big Beaver Credit Facilities.
"Letter of Credit Issuance Agreement" means that certain Letter of
Credit Issuance Agreement dated as of February 29, 1996 between the
Company and certain banks, pursuant to which such banks agreed to issue
trade letters of credit and standby letters of credit on the terms and
subject to the conditions provided for therein.
"New Indebtedness" means Indebtedness incurred by the Company or any
of its Subsidiaries after the Restructuring Effective Date other than (i)
any Indebtedness under this Agreement, the Other Credit Facilities or the
Big Beaver Credit Facilities, (ii) Indebtedness under or Indebtedness
refunding or refinancing the Real Estate Debt or (iii)
Indebtedness refunding or refinancing unsecured Indebtedness of the
Company outstanding on the Restructuring Effective Date. Indebtedness
outstanding under the Letter of Credit Issuance Agreement shall
constitute New Indebtedness.
"Real Estate Debt" means the Indebtedness outstanding under the
agreements listed on Schedule 1.01(a) hereto.
"Real Estate Debt Documents" means the Restructuring and Repurchase
Agreement and the documents and instruments relating to the Real Estate
Debt, as in effect as of the Restructuring Effective Date, including the
related note purchase agreements, indentures, trust agreements, put
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agreements, promissory notes, mortgages, deeds of trust, leases and other
security documents and the documents described as the "Existing
Transaction Documents" in the Restructuring and Repurchase Agreement.
"Required Deposit Amount" has the meaning specified in Section 6.09.
"Restricted Payment" means, with respect to any Person, (a) any
dividend or other distribution, direct or indirect, or the incurrence of
any liability to make any other payment or distribution of cash or other
property or assets in respect of such Person's capital stock (which shall
include, without limitation, preferred stock, common stock, options,
warrants or any other equity security), (b) any payment on account of the
purchase, prepayment, conversion, exchange, redemption, retirement,
surrender or acquisition of such Person's capital stock or any other
payment or distribution made in respect thereof, either directly or
indirectly, and (c) any purchase or other acquisition or payment in
respect of any option, warrant or other right to acquire any of or any
interest in such Person's capital stock; provided, that "Restricted
Payment" shall not include (i) any dividend payable solely in shares of
its capital stock, (ii) any purchase or exchange of existing employee
stock options for consideration consisting solely of new employee stock
options or (iii) any purchase of capital stock or options to acquire the
same from directors, officers and employees of the Company and its
Subsidiaries consistent with past practices in connection with ordinary
course employment and severance arrangements and in an aggregate amount
that shall not exceed $5,000,000 for all such purchases pursuant to this
clause (iii).
"Restructuring Closing Date" means the date upon which each of the
conditions precedent set forth in Section 4 of that certain Amendment No.
1 to Three Year Credit Agreement dated as of December 22, 1995 by and
among the Company, the Banks and the Documentation Agent have been
satisfied.
"Restructuring and Repurchase Agreement" means that certain
Restructuring and Repurchase Agreement dated as of December 22, 1995 by
and among the Company and certain holders of the Real Estate Debt and
certain other Persons parties thereto.
"Restructuring Effective Date" means December 22, 1995.
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"Scheduled Assets" means the assets of the Company identified on
Schedule 1.01(b) hereto.
"364 Day Credit Facility" means the revolving credit facility
evidenced by that certain 364 Day Credit Agreement dated as of October 5,
1995 among the Company, [ ], as documentation agent thereunder, and the
financial institutions signatory thereto.
"Seasonal Credit Facility" means the revolving credit facility
evidenced by that certain Seasonal Credit Agreement dated as of October
5, 1995 among the Company, [ ], as documentation agent thereunder, and
the financial institutions signatory thereto.
"Set-off and Sharing Agreement" means that certain Set-Off and
Sharing Agreement dated as of the Restructuring Effective Date among the
holders of the Real Estate Debt and the institutions in the Kmart Bank
Group party thereto.
"Warehouse Facility Credit Agreement" means the credit facilities
evidenced by that certain Warehouse Facility Credit Agreement dated as of
October 7, 1994 among the Company, the other borrowers named therein,
[ ], as documentation agent thereunder, and the
financial institutions signatory thereto.
2.2 Article II of the Credit Agreement is hereby amended as follows:
(a) Section 2.01 is hereby amended and restated in its entirety to read as
follows:
2.01 Amounts and Terms of Commitments. Each Bank severally agrees,
on the terms and conditions hereinafter set forth, and upon request by
the Company, to make Loans in Dollars to the Company (each such Loan, a
"Committed Loan") and to participate in Letters of Credit from time to
time on any Business Day during the period from the Closing Date to the
Termination Date, in an aggregate principal amount not to exceed at any
time outstanding the amount set forth opposite the Bank's name in
Schedule 2.01 (such amount as the same may be reduced pursuant to Section
2.07 or Section 2.09 or as a result of one or more assignments pursuant
to Section 10.08, being herein referred to as a Bank's "Commitment");
provided, that, after giving effect to any Committed Borrowing or Letter
of
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Credit Issuance, the aggregate principal amount of all outstanding
Committed Loans and all Competitive Bid Loans plus the aggregate amount
of outstanding LC Obligations shall not exceed the Aggregate Commitment;
and provided further that without the prior written consent of all of the
Banks, after giving effect to any Committed Borrowing or Letter of Credit
Issuance, the aggregate principal amount of all outstanding Committed
Loans and all Competitive Bid Loans plus the aggregate amount of
outstanding LC Obligations shall not exceed the Ceiling Amount. Within
the limits of each Bank's Commitment (and subject in all cases to the
requirement that after giving effect to any Committed Borrowing or Letter
of Credit Issuance, the aggregate principal amount of all outstanding
Committed Loans and all Competitive Bid Loans plus the aggregate amount
of outstanding LC Obligations shall not exceed the Ceiling Amount without
the consent of all of the Banks), and subject to the other terms and
conditions hereof and the terms and conditions of the Facing Agreement,
the Company may borrow under this Section 2.01, prepay pursuant to
Section 2.08 and reborrow pursuant to this Section 2.01.
(b) Section 2.03 is hereby amended by deleting paragraph (a) thereof in
its entirety and replacing it with the following:
(a) Each Committed Borrowing shall be made upon the irrevocable
request of the Company by a facsimile to the Documentation Agent (which
shall be confirmed promptly by a telephone call) in the form of a Notice
of Borrowing which facsimile must be received by the Documentation Agent
prior to 11:00 a.m. (New York City time) (i) three (3) Business Days
prior to the requested borrowing date, in the case of LIBOR Committed
Loans, and (ii) on the requested borrowing date, in the case of
Reference Rate Committed Loans, specifying:
(A) the amount of the Borrowing, which (except as otherwise
provided for in Section 5(f) of the Facing Agreement) shall be in
an aggregate minimum principal amount of Ten Million Dollars
($10,000,000) or any multiple of Five Million Dollars ($5,000,000)
in excess thereof;
(B) the requested borrowing date, which shall be a Business
Day;
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(C) whether the Borrowing is to be comprised of LIBOR
Committed Loans or Reference Rate Committed Loans; and
(D) if the Borrowing is to be comprised of LIBOR Committed
Loans, the duration of the initial Interest Period applicable to
such Loans. If the Notice of Borrowing shall fail to specify the
duration of the initial Interest Period for any LIBOR Committed
Loans the Company shall be deemed to have elected an Interest
Period of one month;
provided, however, that with respect to any Borrowing to be made on
the Closing Date, a Notice of Borrowing shall be delivered to the
Documentation Agent not later than 11:00 a.m. (New York City
time) on the Closing Date (such Borrowing will consist of Reference
Rate Committed Loans only); provided, further, that no Borrowing
shall be made without the prior written consent of all of the
Banks if after giving effect to any such Borrowing, the aggregate
principal amount of all Loans plus the aggregate amount of
outstanding LC Obligations would exceed the Ceiling Amount.
(c) Paragraphs (a) through (d) of Section 2.04 are hereby deleted
in their entirety and replaced with the following:
(a) The Company may upon notice to the Documentation Agent in
accordance with Section 2.04(b):
(i) elect to convert, as of any Business Day, any Reference
Rate Committed Loans (or any part thereof in an aggregate amount
not less than Ten Million Dollars ($10,000,000), or that is in an
integral multiple of Five Million Dollars ($5,000,000) in excess
thereof) (or such other outstanding principal amount of such Loan
as may result from mandatory prepayments of such Loan hereunder)
into LIBOR Committed Loans; or
(ii) elect to convert, as of the last day of any Interest
Period, any LIBOR Committed Loans maturing on such day (or any part
thereof in an aggregate amount not less than Ten Million Dollars
($10,000,000), or that is in an integral multiple of Five Million
Dollars ($5,000,000) in excess thereof) (or such other outstanding
principal amount of such Loan as may result from mandatory
prepayments of such
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Loan hereunder) into Reference Rate Committed Loans; or
(iii) elect to continue as of the last day of any
interest period (a "Continuation Date") any LIBOR Committed Loans
maturing on such day (or any part thereof in an aggregate amount
not less than Ten Million Dollars ($10,000,000), or that is in an
integral multiple of Five Million Dollars ($5,000,000) in excess
thereof) (or such other outstanding principal amount of such Loan
as may result from mandatory prepayments of such Loan hereunder);
provided, that if the aggregate amount of all LIBOR Committed Loans
comprised in any Borrowing shall have been or would be reduced, by
payment, prepayment, or conversion of part thereof, to an amount less
than Ten Million Dollars ($10,000,000), such LIBOR Committed Loans shall
automatically convert into Reference Rate Committed Loans, on and as of
the end of applicable Interest Period,
(b) If the Company desires to convert or continue any Loan pursuant
to Section 2.04(a), it shall irrevocably request a conversion or
continuation by a facsimile (confirmed promptly by telephone) of a Notice
of Conversion/Continuation to be received by the Documentation Agent not
later than 11:00 a.m. (New York time) at least (i) three (3) Business
Days in advance of the Conversion Date or Continuation Date, if the Loans
are to be converted into or continued as LIBOR Committed Loans and (ii)
on the same Business Day as the Conversion Date, if the Loans are to be
converted into Reference Rate Committed Loans, specifying:
(A) the proposed Conversion Date or Continuation Date;
(B) the aggregate amount of Loans to be converted or
continued;
(C) the nature of the proposed conversion or continuation; and
(D) the duration of the requested Interest Period, if the
Loans are to be converted into or continued as LIBOR Committed
Loans.
(c) If prior to the time set forth in Section 2.04(b), (i) the
Company has failed to give a timely Notice of Conversion/Continuation
with respect to such LIBOR
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Committed Loans or (ii) the Company has failed to select a new Interest
Period to be applicable to such LIBOR Committed Loans, the Company shall
be deemed to have elected to convert such Loans into Reference Rate
Committed Loans effective as of the expiration of the applicable Interest
Period.
(d) During the existence of a Potential Default or Event of Default,
unless the Required Banks otherwise agree, the Company may not elect to
have a Loan be converted into or continued as a LIBOR Committed Loan
pursuant to Section 2.04.
(d) Section 2.05 is hereby amended and restated in its entirety to
read as follows:
2.05 Competitive Bid Borrowings. In addition to Committed
Borrowings pursuant to Section 2.03, each Bank severally agrees that
the Company may, as set forth in Section 2.06, from time to time prior to
the Restructuring Effective Date, request the Banks through the
Documentation Agent to submit offers to make Competitive Bid Loans to the
Company; provided, however, that the Banks may, but shall have no
obligation to, submit such offers and the Company may, but shall have no
obligation to, accept any such offers; and provided, further, that at no
time shall (a) the aggregate principal amount of all outstanding Loans
exceed the Aggregate Commitment less the aggregate outstanding LC
Obligations, (b) the aggregate principal amount of all outstanding
Competitive Bid Loans exceed the Competitive Bid Commitment Sublimit, or
(c) the number of Interest Periods for Competitive Bid Loans then
outstanding plus the number of Interest Periods for Committed Loans then
outstanding exceeds fifteen (15). Notwithstanding anything in this
Agreement or any Loan Document to the contrary, the Company shall not be
permitted to request or borrow any Competitive Bid Loans after the
Restructuring Effective Date.
(e) Section 2.08 is hereby amended and restated in its entirety to
read as follows:
2.08 Optional Prepayments of Loans.
(a) Subject to Section 3.05 and Section 2.16(a), the Company may at
any time or from time to time, upon at least five (5) Business Days'
notice to the Documentation Agent prepay LIBOR Committed Loans or upon at
least one Business Day's notice to the Documentation Agent prepay
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Reference Rate Committed Loans, in whole or in part, in minimum amounts
of Ten Million Dollars ($10,000,000) or in multiples of Five Million
Dollars ($5,000,000) in excess thereof (or in minimum amounts of Five
Million Dollars ($5,000,000) or multiples of one million dollars
($1,000,000) for optional prepayments made in connection with paragraph
5(c) of the Facing Agreement). Such notice of prepayment shall specify
the date and amount of such prepayment and whether such prepayment is of
Reference Rate Committed Loans or LIBOR Committed Loans. Such notice
shall not thereafter be revocable by the Company, and the Documentation
Agent will promptly notify each Bank thereof and of such Bank's
Commitment Percentage of such prepayment. If such notice is given, the
Company shall make such prepayment and the payment amount specified in
such notice shall be due and payable on the date specified therein,
together with accrued interest to each such date on the amount prepaid
and the amounts required pursuant to Section 3.05.
(b) The Company may not voluntarily prepay all or any portion of
the principal amount of any Competitive Bid Loan prior to the maturity
thereof.
(f) Section 2.09 is hereby amended by adding the following new
clause (c) as follows:
(c) Mandatory Commitments Reductions and Prepayments. The Company
shall make a permanent reduction in the Aggregate Commitment and to the
Ceiling Amount, concurrently with the making of any principal payment
with respect to the Real Estate Debt (except to the extent that such
payment to the holders of the Real Estate Debt was triggered by (x) a
mandatory prepayment pursuant to this Section 2.09(c) or (y) a prepayment
under the Big Beaver Credit Facilities and the Other Credit Facilities
which results in a ratable reduction of the Aggregate Commitments and the
Ceiling Amount in accordance with the succeeding sentence of this Section
2.09(c)), in an amount (the "RE Reduction Amount") equal to such payment
multiplied by a fraction, the numerator of which equals the Ceiling
Amount (as in effect immediately prior to such prepayment of principal in
respect of the Real Estate Debt) and the denominator of which equals the
aggregate amount outstanding under the Real Estate Debt immediately prior
to such payment. In addition, the Company shall make a permanent
reduction in the Aggregate Commitment and to the Ceiling Amount,
concurrently with the making of any principal payment in respect of the
Other Credit Facilities or the Big Beaver Credit Facilities (other than
(i)
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mandatory prepayments under the Big Beaver Credit Facilities or the
Warehouse Facility Credit Agreement as a result of a project disposition
or project refinancing, (ii) principal payments due on February 28,
1997 under the Seasonal Credit Facility and the Big Beaver Credit
Facilities and (iii) prepayments under the Other Credit Facilities and
the Big Beaver Credit Facilities required as a result of prepayments
under the Real Estate Debt or under this Agreement) in an amount (the
"Bank Reduction Amount") equal to such payment multiplied by a fraction,
the numerator of which equals the Ceiling Amount (as in effect
immediately prior to such prepayment of principal under either of the Big
Beaver Credit Facilities or any such Other Credit Facility) and the
denominator of which equals the aggregate amount outstanding under the
facility receiving the payment immediately prior to the making of such
payment. Concurrently with each such reduction, the Company shall
ratably prepay the outstanding Loans in an amount equal to the RE
Reduction Amount or the Bank Reduction Amount, as the case may be,
together with accrued interest to such date on the amount prepaid and the
amounts required pursuant to Section 3.05. Such prepayment amount shall
ratably reduce the outstanding Loans of each Bank. Any reduction of the
Aggregate Commitment shall be applied to each Bank's Commitment pro rata
in accordance with such Bank's relevant Commitment Percentage.
Furthermore, if, for any reason, the aggregate principal amount of all
outstanding Loans plus the aggregate amount of outstanding LC Obligations
exceeds the Ceiling Amount, unless all of the Banks consent otherwise in
writing, the Company shall immediately prepay the Loans in the amount of
such excess.
(g) Section 2.10 is hereby amended and restated in its entirety to
read as follows:
2.10 Interest.
(a) Subject to Sections 2.10(c) and 2.10(d), each Loan shall bear
interest on the outstanding principal amount thereof from the date when
made until paid in full, at the option of the Company as set forth in
its Notice of Borrowing or Notice of Conversion/Continuation,
(i) if such Loan is a Reference Rate Committed Loan, at a rate
per annum equal to the Reference Rate plus one percent (1.0%) (such
interest margin being subject to increase pursuant to Section 7.08
hereof); and
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(ii) if such Loan is a LIBOR Committed Loan, at a rate per
annum equal to the sum of LIBOR plus two percent (2.0%) (such
interest margin being subject to increase pursuant to Section 7.08
hereof).
(b) Interest on each Loan shall be payable in arrears on each
applicable Interest Payment Date. Interest shall also be payable on the
date of any prepayment of Loans for the portion of the Loans so prepaid
and, in the case of conversion of any Reference Rate Committed Loan, on
the date of conversion thereof into a LIBOR Committed Loan.
(c) During the continuation of any Event of Default or after
acceleration, the Company shall pay, on demand, interest (after as well
as before judgment) on the principal amount of all Loans then
outstanding, at a rate per annum which is determined by increasing the
rate of interest then in effect by two percent (2.0%) per annum;
provided, however, that, on and after the expiration of the Interest
Period applicable to any LIBOR Committed Loan on the date of occurrence
of such Event of Default or acceleration, the principal amount of such
Loan shall, during the continuation of such Event of Default or
acceleration, bear interest at a rate per annum equal to the Reference
Rate plus three percent (3.0%).
(d) Anything herein to the contrary notwithstanding, the obligations
of the Company hereunder shall be subject to the limitation that payments
of interest shall not be required, for any period for which interest is
computed hereunder, to the extent (but only to the extent) that
contracting for or receiving such payment by any Bank would be contrary
to the provisions of any law applicable to such Bank limiting the highest
rate of interest which may be lawfully contracted for, charged or
received by such Bank, and in such event the Company shall pay such Bank
interest at the highest rate permitted by applicable law.
(h) Section 2.12 is hereby amended by (i) replacing the phrase "plus
2%" at the end of paragraph (a) thereof with the phrase "plus three percent
(3.0%)", (ii) deleting each reference to ", the CD Rate" in paragraph (b)
thereof and (iii) deleting the reference to "and the CD Rate" in paragraph (d)
thereof.
(i) Section 2.14 is hereby amended by deleting the reference to "or
CD Rate Committed Loans" in paragraph (a) thereof.
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(j) Section 2.15 is hereby amended by amending and restating
subsection (c) to read as follows:
(c) Except as set forth in Section 10.09, nothing herein shall
require any Bank to exercise any right of set-off or similar rights or
shall affect the right of any Bank to exercise, and retain the benefits
of exercising any such right with respect to any other indebtedness or
obligation of the Company.
(k) Section 2.16 is hereby amended and restated to read as follows:
2.16 Amount and Terms of Letters of Credit.
(a) Letter of Credit Commitments; Terms of Letters of Credit. (i)
Subject to and upon the terms and conditions herein set forth and the
terms and conditions set forth in the Facing Agreement, at any time and
from time to time on or after the date hereof and to but not including a
date which is thirty (30) days prior to the Termination Date, each Bank
selected by the Company which is reasonably acceptable to the
Documentation Agent (and which agrees to perform the services of a
fronting bank) agrees to issue (in such capacity, a "Facing Agent") in
its own name or through an Affiliate, one or more Letters of Credit for
the account of the Company in an aggregate Stated Amount in Dollars at
any one time that, together with the aggregate Stated Amount of all other
Letters of Credit issued pursuant hereto, does not exceed the Letter of
Credit Commitment Sublimit; provided, however, that no Facing Agent shall
issue or extend the expiration of any Letter of Credit if, immediately
after giving effect to such issuance or extension, (A) the aggregate LC
Obligations in respect of Standby Letters of Credit at such time would
exceed the Standby Letter of Credit Commitment Sublimit, or (B) the
aggregate LC Obligations in respect of Trade Letters of Credit at such
time would exceed the Trade Letter of Credit Commitment Sublimit, or (C)
the Commitment of any Bank would be exceeded or (D) the aggregate
principal amount of all outstanding Loans plus the aggregate amount of
outstanding LC Obligations would exceed the Ceiling Amount; provided
further that, if the Required Banks, in their sole and absolute
discretion, have directed the Company not to make a prepayment of the
Loans for the purposes of creating availability on Letters of Credit in
the manner contemplated by section 5 of the Facing Agreement, or
otherwise conditioned such a prepayment (and such condition has not been
fulfilled), then, notwithstanding Section 2.08, the Company shall not
make
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such a prepayment and the Facing Agents shall not be required
to issue Letters of Credit to the extent thereof. Each Bank severally,
but not jointly, agrees to participate in each such Letter of Credit
issued by a Facing Agent ratably according to its Commitment Percentage
and to make available to such Facing Agent such Bank's Commitment
Percentage of any payment made to the beneficiary of such Letter of
Credit to the extent not reimbursed by the Company; provided, however,
that no Bank shall be required to participate in any Letter of Credit to
the extent that its participation therein would cause such Bank to exceed
such Bank's Commitment then in effect or such Bank's Commitment
Percentage of the Ceiling Amount. No Bank's obligation to participate in
any Letter of Credit or to make available to a Facing Agent such Bank's
Commitment Percentage of any Letter of Credit Payment made by the Facing
Agent shall be affected by any other Bank's failure to participate in the
same or any other Letter of Credit or by any other Bank's failure to make
available to the relevant Facing Agent such other Bank's Commitment
Percentage of any Letter of Credit Payment. For purposes of this
Agreement, each Trade Letter of Credit which is not paid or not fully
paid by the applicable Facing Agent shall be deemed to be outstanding in
the unpaid amount for the 21-day period following its expiry date unless
previously canceled; provided that not later than the end of such 21-day
period the applicable Facing Agent shall cancel such Trade Letter of
Credit to the extent unpaid.
(ii) Subject to the terms of the Facing Agreement, including
paragraph 4 thereof with respect to Trade Letters of Credit, each Letter
of Credit issued or to be issued hereunder shall have an expiration date
of one (1) year or less from the issuance date thereof; provided,
however, that each Standby Letter of Credit may provide by its terms that
it will be automatically renewed for additional successive periods of up
to one (1) year unless the relevant Facing Agent shall have given notice
to the applicable beneficiary (with a copy to the Company) of the
election by such Facing Agent (such election to be in the sole and
absolute discretion of such Facing Agent) not to extend such Letter of
Credit, such notice to be given not less than thirty (30) days prior to
the then current expiration date of such Letter of Credit; provided,
further, that no Standby Letter of Credit or renewal thereof shall be
dated to expire later than the Termination Date and no Trade Letter of
Credit or renewal thereof shall be stated to expire later than the day
thirty (30) days prior to the Termination Date.
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(b) Procedure for Issuance of Letters of Credit. Subject to the
terms, provisions and procedures set forth in the Facing Agreement, which
terms, provisions and procedures shall supersede the terms, provisions
and procedures of this paragraph (b) to the extent inconsistent or
different, whenever the Company desires the issuance of a Letter of
Credit hereunder, it shall give the relevant Facing Agent (with a copy to
the Documentation Agent) at least five (5) Business Days' prior written
notice specifying the requested day of issuance thereof (which day shall
be a Business Day), such notice to be given prior to 10:00 a.m. (New York
City time) on the date specified for the giving of such notice. Each
such notice (each, a "Letter of Credit Request") shall (except as may be
provided in the Facing Agreement) be in the form of Exhibit J hereto or
such other form to the Company and the Facing Agent may agree to and
shall specify (A) the name of the Bank which the Company would like to
act as the Facing Agent, (B) the proposed issuance date and expiration
date of the requested Letter of Credit, (C) the name and address of
the beneficiary (which Person shall be reasonably acceptable to the
Facing Agent), (D) the Stated Amount of such Letter of Credit, (E) the
purpose of such Letter of Credit (which shall be acceptable to the Facing
Agent), and (F) such other information as the Documentation Agent or the
Facing Agent may reasonably request. In addition, each Letter of Credit
Request shall contain a description of the terms and conditions to be
included in the proposed Letter of Credit (all of which terms and
conditions shall be acceptable to the Facing Agent). Subject to the
terms and provisions of the Facing Agreement, no Letter of Credit shall
contain any provision for payment thereunder at any time earlier than
2:00 p.m. (New York City time) on the first Business Day after the
presentation of all drafts, demands for payment and all other documents,
if any, required to be presented pursuant to such Letter of Credit.
Unless otherwise specified, all Letters of Credit will be governed by the
Uniform Customs and Practice for Documentary Credits of the International
Chamber of Commerce as in effect on the date of issuance of such Letter
of Credit. On the Business Day specified by the Company and upon
fulfillment or waiver of the applicable conditions set forth in Article
IV, the Facing Agent will issue the requested Letter of Credit to the
applicable beneficiary.
(c) Draws upon Letters of Credit; Reimbursement Obligations.
Subject to Section 2 of the Facing Agreement, in the event of any request
for drawing under any Letter of Credit by the beneficiary thereof, the
Facing Agent
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shall give telephonic notice (or notice by such other means acceptable
to the Company and the Facing Agent) to the Company (and, in the
case of Standby Letters of Credit only or during the continuance of an
Event of Default only, notice to the Documentation Agent also) (x)
confirming receipt of such request and (y) of the date on or before which
the Facing Agent intends to honor such drawing, and the Company shall
reimburse the Facing Agent on the day on which such drawing is honored in
an amount in Dollars in same day funds equal to the amount of such
drawing; provided, however, that, anything contained in this Agreement to
the contrary notwithstanding, (i) unless the Company shall have notified
the Documentation Agent and the Facing Agent prior to 10:00 a.m. (New
York City time) on the Business Day of such drawing that the Company
intends to reimburse the Facing Agent for the amount of such drawing with
funds other than the proceeds of Loans, the Company shall be deemed to
have timely given a Notice of Borrowing to the Documentation Agent
requesting each Bank to make Reference Rate Committed Loans on the date
on which such drawing is honored in an amount equal to the amount of such
drawing and (ii) subject to satisfaction or waiver of the conditions
specified in Section 4.02, each such Bank shall, on the date of such
drawing, make Reference Rate Committed Loans in the amount of its
Commitment Percentage of such drawing, the proceeds of which shall be
applied directly by the Documentation Agent to reimburse the Facing Agent
for the amount of such drawing; provided, further, that, if for any
reason, proceeds of Reference Rate Committed Loans are not received by
the Facing Agent on such date in an amount equal to the amount of such
drawing, the Company shall reimburse the Facing Agent, on the Business
Day immediately following the date of such drawing, in an amount in same
day funds equal to the excess of the amount of such drawing over the
amount of such Reference Rate Committed Loans, if any, which are so
received, plus accrued interest on such amount at the Reference Rate plus
one percent (1.0%).
(d) Banks' Participation in Letters of Credit. In the event that the
Company shall fail to reimburse the Facing Agent as provided in Section
2.16(c) in an amount equal to the amount of any drawing honored by the
Facing Agent under a Letter of Credit issued by it in accordance with the
terms hereof, the Facing Agent shall promptly notify the Documentation
Agent and the Documentation Agent shall promptly notify each Bank of the
unreimbursed amount of such drawing and of such Bank's respective
participation therein. Each such Bank shall make available to the Facing
Agent an amount equal to its Commitment Percentage
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of such drawing in same day funds, together with interest thereon at the
Federal Funds Rate for the period from the date of funding of such
drawing to the date of payment by such Bank, at the office of the Facing
Agent specified in such notice, not later than 1:00 p.m. (New York
City time) on the Business Day after the date such Bank is notified by
the Documentation Agent. In the event that any such Bank fails to make
available to the Facing Agent the amount of such Bank's participation in
such Letter of Credit as provided in this Section 2.16(d), the Facing
Agent shall be entitled to recover such amount on demand from such Bank
together with interest at the Federal Funds Rate for two Business Days
and thereafter at the Reference Rate. Nothing in this Section 2.16(d)
shall be deemed to prejudice the right of any Bank to recover from the
Facing Agent any amounts made available by such Bank to the Facing Agent
pursuant to this Section 2.16(d) in the event that it is determined by a
court of competent jurisdiction that the payment with respect to a Letter
of Credit by the Facing Agent in respect of which payment was made by
such Bank constituted gross negligence or willful misconduct on the part
of the Facing Agent. The Facing Agent shall distribute to each Bank
which has paid all amounts payable by it under this Section 2.16(d) with
respect to any Letter of Credit issued by such Facing Agent such Bank's
Commitment Percentage of all payments received by such Facing Agent from
the Company in reimbursement of drawings honored by such Facing Agent
under such Letter of Credit when such payments are received and shall
promptly notify the Documentation Agent of such payment.
(e) Interest and Fees for Letters of Credit.
(i) Facing Agent Fees. The Company agrees to pay the following
amount to each Facing Agent with respect to Letters of Credit issued by
it for the account of the Company:
(A) with respect to drawings made under any Letter of Credit,
interest, payable on demand, on the amount paid by such Facing
Agent in respect of each such drawing from the date of the drawing
through the date such amount is reimbursed by the Company
(including any such reimbursement out of the proceeds of Loans
pursuant to Section 2.16(c)) or the Banks at a rate which is at all
times equal to three percent (3.0%) per annum in excess of the
Reference Rate;
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(B) with respect to the issuance or amendment of each Letter
of Credit and each drawing made thereunder, documentary and
processing charges in accordance with the Facing Agent's agreement
with the Company for such charges in effect at the time of such
issuance, amendment, transfer or drawing, as the case may be; and
(C) a facing fee in respect of Trade Letters of Credit as set
forth in the Facing Agreement and as otherwise or additionally
agreed to from time to time by the Company and the Facing Agent.
(ii) Participating Bank Fees. The Company agrees to pay to the
Documentation Agent for distribution to each participating Bank in
respect of all Standby Letters of Credit outstanding such Bank's
Commitment Percentage of a commission equal to two percent (2.0%) per
annum multiplied by the maximum Stated Amount under such outstanding
Letters of Credit (the "LC Commission"), payable in arrears on and
through the last Business Day of each calendar quarter, on the
Termination Date and thereafter, on demand. The LC Commission shall be
computed from the first day of issuance of each Standby Letter of Credit
and on the basis of the actual number of days elapsed over a year of 360
days. In addition, the Company agrees to pay to the Documentation Agent
for distribution to each participating Bank in respect of all Trade
Letters of Credit outstanding such Bank's Commitment Percentage of a
commission which commission shall be in the amount set forth and shall be
payable on the dates and in the manner set forth in the Facing Agreement.
Promptly upon receipt by the Facing Agent of any amount described in
clause (i) (A) of this Section 2.16(e), the Facing Agent shall distribute to
each Bank that has reimbursed the Facing Agent in accordance with Section
2.16(d) its Commitment Percentage of such amount. Amounts payable under
clauses (i)(B) and (C) of this Section 2.16(e) shall be payable directly to the
Facing Agent for its own account.
(f) LC Obligations Unconditional. Subject to the last paragraph of
Section 2.16(g), the obligation of the Company to reimburse a Facing Agent for
drawings made under any Letter of Credit issued by it and the obligations of
each Bank under Section 2.16(d) with respect thereto shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances, including the following circumstances:
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(i) any lack of validity or enforceability of such Letter of Credit;
(ii) the existence of any claim, setoff, defense or other right
which the Company or any of its Affiliates may have at any time against a
beneficiary or any transferee of such Letter of Credit (or any Persons
for which any such beneficiary or transferee may be acting), the Facing
Agent, any Bank or any other Person, whether in connection with this
Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between the Company or
one of its Subsidiaries and the beneficiary of such Letter of Credit);
(iii) any draft, demand, certificate or any other document presented
under such Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) payment by the Facing Agent under such Letter of Credit against
presentation of a demand, draft or certificate or other document which
does not comply with the terms of such Letter of Credit;
(v) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing; or
(vi) the fact that an Event of Default or a Potential Default shall
have occurred and be continuing.
(g) Indemnification. In addition to amounts payable as elsewhere
provided in this Agreement, the Company hereby agrees to indemnify and hold
harmless, the Facing Agent from and against any and all actions, suits,
proceedings, liabilities, damages, or other claims of any kind or nature
whatsoever which may be made by or asserted against the Facing Agent as a
result of (i) the issuance of the Letters of Credit, other than as a result of
the gross negligence or willful misconduct of the Facing Agent (including
without limitation (A) the Facing Agent's wrongful dishonor of any Letter of
Credit after the presentation to it by the beneficiary thereunder of a draft or
other demand for payment and other documentation strictly complying with the
terms and conditions of such Letter of Credit, or (B) the payment by the Facing
Agent to the beneficiary under any Letter of Credit against presentation of
documents which do not substantially comply with the terms of the Letter of
Credit) or (ii) the failure of the Facing Agent to honor a drawing under any
Letter of Credit as a result of any act or omissions, whether rightful or
wrongful, of any
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present or future de jure or de facto government or Governmental Authority (all
such acts or omissions herein called "Government Acts"). As between the
Company and the Facing Agent, the Company assumes all risks of the acts and
omissions of, or misuse of the Letters of Credit issued by the Facing Agent by,
the respective beneficiaries of such Letters of Credit. In furtherance and not
in limitation of the foregoing, the Facing Agent shall not be responsible: (i)
for the form, validity, sufficiency, accuracy, genuineness or legal effect of
any document submitted by any party in connection with the application for and
issuance of or any drawing under such Letters of Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any such Letter
of Credit or the rights or benefits thereunder or proceeds thereof, in whole or
in part, which may prove to be invalid or ineffective for any reason; (iii) for
failure of the beneficiary of any such Letter of Credit to comply fully with
conditions required in order to draw upon such Letter of Credit;
(iv) for errors, omissions, interruptions or delays in transmission or delivery
of any messages, by mail, cable, telegraph, telex or otherwise, whether or not
they be in cipher, (v) for errors in interpretation of technical terms; (vi)
for any loss or delay in the transmission or otherwise of any document required
in order to make a drawing under any such Letter of Credit or of the proceeds
thereof; (vii) for the misapplication by the beneficiary of any such Letter of
Credit or the proceeds of any drawing under such Letter of Credit; and (viii)
for any consequences arising from causes beyond the control of the Facing Agent
(including any Government Acts). None of the above shall affect, impair, or
prevent the vesting of any of the Facing Agent's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by the Facing
Agent under or in connection with the Letters of Credit issued by it or the
related certificates, if taken or omitted in good faith, shall not put the
Facing Agent under any resulting liability to the Company. Notwithstanding
anything to the contrary contained in this Agreement, the Company shall have no
obligation to indemnify the Facing Agent in respect of any liability incurred
by the Facing Agent arising solely out of the gross negligence or willful
misconduct of the Facing Agent. The right of indemnification in the first
paragraph of this Section 2.l6(g) shall not prejudice any rights that the
Company may otherwise have against the Facing Agent with respect to a Letter of
Credit issued hereunder. In addition, and without limiting the generality of
Article IX hereof, the Documentation Agent shall not (i) be responsible in any
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manner to any of the Banks for any recital, statement, representation or
warranty by the Company (or any affiliate or agent thereof) contained in any
schedule, report, statement or other document referred to or provided herein or
received by the Documentation Agent under or in connection with this Agreement
or the Facing Agreement, or (ii) be responsible in any manner to the Company
for any recital, statement, representation or warranty by any Bank (or any
affiliate or agent thereof) contained in any schedule, report, statement or
other document referred to or provided herein or received by the
Documentation Agent under or in connection with this Agreement or the Facing
Agreement. The Documentation Agent shall not be under any obligation to any
Bank or to the Company to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement, the Facing Agreement, or any other Loan Document.
(h) Stated Amount. The Stated Amount of each Letter of Credit
shall be such amount as the Company and the Facing Agent have agreed to. For
purposes of calculating the Stated Amount of any Letter of Credit at any time:
(i) any increase in the Stated Amount of any Letter of Credit by
reason of any amendment to any Letter of Credit shall be deemed effective
under this Agreement as of the date the Facing Agent actually issues an
amendment purporting to increase the Stated Amount of such Letter of
Credit, whether or not the Facing Agent receives the consent of the
Letter of Credit beneficiary or beneficiaries to the amendment; and
(ii) any reduction in the Stated Amount of any Letter of Credit by
reason of any amendment to any Letter of Credit shall be deemed effective
under this Agreement as of the later of (x) the date the Facing Agent
actually issues an amendment purporting to reduce the Stated Amount of
such Letter of Credit, whether or not the amendment provides that the
reduction be given effect as of an earlier date, or (y) the date the
Facing Agent receives the written consent (including by telex or
facsimile transmission) of the Letter of Credit beneficiary or
beneficiaries to such reduction, which written consent must be dated on
or after the date of the amendment issued by the Facing Agent purporting
to effect such reduction.
2.3 Article III of the Credit Agreement is hereby amended as follows:
(a) Section 3.02 is hereby deleted in its entirety and replaced
with the following:
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3.02 Inability to Determine Rates. If and to the extent that
market or other conditions existing in the London interbank market
relevant to LIBOR Committed Loans make it impossible or impracticable for
the Banks to make such Loans, then the obligations of the Banks to make
LIBOR Committed Loans and the right of the Company to originate, continue
or convert any Loan as or to a LIBOR Committed Loan shall be suspended
until the circumstances giving rise to such suspension shall no longer
exist.
Upon receipt from the Documentation Agent of a notice of the Banks'
inability to make, convert or continue the requested Loan due to any of
the reasons referred to above, notwithstanding anything in this Agreement
to the contrary, the Company may revoke any Notice of Borrowing or Notice
of Conversion/Continuation then submitted by it. If the Company does not
revoke such notice relating to a LIBOR Committed Loan, the Banks shall,
with respect to such LIBOR Committed Loan only, make or convert such Loan
in the amount specified in the applicable notice submitted by the
Company, but such Loan shall be made as or converted into a Reference
Rate Committed Loan instead of a LIBOR Committed Loan. Except as
provided in the immediately preceding sentence, if, notwithstanding the
provisions of this Section 3.02, any Bank has made available to the
Company its Commitment Percentage of any such proposed Loan, then the
Company shall immediately repay the amount so made available to it by
such Bank, together with accrued interest thereon, if any.
(b) Section 3.03 is hereby amended by deleting the paragraph
following clause (iii) of paragraph (a) in its entirety and replacing it with
the following:
and the result of any of the foregoing is to increase the cost to such
Bank or to reduce the amount of any sum receivable by such Bank with
respect to making or maintaining any LIBOR Loan by an amount reasonably
deemed by such Bank to be material, then the Company shall from time to
time, upon written demand by such Bank, pay to such Bank additional
amounts sufficient to compensate such Bank for any such increased cost or
reduced sum receivable to the extent resulting from outstanding LIBOR
Loans and not compensated in connection with the computation of LIBOR.
(c) Section 3.04 is hereby amended by deleting the reference to "or
CD Rate Committed Loan" in paragraph (c) thereof.
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(d) Section 3.05 is hereby amended by deleting the reference to "or
a CD Rate Committed Loan" in each of paragraphs (b) and (c) thereof.
2.4 Article VI of the Credit Agreement is hereby amended as follows:
(a) Section 6.07 is hereby amended by (i) deleting the word "and"
at the end of paragraph (c), (ii) renumbering paragraph (d) as paragraph (e)
and (iii) adding the following new clause (d) as follows:
"(d) the financial statements, certificates, schedules,
documents and other information set forth on Schedule 6.07 within the
time periods therein specified; and"
(b) New Sections 6.09 and 6.10 are hereby added as follows:
6.09 Maintenance of Deposits. The Company shall at all times
maintain with one or more financial institutions that are members of the
Kmart Bank Group and that are party to the Bank Setoff Sharing Agreement
cash and Cash Equivalents on deposit (the "Deposits") in an aggregate
amount not less than the lesser of (a) the Deposit Threshold and (b) the
total amount of all cash and Cash Equivalents of the Company and its
Subsidiaries (other than cash and Cash Equivalents maintained at Kmart
Canada Ltd. and its subsidiaries or at Kmart CR a.s. (Czech operations)
in the ordinary course of business, consistent with past practices) at
such time (the "Required Deposit Amount"); provided, that any amounts
maintained in store depository accounts with depository institutions
which are not members of the Kmart Bank Group as required by the
Company's business operations in the normal course of business consistent
with past practices shall not be considered cash or Cash Equivalents for
the purposes of clause (b) of this Section 6.09.
6.10 Most Favored Lender Status. If the Company, any Subsidiary or
any obligor under the Real Estate Debt shall at any time, directly or
indirectly, amend, restate or otherwise modify any of the Real Estate
Debt Documents, in any manner which would have the effect of (i) adding
any new or additional covenants or defaults applicable to the Company or
any Subsidiary, (ii) amending in a manner more beneficial to the holders
of such Real Estate Debt or in a manner more onerous to the Company, any
Subsidiary or any obligor under the Real Estate Debt, any covenant or
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default applicable to the Company or any Subsidiary under such Real
Estate Debt or (iii) otherwise enhancing the rights and benefits of any
holder of the Real Estate Debt against the Company or any Subsidiary,
then, in each such event, the Company shall concurrently enter into
or cause to be entered into such amendments to this Agreement and such
other documents and instruments, in form and substance reasonably
satisfactory to the Required Banks, as shall be necessary to afford the
Banks the same or equivalent benefits and rights as such amendments to,
or other agreements in respect of, the Real Estate Debt Documents afford
the holders of the Real Estate Debt; provided that any such new or
additional covenants or defaults, amended covenants or defaults, or
enhanced rights and benefits shall be deemed automatically incorporated
herein by reference in the event such modifications are made to the Real
Estate Debt Documents without the Company entering into concurrent
amendments as required by this Section 6.10.
2.5 Article VII of the Credit Agreement is hereby amended as follows:
(a) Section 7.02 is hereby amended and restated in its entirety to
read as follows:
7.02 Disposition of Assets. The Company shall not, directly or
indirectly, sell, assign, lease, convey, transfer or otherwise dispose of
(whether in one or a series of transactions) any property (including
accounts and notes receivable, with or without recourse) or enter into
any agreement to do any of the foregoing except:
(a) dispositions of inventory, or used, worn-out or surplus
equipment, all in the ordinary course of business;
(b) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar
replacement equipment, or the proceeds of such sale are
reasonably promptly applied to the purchase price of such
replacement equipment;
(c) dispositions of inventory or equipment by the Company to
any Subsidiary pursuant to reasonable business requirements;
(d) dispositions of Scheduled Assets; and
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(e) other dispositions of assets having, in any fiscal year of
the Company, an aggregate book value not exceeding 10% of the
Company's consolidated total assets as of the end of the most
recently ended fiscal year of the Company, as reflected in the
Company's balance sheet contained in its audited financial
statements for such fiscal year;
provided, however, that this Section 7.02 shall not be deemed to prohibit
the sale of all, substantially all, or a part of the capital stock or of
all, substantially all, or a part of the assets of any Specialty Retail
Subsidiary of the Company, even if such an entity is no longer a
Subsidiary of the Company, if (x) consideration received is equal to the
fair market value (as reasonably determined by the Company), or (y) the
Company's board of directors deems such transaction to be necessary by
reason of applicable laws, regulations or governmental policies
applicable to the Company.
(b) Section 7.03 is hereby amended and restated in its
entirety to read as follows:
7.03 Limitation on Liens. The Company shall not, and shall not
permit any Subsidiary (other than Liens granted by Kmart Canada Ltd. and
its subsidiaries or by Kmart CR a.s. (Czech operations) on such
Person's assets prior to the Restructuring Effective Date) to, create,
incur or suffer to exist any Lien on any assets of the Company or any
such Subsidiary whether now owned or hereafter acquired; provided,
however, that such restriction shall not apply with respect to any of the
following types of Liens:
(a) Liens for taxes not delinquent or being contested in good
faith;
(b) Liens created and deposits made in connection with
workers' compensation, unemployment insurance and other social
security legislation, or to secure the performance of bids,
tenders, contracts (other than for the repayment of borrowed
money), statutory obligations, surety and appeal bonds and other
similar obligations incurred in the ordinary course and Liens
securing obligations to mechanics, materialmen, bailees,
warehousemen and similar Liens arising under operation of law and
incurred in the ordinary course of business;
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(c) purchase money mortgages (including vendors' rights under
purchase or land contracts or under other agreements whereby title
or another interest is retained by the vendor for the purpose of
securing the purchase price thereof) on property acquired or
constructed after the Restructuring Effective Date, or the
acquisition after the Restructuring Effective Date of property
subject to such a Lien which is limited to such property and was
not created in anticipation of such acquisition;
(d) mortgages, security interests and Liens on assets of the
Company or any Subsidiary existing on the Restructuring Effective
Date, and set forth on Schedule 7.03, which secure any Indebtedness
of the Company or any such Subsidiary, or any refundings or
extensions for an amount not exceeding the principal amount of such
Indebtedness so long as such refundings or extensions are secured
only by the same property or assets;
(e) Liens on property of the Company or any Subsidiary
created concurrently with the release of existing Liens on other
property of the Company or any such Subsidiary, as provided under
the Real Estate Debt Documents, but only (i) if such substitution
is one of several alternative actions available to the obligor
under such Real Estate Debt, of which such obligor must choose one,
following the occurrence of a condemnation, casualty or eminent
domain event, or upon the existence of an environmental condition
or (ii) in respect of a substitution of collateral resulting from
the single store collateral substitution obligation existing on the
Restructuring Effective Date and resulting from a store closing in
September, 1995 with respect to the Deal 2 Notes (as defined in the
Restructuring and Repurchase Agreement); provided that the fair
market value of the property subject to any such Lien permitted
under clause (i) hereof does not exceed one hundred ten percent
(110%) of the fair market value of the property as to which a Lien
is concurrently being released (the fair market value of the
property being relieved of such Lien being determined immediately
prior to the occurrence of such casualty or condemnation or eminent
domain event, or the discovery of such environmental condition, or
the occurrence of such store closing);
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(f) Liens on Deposits in favor of the Kmart Bank Group and
liens on cash balances of Kmart Canada Ltd. and its subsidiaries or
Kmart CR a.s. (Czech operations) maintained in the ordinary course
of business, consistent with past practices in favor of the lenders
to such entities and Liens on monies held in the Paydown Trust
Account (as defined in the Restructuring and Repurchase Agreement)
in favor of the holders of the Real Estate Debt;
(g) Liens on the assets of Kmart Canada Ltd. and its
subsidiaries or Kmart CR a.s. (Czech operations) to secure New
Indebtedness incurred by such Persons and Liens to secure New
Indebtedness (including, without limitation, New Indebtedness
incurred pursuant to the Letter of Credit Issuance Agreement);
provided that such Liens to secure New Indebtedness shall encumber
only
(i) noncurrent assets including, without limitation,
Scheduled Assets (or cash collateral pledged to secure
the Indebtedness under the Letter of Credit Issuance
Agreement in substitution of a Lien on noncurrent assets);
and
(ii) in the case of the Letter of Credit Issuance Agreement,
documents of title relating to goods which are the subject of
trade letters of credit issued by the Trade B Banks (as
defined therein) and securing the Trade B Letters of Credit
(as defined therein) under the terms set forth in such
agreement as in effect on the Restructuring Closing Date;
provided that the percentage of the aggregate face amount of
all Trade B Letters of Credit that are so secured shall not
exceed thirty-five percent (35%) (or as close to 35% as
practicable in light of the face amounts of Trade B Letters
of Credit that are drawn or paid as contemplated by the
Letter of Credit Issuance Agreement) of the Trade B Letters
of Credit issued by the Trade B Banks;
provided further that no such Lien shall be permitted under this
clause (g) to secure any unsecured Indebtedness of the Company or any
Subsidiary outstanding on the Restructuring Effective Date or any
refundings or extension thereof;
(h) easements, rights-of-way, zoning and similar restrictions and
other similar charges or encumbrances
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not interfering in any material respect with the ordinary conduct of
the business of the Company and its Subsidiaries;
(i) Liens on cash collateral to secure the Company's
reimbursement obligations under letters of credit issued pursuant to
the Letter of Credit Issuance Agreement to the extent such cash
collateral is permitted under the terms thereof as in effect on the
Restructuring Closing Date; and
(j) Liens on cash collateral to secure the Company's
reimbursement obligations under two standby letters of credit issued
by [ ] after the Restructuring Effective Date in an
aggregate amount that shall not exceed the lesser of (x) 105% of the
outstanding face amount thereof or (y) $25,000,000.
(c) New sections 7.06, 7.07, 7.08 and 7.09 are hereby added as
follows:
7.06 Restricted Payments. The Company shall not, nor shall it
permit any Subsidiary to, declare, order, make or pay, or set aside any
sum for, any Restricted Payment, except that (a) any Subsidiary may
declare and pay dividends to the Company, (b) the Company may pay
dividends in respect of its common stock which were declared prior to
December 31, 1995 and (c) the Company may declare and pay dividends in
respect of any of its preferred stock issued and outstanding as of the
Restructuring Effective Date until, for any particular shares of
preferred stock, such time as the Company shall have declined any bona
fide offer from any holder of any such preferred stock to convert or
enter into an agreement to convert such preferred stock into common stock
of the Company.
7.07 Payment of Indebtedness. (a) During the period from December
17, 1995 through February 28, 1997, the Company shall not, nor shall
it permit any Subsidiary (other than payments by Kmart Canada, Ltd. or its
subsidiaries or by Kmart CR a.s. (Czech operations) in respect of such
Person's respective Indebtedness in existence as of the Restructuring
Effective Date or New Indebtedness incurred by such Persons in the
ordinary course of business, consistent with past practices) to, directly
or indirectly, make any principal payment, in respect of any Real Estate
Debt or any other Indebtedness (including by way of purchase, refinancing,
defeasance or other direct or indirect transfer of cash consideration to
the holders thereof; provided
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that the Company may exchange any of its outstanding Indebtedness for
money borrowed for shares of its capital stock and make cash payments to
the holders of such Indebtedness in respect of fractional shares in
connection with such exchange) other than (i) scheduled payments on the
Real Estate Debt set forth on Schedule 7.07 and capital lease payments
relating to stores securing the Real Estate Debt in an amount not to
exceed $9,000,000 in the aggregate; provided that concurrently with
making such payments, the Company makes a ratable repayment of the Loans
hereunder as required pursuant to Section 2.09(a) hereof, (ii) scheduled
payments of other mortgage indebtedness in existence as of the
Restructuring Effective Date in an amount not to exceed $12,000,000 in
the aggregate, (iii) payments made pursuant to guaranties of existing
leases of former Subsidiaries of the Company; provided; that such
payments may only be made with respect to rents so guaranteed as and when
the same may become due in the ordinary course (and not on any
accelerated rents that may become due as a result of a default on the
underlying lease), (iv) payments made with respect to Spin-Off Tenant Put
Options (as defined in the Restructuring and Repurchase Agreement as in
effect on the Restructuring Closing Date), (v) ratable payments of
principal of the Real Estate Debt concurrently with the making of any
payments or reduction of commitments and ceiling amounts in respect of
the Indebtedness under this Agreement, the Other Credit Facilities or the
Big Beaver Credit Facilities or other Real Estate Debt, to the extent
required pursuant to Sections 2.2, 2.3 or 2.5 of the Restructuring and
Repurchase Agreement as in effect on the Restructuring Closing Date, (vi)
ratable payments of principal of the Other Credit Facilities and the Big
Beaver Credit Facilities concurrently with the making of any prepayments
or reduction of commitments under this Agreement, the Real Estate Debt,
any of the Other Credit Facilities or the Big Beaver Credit Facilities to
the extent required pursuant to the terms of the Other Credit Facilities
and the Big Beaver Facilities as in effect on the Restructuring Closing
Date, (vii) regular, ordinary course payments of Capitalized Lease
Obligations in amounts consistent with past practices, (viii) payments in
respect of the termination of leases to the extent that the Company
believes that such payments provide a substantial benefit to the Company
(provided that such lease termination payments do not exceed the lesser
of (a) One Hundred Million Dollars ($100,000,000) in the aggregate in any
fiscal year of the Company and (b) One Hundred Twenty Five Million
Dollars ($125,000,000) in the aggregate for all such payments, (ix)
repayment of Indebtedness secured by Liens on real property in connection
with the sale or other disposition of such real property provided that
the Company or such Subsidiary receives net cash proceeds from such sale
or disposition in excess of the Indebtedness required to be repaid, (x)
mandatory principal payments under the Big Beaver Credit Facilities and
the Warehouse Facility Credit Agreement as a result of project
dispositions or project refinancings, (xi) principal payments under this
Agreement and principal payments on the February 28, 1997 scheduled
maturity of the Seasonal Credit Facility and the Big Beaver Credit
Facilities, (xii) ratable principal payments under this Agreement, the
Other Credit Facilities and the Big Beaver Credit Facilities in
accordance with Section 7.09, (xiii) payments in respect of New
Indebtedness, (xiv) payments of reimbursement obligations under letters
of credit issued under the Letter of Credit Issuance Agreement; provided
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that such payments do not reduce the commitments thereunder except to the
extent provided under the Letter of Credit Issuance Agreement as in
effect on the Restructuring Closing Date and (xv) other payments of
principal in respect of Indebtedness in an aggregate amount that shall
not exceed the lesser of (a) Fifty Million Dollars ($50,000,000) in any
fiscal year of the Company and (b) Seventy-Five Million Dollars
($75,000,000) in the aggregate for all such payments, but only
with respect to Indebtedness other than (1) Real Estate Debt and (2)
Indebtedness under the Other Credit Facilities and the Big Beaver
Credit Facilities.
(b) During the period from December 17, 1995 through October 3,
1997, the Company shall not, nor shall it permit any Subsidiary (other
than payments by Kmart Canada, Ltd. or its subsidiaries or by Kmart CR
a.s. (Czech operations) in respect of such Person's respective
Indebtedness in existence as of the Restructuring Effective Date or New
Indebtedness incurred by such Person in the ordinary course of business,
consistent with past practices) to, directly or indirectly, make any
principal payment in respect of any Real Estate Debt or any other
Indebtedness (including by way of purchase, refinancing, defeasance or
other direct or indirect transfer of cash consideration to the holders
thereof; provided that the Company may exchange any of its outstanding
Indebtedness for money borrowed for shares of its capital stock and make
cash payments to the holders of such Indebtedness in respect of
fractional shares) other than (i) scheduled principal payments on such
Indebtedness, (ii) repayments of Indebtedness of the type permitted under
Sections 7.07(a)(iii), (iv), (v), (vi), (ix), (x), (xi), (xii), (xiii)
and (xiv), (ii) payments in respect of the termination of leases to the
extent that the Company believes that such payments provide a substantial
benefit to the Company, provided that such lease termination payments do
not exceed the lesser of (a) One Hundred Million Dollars ($100,000,000)
in the aggregate in any fiscal year of the Company and (b) One Hundred
Twenty-Five Million Dollars ($125,000,000) in the aggregate for all such
payments and (iii) other payments of principal in respect of Indebtedness
in an aggregate amount that shall not exceed the lesser of (a) Fifty
Million Dollars ($50,000,000) in the aggregate of any fiscal year of the
Company and (b) Seventy-Five Million Dollars ($75,000,000) in the
aggregate for all such payments, but only with respect to Indebtedness
other than (1) Real Estate Debt and (2) Indebtedness under the Other
Credit Facilities and the Big Beaver Credit Facilities.
7.08 Amendment of Real Estate Debt Documents. The Company shall
not, nor shall it permit any Subsidiary to amend, restate or otherwise
modify any of the documents relating to or governing any Real Estate Debt
in any manner which would, directly or indirectly, (a) provide for an
interest rate payable on such Real Estate Debt in excess of the interest
rate provided for in the Real Estate Debt Documents unless this Agreement
shall have been amended, concurrently with such increase in the interest
rate payable on such Real Estate Debt, to increase the interest rates set
forth herein by an amount equal to such excess, (b) provide for the
payment of any fees in addition to the fees payable under such Real
Estate Debt Documents (or provide for any increase in existing fees
payable thereunder) unless this Agreement shall have been amended,
concurrently with the agreement to pay such new or increased fees, to
provide for an equivalent fee to the Banks in a dollar amount equal to
such new fee (or the aggregate amount of any increase in existing fees)
multiplied by a fraction the numerator of which equals the Ceiling Amount
and the denominator of which equals the aggregate amount outstanding
under the Real Estate Debt at such time or (c) provide for any
clarification of any mortgagee's, tenant's or landlord's rights and
obligations under the federal bankruptcy code or similar law with respect
to ground leases or similar arrangements.
7.09 Ratable Payment of Bank Facilities. The Company shall not,
nor shall it permit any Subsidiary to, directly or indirectly, make any
principal payment in respect of the Big Beaver Credit Facilities or the
Other Credit Facilities (other than (i) mandatory prepayments under the
Big Beaver Credit Facilities or the Warehouse Facility Credit Agreement
as a result of a project disposition or project refinancing, (ii) ratable
payments of principal of
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the Other Credit Facilities and the Big Beaver Credit Facilities
concurrently with the making of any prepayments or reduction of
commitments under this Agreement, the Real Estate Debt, any of the Other
Credit Facilities or the Big Beaver Credit Facilities to the extent
required pursuant to the provisions of the Other Credit Facilities and
the Big Beaver Facilities as in effect on the Restructuring Closing Date,
which provisions are substantially similar to Section 2.09(c) hereof) and
(iii) the scheduled principal payments due on February 28, 1997 under the
Seasonal Credit Facility and the Big Beaver Credit Facilities) unless the
Company shall concurrently make a permanent ratable reduction to the
Aggregate Commitment and the Ceiling Amount together with a repayment of
the outstanding Loans to the extent required by Section 2.09(c).
2.6 Article VIII of the Credit Agreement is hereby amended as
follows:
(a) Paragraph (c) of Section 8.01 is hereby deleted in its
entirety and replaced with the following:
(c) Specific Defaults. The Company fails to perform or observe any
term, covenant or agreement contained in Sections 6.02, 6.03, 6.08(a),
6.09, 6.10, 7.01, 7.02, 7.03, 7.06, 7.07, 7.08 or 7.09; or
(b) Paragraph (f) of Section 8.01 is hereby deleted in its
entirety and replaced with the following:
(f) Cross Default; Cross-Acceleration. (i) the Company or any
Subsidiary fails to make any payment of principal or interest or fees
under any of the Other Credit Facilities when due after taking into
account any application of grace periods, or (ii) by reason of any action
taken by the Company or any Subsidiary with the intent and capacity
promptly to satisfy any obligation of the Company or any Subsidiary
resulting therefrom, including, without limitation, the calling for
payment by the Company of any of its Indebtedness or the termination by
the Company of any of its guaranty obligations, any Indebtedness shall
mature or be declared due and payable prior to its stated maturity and
such Indebtedness shall remain unpaid for a period of two (2) Business
Days thereafter, or (iii) the Company or any Subsidiary fails to perform
or observe any condition or covenant or any other event shall occur
or condition exist (other than with respect to matters described under
clause (ii) immediately preceding) relating
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to Indebtedness (other than Indebtedness under the Other Credit
Facilities) having an aggregate principal amount (including undrawn
committed or available amounts) of more than Fifty Million Dollars
($50,000,000) if the effect of any such failure, event or condition is to
cause such Indebtedness to be declared to be due and payable or otherwise
become due and payable prior to its stated maturity, (iv) the Company or
any Subsidiary fails to pay any such other Indebtedness described in
clause (iii) in full at its stated maturity (except for any such
Indebtedness under that certain Loan Agreement dated as of January 21,
1992 among the borrowers named therein, the financial institutions
signatory thereto and [ ], as Managing Agent, for so
long as any forebearance agreement contained in the "Fourth Amendment to
Loan Agreement and Limited Forebearance" dated as of the Restructuring
Efffective Date as in effect as of the Restructuring Effective Date in
respect of such Indebtedness remains in full force and effect) or (v)
there shall occur a "Triggering Event" (as defined in the Restructuring
and Repurchase Agreement) or all or any portion of any Real Estate Debt
shall otherwise mature or be declared or otherwise become due and payable
prior to October 3, 1997 (except for principal payments permitted in
Section 7.07); or
(c) Paragraph (h) of Section 8.01 is hereby deleted in its
entirety and replaced with the following:
(h) Monetary Judgments. A final judgment or judgments in excess of
Fifty Million Dollars ($50,000,000) shall be entered against the Company
by a court of record and not discharged in accordance with its terms or,
within sixty (60) days from the date of entry thereof, stayed from
execution and (within said period of sixty (60) days or such longer
period during which execution of such judgment(s) shall have been stayed)
appeal taken therefrom and execution thereof stayed during such appeal;
or
(d) Section 8.01 is further amended by (i) deleting the period at
the end of clause (j) and replacing it with "; or" and (ii) adding the
following new clauses (k) through (n) as follows:
(k) Payments on Real Estate Debt. The Company or any Subsidiary
shall make or permit to be made (either voluntarily or otherwise) any
principal payment to any holder of any Real Estate Debt and shall fail to
make a concurrent repayment of the Obligations to the extent required
pursuant to Section 2.09; or
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(l) Unreimbursed Put Payments. There shall have occurred the
expiration of ten (10) days after the satisfaction of the following
conditions:
(i) the exercise of a Spin-Off Tenant Put Option against the
Company by any Spin-Off Creditor and
(ii) the expiration of the one hundred twenty (120) period
following the payment by the Company of the Purchase Amount in
respect of such exercise, if, upon such expiration, the aggregate
amount of Unreimbursed Put Payments (after giving effect to all
amounts received by the Company from (i) the sale or other
disposition of the relevant tendered securities and/or any asset or
assets securing the same and (ii) any other Person that is
obligated, directly or indirectly, in respect of the relevant
Spin-Off Tenant Put Option or otherwise makes any payment with
respect thereto) in respect of (1) such exercise and (2) all
Spin-Off Tenant Put Options which have been exercised at any time
prior to the commencement of such 120 day period, exceeds fifteen
million dollars ($15,000,000),
For purposes of this Section 8.01(l), the terms "Spin-Off Tenant Put
Option", "Spin-Off Creditor", "Purchase Amount", and "Unreimbursed Put
Payments" shall have the meanings ascribed to such terms in the
Restructuring and Repurchase Agreement as in effect on the Restructuring
Closing Date (including as such terms are further defined by reference to
any other agreements), and not as such terms or other agreements may
subsequently be amended or otherwise modified; or
(m) Breach of Financing Agreements. The Company or any Subsidiary
shall fail to perform or observe any term, covenant or agreement with
respect to any New Indebtedness having an aggregate principal amount of
more than Fifty Million Dollars ($50,000,000), and such default shall
continue unremedied or unwaived, or the term or covenant in respect of
such failure shall not have been amended, as the case may be, within
forty five (45) days after the first date upon which any holder or
holders thereof (or any representative of such holder(s)) shall have the
right, on account of such failure and after giving effect to any required
notice and the lapse of any applicable cure periods, to declare such
Indebtedness to be immediately due and payable;
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(n) Underutilized Capacity Under Letter of Credit Issuance
Agreement. On any date on and after October 31, 1996, until February 28,
1997, (a) the sum of, without duplication, (i) the aggregate face amount
of the outstanding letters of credit on such date issued pursuant to
the Letter of Credit Issuance Agreement and that certain predecessor
letter agreement dated as of the Restructuring Effective Date and (ii)
the aggregate face amount of the Existing Trade A Letters of Credit,
Existing Trade B Letters of Credit and Existing Standby Letters of Credit
(as such terms are defined in the Letter of Credit Issuance Agreement)
still outstanding on such date minus (b) any such letters of credit that
are cash collateralized shall be less than the product of (i) eighty
percent (.80) and (ii) the sum of (x) the Maximum Trade A L/C Commitment
Amounts, (y) the Maximum Trade B L/C Commitment Amount and (z) the
Maximum Standby L/C Commitment Amounts (as such terms are defined in the
Letter of Credit Issuance Agreement as in effect on the Restructuring
Closing Date), each determined as of such date.
2.7 Article IX of the Credit Agreement is hereby amended as follows:
(a) Section 9.03 is amended by replacing the parenthetical in
clause (i) thereof with the following parenthetical:
(except for its own gross negligence or willful misconduct)
2.8 Article X of the Credit Agreement is hereby amended as follows:
(a) Subsection (a) of 10.01 is hereby amended and restated to read as
follows:
"(a) increase the Commitment of any Bank or the Ceiling Amount or
amend the definition of Ceiling Amount in any manner which would result
in the Ceiling Amount being greater at any time than it would be absent
such amendment;"
(b) Paragraph (a) of Section 10.08 is hereby amended by (i)
relettering clause (D) thereof as clause (E) and adding the
following new clause (D) immediately following clause (C):
(D) Such Assignee shall acknowledge in the Assignment and
Acceptance or otherwise in a written instrument
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that its rights and obligations with respect to the sharing of setoff
rights shall be subject to the terms of the Bank Setoff Sharing
Agreement.
(c) Paragraph (e) of Section 10.08 is hereby amended by adding the
following sentence at the end thereof:
Notwithstanding the foregoing, each Bank shall be permitted to sell the
participations referenced in Section 10.09 without compliance with the
foregoing provisions.
(d) Section 10.09 is hereby deleted in its entirety and replaced
with the following:
10.09 Set-off. In addition to any rights and remedies of the Banks
provided by law, if any of the Obligations shall have become due and
payable, each Bank is authorized at any time and from time to time,
without prior notice to the Company, any such notice being waived by the
Company to the fullest extent permitted by law, to set-off and apply any
and all deposits (general or special, time or demand, provisional or
final) at any time held by, and other indebtedness at any time owing to
or by, such Bank or any affiliate of such Bank to or for the credit or
the account of the Company against any and all Obligations owing to such
Bank (including without limitation Obligations owing to such Bank by way
of participations deemed purchased pursuant to the second proviso of this
sentence), and subject to the sharing provisions of Section 2.15
and any other sharing arrangements agreed to by any of the Banks
(including the provisions of the Bank Setoff Sharing Agreement), now or
hereafter existing, irrespective of whether or not the Documentation
Agent or such Bank shall have made demand under this Agreement or any
Loan Document; provided, that to the extent that the Company owes any
amounts to such Bank other than the obligations owing under this
Agreement (including obligations under the Other Credit Facilities and
the Big Beaver Credit Facilities and obligations in respect of other
Indebtedness) at the time of such set-off, then such Bank is authorized
to and shall apportion and apply the amounts set-off ratably based on the
relative aggregate amounts owing under this Agreement, the Other Credit
Facilities and the Big Beaver Credit Facilities to all of the lenders
thereunder and the amount of such other Indebtedness; provided, further,
that to the extent that any Bank has amounts available to be set-off in
excess of the aggregate of all outstanding obligations of the Company to
such Bank under this Agreement (an "Excess Setoff Amount") after making
the apportionment and application of set-off
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amounts described in the preceding proviso, then (i) the other Banks and
the lenders under the Other Credit Facilities and the Big Beaver
Credit Facilities, on a pro rata basis, shall be deemed automatically for
purposes of this Section 10.09 to have sold such Bank and such Bank shall
be deemed to have purchased a participation in the obligations owing to
such other Banks and such lenders thereunder in an aggregate amount equal
to the Excess Setoff Amount, (ii) such purchased participation shall be
deemed to be an Obligation for purposes of this Agreement and (iii) such
Bank shall be authorized to set off the Excess Setoff Amount against such
purchased participations. To the extent that any Bank exercises its
rights of set-off at a time when the aggregate amount of the Deposits
is in excess of the Required Deposit Amount, then the amount set-off by
such Bank shall be treated in accordance with the Set-Off and Sharing
Agreement. Each Bank agrees promptly to notify the Company and the
Documentation Agent after any set-off is made by such Bank; provided,
that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Bank under this Section
10.09 are in addition to the other rights and remedies (including other
rights of set-off) which such Bank may have.
(e) A new Section 10.18 is added as follows:
10.18 Termination of This Agreement. Upon (i) the payment in full
in cash of the outstanding principal amount of each Loan and all other
Obligations then due and payable, (ii) the mandatory or voluntary
permanent termination of the Commitments and (iii) the deposit by the
Company with the Documentation Agent of cash collateral ("Cash
Collateral") in an amount equal to one hundred five percent (105%) of the
undrawn Stated Amount of all Letters of Credit that are then outstanding,
this Agreement and all of the provisions thereof (other than this Section
10.18, Section 2.15, Section 2.16 with respect to then outstanding
Letters of Credit, Article III, Section 9.07, Section 10.04, Section
10.05 and any other provision hereof which, by its terms, survive the
termination of this Agreement and the payment in full of the Obligations)
shall terminate and shall be of no further force or effect. The
Documentation Agent shall distribute the Cash Collateral as follows: (i)
upon any draw on any Letter of Credit, the Documentation Agent shall
immediately pay (x) the Facing Agent under such Letter of Credit an
amount equal to such draw (and any other fees, interest or other
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amounts due in connection with such draw) and (y) the
Company any remaining Cash Collateral with respect to a particular Letter
of Credit after such Letter of Credit is fully drawn) and (ii) upon the
termination, cancellation or the 21st day after the expiration of any
Letter of Credit, the Documentation Agent shall immediately pay to the
Company an amount equal to any remainder of the Cash Collateral allocated
to such Letter of Credit. In the event that any payment or distribution
in respect of the Obligations is avoided or otherwise rescinded, the
Obligations and this Agreement shall be immediately revived and
reinstated and the Company shall perform such acts as may be requested by
the Banks to consummate such revival and reinstatement.
2.9 The Schedules to the Credit Agreement are hereby amended by (a)
deleting Schedule 7.03 in its entirety and replacing it with Schedule 7.03 to
this Amendment Agreement, (b) adding Schedule 1.01(a), Schedule 1.01(b) and
Schedule 1.01(c) thereto as set forth in Schedule 1.01(a), Schedule 1.01(b) and
Schedule 1.01(c) to this Amendment Agreement, (c) adding Schedule 6.07 thereto
as set forth in Schedule 6.07 to this Amendment Agreement and (d) adding
Schedule 7.07 thereto as set forth in Schedule 7.07 to this Amendment
Agreement.
3. Company's Representations and Warranties. In order to induce the
Banks and the Agent to enter into this Amendment Agreement, the Company hereby
represents and warrants that as of the Restructuring Closing Date:
(a) the Company has the right, power and capacity and has been duly
authorized and empowered by all requisite corporate and shareholder
action to enter into, execute, deliver and perform this Amendment
Agreement;
(b) this Amendment Agreement and the Credit Agreement (as amended
hereby) constitutes the Company's legal, valid and binding obligation,
enforceable against the Company in accordance with its terms, except as
enforcement thereof may be subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and general principles of equity (regardless of whether such
enforcement is sought in a proceeding in equity or at law or otherwise);
(c) the Company's execution and delivery of this Amendment
Agreement and the performance of this Amendment Agreement and the Credit
Agreement (as amended hereby) do not and will not violate its articles of
incorporation or
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bylaws or any law, rule, regulation, order, writ,
judgment, decree or award applicable to it or any contractual provision
to which it is a party or to which it or any of its property is subject;
(d) no authorization or approval or other action by, and no notice
to or filing or registration with, any governmental authority or
regulatory body (other than those which have been obtained and are in
force and effect) is required in connection with its execution, delivery
and performance of this Amendment Agreement and the Credit Agreement (as
amended hereby);
(e) no Event of Default or Potential Default (except to the extent
referenced in that certain letter agreement dated December 22, 1995 among
the Company and the financial institutions thereto (the "Forebearance
Agreement") has occurred and is continuing under the Credit Agreement (as
amended hereby) or would exist after giving effect to the transactions
contemplated by this Amendment Agreement;
(f) Except as disclosed in writing to each of the Banks, since December
22, 1995, there has been no change in the financial condition, operations,
business, properties or prospects of the Company or any Subsidiary except
changes that individually or in the aggregate could not reasonably be expected
to have a Material Adverse Effect (as defined in Section 2.1(a) of this
Amendment Agreement). There is no fact known to the Company that could
reasonably be expected to have a Material Adverse Effect (as defined in Section
2.1(a) of this Amendment Agreement) that has not been set forth in writing to
each of the Banks; and
(g) The representations and warranties made by the Company
contained in Article V of the Credit Agreement are true and correct in
all material respects (except to the extent such representations and
warranties expressly refer to an earlier date, in which case they shall
be true and correct as of such earlier date).
The Company agrees and acknowledges that the representations and warranties set
forth in this Section 3 shall be considered to be representations and
warranties deemed made under the Credit Agreement for purposes of the Event of
Default set forth in Section 8.01(e) of the Credit Agreement.
4. Conditions to Effectiveness. The effectiveness of this Amendment
Agreement is specifically subject to the satisfaction of the following
conditions precedent or concurrent:
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<PAGE> 203
(a) No Defaults; Representations and Warranties True. No Potential
Default or Event of Default (except to the extent referenced in the
Forebearance Agreement) under the Credit Agreement (as amended hereby)
shall have occurred and be continuing. The representations and
warranties set forth
in Section 3 of this Amendment Agreement shall be true and correct.
(b) Execution of Amendment. The Company and the Required Banks
shall have duly executed and delivered to the Agent a counterpart of this
Amendment Agreement.
(c) Incremental Interest. The Company shall have paid to the Agent
for the account of each Bank under the Credit Agreement, an amount equal
to the difference between (A) the interest paid to such Bank with respect
to the outstanding Loans from December 22, 1995 through the date of
effectiveness of this Amendment Agreement and (B) the interest that would
have been payable with respect to such Loans had this Amendment Agreement
become effective on December 22, 1995. The Company agrees and
acknowledges that such incremental interest shall be deemed to be fees
and interest required to be paid under the Credit Agreement pursuant to
the Event of Default in Section 8.01(b) of the Credit Agreement.
(d) Other Amendments. The Agent shall have received evidence
reasonably satisfactory to it that (i) each of the agreements listed on
Schedule 1.01(a) hereto has been amended on substantially the terms and
conditions set forth in the Agreement in Principle dated as of December
18, 1995 and otherwise in form and substance reasonably satisfactory to
the Agent, (ii) amendments to the agreements evidencing the Other Credit
Facilities reflecting the provisions of the Forebearance Agreement and
the attached Summary of Indicative Terms dated 12/17/95 (the "Term
Sheet") shall have been executed and delivered by the "Required Banks"
thereunder, (iii) an amendment to the Seasonal Credit Facility reflecting
the provisions of the Forebearance Agreement and the Term Sheet shall
have been executed and delivered by each "Bank" thereunder, (iv) an
amendment to, or a forbearance agreement in respect of, the Loan
Agreement dated as ofJanuary 21, 1992 among the borrowers named therein,
the financial institutions signatory thereto and [ ], as Managing
Agent, as amended through the date hereof and as further amended,
restated, supplemented or modified from time to time reflecting the
provisions of the Forebearance Agreement and Term Sheet shall have been
executed and delivered by financial institutions party thereto holding at
least 85% of
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the outstanding loans thereunder, and (v) an amendment to the Loan
Agreement dated as of August 7, 1992 among the borrowers named
therein, the financial institutions signatory thereto, and [ ],
as Agent, as amended through the date hereof, reflecting the provisions
of the Forebearance Agreement and the Term Sheet shall have been executed
and delivered by the "Required Banks" thereunder; each on substantially,
the terms and conditions set forth in the Term Sheet. Each of the
undersigned Banks agrees and acknowledges that their execution and
delivery of a counterpart of this Amendment Agreement shall be also
deemed to be the execution and delivery by such Bank of the amendments to
the Other Credit Facilities contemplated by clause (ii) above for
purposes of ascertaining whether such amendments were executed and
delivered by the "Required Banks" under the Other Credit Facilities.
(e) Letter of Credit Facility; Setoff Sharing Agreement. The
Letter of Credit Issuance Agreement dated as of the date hereof among
the Borrower, the financial institutions signatory thereto and [ ], as
agent and the related collateral proceeds sharing agreement among such
financial institutions shall each have become effective. The Bank Setoff
Sharing Agreement shall have been executed
and delivered by all Banks in which the Company shall have on deposit
cash and Cash Equivalents.
(f) Payment of Expenses. The Company shall have paid all invoiced
fees and expenses referenced in Section 5(a) hereof and in Section 10.04
of the Credit Agreement.
(g) Opinion of Counsel. The Agent shall have received an opinion
of internal counsel and of reasonably acceptable outside counsel and the
Company's general counsel in favor of the Banks in form and substance
acceptable to the Agent with respect to (a) the legal existence and good
standing of the Company, (b) the authority of the Company to enter into
this Amendment Agreement and the due execution and delivery thereof, (c)
that the obligations of the Company under the Amendment Agreement are
legal, valid, binding and enforceable in accordance with their terms
(subject to customary exceptions), (d) noncontravention with applicable
securities laws and other laws, rules and regulations and material
agreements applicable to the Company and (e) such other matters as the
Agent may reasonably request.
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5. Miscellaneous. The parties hereto hereby further agree as
follows:
(a) Costs, Expenses and Taxes. The Company hereby agrees to pay all
reasonable fees, costs and expenses of the Agent and [ ]incurred in
connection with the negotiation, preparation and execution of this
Amendment Agreement and the transactions contemplated hereby, and in
connection with any future amendment, modification or consents of or in
respect of the Credit Agreement (whether or not adopted), including,
without limitation, the reasonable fees and expenses of each of Winston &
Strawn and Wachtell, Lipton, Rosen & Katz ("Wachtell, Lipton"), counsel
to the Agent and the Banks. Without limiting the generality of the
foregoing, the Company hereby agrees to pay, upon receipt thereof, each
statement for reasonable fees and expenses of (i) Wachtell, Lipton and
(ii) any other advisor, counselor, consultant or accountant retained by
Wachtell, Lipton, the Banks collectively or the Agent, rendered after the
date hereof (x) relating to the ongoing evaluation of the rights and
status of the Banks with respect to the matters contemplated by this
Amendment Agreement and the rendering of advice to the Banks with respect
thereto, (y) relating to any amendments, waivers or consents requested by
the Company (whether or not adopted) pursuant to the provisions hereof or
of any Loan Document or (z) relating to any work-out or restructuring of
Indebtedness of the Company after December 22, 1995. The Company agrees
to reasonably cooperate with and provide information reasonably requested
by any advisor, accountant, counselor, consultant or accountant retained
by the Banks, the Agent or Wachtell, Lipton. The Company also agrees to
pay all reasonable fees and expenses (including any Attorney Costs) of
each of the Banks in connection with this Amendment Agreement and the
Forebearance Agreement.
(b) Counterparts. This Amendment Agreement may be executed in one
or more counterparts, each of which, when executed and delivered, shall
be deemed to be an original and all of which counterparts, taken
together, shall constitute but one and the same document with the same
force and effect as if the signatures of all of the parties were on a
single counterpart, and it shall not be necessary in making proof of this
Amendment Agreement to produce more than one (1) such counterpart.
(c) Headings. Headings used in this Amendment Agreement are for
convenience of reference only and shall not affect the construction of
this Amendment Agreement.
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(d) Integration. This Agreement, the Credit Agreement (as amended
hereby) and the Facing Agreement constitute the entire agreement among
the parties hereto with respect to the subject matter hereof.
(e) Governing law. THIS AMENDMENT AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS AND
DECISIONS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO CONFLICT OF LAWS
PRINCIPLES).
(f) Binding Effect. This Amendment Agreement shall be binding upon
and inure to the benefit of and be enforceable by the Company, the Agent
and the Banks and their respective successors and permitted assigns.
This Amendment Agreement shall not be construed so as to confer any right
or benefit upon any Person other than the Company, the Agent and the
Banks and their respective successors and permitted assigns.
(g) Amendment; Waiver; Status as Loan Document. The parties hereto
agree and acknowledge that nothing contained in this Amendment Agreement
in any manner or respect limits or terminates any of the provisions of
the Credit Agreement other than as expressly set forth herein and further
agree and acknowledge that the Credit Agreement (as amended hereby)
remains and continues in full force and effect and is hereby ratified and
confirmed. Except to the extent expressly set forth herein, the
execution, delivery and effectiveness of this Amendment Agreement shall
not operate as a waiver of any rights, power or remedy of the Banks or
the Agent under the Credit Agreement or constitute a waiver of any
provision of the Credit Agreement. No delay on the part of any Bank or
the Agent in exercising any of their respective rights, remedies, powers
and privileges under the Credit Agreement or partial or single exercise
thereof,
shall constitute a waiver thereof. None of the terms and conditions of
this Amendment Agreement may be changed, waived, modified or varied in
any manner whatsoever, except in accordance with Section 10.01 of the
Credit Agreement. The parties hereto agree that this Amendment Agreement
shall constitute a Loan Document for purposes of the Credit Agreement.
(h) Clarification with Respect to Facing Agreement. The parties
hereto agree and acknowledge that for purposes of paragraph 5(b) of the
Facing Agreement, the reference to the "Aggregate Commitment" in clause
(ii)(y) thereof means the Ceiling Amount at such time.
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(i) Authorization Relating to Collateral and Intercreditor
Agreement. Each of the Banks hereby authorizes the Agent to (i) execute
the Collateral and Intercreditor Agreement dated as of the date hereof
and relating to the sharing of collateral pledged to secure Indebtedness
under the Letter of Credit Issuance Agreement among the financial
institutions party to the Letter of Credit Issuance Agreement and the
agents under the Other Credit Facilities (including the Agent) and the
Big Beaver Credit Facilities and (ii) distribute any amount received
pursuant to the sharing provisions thereof in the manner contemplated by
Section 2.13 of the Credit Agreement.
[Balance of page left intentionally blank; signature pages follow.]
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IN WITNESS WHEREOF, the Company, the Agent and the Banks have executed
this Amendment Agreement as of the date first above written.
KMART CORPORATION
By:
----------------------
Title:
-------------------
[Three Year Signature Page]
<PAGE> 209
FOURTH AMENDMENT TO LOAN AGREEMENT AND LIMITED FOREBEARANCE
This Fourth Amendment to Loan Agreement and Limited Forebearance (this
"Amendment Agreement") is entered into as of December 22, 1995 by and among
Kmart Corporation and certain other entities in their capacities as borrowers
(collectively, the "Borrowers"), Kmart Corporation in its capacity as the
guarantor of the Borrowers' obligations (together, with its capacity as a
Borrower, the "Guarantor"), the undersigned financial institutions (the
"Banks") and [ ] as Managing Agent (the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrowers, the Banks and the Agent are parties to that
certain Loan Agreement dated as of January 21, 1992 (as amended, restated,
modified, or supplemented and in effect from time to time, the "Loan
Agreement") pursuant to which the Banks have provided to the Borrowers certain
credit facilities); and
WHEREAS, the Borrowers have requested that the Loan Agreement be amended
in certain respects as set forth herein, and the Banks and the Agent are
agreeable to the same, subject to the terms and conditions herein set forth;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. Defined Terms. Capitalized terms used herein and not otherwise
defined herein shall have the meanings attributed to such terms in the Loan
Agreement, as amended hereby.
2. Amendments to Loan Agreement.
2.1 Section 1.01 of the Loan Agreement is hereby amended by
(a) amending and restating the definitions of "Borrowing Margin",
"Consolidated Net Worth", "EBITDAR", "Facility Termination Date" and "Guarantor
Restructuring" to read as follows:
"Borrowing Margin" means three and one-half percent (3.50%).
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"Consolidated Net Worth" means as of the date of any determination
thereof, the consolidated net worth of the Guarantor, determined in
accordance with GAAP; provided, however, that any gains or losses from
the disposition of any Specialty Retail Subsidiary (or from any
write-downs of the Guarantor's investment in any Specialty Retail
Subsidiary in Builder's Square, Inc., Kmart Canada Ltd., Kmart CR a.s.,
Kmart SR a.s. and Kmart s.r.o. permitted under the Financial Accounting
Standards Board Statement No. 121 prior to any such disposition) and any
changes after the Closing Date in the foreign currency translation
adjustment account as presented in the Guarantor's financial statements
(and in accordance with GAAP) shall be excluded from the determination of
Consolidated Net Worth.
"EBITDAR" means, for any applicable period, for the Guarantor the
aggregate of the following, without duplication: (a) consolidated net
income for such period, plus (b) consolidated interest expense (net of
any interest income) for such period, plus (c) consolidated provision for
taxes for such period, plus (d) consolidated depreciation expense for
such period, plus (e) consolidated amortization expense for such period,
plus (f) consolidated Rent Expenses for such period, minus (or plus,
as applicable) (g) on a consolidated basis, any extraordinary gains (or
plus extraordinary losses) for such period (including any loss resulting
from any write-downs of the Guarantor's investment in Builder's Square,
Inc., Kmart Canada Ltd., Kmart CR a.s., Kmart SR a.s. or Kmart s.r.o.
permitted under the Financial Accounting Standards Board Statement No.
121), minus (or plus, as applicable) (h) any gains (or plus any losses)
attributable to the Specialty Retail Subsidiaries for such period other
than results of operations in the ordinary course of business, plus (i)
solely with respect to the four fiscal quarters ending in October 1994,
the $1.348 billion restructuring charge recorded in the fourth fiscal
quarter of the Guarantor's fiscal year ending January 26, 1994, minus (or
plus, as applicable) (j) any gains (or losses) realized from the sale of
Kmart Canada Ltd. and each of its Subsidiaries, Kmart CR a.s. (Czech
operations), Kmart SR a.s. (Slovak operations) and Kmart s.r.o. (servicer
of Czech and Slovak operations).
"Facility Termination Date" shall mean the earliest to occur of:
(i) February 28, 1997, or
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(ii) the date on which the Total Commitment shall have been reduced
to $0 pursuant to this Agreement, or
(iii) the date, if any, of the acceleration of all of the Loans in
accordance with Section 7.1 or 7.2 hereof.
"Guarantor Restructuring" means any of: (a) any merger or
consolidation of the Guarantor with any other Person, but excluding
any merger or consolidation:
(i) in which the successor formed by or resulting from such
merger or consolidation is Kmart Corporation or a Subsidiary of
Kmart Corporation and, if the survivor is a Subsidiary of
Kmart Corporation, such Subsidiary shall affirm the obligations of
Kmart Corporation under the Loan Documents in writing; and
(ii) occurring while no Unmatured Guarantor Event of Default or
Guarantor Event of Default exists; and
(iii) which will not otherwise give rise to or cause an
Unmatured Guarantor Event of Default or a Guarantor Event of
Default;
and (b) any sale, assignment, lease, conveyance, transfer or other
disposition (whether in one or a series of transactions) of any property
(including accounts and notes receivable, with or without recourse), but
excluding any Permitted Disposition of a Specialty Retail Subsidiary and
also excluding any of the following:
(i) dispositions of inventory, or used, worn-out or surplus
equipment, all in the ordinary course of business; and/or
(ii) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar
replacement equipment, or the proceeds of such sale are reasonably
promptly applied to the purchase price of such replacement
equipment; and/or
(iii) dispositions of inventory or equipment by Kmart
Corporation to any Subsidiary pursuant to reasonable business
requirements; and/or
(iv) dispositions of Scheduled Assets; and/or
(v) other dispositions of assets having, in any fiscal year of
Kmart Corporation, an aggregate book
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value not exceeding 10% of Kmart Corporation's consolidated total
assets as of the end of the most recently ended fiscal year of
Kmart Corporation, as reflected in Kmart Corporation's balance
sheet contained in its audited financial statements for such fiscal
year.
(b) deleting the definition of "Deposited Monies";
and (b) adding the definitions of "Bank Setoff Sharing Agreement", "Big Beaver
II Credit Facility", "Capitalized Lease Obligations", "Cash Equivalents",
"Ceiling Amount", "Deposits", "Deposit Threshold", "Kmart Bank Group", "Letter
of Credit Issuance Agreement", "New Indebtedness", "Other Credit Facilities",
"Real Estate Debt", "Real Estate Debt Documents", "Required Deposit Amount",
"Restricted Payment", "Restructuring Closing Date", "Restructuring Effective
Date", "Restructuring and Repurchase Agreement", "Scheduled Assets", "Seasonal
Credit Agreement", "Set-Off and Sharing Agreement" and "Warehouse Facility
Credit Agreement" as follows:
"Bank Setoff Sharing Agreement" means that certain Bank Setoff
Sharing Agreement dated as of the Restructuring Effective Date among the
Banks party thereto, the Guarantor and [ ], as agent.
"Big Beaver II Credit Facility" means the revolving credit facility
evidenced by that certain Loan Agreement dated as of August 7, 1992 among
the borrowers named therein, the financial institutions signatory
thereto, and [ ], as Agent, as amended through the date
hereof and as further amended, restated, supplemented or modified from
time to time.
"Capitalized Lease Obligations" means, in relation to any Person,
obligations for the payment of rent for any real or personal property
under leases or agreements to lease that, in accordance with GAAP, have
been or should be capitalized on the books of the lessee and, for
purposes hereof, the amount of any such obligation shall be the
capitalized amount thereof determined in accordance with GAAP.
"Cash Equivalents" means investments substantially of the type
described on Schedule 1.01(c) hereof.
"Ceiling Amount" means, at any time of determination, one hundred
sixteen million, seven hundred seventy-seven
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thousand, seven hundred forty-nine dollars ($116,777,749) less the aggregate
amount of payments made in respect of the Loans after the Restructuring
Effective Date pursuant to Section 3.4(c) as such amount may be increased from
time to time with the consent of all of the Banks.
"Deposits" has the meaning specified in Section 5.3.
"Deposit Threshold" means, at any time, the sum of (a) $400,000,000
plus (b) an amount equal to (i) the increase in the fair market value (as
determined based on appraisals satisfactory to the Managing Agent) of
collateral securing the Real Estate Debt arising from the substitution of
collateral after the Restructuring Effective Date to the extent permitted by
Section 5.9(e) upon an event of casualty, condemnation or eminent domain
event, or upon the existence of an environmental condition, (but in any event
excluding a substitution of collateral resulting from the single store
collateral substitution obligation existing on the Restructuring Effective Date
and resulting from a store closing in September, 1995 with respect to the Deal
2 Notes (as defined in the Restructuring and Repurchase Agreement) to the
extent such substitution is permitted under the Real Estate Debt Documents as
in effect as of the Restructuring Closing Date, multiplied by a fraction, the
numerator of which is equal to the sum of the outstanding obligations under
this Agreement, the Other Credit Facilities and the Big Beaver II Credit
Facility at the time of such substitution and the denominator of which is equal
to the Real Estate Debt outstanding at the time of such substitution, less (ii)
the fair market value (as determined based on appraisals satisfactory to the
Documentation Agent) of any property pledged to secure the outstanding
obligations under this Agreement, the Other Credit Facilities and the Big
Beaver II Credit Facility concurrently with such pledge of substituted
collateral to the holders of the Real Estate Debt.
"Kmart Bank Group" means the lending institutions from time to time
party to one or more of this Agreement, the Other Credit Facilities and the Big
Beaver II Credit Facility.
"Letter of Credit Issuance Agreement" means that certain Letter of
Credit Issuance Agreement dated as of February 29, 1996 between the Guarantor
and certain banks, pursuant to which such banks agreed to issue trade letters
of credit and standby letters of credit on the terms and subject to the
conditions provided for therein, as
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amended, restated, supplemented or modified from time to time.
"New Indebtedness" means Indebtedness incurred by the Guarantor or
any of its Subsidiaries after the Restructuring Effective Date other than
(i) any Indebtedness under this Agreement, the Other Credit Facilities or
the Big Beaver II Credit Facility, (ii) Indebtedness under or
Indebtedness refunding or refinancing the Real Estate Debt or (iii)
Indebtedness refunding or refinancing unsecured Indebtedness of the
Guarantor outstanding on the Restructuring Effective Date. Indebtedness
outstanding under the Letter of Credit Issuance Agreement shall
constitute New Indebtedness.
"Other Credit Facilities" means, collectively: (a) the revolving
credit facility evidenced by that certain Three Year Credit Agreement
dated as of October 7, 1994 among the Guarantor, [ ], as documentation
agent thereunder, and the financial institutions signatory thereto, as
amended, restated, supplemented or modified from time to time; (b) the
revolving credit facility evidenced by that certain 364 Day Credit
Agreement dated as of October 5, 1995 among the Guarantor, [ ], as
documentation agent thereunder, and the financial institutions signatory
thereto, as amended, restated, supplemented or modified from time to
time, (c) the Seasonal Credit Agreement; and (d) the Warehouse Facility
Credit Agreement, as amended, restated, supplemented or modified from
time to time.
"Real Estate Debt" means the Indebtedness outstanding under the
agreements listed on Schedule 1.01(a) hereto.
"Real Estate Debt Documents" means the Restructuring and Repurchase
Agreement and the documents and instruments relating to the Real Estate
Debt, as in effect as of the Restructuring Effective Date, including
the related note purchase agreements, indentures, trust agreements, put
agreements, promissory notes, mortgages, deeds of trust, leases and other
security documents and the documents described as the "Existing
Transaction Documents" in the Restructuring and Repurchase Agreement.
"Required Deposit Amount" has the meaning specified in Section 5.3.
"Restricted Payment" means, with respect to any Person, (a) any
dividend or other distribution, direct or
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indirect, or the incurrence of any liability to make any other payment or
distribution of cash or other property or assets in respect of such
Person's capital stock (which shall include, without limitation,
preferred stock, common stock, options, warrants or any other equity
security), (b) any payment on account of the purchase, prepayment,
conversion, exchange, redemption, retirement, surrender or
acquisition of such Person's capital stock or any other payment or
distribution made in respect thereof, either directly or indirectly, and
(c) any purchase or other acquisition or payment in respect of any
option, warrant or other right to acquire any of or any interest in such
Person's capital stock; provided, that "Restricted Payment" shall not
include (i) any dividend payable solely in shares of its capital stock,
(ii) any purchase or exchange of existing employee stock options for
consideration consisting solely of new employee stock options or (iii)
any purchase of capital stock or options to acquire the same from
directors, officers and employees of the Guarantor and its Subsidiaries
consistent with past practices in connection with ordinary course
employment and severance arrangements and in an aggregate amount that
shall not exceed $5,000,000 for all such purchases pursuant to this
clause (iii).
"Restructuring and Repurchase Agreement" means that certain
Restructuring and Repurchase Agreement dated as of December 22, 1995 by
and among the Guarantor, certain holders of the Real Estate Debt and
certain other Persons parties thereto.
"Restructuring Closing Date" means the date upon which each of the
conditions precedent set forth in Section 4 of that certain Fourth
Amendment to Loan Agreement and Limited Forebearance dated as of December
22, 1995 by and among the Guarantor, the Borrowers, the Banks and the
Documentation Agent have been satisfied.
"Restructuring Effective Date" means December 22, 1995.
"Scheduled Assets" means the assets of the Guarantor identified on
Schedule 1.01(b) hereto.
"Seasonal Credit Agreement" means that certain Seasonal Credit
Agreement dated as of October 5, 1995 among the Guarantor, [ ], as
documentation agent thereunder, and the financial institutions signatory
thereto, as amended, restated, supplemented or modified from time to
time.
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"Set-off and Sharing Agreement" means that certain Set-Off and
Sharing Agreement dated as of Restructuring Closing Date among the
holders of the Real Estate Debt and the institutions in the Kmart Bank
Group party thereto.
"Warehouse Facility Credit Agreement" means that certain Warehouse
Facility Credit Agreement dated as of October 7, 1994 among the
Guarantor, the other borrowers named therein, [ ], as documentation
agent thereunder, and the financial institutions signatory thereto, as
amended, restated, supplemented or modified from time to time.
2.2 Article II of the Loan Agreement is hereby amended as follows:
(a) Section 2.1 is hereby deleted in its entirety and replaced with
the following:
2.1 Loans. Each Bank, severally and for itself alone, hereby
agrees, on the terms and subject to the conditions hereinafter set forth,
to make loans to one or more of the Borrowers, on the date requested from
time to time from and after the date of this Agreement to, but not
including, the Facility Termination Date, in the Pro Rata Share of such
Bank of such amounts as a Borrower may request, but not exceeding: (i)
in the aggregate at any one time outstanding, the Loan Commitment of such
Bank; or (ii) with respect to any Project, such Bank's Project Commitment
for such Project; provided that without the prior written consent of all
of the Banks, after giving effect to any Borrowing, the aggregate
outstanding amount of all Loans shall not exceed the Ceiling Amount.
(b) Section 2.5 is hereby amended by deleting paragraph (a) thereof in
its entirety and replacing it with the following:
(a) Each Borrower hereunder shall be entitled to request only one
Borrowing (other than Roll-Over Borrowings) per month, and all Loans to
all Borrowers in any month shall be funded on the same date, which shall
be a Monthly Borrowing Date. Subject to Section 2.5(c) hereof, on or
before ten (10) Business Days prior to the Monthly Borrowing
Date in any month in which any Borrower desires to obtain a Eurodollar
Rate Loan hereunder or a Prime Rate Loan hereunder, such Borrower shall
give the Managing Agent, at its office located at [ ],
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telecopied notice (given not later than 11:00 A.M. (New York time) and
confirmed in writing) of the amount which such Borrower desires to borrow
as a Borrowing hereunder during such month. Each such notice (each a
"Notice of Borrowing"), which shall be in the form of Exhibit E hereto,
shall become irrevocable on the date which is three (3) Business Days
prior to the applicable borrowing date and shall specify the Project for
which such Borrowing will be used, the amount of such Borrowing, the date
of Borrowing (which shall be a Monthly Borrowing Date), and shall (i)
certify that construction of the Project has proceeded to such date
within the overall Project Budget and Borrower reasonably believes that
completion of the construction of the Project within the overall Project
Budget will occur, (ii) provide by line item in the Project Budget a
summary of amounts expended prior to the date of such requested Borrowing
and amounts intended to be expended from proceeds of such Borrowing and
(iii) certify as such other matters with respect to the relevant Project
and the applicable Borrower as may from time to time be required by the
Managing Agent. In the event that the applicable Borrower is unable to
certify as to any of the matters required to be set forth in the Notice
of Borrowing and certified by such Borrower, or in the event of any
inaccuracy or discrepancy contained therein, the Managing Agent and the
Banks shall not be required to make the Borrowing so requested unless and
until such certifications, inaccuracies or discrepancies are remedied to
the Managing Agent's satisfaction. On or before three (3) Business Days
prior to any date of Borrowing hereunder, the applicable Borrower shall
give to the Managing Agent at its address specified in this Section
2.5(a), a Rate Selection Notice with respect to such Borrowing. The
Managing Agent shall promptly give each Bank telephonic notice (confirmed
in writing) of each proposed Borrowing, of such Bank's proportionate
share thereof and of the other relevant matters covered by the Notice of
Borrowing and Rate Selection Notice. Without in any way limiting each
Borrower's obligation to confirm in writing any telephonic notice, the
Managing Agent may act without liability upon the basis of telephonic
notice believed by the Managing Agent in good faith to be from such
Borrower prior to receipt of written confirmation, each Borrower hereby
waiving the right to dispute the Managing Agent's record of the terms of
such telephonic notice. Schedule 2.5(a) hereto sets forth, by way of
example, the dates of notices and actions required by this Section
2.5(a). Notwithstanding anything to the contrary in this Agreement, no
Borrowing shall be made without the prior
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written consent of all of the Banks if the aggregate amount of the Loans
(after giving effect to such Borrowing) would exceed the Ceiling Amount.
(c) Section 2.7(a) is hereby amended and restated in its entirety to
read as follows:
(a) Each Borrower agrees to pay interest in respect of the unpaid
principal amount of each Prime Rate Loan made to such Borrower from the
date the proceeds thereof are made available to such Borrower until
maturity (whether by acceleration or otherwise) of such Prime Rate Loan,
or until such Prime Rate Loan is converted into a Eurodollar Rate Loan,
at a fluctuating rate per annum equal to the Prime Rate in effect from
time to time plus two and one-half percent (2.50%).
(d) Section 2.7(c) is hereby amended and restated in its entirety to read
as follows:
(c) Notwithstanding the rates of interest specified in clauses (a)
and (b) above and the payment dates specified below, effective
immediately upon the occurrence of any Guarantor Event of Default and for
so long thereafter as any such Guarantor Event of Default shall be
continuing, the principal balance of each Loan then outstanding and, to
the extent permitted by applicable law, any interest payment on each Loan
not paid when due, shall bear interest payable upon demand, after as well
as before judgment, at a rate per annum equal to the greater of (i) the
Prime Rate in effect from time to time plus four and one-half percent
(4.50%) or, (ii) if applicable, the Eurodollar Rate plus five and
one-half percent (5.50%) (such rate of interest being the "Default
Rate").
2.3 Article III of the Loan Agreement is hereby amended as follows:
(a) Section 3.4 is hereby amended by (i) renumbering subsection (c)
thereof as subsection (d) and inserting a new subsection (c) that shall read as
follows:
(c) If any principal payment is made to the holders of the Real
Estate Debt (except to the extent that such payment to the holders of the
Real Estate Debt was triggered by (x) a mandatory prepayment pursuant to
this Section 3.4(c) or (y) a prepayment made under the Big Beaver II
Credit Facility and the Other Credit Facilities which
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results in a ratable reduction of the Total Commitment and to the Ceiling
Amount in accordance with the next sentence of this Section 3.4(c)), the
Guarantor shall cause to be made concurrently a permanent reduction in
the Total Commitment and to the Ceiling Amount, in an amount (the "RE
Reduction Amount") equal to such payment multiplied by a fraction, the
numerator of which equals the Ceiling Amount (as in effect immediately
prior to such prepayment of principal in respect of the Real Estate Debt)
and the denominator of which equals the aggregate amount outstanding
under the Real Estate Debt immediately prior to such payment. In
addition, the Guarantor shall cause to be made a permanent reduction in
the Total Commitment and to the Ceiling Amount, concurrently with the
making of any principal payment in respect of the Big Beaver II Credit
Facility or the Other Credit Facilities (other than (i) mandatory
prepayments under the Big Beaver II Credit Facility or the Warehouse
Facility Credit Agreement as a result of a project disposition or project
refinancing and (ii) prepayments under the Other Credit Facilities and
the Big Beaver II Credit Facility required as a result of prepayments
under the Real Estate Debt or under this Agreement), in an amount, (the
"Bank Reduction Amount") equal to such payment multiplied by a fraction,
the numerator of which equals the Ceiling Amount (as in effect
immediately prior to such prepayment of principal under the Big Beaver II
Credit Facility or any such Other Credit Facilities) and the denominator
of which equals the aggregate amount outstanding under the facility
receiving the payment immediately prior to the making of such payment.
Concurrently with each such reduction, the Guarantor shall ratably prepay
the outstanding Loans in an amount equal to the RE Reduction Amount or
the Bank Reduction Amount, as the case may be, together with accrued
interest to such date on the amount prepaid and the amounts required
pursuant to Section 2.10. Such prepayment amount and reduction of the
Total Commitment shall ratably reduce each Bank's outstanding Loans and
Loan Commitment in accordance with its Pro Rata Share. Furthermore, if
for any reason, the aggregate principal amount of all outstanding Loans
exceeds the Ceiling Amount, then, unless all of the Banks otherwise
consent in writing, the Guarantor shall immediately prepay the Loans in
the amount of such excess. Any prepayment made by the Guarantor pursuant
to this Section 3.4(c) shall be treated and accounted for solely for the
purposes hereof as a payment by the Guarantor under the Guaranty.
(b) Section 3.5 is hereby amended and restated to read as follows:
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3.5 Other Provisions With Respect to Prepayments. Except as
otherwise provided herein, any repayment of a Eurodollar Rate Loan which
shall be made prior to the end of the applicable Interest Period for such
Loan shall be subject to the provisions of Section 2.10 hereof.
(c) Section 3.10 is hereby amended and restated as follows:
Section 3.10 Option to Extend Term. In the event that the Facility
Termination Date is a date after January 20, 1995, each Borrower with
outstanding Loans hereunder shall at the request of the Agent immediately
execute and deliver to the Banks amended Notes evidencing such maturity
of the Loans evidenced thereby ("Extension Notes"), which shall each be
in substantially the form of Exhibit B-3 hereto, duly completed. Upon
receipt of such amended Notes, the Notes which have been amended thereby
shall be deemed superseded and of no further effect and shall be returned
to the Borrowers which issued the same.
2.4 Article IV of the Loan Agreement is hereby amended by inserting,
immediately before the period at the end of Section 4.1(j), the following:
; provided, however, that any past or future reduction in the Guarantor's
credit rating or decline in the market price of the Guarantor's stock
shall not of themselves be deemed to constitute a material adverse change
for the purpose hereof.
2.5 Article V of the Loan Agreement is hereby amended as follows:
(a) Subsection (a) of Section 5.1 is amended by (i) deleting the
word "and" at the end of clause (iv) thereof, (ii) renumbering clause (v) as
clause (iv) and (iii) adding the following new clause (iv) therein:
(iv) With respect to the Guarantor, the information described on
Schedule 5.1 within the time periods therein specified, and
(b) New sections 5.3, 5.4. 5.5, 5.6. 5.7, 5.8 and 5.9 are hereby
added as follows:
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Section 5.3 Affirmative Covenant Relating to Maintenance of
Deposits. The Guarantor shall at all times maintain with one or more
financial institutions that are members of the Kmart Bank Group and that
are party to the Bank Setoff Sharing Agreement cash and Cash Equivalents
on deposit (the "Deposits") in an aggregate amount not less than the
lesser of (a) the Deposit Threshold and (b) the total amount of all cash
and Cash Equivalents of the Guarantor and its Subsidiaries (other than
cash and Cash Equivalents maintained at Kmart Canada Ltd. and its
subsidiaries or at Kmart CR a.s. (Czech operations) in the ordinary
course consistent with past practices) at such time (the "Required
Deposit Amount"); provided, that any amounts maintained in store
depository accounts with depository institutions which are not members of
the Kmart Bank Group as required by the Guarantor's business operations
in the normal course of business consistent with past practices shall not
be considered cash or Cash Equivalents for the purposes of clause (b) of
this Section 5.3.
Section 5.4 Affirmative Covenant Regarding Most Favored Lender
Status. If the Guarantor, or any Subsidiary of the Guarantor or any
obligor under the Real Estate Debt shall at any time, directly or
indirectly, amend, restate or otherwise modify any of the Real Estate
Debt Documents, in any manner which would have the effect of (i) adding
any new or additional covenants or defaults applicable to a Borrower or a
Subsidiary of a Borrower, (ii) amending in a manner more beneficial to
the holders of such Real Estate Debt or in a manner more onerous to the
Guarantor, any Subsidiary or any obligor under the Real Estate Debt, any
covenant or default under such Real Estate Debt applicable to a Borrower
or a Subsidiary of a Borrower or (iii) otherwise enhancing the rights and
benefits of any holder of the Real Estate Debt against a Borrower or any
Subsidiary of the Borrower, then, in each such event, the Borrowers shall
concurrently enter into or cause to be entered into such amendments to
this Agreement and such other documents and instruments, in form and
substance reasonably satisfactory to the Required Banks, as shall be
necessary to afford the Banks the same or equivalent benefits and rights
as such amendments to, or other agreements in respect of, the Real Estate
Debt Documents afford the holders of the Real Estate Debt; provided that
any such new or additional covenants or defaults, amended covenants or
defaults, or enhanced rights and benefits shall be deemed automatically
incorporated herein by reference
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in the event such modifications are made to the Real Estate Debt
Documents without the Borrowers entering into concurrent amendments as
required by this Section 5.4.
Section 5.5 Negative Covenant of Kmart Corporation Regarding
Restricted Payments. The Guarantor shall not, nor shall it permit any of
its Subsidiaries to, declare, order, make or pay, or set aside any sum
for, any Restricted Payment, except that (a) any Subsidiary may declare
and pay dividends to the Guarantor, (b) Kmart Corporation may pay
dividends in respect of its common stock which were declared prior to
December 31, 1995 and (c) the Guarantor may declare and pay dividends in
respect of any of its preferred stock issued and outstanding as of the
Restructuring Effective Date until, for any particular shares of
preferred stock, such time as Kmart Corporation shall have declined any
bona fide offer from any holder of any such preferred stock to convert or
enter into an agreement to convert such preferred stock into common stock
of the Guarantor.
5.6 Negative Covenant of Kmart Corporation Regarding Payment of
Indebtedness. (a) During the period from December 17, 1995 through
February 28, 1997, the Guarantor shall not, nor shall it permit any of
its Subsidiaries (other than payments by Kmart Canada, Ltd. or its
subsidiaries or by Kmart CR a.s. (Czech operations) in respect of such
Person's respective Indebtedness in existence as of the Restructuring
Effective Date or New Indebtedness incurred by such Persons in the
ordinary course of business consistent with past practices) to, directly
or indirectly, make any principal payment, in respect of any Real Estate
Debt or any other Indebtedness (including by way of purchase, refinancing
defeasance or other direct or indirect transfer of cash consideration to
the holders thereof; provided that the Guarantor may exchange any of its
outstanding Indebtedness for money borrowed for shares of its capital
stock and make cash payments to the holders of such Indebtedness in
respect of fractional shares in connection with such exchange) other than
(i) scheduled payments on the Real Estate Debt set forth on Schedule 5.6
and capital lease payments relating to stores securing the Real Estate
Debt in an amount not to exceed $9,000,000 in the aggregate; provided
that concurrently with making such payments, the Guarantor makes a ratable
repayment of the Loans hereunder as required pursuant to Section 3.4(c)
hereof, (ii) scheduled payments of other mortgage indebtedness in
existence as of the Restructuring Effective Date in an amount not to
exceed $12,000,000 in the aggregate, (iii) payments made pursuant to
guaranties of existing leases of former Subsidiaries of the Guarantor;
provided; that such payments may only be made with respect to rents so
guaranteed as and when the same may become due in the ordinary course
(and not on any accelerated rents that may become due as a result of a
default on the underlying lease), (iv) payments made with respect to
Spin-Off Tenant Put Options (as defined in the Restructuring and
Repurchase Agreement as in effect on the Restructuring Closing Date), (v)
ratable payments of principal of the Real Estate Debt concurrently with
the making of any payments or reduction of commitments and ceiling
amounts in respect of the Indebtedness under this Agreement, the Other
Credit Facilities or the Big Beaver II Credit Facility or other Real
Estate Debt, to the extent required pursuant to Sections 2.2, 2.3 or 2.5
of the Restructuring and Repurchase Agreement as in effect on the
Restructuring Closing Date, (vi) ratable payments of principal of the
Other Credit Facilities and
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the Big Beaver II Credit Facility concurrently with the making of any
prepayments or reduction of commitments under this Agreement, the Real
Estate Debt, any of the Other Credit Facilities or the Big Beaver II
Credit Facility to the extent required pursuant to the terms of the Other
Credit Facilities and the Big Beaver II Credit Facility as in effect on
the Restructuring Closing Date, (vii) regular, ordinary course payments of
Capitalized Lease Obligations in amounts consistent with past practices,
(viii) payments in respect of the termination of leases to the extent that
the Guarantor believes that such payments provide a substantial benefit
to the Guarantor (provided that such lease termination payments do not
exceed the lesser of (a) One Hundred Million Dollars ($100,000,000) in the
aggregate in any fiscal year of the Guarantor and (b) One Hundred
Twenty-Five Million Dollars ($125,000,000) in the aggregate for all such
payments, (ix) repayment of Indebtedness secured by Liens or real property
in connection with the sale or other disposition of such real property
provided that the Guarantor or such Subsidiary receives net cash proceeds
in such sale or disposition in excess of the Indebtedness required to be
repaid, (x) mandatory principal payments under the Big Beaver II Credit
Facility and the Warehouse Facility Credit Agreement as a result of a
project disposition or project refinancing, (xi) principal payments under
this Agreement, (xii) ratable principal payments under this Agreement, the
Other Credit Facilities and the Big Beaver II Credit Facility in
accordance with Section 5.8, (xiii) payments in respect of New
Indebtedness, (xiv) payments of reimbursement obligations under letters of
credit issued under the Letter of Credit Issuance Agreement; provided that
such payments do not reduce the commitments thereunder except to the
extent provided under the Letter of Credit Issuance Agreement as in effect
on the Restructuring Closing Date, (xv) payments of reimbursement
obligations under letters of credit issued under the credit facility
described in clause (a) of the definition of Other Credit Facilities and
(xvi) other payments of principal in respect of Indebtedness in an
aggregate amount that shall not exceed the lesser of (a) Fifty Million
Dollars ($50,000,000) in any fiscal year of the Guarantor and (b)
Seventy-Five Million Dollars ($75,000,000) in the aggregate for all such
payments, but only with respect to Indebtedness other than (1) Real Estate
Debt and (2) Indebtedness under the Other Credit Facilities and the Big
Beaver II Credit Facility.
(b) During the period from December 17, 1995 through October 3,
1997, the Guarantor shall not, nor shall it permit any Subsidiary (other
than payments by Kmart Canada, Ltd. or its subsidiaries or by Kmart CR
a.s. (Czech operations) in respect of such Person's respective
Indebtedness in existence as of the Restructuring Effective Date or New
Indebtedness incurred by such Person in the ordinary course of business,
consistent with past practices) to, directly or indirectly, make any
principal payment in respect of any Real Estate Debt or any other
Indebtedness (including by way of purchase, refinancing, defeasance or
other direct or indirect transfer of cash consideration to the holders
thereof; provided that the Guarantor may exchange any of its outstanding
Indebtedness for money borrowed for shares of its capital stock and make
cash payments to the holders of such Indebtedness in respect of
fractional shares) other than (i) scheduled principal payments on such
Indebtedness, (ii) repayments of Indebtedness of the type permitted under
Sections 5.6(a)(iii), (iv), (v), (vi), (ix), (x), (xi), (xii), (xiii),
(xiv) and (xv), (ii) payments in respect of the termination of leases to
the extent that the Guarantor believes that such payments provide a
substantial benefit to the Guarantor, provided that such lease
termination payments do not exceed the lesser of (a) One Hundred Million
Dollars ($100,000,000) in the aggregate in any fiscal year of the
Guarantor and (b) One Hundred Twenty-Five Million Dollars ($125,000,000)
in the aggregate for all such payments and (iii) other payments of
principal in respect of Indebtedness in an aggregate amount that shall
not exceed the lesser of (a) Fifty Million Dollars ($50,000,000) in the
aggregate in any fiscal year of the Guarantor and (b) Seventy-Five
Million Dollars ($75,000,000) in the aggregate for all such payments, but
only with respect to Indebtedness other than (1) Real Estate Debt and (2)
Indebtedness under the Other Credit Facilities and the Big Beaver II
Credit Facility.
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5.7 Covenant of Kmart Corporation Regarding Amendment of Real
Estate Debt Documents. The Guarantor shall not, nor shall it permit any
of its Subsidiaries, to amend, restate or otherwise modify any of the
documents relating to or governing any Real Estate Debt in any manner
which would, directly or indirectly, (a) provide for an interest rate
payable on such Real Estate Debt in excess of the interest rate provided
for in the Real Estate Debt Documents unless this Agreement shall have
been amended, concurrently with such increase in the interest rate
payable on such Real Estate Debt, to increase the interest rates set
forth herein by an amount equal to such excess, (b) to provide for the
payment of any fees in addition to the fees payable under such Real
Estate Debt Documents (or provide for any increase in existing fees
payable thereunder) unless this Agreement shall have been amended,
concurrently with the agreement to pay such new or increased fees, to
provide for an equivalent fee to the Banks in a dollar amount equal to
such new fee (or the aggregate amount of any increase in existing fees)
multiplied by a fraction the numerator of which equals the Ceiling Amount
and the denominator of which equals the aggregate amount outstanding
under the Real Estate Debt at such time or (c) provide for any
clarification of any mortgagee's, tenant's or landlord's rights and
obligations under the federal bankruptcy code or similar law with respect
to ground leases or similar arrangements.
5.8 Covenant of Kmart Corporation Regarding Ratable Payment of Bank
Facilities. The Guarantor shall not, nor shall it permit any of its
Subsidiaries to, directly or indirectly, make any principal payment, in
respect of the Big Beaver II Credit Facility or the Other Credit
Facilities (other than (i) mandatory prepayments under the Big Beaver II
Credit Facility or the Warehouse Facility Credit Agreement as a result of
a project disposition or project refinancing and (ii) ratable payments of
principal of the Other Credit Facilities and the Big Beaver II Credit
Facility concurrently with the making of any prepayments or reduction of
commitments under this Agreement, the Real Estate Debt, any of the Other
Credit Facilities or the Big Beaver II Credit Facility to the extent
required pursuant to the provisions of the Other Credit Facilities and
the Big Beaver II Credit Facility as in effect on the Restructuring
Closing Date, which provisions are substantially similar to Section
3.4(c) hereof) unless Kmart Corporation shall concurrently make a
permanent ratable reduction to the Total Commitment and the Ceiling
Amount together with a repayment of the outstanding Loans to the extent
required by Section 3.4.
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5.9 Limitation on Liens of Kmart Corporation. The Guarantor shall
not, and shall not permit any of its Subsidiaries (other than Liens
granted by Kmart Canada Ltd. and its subsidiaries or by Kmart CR a.s. on
such Person's respective assets prior to the Restructuring Effective
Date) to, create, incur or suffer to exist any Lien on any assets of the
Guarantor or any of its Subsidiaries, whether now owned or hereafter
acquired; provided, however, that such restriction shall not apply with
respect to any of the following types of Liens:
(a) Liens for taxes not delinquent or being contested in good
faith;
(b) Liens created and deposits made in connection with workers'
compensation, unemployment insurance and other social security
legislation, or to secure the performance of bids, tenders,
contracts (other than for the repayment of borrowed money),
statutory obligations, surety and appeal bonds and other similar
obligations incurred in the ordinary course and Liens securing
obligations to mechanics, materialmen, bailees, warehousemen and
similar Liens arising under operation of law and incurred in the
ordinary course of business;
(c) purchase money mortgages (including vendors' rights under
purchase or land contracts or under other agreements whereby title
or another interest is retained by the vendor for the purpose of
securing the purchase price thereof) on property acquired or
constructed after the Restructuring Effective Date, or the
acquisition after the Restructuring Effective Date of property
subject to such a Lien which is limited to such property and was
not created in anticipation of such acquisition;
(d) mortgages, security interests and Liens on assets of the
Guarantor or any of its Subsidiaries existing on the Restructuring
Effective Date, and set forth on Schedule 5.9 which secure any
Indebtedness of the Guarantor or any such Subsidiary, or any
refundings or extensions for an amount not exceeding the principal
amount of such Indebtedness so long as such refundings or
extensions are secured only by the same property or assets;
(e) Liens on property of the Guarantor or any of its Subsidiaries
created concurrently with the release of existing Liens on other
property of the Guarantor or
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any such Subsidiary, as provided under the Real Estate Debt
Documents, but only (i) if such substitution is one of several
alternative actions available to the obligor under such Real Estate
Debt, of which such obligor must choose one, following the
occurrence of a condemnation, casualty or eminent domain event, or
upon the existence of an environmental condition or (ii) in respect
of a substitution of collateral resulting from the single store
collateral substitution obligation existing on the Restructuring
Effective Date and resulting from a store closing in September,
1995 with respect to the Deal 2 Notes (as defined in the
Restructuring and Repurchase Agreement); provided that the fair
market value of the property subject to any such Lien permitted
under clause (i) hereof does not exceed one hundred ten percent
(110%) of the fair market value of the property as to which a Lien
is concurrently being released (the fair market value of the
property being relieved of such Lien being determined immediately
prior to the occurrence of such casualty or condemnation event, the
discovery of such environmental condition or the occurrence of such
store closing);
(f) Liens on Deposits in favor of the Kmart Bank Group and liens on
cash balances of Kmart Canada Ltd. and its subsidiaries or Kmart CR
a.s. (Czech operations) maintained in the ordinary course of
business, consistent with past practices in favor of the lenders to
such entities and Liens on monies held in the Paydown Trust Account
(as defined in the Restructuring and Repurchase Agreement) in favor
of the holders of the Real Estate Debt;
(g) Liens on the assets of Kmart Canada Ltd. and its subsidiaries
or Kmart CR a.s. (Czech operations) to secure New Indebtedness
incurred by such Persons and Liens to secure New Indebtedness
(including, without limitation, New Indebtedness incurred pursuant
to the Letter of Credit Issuance Agreement); provided that such
Liens to secure New Indebtedness shall encumber only
(i) noncurrent assets including, without limitation, Scheduled
Assets (or cash collateral pledged to secure the Indebtedness
under the Letter of Credit Issuance Agreement in substitution
of a Lien on noncurrent assets; and
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(ii) in the case of the Letter of Credit Issuance Agreement,
documents of title relating to goods which are the subject of
trade letters of credit issued by the Trade B Banks (as
defined therein) and securing the Trade B Letters of Credit
(as defined therein) under the terms set forth in such
agreement as in effect on the Restructuring Closing Date;
provided that the percentage of the aggregate amount of all
Trade B Letters of Credit that are so secured shall not exceed
thirty-five percent (35%) (or as close to 35% as practicable
in light of the face amounts of Trade B Letters of Credit that
are drawn or paid as contemplated by the Letter of Credit
Issuance Agreement) of the Trade B Letters of Credit issued by
the Trade B Banks;
provided further that no such Lien shall be permitted under this clause
(g) to secure any unsecured Indebtedness of the Guarantor or any of its
Subsidiary outstanding on the Restructuring Effective Date or any
refundings or extension thereof;
(h) easements, rights-of-way, zoning and similar restrictions and other
similar charges or encumbrances not interfering in any material respect
with the ordinary conduct of the business of the Guarantor and its
Subsidiaries;
(i) Liens on cash collateral to secure the Guarantor's reimbursement
obligations under letters of credit issued pursuant to the Letter of
Credit Issuance Agreement to the extent such cash collateral is permitted
under the terms thereof as in effect on the Restructuring Closing Date;
and
(j) Liens on cash collateral to secure the Guarantor's reimbursement
obligations under two standby letters of credit issued by [ ] after
the Restructuring Effective Date in an aggregate amount that shall not
exceed the lesser of (x) 105% of the outstanding face amount thereof or
(y) $25,000,000.
2.6 Article VI of the Loan Agreement is hereby amended as follows:
(a) Section 6.2(d) of the Loan Agreement is hereby amended and
restated to read as follows:
"(d) [INTENTIONALLY OMITTED]"
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(b) Section 6.2(e) of the Loan Agreement is hereby amended and restated
to read as follows:
"(e) Since the Restructuring Effective Date, there shall have
been no material adverse change in the business, financial condition,
operations, assets or prospects of the Guarantor and its Subsidiaries
taken as a whole; provided, however, that any past or future reduction
in the Guarantor's credit rating or decline in the market price of the
Guarantor's stock shall not of themselves be deemed to constitute a
material adverse change.
(c) Section 6.3(b) of the Loan Agreement is hereby amended by adding,
immediately after the words "Unmatured Guarantor Event of Default", the
following:
"(except to the extent that the same may result from any failure
of the Guarantor to pay on its stated maturity all or any portion
of the unpaid principal amount of the Loans to any Bank not party
to the Fourth Amendment to Loan Agreement and Limited Forebearance
dated as of December 22, 1995 during the period commencing January
21, 1996 and ending on the Facility Termination Date)"
2.7 Article VII of the Loan Agreement is hereby amended as follows:
(a) Paragraph (a) of Section 7.1 is hereby amended and restated to read
as follows"
"(a) [INTENTIONALLY OMITTED]"
(b) Paragraph (b) of Section 7.1 is hereby amended and restated to read
as follows:
(b) (i) The Guarantor or any of its Material Subsidiaries,
shall default in the payment when due, whether at stated maturity
or otherwise, of any Indebtedness for Money Borrowed of the
Guarantor or any of its Material Subsidiaries, whether individually
or in the aggregate, equal to or in excess of $50 million, whether
such Indebtedness now exists or shall hereafter be created, and
such default shall be uncured or unwaived after the expiration of
all applicable grace periods with respect thereto; (ii) or breach
or default by Guarantor or any of its Material Subsidiaries with
respect to any other material term
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of any evidence of any Indebtedness for Money Borrowed in excess of
$50 million or of any loan agreement, mortgage, indenture or other
agreement relating thereto, if the effect of such default or breach
is to cause, or to permit the holder or holders (or a trustee on
behalf of such holder or holders) of such Indebtedness for Money
Borrowed to cause such Indebtedness for Money Borrowed to
become or be declared due prior to its stated maturity (upon the
giving or receiving of notice but after the expiration of all
applicable grace periods with respect thereto) provided, however,
that with respect to Indebtedness for Money Borrowed in respect of
real property leases, no such breach or default shall be deemed to
exist if the Guarantor or Material Subsidiary, as the case may be,
is contesting in good faith the existence of such breach or default
by appropriate means and if the existence of such breach or
default, if determined adversely to Guarantor or the Material
Subsidiary, as the case may be, would not have a material adverse
effect on Guarantor and its Subsidiaries on a consolidated basis;
or (iii) there shall occur a "Triggering Event" (as defined in the
Restructuring and Repurchase Agreement) or all or any portion of
any Real Estate Debt shall otherwise mature or be declared or
otherwise become due and payable prior to October 3, 1997 (except
for principal payments permitted in Section 5.6);
(c) Paragraphs (k) through (o) are hereby added to Section 7.1 as
follows:
(k) Payments on Real Estate Debt. The Guarantor or any Subsidiary
of the Guarantor shall make or permit to be made (either voluntarily or
otherwise) any principal payment to any holder of any Real Estate Debt
and shall fail to make a concurrent repayment of the Obligations to the
extent required pursuant to Section 3.4(c); or
(l) Unreimbursed Put Payments. There shall have occurred the
expiration of ten (10) days after the satisfaction of the following
conditions:
(i) the exercise of a Spin-Off Tenant Put Option against the
Guarantor by any Spin-Off Creditor and
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(ii) the expiration of the one hundred twenty (120) day
period following the payment by the Guarantor of the Purchase
Amount in respect of such exercise, if, upon such expiration, the
aggregate amount of Unreimbursed Put Payments (after giving effect
to all amounts received by the Guarantor from (i) the sale or other
disposition of the relevant tendered securities and/or any asset or
assets securing the same and (ii) any other Person that is
obligated, directly or indirectly, in respect of the relevant
Spin-Off Tenant Put Option or otherwise makes any payment with
respect thereto) in respect of (1) such exercise and (2) all
Spin-Off Tenant Put Options which have been exercised at any time
prior to the commencement of such 120-day period, exceeds fifteen
million dollars ($15,000,000),
For purposes of this Section 7.1(l), the terms "Spin-Off Tenant Put Option",
"Spin-Off Creditor", "Purchase Amount", and "Unreimbursed Put Payments" shall
have the meanings ascribed to such terms in the Restructuring and Repurchase
Agreement as in effect on the Restructuring Closing Date (including as such
terms are further defined by reference to any other agreements), and not as
such terms or other agreements may subsequently be amended or otherwise
modified; or
(m) Breach of Financing Agreements. The Guarantor or any Subsidiary of
the Guarantor shall fail to perform or observe any term, covenant or agreement
with respect to any New Indebtedness having an aggregate principal amount of
more than Fifty Million Dollars ($50,000,000), and such default shall continue
unremedied or unwaived, or the term or covenant in respect of such failure
shall not have been amended, as the case may be, within forty-five (45) days
after the first date upon which any holder or holders thereof (or any
representative of such holder(s)) shall have the right, on account of such
failure and after giving effect to any required notice and the lapse of any
applicable cure periods, to declare such Indebtedness to be immediately due and
payable;
(n) Underutilized Capacity Under Letter of Credit Issuance Agreement. On
any date on and after October 31, 1996, until February 28, 1997, (a) the sum
of, without duplication, (i) the aggregate face amount of the outstanding
letters of credit on such date issued pursuant to the Letter of Credit Issuance
Agreement and that certain predecessor letter agreement dated as of the
Restructuring Effective Date and (ii) the aggregate face amount of the Existing
Trade A Letters of Credit, Existing Trade B Letters of Credit and Existing
Standby Letters of
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Credit (as such terms are defined in the Letter of Credit Issuance Agreement
as in effect on the Restructuring Closing Date) still outstanding on such
date minus (b) any such letters of credit that are cash collateralized shall
be less than the product of (i) eighty percent (.80) and (ii) the sum of (x)
the Maximum Trade A L/C Commitment Amounts, (y) the Maximum Trade B L/C
Commitment Amount and (z) the Maximum Standby L/C Commitment Amounts (as such
terms are defined in the Letter of Credit Issuance Agreement as in effect on
the Restructuring Closing Date), each determined as of such date.
(o) Breach of Certain Covenants. Kmart Corporation fails to perform
or observe any term, covenant or agreement contained in Sections 5.3, 5.4. 5.5,
5.6, 5.7, 5.8 or 5.9.
2.8 Article IX of the Loan Agreement is hereby amended as follows:
(a) Clause (iii) of Section 9.1 is hereby amended and restated to
read as follows:
(iii) changing the Loan Commitment of any Bank hereunder or the
definition of "Ceiling Amount" in any manner which would result in the
Ceiling Amount being greater at any time than it would be absent such
amendment;
(b) Section 9.4 is hereby amended by replacing the phrase "Prime
Rate in effect from time to time" at the end of the third from last sentence in
such section with the phrase "Prime Rate in effect from time to time plus
two and one-half percent (2.50%)".
(b) Section 9.6(b) is hereby amended and restated to read as follows:
(b) In addition to any rights and remedies of the Banks provided by
law, if any of the Obligations or the Loans shall have become due and
payable, each Bank is authorized at any time and from time to time,
without prior notice to the Guarantor or any Borrower, any such notice
being waived by the Borrowers to the fullest extent permitted by law, to
set-off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held by, and other indebtedness
at any time owing to or by, such Bank or any affiliate of such Bank to or
for the credit or the account of the Guarantor or any Borrower
against any and all obligations owing to such Bank (including, without
limitation, obligations owing to
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such Bank by way of participations deemed purchased pursuant to the
second proviso of this sentence), and subject to the sharing provisions
of Section 9.6(a) and any other sharing arrangements agreed to by any of
the Banks (including the provisions of the Bank Setoff Sharing
Agreement), now or hereafter existing, irrespective of whether or not the
Managing Agent or such Bank shall have made demand under this Agreement
or any Loan Document; provided, that to the extent that the Guarantor or
any Borrower owes any amounts to such Bank other than the obligations
owing under this Agreement (including obligations under the Other Credit
Facilities and the Big Beaver II Credit Facility and obligations in
respect of other Indebtedness) at the time of such set-off, then such
Bank is authorized to and shall apportion and apply the amounts set-off
ratably based on the relative aggregate amounts owing under this
Agreement, the Other Credit Facilities and the Big Beaver II Credit
Facility to all of the lenders thereunder and the amount of such other
Indebtedness; provided, further, that to the extent that any Bank has
amounts available to be set-off in excess of the aggregate of all
outstanding obligations of the Guarantor or any Borrower to such Bank
under this Agreement (an "Excess Setoff Amount") after making the
apportionment and application of set-off amounts described in the
preceding proviso, then (i) the other Banks and the lenders under the
Other Credit Facilities and the Big Beaver II Credit Facility, on a pro
rata basis, shall be deemed automatically for purposes of this Section
9.6 to have sold such Bank and such Bank shall be deemed to have
purchased a participation in the obligations owing to such other Banks
and such lenders thereunder in an aggregate amount equal to the Excess
Setoff Amount, (ii) such purchased participation shall be deemed to be an
Obligation for purposes of this Agreement and (iii) such Bank shall be
authorized to set off the Excess Setoff Amount against such purchased
participations. To the extent that any Bank exercises its rights of
set-off at a time when the aggregate amount of the Deposits is in excess
of the Required Deposit Amount, then the amount set-off by such Bank
shall be treated in accordance with the Set-Off and Sharing Agreement.
Each Bank agrees promptly to notify the appropriate Borrower, as the case
may be, the Guarantor and the Documentation Agent after any set-off is
made by such Bank; provided, that the failure to give such notice shall
not affect the validity of such set-off and application.
Each Borrower expressly agrees that to the extent such Borrower
makes a payment or payments hereunder or under any Note and such payment
or payments, or any
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part thereof, are subsequently invalidated, declared to be fraudulent or
preferential, set aside or are required to be repaid to a trustee,
receiver, or any other party under any bankruptcy act, state or
federal law, common law or equitable cause, then to the extent of such
payment or repayment, the Indebtedness to the Banks or part thereof
intended to be satisfied shall be revived and continued in full force and
effect as if said payment or payments had not been made.
(c) Paragraph (b) of Section 9.8 is hereby amended by adding the
following sentence at the end thereof:
Notwithstanding the foregoing, each Bank shall be permitted to sell the
participations referenced in Section 9.6(b) without compliance with the
foregoing provisions.
(d) Paragraph (c) of Section 9.8 is hereby amended by (1) relettering
clause (iii) in the first sentence thereof as clause (iv) and (2) adding the
following new clause (iii) immediately following clause (ii) thereof:
(iii) such Eligible Assignee shall acknowledge in a written instrument
that its rights and obligations with respect to the sharing of setoff
rights shall be subject to the terms of the Bank Setoff Sharing
Agreement.
2.9 The Schedules to the Loan Agreement are hereby amended by adding
Schedule 1.01(a), Schedule 1.01(b), Schedule 1.01(c), Schedule 5.1, Schedule
5.6 and Schedule 5.9 thereto as set forth in Schedule 1.01(a), Schedule
1.01(b), Schedule 1.01(c), Schedule 5.1, Schedule 5.6 and Schedule 5.9 hereto.
3. Representations and Warranties. In order to induce the Banks and
the Agent to enter into this Amendment Agreement, the Guarantor and each
Borrower hereby represents and warrants as to itself only that as of the
Restructuring Closing Date:
(a) the Guarantor and such Borrower has the right, power and
capacity and has been duly authorized and empowered by all requisite
corporate and shareholder action to enter into, execute, deliver and
perform this Amendment Agreement;
(b) this Amendment Agreement and the Loan Agreement (as amended
hereby) constitutes the Guarantor's and such Borrower's legal, valid and
binding obligation, enforceable against such Borrower and the Guarantor
in accordance
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with its terms, except as enforcement thereof may be subject to the
effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and
general principles of equity (regardless of whether such enforcement is
sought in a proceeding in equity or at law or otherwise);
(c) the Guarantor's and such Borrower's execution and delivery of
this Amendment Agreement and the performance of this Amendment Agreement
and the Loan Agreement (as amended hereby) do not and will not violate
its articles of incorporation or bylaws or any law, rule, regulation,
order, writ, judgment, decree or award applicable to it or any
contractual provision to which it is a party or to which it or any of its
property is subject;
(d) no authorization or approval or other action by, and no notice
to or filing or registration with, any governmental authority or
regulatory body (other than those which have been obtained and are in
force and effect) is required in connection with its execution, delivery
and performance of this Amendment Agreement and the Loan Agreement (as
amended hereby); and
(e) no Borrower Event of Default or Unmatured Borrower Event of
Default (except to the extent referenced in that certain letter agreement
dated December 22, 1995 among Kmart Corporation and the financial
institutions party thereto (the "Forebearance Agreement") has occurred
and is continuing under the Loan Agreement (as amended hereby) or would
exist after giving effect to the transactions contemplated by this
Amendment Agreement.
(f) Except as disclosed in writing to each of the Banks, since
December 22, 1995, there has been no change in the financial condition,
operations, business, properties or prospects of the Guarantor or any of
its Subsidiaries (other than a downgrade in the Guarantor's credit rating
or a decline in the Guarantor's stock price) that individually or
in the aggregate could reasonably be expected to have a material adverse
change in, or material adverse effect upon, (i) the business, financial
condition, operations, assets or prospects of the Guarantor, or of the
Guarantor and its Subsidiaries taken as a whole, or (b) the Guarantor's
ability to perform its obligations under this Loan Agreement or the Loan
Documents, or (c) the validity or enforceability of this Agreement or any
other Loan Documents (a "Material Adverse Effect"). There is no fact
known to the Guarantor that could reasonably be
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expected to have a Material Adverse Effect that has not been set forth
in writing to each of the Banks; and
(g) The representations and warranties made by each Borrower in
Section 4.1 of the Loan Agreement and by the Guarantor in Section 5 of
the Guaranty are true and correct in all material respects (except to the
extent such representations and warranties of any Borrower refers to
parties other than such Borrower expressly refer to an earlier date, in
which case they shall be true and correct as of such earlier date).
The Guarantor and each Borrower agrees and acknowledges that its
representations and warranties set forth in this Section 3 shall be considered
to be representations and warranties deemed made under the Loan Agreement as of
the date hereof for purposes of the Borrower Event of Default set forth in
Section 7.2(b) of the Loan Agreement.
4. Conditions to Effectiveness (other than Amendment to Definition
of Facility Termination Date). The effectiveness of all provisions of this
Amendment Agreement (other than the modification to the definition of "Facility
Termination Date" in Section 2.1 of this Amendment Agreement) is specifically
subject to the satisfaction of the following conditions precedent or concurrent:
(a) No Defaults; Representations and Warranties True. No Borrower
Event of Default, Unmatured Borrower Event of Default, Guarantor Event of
Default or Unmatured Guarantor Event of Default (except to the extent
referenced in the Forebearance Agreement) under the Loan Agreement (as amended
hereby) shall have occurred and be continuing. The representations and
warranties set forth in Section 3 of this Amendment Agreement shall be true and
correct.
(b) Execution of Amendment. The Guarantor, each Borrower and Banks
holding Loans constituting eighty five percent (85%) of the principal amount of
all Loans then outstanding shall have delivered to the Agent a counterpart of
this Amendment Agreement duly executed by the Guarantor, such Borrower or such
Bank.
(c) Amendment Fee; Incremental Interest. The Guarantor shall have
paid or caused to be paid to the Agent for the account of (i) each Bank that
executed and delivered a counterpart hereof an amendment fee equal to 1.0% of
the outstanding Obligations to such Bank as of December 22, 1995 and (ii) each
Bank an amount equal to the difference between (A) the interest
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paid to such Bank with respect to the outstanding Loans from December 22, 1995
through the date of effectiveness of this Amendment Agreement and (B) the
interest that would have been payable with respect to such Loans had this
Amendment Agreement become effective on December 22, 1995.
(d) Other Amendments. The Agent shall have received evidence
reasonably satisfactory to it that (i) each of the agreements listed on
Schedule 1.01(a) hereto has been amended on substantially the terms and
conditions set forth in the Agreement in Principle dated as of December 18,
1995 and otherwise in form and substance reasonably satisfactory to the Agent,
(ii) amendments to the agreements evidencing the Other Credit Facilities
(other than the Seasonal Credit Agreement) and reflecting the provisions of the
Forebearance Agreement and the attached Summary of Indicative Terms dated
12/17/95 (the "Term Sheet") shall have been executed and delivered by the
"Required Banks" thereunder (iii) an amendment to the Seasonal Credit Agreement
reflecting the provisions of the Forebearance Agreement and the Term Sheet
shall have been executed and delivered by all of the Banks thereunder and (iv)
an amendment to the Big Beaver II Credit Facility and reflecting the provisions
of the Forebearance Agreement and the Term Sheet shall have been executed by
the "Required Banks" thereunder; each on substantially the terms and conditions
set forth in the Term Sheet.
(e) Letter of Credit Facility. The Letter of Credit Issuance
Agreement dated as of the date hereof among the Guarantor, the financial
institutions signatory thereto and [ ], as agent and the related collateral
proceeds sharing agreement among such financial institutions shall each have
become effective. The Bank Setoff Sharing Agreement shall have been executed
and delivered by all Banks in which the Guarantor shall have on deposit cash
and Cash Equivalents.
(f) Payment of Expenses. The Guarantor shall have paid all
invoiced fees and expenses referenced in section 7(a) hereof and Section 9.4 of
the Loan Agreement.
(g) Opinion of Counsel. The Agent shall have received an opinion of
internal counsel and of reasonably acceptable outside counsel and the
Guarantor's general counsel in favor of the Banks in form and substance
acceptable to the Agent with respect to (a) the legal existence and good
standing of the Guarantor and each Borrower, (b) the authority of the Guarantor
and each Borrower to enter into this Amendment Agreement and the due execution
and delivery thereof, (c) that the obligations of the Guarantor under the Loan
Agreement as
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amended by this Amendment Agreement are legal, valid, binding and enforceable
in accordance with their terms (subject to customary exceptions), (d)
noncontravention with applicable securities laws and other laws, rules and
regulations and material agreements, and (e) such other matters as the Agent
may reasonably request.
5. Conditions to Effectiveness of Amendment to Definition of
Facility Termination Date; Limited Forebearance. The effectiveness of the
modification to the definition of "Facility Termination Date" in Section 2.1 of
this Amendment Agreement is specifically subject to (i) the satisfaction of
each condition in Section 4 hereof and (ii) the Agent receiving a counterpart
of this Amendment Agreement duly executed by each Bank. In the event that all
of the conditions in this Section 5 are satisfied other than the requirements
of clause (ii) of the preceding sentence, then (i) all provisions of this
Amendment Agreement other than the modification to the definition of Facility
Termination Date in Section 2.1 hereof shall be effective and (ii) each of the
Banks signatory below agrees that it will not exercise any right or remedies
(including under the Guaranty) arising solely from the occurrence of a Borrower
Event of Default under Section 7.2(a) of the Loan Agreement arising solely from
the failure of any Borrower to repay the unpaid principal amount of the Loans
for the period from January 21, 1996 until the earlier of (a) February 28, 1997
and (b) the occurrence and continuance of any other Guarantor Event of Default
or Borrower Event of Default. The limited forebearance in this Section 5 of
this Amendment Agreement shall not in any way limit the rights or remedies of
the Agent or the Banks under the Loan Agreement as amended by this Amendment
Agreement or under the Guaranty except to the extent explicitly set forth in
the preceding sentence.
6. Waivers of Borrower Defaults from Kmart Funding. The undersigned
Banks hereby waive as of December 22, 1995, the failure of any Borrower to
comply with Section 5.2(b) of the Loan Agreement solely by reason of the
incurrence of Indebtedness by such Borrower to the Guarantor in connection
with the Guarantor's funding of project construction and completion.
7. Miscellaneous. The parties hereto hereby further agree as
follows:
(a) Costs, Expenses and Taxes. The Guarantor hereby agree to pay
all reasonable fees, costs and expenses of the Agent in connection with the
negotiation, preparation and execution of this Amendment Agreement and the
transactions contemplated hereby, and in connection with any future amendment,
modification or consents of or in respect of the Loan Agreement
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(whether or not adopted), including, without limitation, the reasonable fees
and expenses of each of Winston & Strawn and Wachtell, Lipton, Rosen & Katz
("Wachtell, Lipton"), counsel to the Agent and the Banks. Without limiting the
generality of the foregoing, the Guarantor hereby agrees to pay, upon receipt
thereof, each statement for reasonable fees and expenses of (i) Wachtell,
Lipton and (ii) any other advisor, counselor, consultant or accountant retained
by Wachtell, Lipton, the Banks or the Agent, rendered after the date hereof (x)
relating to the ongoing evaluation of the rights and status of the Banks with
respect to the matters contemplated by this Amendment Agreement and the
rendering of advice to the Banks with respect thereto, (y) relating to any
amendments, waivers or consents requested by the Guarantor (whether or not
adopted) pursuant to the provisions hereof or of any Loan Document or (z)
relating to any work-out or restructuring of Indebtedness of the Guarantor
after December 22, 1995. The Guarantor agrees to reasonably cooperate with and
provide information reasonably requested by any advisor, accountant, counselor,
consultant or accountant retained by the Banks, the Agent or Wachtell, Lipton.
The Guarantor also agrees to pay all reasonable fees and expenses (including
any attorneys' fees) of each of the Banks in connection with this Amendment
Agreement and the Forebearance Agreement.
(b) Counterparts. This Amendment Agreement may be executed in one
or more counterparts, each of which, when executed and delivered, shall be
deemed to be an original and all of which counterparts, taken together, shall
constitute but one and the same document with the same force and effect as if
the signatures of all of the parties were on a single counterpart, and it shall
not be necessary in making proof of this Amendment Agreement to produce more
than one (1) such counterpart.
(c) Headings. Headings used in this Amendment Agreement are for
convenience of reference only and shall not affect the construction of this
Amendment Agreement.
(d) Integration. This Agreement and the Loan Agreement (as amended
hereby) constitute the entire agreement among the parties hereto with respect
to the subject matter hereof.
(e) Governing Law. THIS AMENDMENT AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS AND DECISIONS
OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO CONFLICT OF LAWS PRINCIPLES).
(f) Binding Effect. This Amendment Agreement shall be binding upon
and inure to the benefit of and be enforceable by the Guarantor, the Agent and
the Banks and their respective
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successors and permitted assigns. This Amendment Agreement shall not be
construed so as to confer any right or benefit upon any Person other than the
Guarantor, the Borrowers, the Agent and the Banks and their respective
successors and permitted assigns.
(g) Amendment; Waiver; Status as Loan Document. The parties hereto
agree and acknowledge that nothing contained in this Amendment Agreement in any
manner or respect limits or terminates any of the provisions of the Loan
Agreement or the Guaranty other than as expressly set forth herein and further
agree and acknowledge that the Loan Agreement (as amended hereby) and the
Guaranty remains and continues in full force and effect and is hereby ratified
and confirmed. Except to the extent expressly set forth herein, the execution,
delivery and effectiveness of this Amendment Agreement shall not operate as a
waiver of any rights, power or remedy of the Banks or the Agent under the Loan
Agreement or the Guaranty or constitute a waiver of any provision of the Loan
Agreement or the Guaranty. No delay on the part of any Bank or the Agent in
exercising any of their respective rights, remedies, powers and privileges
under the Loan Agreement or partial or single exercise thereof, shall
constitute a waiver thereof. None of the terms and conditions of this
Amendment Agreement may be changed, waived, modified or varied in any manner
whatsoever, except in accordance with Section 9.1 of the Loan Agreement. The
parties hereto agree that this Amendment Agreement shall constitute a Loan
Document for purposes of the Loan Agreement and the Guaranty.
(h) Authorization Relating to Collateral and Intercreditor
Agreement. Each of the Banks hereby authorizes the Agent to (i) execute the
Collateral and Intercreditor Agreement dated as of the date hereof and
relating to the sharing of collateral pledged to secure Indebtedness under the
Letter of Credit Issuance Agreement among the financial institutions party to
the Letter of Credit Issuance Agreement, the Agent and the agents under the
Other Credit Facilities (including the Agent) and the Big Beaver II Credit
Facility and (ii) distribute any amount received pursuant to the sharing
provisions thereof in the manner contemplated by the Loan Agreement.
8. Reaffirmation of Guaranty. The Guarantor hereby agrees and
acknowledges that the Guaranty is in full force and effect and shall continue
to be in full force and effect after any of the provisions of this Amendment
Agreement shall become effective. The Guaranty is hereby reaffirmed as of the
date hereof in all respects by Kmart Corporation and the obligations guaranteed
under the Guaranty shall include the Borrowers' Obligations under the Loan
Agreement as amended, restated, modified or supplemented and in effect from
time to time, including
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any amendment thereto contemplated by this Amendment Agreement. The
Guarantor agrees that the representations and warranties in the Guaranty are
true and correct in all material respects on and as of the date hereof as if
made on the date hereof.
[Balance of page left intentionally blank; signature pages follow.]
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IN WITNESS WHEREOF, the Borrowers, the Agent and the Banks have executed
this Amendment Agreement as of the date first above written.
THE GUARANTOR:
KMART CORPORATION
By: ________________________________________
Title: _____________________________________
THE BORROWERS:
KMART CORPORATION
By: ________________________________________
Title: _____________________________________
[Big Beaver I Signature Pages]
<PAGE> 242
SECOND AMENDMENT TO LOAN AGREEMENT
This Second Amendment to Loan Agreement (this "Amendment Agreement")
is entered into as of December 22, 1995 by and among Kmart Corporation and
certain other entities in their capacities as borrowers (collectively, the
"Borrowers"), Kmart Corporation in its capacity as the guarantor of the
Borrowers' obligations (collectively, with its capacity as a Borrower, the
"Guarantor"), the undersigned financial institutions (the "Banks") and [ ]
as Agent (the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrowers, the Banks and the Agent are parties to that
certain Loan Agreement dated as of August 7, 1992 (as amended, restated,
modified, or supplemented and in effect from time to time, the "Loan
Agreement") pursuant to which the Banks have provided to the Borrowers certain
credit facilities); and
WHEREAS, the Borrowers have requested that the Loan Agreement be
amended in certain respects as set forth herein, and the Banks and the Agent
are agreeable to the same, subject to the terms and conditions herein set
forth;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. Defined Terms. Capitalized terms used herein and not otherwise
defined herein shall have the meanings attributed to such terms in the Loan
Agreement, as amended hereby.
2. Amendments to Loan Agreement.
2.1 Section 1.01 of the Loan Agreement is hereby amended by
(a) amending and restating the definitions of "Borrowing Margin", "Consolidated
Net Worth", "EBITDAR", "Facility Termination Date", and "Guarantor
Restructuring" to read as follows:
"Borrowing Margin" means three and one-half percent (3.50%).
"Consolidated Net Worth" means as of the date of any determination
thereof, the consolidated net worth of the
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Guarantor, determined in accordance with GAAP; provided,
however, that any gains or losses from the disposition of any
Specialty Retail Subsidiary (or from any write-downs of the
Guarantor's investment in any Specialty Retail Subsidiary in Builder's
Square, Inc., Kmart Canada Ltd., Kmart CR a.s., Kmart SR a.s. and
Kmart s.r.o. permitted under the Financial Accounting Standards Board
Statement No. 121 prior to any such disposition) and any changes after
the Closing Date in the foreign currency translation adjustment
account as presented in the Guarantor's financial statements (and in
accordance with GAAP) shall be excluded from the determination of
Consolidated Net Worth.
"EBITDAR" means, for any applicable period, for the Guarantor
the aggregate of the following, without duplication: (a) consolidated
net income for such period, plus (b) consolidated interest expense
(net of any interest income) for such period, plus (c) consolidated
provision for taxes for such period, plus (d) consolidated
depreciation expense for such period, plus (e) consolidated
amortization expense for such period, plus (f) consolidated Rent
Expenses for such period, minus (or plus, as applicable) (g) on a
consolidated basis, any extraordinary gains (or plus extraordinary
losses) for such period (including any loss resulting from any
write-downs of the Guarantor's investment in Builder's Square, Inc.,
Kmart Canada Ltd., Kmart CR a.s., Kmart SR a.s. or Kmart s.r.o.
permitted under the Financial Accounting Standards Board Statement No.
121), minus (or plus, as applicable) (h) any gains (or plus any
losses) attributable to the Specialty Retail Subsidiaries for such
period other than results of operations in the ordinary course of
business, plus (i) solely with respect to the four fiscal quarters
ending in October 1994, the $1.348 billion restructuring charge
recorded in the fourth fiscal quarter of the Guarantor's fiscal year
ending January 26, 1994, minus (or plus, as applicable) (j) any gains
(or losses) realized from the sale of Kmart Canada Ltd. and each of
its Subsidiaries, Kmart CR a.s. (Czech operations), Kmart SR a.s.
(Slovak operations) and Kmart s.r.o. (servicer of Czech and Slovak
operations).
"Facility Termination Date" shall mean the earliest to occur
of:
(i) February 28, 1997, or
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(ii) the date on which the Total Commitment shall have been
reduced to $0 pursuant to this Agreement, or
(iii) the date, if any, of the acceleration of all of the
Loans in accordance with Section 7.1 or 7.2 hereof.
"Guarantor Restructuring" means any of: (a) any merger or
consolidation of the Guarantor with any other Person, but excluding
any merger or consolidation:
(i) in which the successor formed by or resulting from such
merger or consolidation is Kmart Corporation or a Subsidiary of
Kmart Corporation and, if the survivor is a Subsidiary of Kmart
Corporation, such Subsidiary shall affirm the obligations of
Kmart Corporation under the Loan Documents in writing; and
(ii) occurring while no Unmatured Guarantor Event of Default or
Guarantor Event of Default exists; and
(iii) which will not otherwise give rise to or cause an
Unmatured Guarantor Event of Default or a Guarantor Event of
Default;
and (b) any sale, assignment, lease, conveyance, transfer or
other disposition (whether in one or a series of transactions) of any
property (including accounts and notes receivable, with or without
recourse), but excluding any Permitted Disposition of a Specialty
Retail Subsidiary and also excluding any of the following:
(i) dispositions of inventory, or used, worn-out or surplus
equipment, all in the ordinary course of business; and/or
(ii) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar
replacement equipment, or the proceeds of such sale are
reasonably promptly applied to the purchase price of such
replacement equipment; and/or
(iii) dispositions of inventory or equipment by Kmart
Corporation to any Subsidiary pursuant to reasonable business
requirements; and/or
(iv) dispositions of Scheduled Assets;
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(v) other dispositions of assets having, in any fiscal year of
Kmart Corporation, an aggregate book value not exceeding 10% of
Kmart Corporation's consolidated total assets as of the end of
the most recently ended fiscal year of Kmart Corporation, as
reflected in Kmart Corporation's balance sheet contained in its
audited financial statements for such fiscal year.
(b) deleting the definition of "Deposited Monies";
and (b) adding the definitions of "Bank Setoff and Sharing Agreement",
"Big Beaver I Credit Facility", "Capitalized Lease Obligations", "Cash
Equivalents", "Ceiling Amount", "Deposits", "Deposit Threshold", "Kmart Bank
Group", "New Indebtedness", "Letter of Credit Issuance Agreement", "Other
Credit Facilities", "Real Estate Debt", "Real Estate Debt Documents", "Required
Deposit Amount", "Restricted Payment", "Restructuring and Repurchase
Agreement", "Restructuring Closing Date", "Restructuring Effective Date",
"Scheduled Assets", "Seasonal Credit Agreement", "Set-Off and Sharing
Agreement" and "Warehouse Facility Credit Agreement" as follows:
"Bank Setoff Sharing Agreement" means that certain Bank Setoff
Sharing Agreement dated as of the Restructuring Effective Date among
the Banks party thereto, the Guarantor and [ ], as agent.
"Big Beaver I Credit Facility" means the revolving credit
facility evidenced by that certain Loan Agreement dated as of January
21, 1992 among the borrowers named therein, the financial institutions
signatory thereto, and [ ] as Managing Agent, as amended through
the date hereof and as further amended, restated, supplemented or
modified from time to time.
"Capitalized Lease Obligations" means, in relation to any
Person, obligations for the payment of rent for any real or personal
property under leases or agreements to lease that, in accordance with
GAAP, have been or should be capitalized on the books of the lessee
and, for purposes hereof, the amount of any such obligation shall be
the capitalized amount thereof determined in accordance with GAAP.
"Cash Equivalents" means investments substantially of the type
described on Schedule 1.01(c) hereof.
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"Ceiling Amount" means, at any time of determination, eighty
two million, seventeen thousand, nine hundred twenty one dollars
($82,017,921) less the aggregate amount of payments made in respect of
the Loans after the Restructuring Effective Date pursuant to Section
3.4(c) as such amount may be increased from time to time with the
consent of all of the Banks.
"Deposits" has the meaning specified in Section 5.3.
"Deposit Threshold" means, at any time, the sum of (a)
$400,000,000 plus (b) an amount equal to (i) the increase in the fair
market value (as determined based on appraisals satisfactory to the
Agent) of collateral securing the Real Estate Debt arising from the
substitution of collateral after the Restructuring Effective Date to
the extent permitted by Section 5.9(e) upon an event of casualty,
condemnation or eminent domain event, or upon the existence of an
environmental condition, (but in any event excluding a substitution of
collateral resulting from the single store collateral substitution
obligation existing on the Restructuring Effective Date and resulting
from a store closing in September, 1995 with respect to the Deal 2
Notes (as defined in the Restructuring and Repurchase Agreement); to
the extent such substitution is permitted under the Real Estate Debt
Documents as in effect on the Restructuring Closing Date, multiplied
by a fraction, the numerator of which is equal to the sum of the
outstanding obligations under this Agreement, the Other Credit
Facilities and the Big Beaver I Credit Facility at the time of such
substitution and the denominator of which is equal to the Real Estate
Debt outstanding at the time of such substitution, less (ii) the fair
market value (as determined based on appraisals satisfactory to the
Agent) of any property pledged to secure the outstanding obligations
under this Agreement, the Other Credit Facilities and the Big Beaver I
Credit Facility concurrently with such pledge of substituted
collateral to the holders of the Real Estate Debt.
"Kmart Bank Group" means the lending institutions party to one
or more of this Agreement, the Other Credit Facilities and the Big
Beaver I Credit Facility.
"Letter of Credit Issuance Agreement" means that certain
Letter of Credit Issuance Agreement dated as of the Restructuring
Closing Date between the Guarantor and certain banks, pursuant to
which such banks agreed to issue trade letters of credit and standby
letters of credit on the terms and subject to the conditions provided
for
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<PAGE> 247
therein, as amended, restated, supplemented or modified from time to
time.
"New Indebtedness" means Indebtedness incurred by the
Guarantor or any of its Subsidiaries after the Restructuring Effective
Date other than (i) any Indebtedness under this Agreement, the Other
Credit Facilities or the Big Beaver I Credit Facility, (ii)
Indebtedness under or Indebtedness refunding or refinancing the Real
Estate Debt or (iii) Indebtedness refunding or refinancing unsecured
Indebtedness of the Guarantor outstanding on the Restructuring
Effective Date. Indebtedness outstanding under the Letter of Credit
Issuance Agreement shall constitute New Indebtedness.
"Other Credit Facilities" means, collectively: (a) the
revolving credit facility evidenced by that certain Three Year Credit
Agreement dated as of October 7, 1994 among the Guarantor, [ ], as
documentation agent thereunder, and the financial institutions
signatory thereto, as amended, restated, supplemented or modified from
time to time; (b) the revolving credit facility evidenced by that
certain 364 Day Credit Agreement dated as of October 5, 1995 among the
Guarantor, [ ], as documentation agent thereunder, and the
financial institutions signatory thereto, as amended, restated,
supplemented or modified from time to time, (c) the Seasonal Credit
Agreement; and (d) the Warehouse Facility Credit Agreement.
"Real Estate Debt" means the Indebtedness outstanding under
the agreements listed on Schedule 1.01(a) hereto.
"Real Estate Debt Documents" means the Restructuring and
Repurchase Agreement and the documents and instruments relating to the
Real Estate Debt, as in effect as of the Restructuring Effective Date,
including the related note purchase agreements, indentures, trust
agreements, put agreements, promissory notes, mortgages, deeds of
trust, leases and other security documents and the documents described
as the "Existing Transaction Documents" in the Restructuring and
Repurchase Agreement.
"Required Deposit Amount" has the meaning specified in Section
5.3.
"Restricted Payment" means, with respect to any Person, (a)
any dividend or other distribution, direct or indirect, or the
incurrence of any liability to make any
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other payment or distribution of cash or other property or assets in
respect of such Person's capital stock (which shall include, without
limitation, preferred stock, common stock, options, warrants or any
other equity security), (b) any payment on account of the purchase,
prepayment, conversion, exchange, redemption, retirement, surrender or
acquisition of such Person's capital stock or any other payment or
distribution made in respect thereof, either directly or indirectly,
and (c) any purchase or other acquisition or payment in respect of any
option, warrant or other right to acquire any of or any interest in
such Person's capital stock; provided, that "Restricted Payment" shall
not include (i) any dividend payable solely in shares of its capital
stock, (ii) any purchase or exchange of existing employee stock
options for consideration consisting solely of new employee stock
options or (iii) any purchase of capital stock or options to acquire
the same from directors, officers and employees of the Guarantor and
its Subsidiaries consistent with past practices in connection with
ordinary course employment and severance arrangements and in an
aggregate amount that shall not exceed $5,000,000 for all such
purchases pursuant to this clause (iii).
"Restructuring and Repurchase Agreement" means that certain
Restructuring and Repurchase Agreement dated as of December 22, 1995
by and among the Guarantor, certain holders of the Real Estate Debt
parties thereto and certain other Persons.
"Restructuring Closing Date" means the date upon which each of
the conditions precedent set forth in Section 4 of that certain Second
Amendment to Loan Agreement dated as of December 22, 1995 by and among
the Guarantor, the Borrowers, the Banks and the Documentation Agent
have been satisfied.
"Restructuring Effective Date" means December 22, 1995.
"Scheduled Assets" means the assets of the Guarantor
identified on Schedule 1.01(b) hereto.
"Seasonal Credit Agreement" means that certain Seasonal Credit
Agreement dated as of October 5, 1995 among the Guarantor, [ ], as
documentation agent thereunder, and the financial institutions
signatory thereto, as amended, restated, supplemented or modified
from time to time.
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"Set-off and Sharing Agreement" means that certain Set-Off and
Sharing Agreement dated as of the Restructuring Closing Date among the
holders of the Real Estate Debt and the institutions in the Kmart Bank
Group party thereto.
"Warehouse Facility Credit Agreement" means that certain
Warehouse Facility Credit Agreement dated as of October 7, 1994 among
the Guarantor, the other borrowers named therein, [ ], as
documentation agent thereunder, and the financial institutions
signatory thereto, as amended, restated, supplemented or modified
from time to time.
2.2 Article II of the Loan Agreement is hereby amended as
follows:
(a) Section 2.1 is hereby deleted in its entirety and replaced
with the following:
2.1 Loans. Each Bank, severally and for itself alone, hereby
agrees, on the terms and subject to the conditions hereinafter set
forth, to make loans to one or more of the Borrowers, on the date
requested from time to time from and after the date of this Agreement
to, but not including, the Facility Termination Date, in the Pro Rata
Share of such Bank of such amounts as a Borrower may request, but not
exceeding: (i) in the aggregate at any one time outstanding, the Loan
Commitment of such Bank minus such Bank's Pro Rata Share of the
aggregate Stated Amount of Letters of Credit (including such Bank's
Pro Rata Share of the aggregate proposed Stated Amount of all
requested Letters of Credit); or (ii) with respect to any Project,
such Bank's Project Commitment for such Project minus such Bank's Pro
Rata Share of the aggregate Stated Amount of Letters of Credit
relating to such Project (including such Bank's Pro Rata Share of the
aggregate proposed Stated Amount of all requested Letters of Credit
relating to such Project); provided that without the prior written
consent of all of the Banks, after giving effect to any Borrowing, the
aggregate outstanding amount of all Loans plus the aggregate Stated
Amount of Letters of Credit shall not exceed the Ceiling Amount.
(b) Section 2.5 is hereby amended by deleting paragraph
(a) thereof in its entirety and replacing it with the following:
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(a) Each Borrower hereunder shall be entitled to request only
one Borrowing (other than Roll-Over Borrowings) per month, and all
Loans to all Borrowers in any month shall be funded on the same date,
which shall be a Monthly Borrowing Date. Subject to Section 2.5(c)
hereof, on or before ten (10) Business Days prior to the Monthly
Borrowing Date in any month in which any Borrower desires to obtain a
Eurodollar Rate Loan hereunder or a Prime Rate Loan hereunder,
such Borrower shall give the Agent, at its office located at [ ],
telecopied notice (given not later than 11:00 A.M. (New York time) and
confirmed in writing) of the amount which such Borrower desires to
borrow as a Borrowing hereunder during such month. Each such notice
(each a "Notice of Borrowing"), which shall be in the form of Exhibit
E hereto, shall become irrevocable on the date which is three (3)
Business Days prior to the applicable borrowing date and shall specify
the Project for which such Borrowing will be used, the amount of such
Borrowing, the date of Borrowing (which shall be a Monthly Borrowing
Date), and shall (i) certify that construction of the Project has
proceeded to such date within the overall Project Budget and Borrower
reasonably believes that completion of the construction of the Project
within the overall Project Budget will occur, (ii) provide by line
item in the Project Budget a summary of amounts expended prior to the
date of such requested Borrowing and amounts intended to be expended
from proceeds of such Borrowing and (iii) certify as such other
matters with respect to the relevant Project and the applicable
Borrower as may from time to time be required by the Agent. In the
event that the applicable Borrower is unable to certify as to any of
the matters required to be set forth in the Notice of Borrowing and
certified by such Borrower, or in the event of any inaccuracy or
discrepancy contained therein, the Agent and the Banks shall not be
required to make the Borrowing so requested unless and until such
certifications, inaccuracies or discrepancies are remedied to the
Agent's satisfaction. On or before three (3) Business Days prior to
any date of Borrowing hereunder, the applicable Borrower shall give to
the Agent at its address specified in this Section 2.5(a), a Rate
Selection Notice with respect to such Borrowing. The Agent shall
promptly give each Bank telephonic notice (confirmed in writing) of
each proposed Borrowing, of such Bank's proportionate
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share thereof and of the other relevant matters covered by the Notice
of Borrowing and Rate Selection Notice. Without in any way limiting
each Borrower's obligation to confirm in writing any telephonic
notice, the Agent may act without liability upon the basis of
telephonic notice believed by the Agent in good faith to be from such
Borrower prior to receipt of written confirmation, each Borrower
hereby waiving the right to dispute the Agent's record of the terms of
such telephonic notice. Schedule 2.5(a) hereto sets forth, by way of
example, the dates of notices and actions required by this Section
2.5(a). Notwithstanding anything to the contrary in this Agreement,
no Borrowing shall be made without the prior written consent of all of
the Banks if the aggregate outstanding amount of all Loans plus the
aggregate Stated Amount of Letters of Credit would exceed the Ceiling
Amount after giving effect to any such Borrowing.
(c) Section 2.7(a) is hereby amended and restated in its entirety
to read as follows:
(a) Each Borrower agrees to pay interest in respect of the
unpaid principal amount of each Prime Rate Loan made to such Borrower
from the date the proceeds thereof are made available to such Borrower
until maturity (whether by acceleration or otherwise) of such Prime Rate
Loan, or until such Prime Rate Loan is converted into a Eurodollar Rate
Loan, at a fluctuating rate per annum equal to the Prime Rate in effect
from time to time plus two and one-half percent (2.50%). Except as
otherwise provided for herein, all other Obligations not paid when due
shall bear interest at the rate then borne by Prime Rate Loans (which is
the Prime Rate in effect from time to time plus two and one-half percent
(2.50%), subject to Section 2.7(c) below).
(d) Section 2.7(c) is hereby amended and restated in its entirety
to read as follows:
(c) Notwithstanding the rates of interest specified in
clauses (a) and (b) above and the payment dates specified below,
effective immediately upon the occurrence of any Guarantor Event of Default
and for so long thereafter as any such Guarantor Event of Default shall be
continuing, the principal balance of each Loan then outstanding and, to the
extent permitted by applicable law, any interest payment on each Loan not
paid when due, shall bear
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interest payable upon demand, after as well as before judgment, at a
rate per annum equal to the greater of (i) the Prime Rate in effect from
time to time plus four and one-half percent (4.50%) or, (ii) if applicable,
the Eurodollar Rate plus five and one-half percent (5.50%) (such rate of
interest being the "Default Rate").
(e) Subsection (a) of Section 2.13 is hereby amended by adding the
following sentence at the end thereof:
"Notwithstanding anything in this Agreement to the contrary, no Letters
of Credit shall be requested or issued on and after the Restructuring
Effective Date."
2.3 Article III of the Loan Agreement is hereby amended as
follows:
(a) Section 3.4 is hereby amended by (i) renumbering subsection
(c) thereof as subsection (d) and inserting a new subsection (c) that shall
read as follows:
(c) If any principal payment is made to the holders of the
Real Estate Debt (except to the extent that such payment to the holders
of the Real Estate Debt was triggered by (x) a mandatory prepayment
pursuant to this Section 3.4(c) or (y) a prepayment made under the Big
Beaver I Credit Facility and the Other Credit Facilities which results in a
ratable reduction of the Total Commitment and to the Ceiling Amount in
accordance with the next sentence of this Section 3.4(c)), the Guarantor
shall cause to be made concurrently a permanent reduction in the Total
Commitment and to the Ceiling Amount, in an amount (the "RE Reduction
Amount") equal to such payment multiplied by a fraction, the numerator of
which equals the Ceiling Amount (as in effect immediately prior to such
prepayment of principal in respect of the Real Estate Debt) and the
denominator of which equals the aggregate amount outstanding under the Real
Estate Debt immediately prior to such payment. In addition, the Guarantor
shall cause to be made a permanent reduction in the Total Commitment and to
the Ceiling Amount, concurrently with the making of any principal payment
in respect of the Big Beaver I Credit Facility or the Other Credit
Facilities (other than (i) mandatory prepayments under the Big Beaver I
Credit Facility or the Warehouse Facility Credit Agreement as a result of a
project disposition or project refinancing and (ii) prepayments under the
Other Credit Facilities and the Big Beaver I Credit Facility required as a
result of prepayments under the Real Estate Debt or under this Agreement),
in an amount, (the "Bank Reduction Amount") equal to such
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payment multiplied by a fraction, the numerator of which equals the
Ceiling Amount (as in effect immediately prior to such prepayment of
principal under the Big Beaver I Credit Facility or any such Other Credit
Facilities) and the denominator of which equals the aggregate amount
outstanding under the facility receiving the payment immediately prior to
the making of such payment. Concurrently with each such reduction, the
Guarantor shall ratably prepay the outstanding Loans in an amount equal to
the RE Reduction Amount or the Bank Reduction Amount, as the case may be,
together with accrued interest to such date on the amount prepaid and the
amounts required pursuant to Section 2.10. Such prepayment amount and
reduction of the Total Commitment shall ratably reduce each Bank's
outstanding Loans and Loan Commitment in accordance with its Pro Rata
Share. Furthermore, if for any reason, the aggregate principal amount of
all outstanding Loans plus the aggregate Stated Amount of Letters of Credit
exceeds the Ceiling Amount, then, unless all of the Banks otherwise consent
in writing, the Guarantor shall immediately prepay the Loans in the amount
of such excess. Any prepayment made by the Guarantor pursuant to this
Section 3.4(c) shall be treated and accounted for solely for the purposes
hereof as a payment by the Guarantor under the Guaranty.
(b) Section 3.5 is hereby amended and restated to read as follows:
3.5 Other Provisions With Respect to Prepayments. Except as
otherwise provided herein, any repayment of a Eurodollar Rate Loan
which shall be made prior to the end of the applicable Interest Period for
such Loan shall be subject to the provisions of Section 2.10 hereof.
(c) Section 3.10 is hereby amended and restated to read as
follows:
"Section 3.10 [INTENTIONALLY OMITTED]"
2.4 Article IV of the Loan Agreement is hereby amended by
inserting, immediately before the period at the end of Section 4.1(j), the
following:
; provided, however, that any past or future reduction in the Guarantor's
credit rating or decline in the market price of the Guarantor's stock shall
not of themselves be deemed to constitute a material adverse change for
the purpose hereof.
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2.5 Article V of the Loan Agreement is hereby amended as follows:
(a) Subsection (a) of Section 5.1 is amended by (i) deleting the word
"and" at the end of clause (iv) thereof, (ii) renumbering clause (v) as clause
(iv) and (iii) adding the following new clause (iv) therein:
(iv) With respect to the Guarantor, the information described
on Schedule 5.1 within the time periods therein specified, and
(b) New sections 5.3, 5.4. 5.5, 5.6. 5.7, 5.8 and 5.9 are
hereby added as follows:
Section 5.3 Affirmative Covenant Relating to Maintenance of
Deposits. The Guarantor shall at all times maintain with one or more
financial institutions that are members of the Kmart Bank Group and
that are party to the Bank Setoff Sharing Agreement cash and Cash
Equivalents on deposit (the "Deposits") in an aggregate amount not
less than the lesser of (a) the Deposit Threshold and (b) the total
amount of all cash and Cash Equivalents of the Guarantor and its
Subsidiaries (other than cash and Cash Equivalents maintained at Kmart
Canada, Ltd. and its subsidiaries or at Kmart CR a.s. (Czech
operations) in the ordinary course, consistent with past practices) at
such time (the "Required Deposit Amount"); provided, that any amounts
maintained in store depository accounts with depository institutions
which are not members of the Kmart Bank Group as required by the
Guarantor's business operations in the normal course of business
consistent with past practices shall not be considered cash or Cash
Equivalents for the purposes of clause (b) of this Section 5.3.
Section 5.4 Affirmative Covenant Regarding Most Favored
Lender Status. If the Guarantor, or any Subsidiary of the Guarantor
or any obligor under the Real Estate Debt shall at any time, directly
or indirectly, amend, restate or otherwise modify any of the Real
Estate Debt Documents, in any manner which would have the effect of
(i) adding any new or additional covenants or defaults applicable to a
Borrower or a Subsidiary of a Borrower, (ii) amending in a manner more
beneficial to the holders of such Real Estate Debt or in a manner more
onerous to the Guarantor, any Subsidiary or any obligor under the Real
Estate Debt, any covenant or default under such Real Estate Debt
applicable to a Borrower or a Subsidiary of a Borrower or (iii)
otherwise enhancing the rights and benefits of any holder of the Real
Estate Debt against a
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Borrower or any Subsidiary of the Borrower, then, in each such event,
the Borrowers shall concurrently enter into or cause to be entered
into such amendments to this Agreement and such other documents and
instruments, in form and substance reasonably satisfactory to the
Required Banks, as shall be necessary to afford the Banks the same or
equivalent benefits and rights as such amendments to, or other
agreements in respect of, the Real Estate Debt Documents afford the
holders of the Real Estate Debt; provided that any such new or
additional covenants or defaults, amended covenants or defaults, or
enhanced rights and benefits shall be deemed automatically
incorporated herein by reference in the event such modifications are
made to the Real Estate Debt Documents without the Borrowers entering
into concurrent amendments as required by this Section 5.4.
Section 5.5 Negative Covenant of Kmart Corporation Regarding
Restricted Payments. The Guarantor shall not, nor shall it permit any
of its Subsidiaries to, declare, order, make or pay, or set aside any
sum for, any Restricted Payment, except that (a) any Subsidiary may
declare and pay dividends to the Guarantor, (b) Kmart Corporation may
pay dividends in respect of its common stock which were declared prior
to December 31, 1995 and (c) the Guarantor may declare and pay
dividends in respect of any of its preferred stock issued and
outstanding as of the Restructuring Effective Date until, for any
particular shares of preferred stock, such time as Kmart Corporation
shall have declined any bona fide offer from any holder of any such
preferred stock to convert or enter into an agreement to convert such
preferred stock into common stock of the Guarantor.
5.6 Negative Covenant of Kmart Corporation Regarding
Payment of Indebtedness. (a) During the period from December 17, 1995
through February 28, 1997, the Guarantor shall not, nor shall it
permit any of its Subsidiaries (other than payments by Kmart Canada,
Ltd. or its subsidiaries or by Kmart CR a.s. (Czech operations) in
respect of such Person's respective Indebtedness in existence as of the
Restructuring Effective Date or New Indebtedness incurred by such
Persons in the ordinary course of business consistent with past
practices) to, directly or indirectly, make any principal payment, in
respect of any Real Estate Debt or any other Indebtedness (including
by way of purchase, refinancing defeasance or other direct or indirect
transfer of cash consideration to the holders thereof; provided that
the Guarantor may exchange any of its outstanding Indebtedness for
money borrowed for shares of its
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capital stock and make cash payments to the holders of such
Indebtedness in respect of fractional shares in connection with such
exchange) other than (i) scheduled payments on the Real Estate Debt
set forth on Schedule 5.6 and capital lease payments relating to
stores securing the Real Estate Debt in an amount not to exceed
$9,000,000 in the aggregate; provided that concurrently with making
such payments, the Guarantor makes a ratable repayment of the Loans
hereunder as required pursuant to Section 3.4 (c) hereof, (ii)
scheduled payments of other mortgage indebtedness in existence as of
the Restructuring Effective Date in an amount not to exceed
$12,000,000 in the aggregate, (iii) payments made pursuant to
guaranties of existing leases of former Subsidiaries of the Guarantor;
provided; that such payments may only be made with respect to rents so
guaranteed as and when the same may become due in the ordinary course
(and not on any accelerated rents that may become due as a result of a
default on the underlying lease), (iv) payments made with respect to
Spin-Off Tenant Put Options (as defined in the Restructuring and
Repurchase Agreement as in effect on the Restructuring Closing Date),
(v) ratable payments of principal of the Real Estate Debt
concurrently with the making of any payments or reduction of
commitments and ceiling amounts in respect of the Indebtedness under
this Agreement, the Other Credit Facilities or the Big Beaver I Credit
Facility or other Real Estate Debt, to the extent required pursuant to
Sections 2.2, 2.3 or 2.5 of the Restructuring and Repurchase Agreement
as in effect on the Restructuring Closing Date, (vi) ratable payments
of principal of the Other Credit Facilities and the Big Beaver I
Credit Facility concurrently with the making of any prepayments or
reduction of commitments under this Agreement, the Real Estate Debt,
any of the Other Credit Facilities or the Big Beaver I Credit Facility
to the extent required pursuant to the terms of the Other Credit
Facilities and the Big Beaver I Credit Facility as in effect on the
Restructuring Closing Date, (vii) regular, ordinary course payments of
Capitalized Lease Obligations in amounts consistent with past
practices, (viii) payments in respect of the termination of leases to
the extent that the Guarantor believes that such payments provide a
substantial benefit to the Guarantor (provided that such lease
termination payments do not exceed the lesser of (a) One Hundred
Million Dollars ($100,000,000) in the aggregate in any fiscal year of
the Guarantor and (b) One Hundred Twenty-Five Million Dollars
($125,000,000) in the aggregate for all such payments), (ix) repayment
of Indebtedness secured by Liens or real property in connection with
the sale or other disposition of such real property provided that the
Guarantor or such Subsidiary receives net cash proceeds in such sale
or disposition in excess of the Indebtedness required to be repaid,
(x) mandatory principal payments under the Big Beaver I Credit
Facility and the Warehouse Facility Credit Agreement as a result of a
project disposition or project refinancing, (xi) principal payments
under this Agreement, (xii) ratable principal payments under this
Agreement, the Other Credit Facilities and the Big Beaver I Credit
Facility in accordance with Section 5.8, (xiii) payments in respect of
New Indebtedness, (xiv) payments of reimbursement obligations under
letters of credit issued under the Letter of Credit Issuance
Agreement; provided that such payments do not reduce the commitments
thereunder except to the extent provided under the Letter of
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Credit Issuance Agreement as in effect on the Restructuring
Closing Date, (xv) payments of reimbursement obligations under letters
of credit issued under the credit facility described in clause (a) of
the definition of Other Credit Facilities and (xvi) other payments of
principal in respect of Indebtedness in an aggregate amount that shall
not exceed the lesser of (a) Fifty Million Dollars ($50,000,000) in
any fiscal year of the Guarantor and (b) Seventy-Five Million Dollars
($75,000,000) in the aggregate for all such payments, but only with
respect to Indebtedness other than (1) Real Estate Debt and (2)
Indebtedness under the Other Credit Facilities and the Big Beaver I
Credit Facility.
(b) During the period from December 17, 1995 through October 3,
1997, the Guarantor shall not, nor shall it permit any Subsidiary
(other than payments by Kmart Canada, Ltd. or its subsidiaries or by
Kmart CR a.s. (Czech operations) in respect of such Person's
respective Indebtedness in existence as of the Restructuring Effective
Date or New Indebtedness incurred by such Person in the ordinary
course of business, consistent with past practices) to, directly or
indirectly, make any principal payment in respect of any Real Estate
Debt or any other Indebtedness (including by way of purchase,
refinancing, defeasance or other direct or indirect transfer of cash
consideration to the holders thereof; provided that the Guarantor may
exchange any of its outstanding Indebtedness for money borrowed for
shares of its capital stock and make cash payments to the holders of
such Indebtedness in respect of fractional shares) other than (i)
scheduled principal payments on such Indebtedness, (ii) repayments of
Indebtedness of the type permitted under Sections 5.6(a)(iii), (iv),
(v), (vi), (ix), (x), (xi), (xii), (xiii), (xiv) and (xv), (ii)
payments in respect of the termination of leases to the extent that
the Guarantor believes that such payments provide a substantial
benefit to the Guarantor, provided that such lease termination
payments do not exceed the lesser of (a) One Hundred Million Dollars
($100,000,000) in the aggregate in any fiscal year of the Guarantor
and (b) One Hundred Twenty-Five Million Dollars ($125,000,000) in the
aggregate for all such payments and (iii) other payments of principal
in respect of Indebtedness in an aggregate amount that shall not
exceed the lesser of (a) Fifty Million Dollars ($50,000,000) in the
aggregate in any fiscal year of the Guarantor and (b) Seventy-Five
Million Dollars ($75,000,000) in the aggregate for all such payments,
but only with respect to Indebtedness other than (1) Real Estate Debt
and (2) Indebtedness under the Other Credit Facilities and the Big
Beaver I Credit Facility.
5.7 Covenant of Kmart Corporation Regarding Amendment of Real
Estate Debt Documents. The Guarantor shall not, nor shall it permit
any of its Subsidiaries, to amend, restate or otherwise modify any of
the documents relating to or governing any Real Estate Debt in any
manner which would, directly or indirectly, (a) provide for an
interest rate payable on such Real Estate Debt in excess of the
interest rate provided for in the Real Estate Debt Documents unless
this Agreement shall have been amended, concurrently with such
increase in the interest rate payable on such Real Estate Debt, to
increase the interest rates set forth herein by an amount equal to
such excess, (b) to provide for the payment of any fees in addition to
the fees payable under such Real Estate Debt Documents (or provide for
any increase in existing fees payable thereunder) unless this
Agreement shall have been amended, concurrently with the agreement to
pay such new or increased fees, to provide for an equivalent fee to
the Banks in a dollar amount equal to such new fee (or the aggregate
amount of any increase in existing fees) multiplied by a fraction the
numerator of which equals the Ceiling Amount and the denominator of
which equals the aggregate amount outstanding under the Real Estate
Debt at such time or (c) provide for any clarification of any
mortgagee's, tenant's or landlord's rights and obligations under the
federal bankruptcy code or similar law with respect to ground leases
or similar arrangements.
5.8 Covenant of Kmart Corporation Regarding Ratable Payment
of Bank Facilities. The Guarantor shall not, nor shall it permit any
of its Subsidiaries to, directly or indirectly, make any principal
payment, in respect of the Big Beaver I Credit Facility or the Other
Credit Facilities (other than (i) mandatory prepayments under the Big
Beaver I Credit Facility or the Warehouse Facility Credit
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Agreement as a result of a project disposition or project refinancing
and (ii) ratable payments of principal of the Other Credit Facilities
and the Big Beaver I Credit Facility concurrently with the making of
any prepayments or reduction of commitments under this Agreement, the
Real Estate Debt, any of the Other Credit Facilities or the Big Beaver
I Credit Facility to the extent required pursuant to the provisions of
the Other Credit Facilities and the Big Beaver I Credit Facility as in
effect on the Restructuring Closing Date, which provisions are
substantially similar to Section 3.4(c) hereof) unless Kmart
Corporation shall concurrently make a permanent ratable reduction to
the Total Commitment and the Ceiling Amount together with a repayment
of the outstanding Loans to the extent required by Section 3.4.
5.9 Limitation on Liens of Kmart Corporation. The Guarantor
shall not, and shall not permit any of its Subsidiaries (other than
Liens granted by Kmart Canada Ltd. and its subsidiaries or by Kmart CR
a.s. on such Person's respective assets prior to the Restructuring
Effective Date) to, create, incur or suffer to exist any Lien on any
assets of the Guarantor or any of its Subsidiaries, whether now owned
or hereafter acquired; provided, however, that such restriction shall
not apply with respect to any of the following types of Liens:
(a) Liens for taxes not delinquent or being contested in good
faith;
(b) Liens created and deposits made in connection with
workers' compensation, unemployment insurance and other social
security legislation, or to secure the performance of bids,
tenders, contracts (other than for the repayment of borrowed
money), statutory obligations, surety and appeal bonds and
other similar obligations incurred in the ordinary course and
Liens securing obligations to mechanics, materialmen, bailees,
warehousemen and similar Liens arising under operation of law
and incurred in the ordinary course of business;
(c) purchase money mortgages (including vendors' rights under
purchase or land contracts or under other agreements whereby
title or another interest is retained by the vendor for the
purpose of securing the purchase price thereof) on property
acquired or constructed after the Restructuring Effective
Date, or the acquisition after the Restructuring Effective
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Date of property subject to such a Lien which is limited to
such property and was not created in anticipation of such
acquisition;
(d) mortgages, security interests and Liens on assets of the
Guarantor or any of its Subsidiaries existing on the
Restructuring Effective Date, and set forth on Schedule 5.9
which secure any Indebtedness of the Guarantor or any such
Subsidiary, or any refundings or extensions for an amount not
exceeding the principal amount of such Indebtedness so long as
such refundings or extensions are secured only by the same
property or assets;
(e) Liens on property of the Guarantor or any of its
Subsidiaries created concurrently with the release of existing
Liens on other property of the Guarantor or any such
Subsidiary, as provided under the Real Estate Debt Documents,
but only (i) if such substitution is one of several
alternative actions available to the obligor under such Real
Estate Debt, of which such obligor must choose one, following
the occurrence of a condemnation, casualty or eminent domain
event, or upon the existence of an environmental condition or
(ii) in respect of a substitution of collateral resulting from
the single store collateral substitution obligation existing
on the Restructuring Effective Date and resulting from a store
closing in September, 1995 with respect to the Deal 2 Notes
(as defined in the Restructuring and Repurchase Agreement);
provided that the fair market value of the property subject to
any such Lien permitted under clause (i) hereof does not
exceed one hundred ten percent (110%) of the fair market value
of the property as to which a Lien is concurrently being
released (the fair market value of the property being relieved
of such Lien being determined immediately prior to the
occurrence of such casualty or condemnation event, the
discovery of such environmental condition or the occurrence of
such store closing);
(f) Liens on Deposits in favor of the Kmart Bank Group
and Liens on cash balances of Kmart Canada Ltd. and its
subsidiaries or Kmart CR a.s. (Czech operations) maintained in
the ordinary course of business, consistent with past
practices in favor of the lenders to such entities, and Liens
on monies held in the Paydown Trust Account (as defined in the
Restructuring and Repurchase Agreement) in favor of the
holders of the Real Estate Debt;
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(g) Liens on the assets of Kmart Canada Ltd. and its
subsidiaries to secure New Indebtedness incurred by such
Persons and Liens to secure New Indebtedness (including,
without limitation, New Indebtedness incurred pursuant to the
Letter of Credit Issuance Agreement); provided that such Liens
to secure New Indebtedness shall encumber only
(i) noncurrent assets including, without limitation,
Scheduled Assets (or cash collateral pledged to
secure the Indebtedness under the Letter of Credit
Issuance Agreement in substitution of a Lien on
noncurrent assets; and
(ii) in the case of the Letter of Credit Issuance
Agreement, documents of title relating to goods which
are the subject of trade letters of credit issued by
the Trade B Banks (as defined therein) and securing
the Trade B Letters of Credit (as defined therein)
under the terms set forth in such agreement as in
effect on the Restructuring Closing Date; provided
that the percentage of the aggregate amount of all
Trade B Letters of Credit that are so secured shall
not exceed thirty-five percent (35%) (or as close to
35% as practicable in light of the face amounts of
Trade B Letters of Credit that are drawn or paid as
contemplated by the Letter of Credit Issuance
Agreement) of the Trade B Letters of Credit issued by
the Trade B Banks;
provided further that no such Lien shall be permitted under this
clause (g) to secure any unsecured Indebtedness of the Guarantor or
any of its Subsidiary outstanding on the Restructuring Effective Date
or any refundings or extension thereof; and
(h) easements, rights-of-way, zoning and similar restrictions and
other similar charges or encumbrances not interfering in any material
respect with the ordinary conduct of the business of the Guarantor and
its Subsidiaries;
(i) Liens on cash collateral to secure the Guarantor's reimbursement
obligations under letters of credit issued pursuant to the Letter of
Credit Issuance Agreement to the extent such cash collateral is
permitted under the terms thereof as in effect on the Restructuring
Closing Date; and
(j) Liens on cash collateral to secure the Guarantor's reimbursement
obligations under two standby letters of
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credit issued by [ ] after the Restructuring Effective Date in an
aggregate amount that shall not exceed the lesser of (x) 105% of the
outstanding face amount thereof or (y) $25,000,000.
2.6 Article VI of the Loan Agreement is hereby amended as
follows:
(a) Section 6.2(d) of the Loan Agreement is hereby amended and
restated to read as follows:
"(d) [INTENTIONALLY OMITTED]"
(b) Section 6.2(e) of the Loan Agreement is hereby amended and
restated to read as follows:
"(e) Since the Restructuring Effective Date, there shall
have been no material adverse change in the business,
financial condition, operations, assets or prospects of the
Guarantor and its Subsidiaries taken as a whole; provided,
however, that any past or future reduction in the Guarantor's
credit rating or decline in the market price of the Guarantor's
stock shall not of themselves be deemed to constitute a
material adverse change."
(C) Section 6.3(b) of the Loan Agreement is hereby amended by
adding, immediately after the words "Unmatured Guarantor Event of Default", the
following:
"(except to the extent that the same may result from
any failure of the Guarantor to pay on its stated maturity
all or any portion of the unpaid principal amount of the
Loans to any Bank not party to the Fourth Amendment to
Loan Agreement and Limited Forebearance dated as of
December 22, 1995 during the period commencing January 21,
1996 and ending on the Facility Termination Date)"
2.7 Article VII of the Loan Agreement is hereby amended as
follows:
(a) Paragraph (a) of Section 7.1 is hereby amended and restated to
read as follows"
"(a) [INTENTIONALLY OMITTED]"
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(b) Paragraph (b) of Section 7.1 is hereby amended and restated to
read as follows:
(b) (i) The Guarantor or any of its Material Subsidiaries, shall
default in the payment when due, whether at stated maturity or otherwise, of
any Indebtedness for Money Borrowed of the Guarantor or any of its Material
Subsidiaries, whether individually or in the aggregate, equal to or in excess
of $50 million, whether such Indebtedness now exists or shall hereafter be
created, and such default shall be uncured or unwaived after the expiration of
all applicable grace periods with respect thereto (except for any such
Indebtedness under the Big Beaver I Credit Facility for so long as any
forebearance agreement contained in the "Fourth Amendment to Loan Agreement and
Limited Forebearance" dated as of the Restructuring Effective Date as in effect
as of the Restructuring Effective Date in respect of such Indebtedness remains
in full force and effect); or (ii) breach or default by the Guarantor or any of
its Material Subsidiaries with respect to any other material term of any
evidence of any Indebtedness for Money Borrowed in excess of $50 million or of
any loan agreement, mortgage, indenture or other agreement relating thereto, if
the effect of such default or breach is to cause, or to permit the holder or
holders (or a trustee on behalf of such holder or holders) of such Indebtedness
for Money Borrowed to cause such Indebtedness for Money Borrowed to become or
be declared due prior to its stated maturity (upon the giving or receiving of
notice but after the expiration of all applicable grace periods with respect
thereto) provided, however, that with respect to Indebtedness for Money
Borrowed in respect of real property leases, no such breach or default shall be
deemed to exist if the Guarantor or Material Subsidiary, as the case may be, is
contesting in good faith the existence of such breach or default by appropriate
means and if the existence of such breach or default, if determined adversely
to the Guarantor or the Material Subsidiary, as the case may be, would not have
a material adverse effect on the Guarantor and its Subsidiaries on a
consolidated basis or (ii) there shall occur a "Triggering Event" (as defined
in the Restructuring and Repurchase Agreement); or (iii) all or any portion of
any Real Estate Debt shall otherwise mature or be declared or otherwise become
due and payable prior to October 3, 1997 (except for principal payments
permitted in Section 5.6);
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(c) Paragraphs (k) through (o) are hereby added to Section 7.1 as
follows:
(k) Payments on Real Estate Debt. The Guarantor or any
Subsidiary of the Guarantor shall make or permit to be made (either
voluntarily or otherwise) any principal payment to any holder of any
Real Estate Debt and shall fail to make a concurrent repayment of the
Obligations to the amount required pursuant to Section 3.4(c); or
(l) Unreimbursed Put Payments. There shall have occurred the
expiration of ten (10) days after the satisfaction of the following
conditions:
(i) the exercise of a Spin-Off Tenant Put Option
against the Guarantor by any Spin-Off Creditor and
(ii) the expiration of the one hundred twenty (120)
day period following the payment by the Guarantor of the
Purchase Amount in respect of such exercise, if, upon such
expiration, the aggregate amount of Unreimbursed Put Payments
(after giving effect to all amounts received by Guarantor from
(i) the sale or other disposition of the relevant tendered
securities and/or any asset or assets securing the same and
(ii) any other Person that is obligated, directly or
indirectly, in respect of the relevant Spin-Off Tenant Put
Option or otherwise makes any payment with respect thereto) in
respect of (1) such exercise and (2) all Spin-Off Tenant Put
Options which have been exercised at any time prior to the
commencement of such 120-day period, exceeds fifteen million
dollars ($15,000,000).
For purposes of this Section 7.1(l), the terms "Spin-Off Tenant Put Option",
"Spin-Off Creditor", "Purchase Amount", and "Unreimbursed Put Payments" shall
have the meanings ascribed to such terms in the Restructuring and Repurchase
Agreement as in effect on the Restructuring Closing Date (including as such
terms are further defined by reference to any other agreements), and not as
such terms or other agreements may subsequently be amended or otherwise
modified; or
(m) Breach of Financing Agreements. The Guarantor or any Subsidiary
of the Guarantor shall fail to perform or observe any term, covenant or
agreement with respect to any New Indebtedness having an aggregate principal
amount of more than Fifty Million Dollars ($50,000,000), and such default shall
continue unremedied or unwaived, or the term or covenant in respect of such
failure shall not have been amended, as the case may be, within forty five (45)
days after the first date upon which any holder or holders thereof (or any
representative of such holder(s)) shall have the right, on account of such
failure and after giving effect to any required notice and the lapse of any
applicable cure periods, to declare such Indebtedness to be immediately due and
payable;
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(n) Underutilized Capacity Under Letter of Credit Issuance Agreement.
On any date on and after October 31, 1996, until February 28, 1997, (a) the sum
of, without duplication, (i) the aggregate face amount of the outstanding
letters of credit on such date issued pursuant to the Letter of Credit Issuance
Agreement and that certain predecessor letter agreement dated as of the
Restructuring Effective Date and (ii) the aggregate face amount of the Existing
Trade A Letters of Credit, Existing Trade B Letters of Credit and Existing
Standby Letters of Credit (as such terms are defined in the Letter of Credit
Issuance Agreement) still outstanding on such date minus (b) any such letters
of credit that are cash collateralized shall be less than the product of (i)
eighty percent (.80) and (ii) the sum of (x) the Maximum Trade A L/C Commitment
Amounts, (y) the Maximum Trade B L/C Commitment Amount and (z) the Maximum
Standby L/C Commitment Amounts (as such terms are defined in the Letter of
Credit Issuance Agreement as in effect on the Restructuring Closing Date), each
determined as of such date.
(o) Breach of Certain Covenants. Kmart Corporation fails to
perform or observe any term, covenant or agreement contained in Sections 5.3,
5.4. 5.5, 5.6, 5.7, 5.8 or 5.9.
2.8 Article IX of the Loan Agreement is hereby amended as follows:
(a) Clause (iii) of Section 9.1 is hereby amended and restated to
read as follows:
(iii) changing the Loan Commitment of any Bank hereunder or the
definition of "Ceiling Amount" in any manner which would result in the
Ceiling Amount being greater at any time than it would be absent such
amendment;
(b) Section 9.4 is hereby amended by replacing the phrase "Prime
Rate in effect from time to time" at the end of the third from last sentence in
such section with the phrase "Prime Rate in effect from time to time plus two
and one-half percent (2.50%)".
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(b) Section 9.6(b) is hereby amended and restated to read as follows:
(b) In addition to any rights and remedies of the Banks
provided by law, if any of the Obligations or the Loans shall have
become due and payable, each Bank is authorized at any time and from
time to time, without prior notice to the Guarantor or any Borrower,
any such notice being waived by the Borrowers to the fullest extent
permitted by law, to set-off and apply any and all deposits (general
or special, time or demand, provisional or final) at any time held by,
and other indebtedness at any time owing to or by, such Bank or any
affiliate of such Bank to or for the credit or the account of the
Guarantor or any Borrower against any and all obligations owing to
such Bank (including, without limitation, obligations owing to such
Bank by way of participations deemed purchased pursuant to the second
proviso of this sentence), and subject to the sharing provisions of
Section 9.6(a) and any other sharing arrangements agreed to by any of
the Banks (including the provisions of the Bank Setoff Sharing
Agreement), now or hereafter existing, irrespective of whether or not
the Managing Agent or such Bank shall have made demand under this
Agreement or any Loan Document; provided, that to the extent that the
Guarantor or any Borrower owes any amounts to such Bank other than the
obligations owing under this Agreement (including obligations under
the Other Credit Facilities and the Big Beaver I Credit Facility and
obligations in respect of other Indebtedness) at the time of such
set-off, then such Bank is authorized to and shall apportion and apply
the amounts set-off ratably based on the relative aggregate amounts
owing under this Agreement, the Other Credit Facilities and the Big
Beaver I Credit Facility to all of the lenders thereunder and the
amount of such other Indebtedness; provided, further, that to the
extent that any Bank has amounts available to be set-off in excess of
the aggregate of all outstanding obligations of the Guarantor or any
Borrower to such Bank under this Agreement (an "Excess Setoff Amount")
after making the apportionment and application of set-off amounts
described in the preceding proviso, then (i) the other Banks and the
lenders under the Other Credit Facilities and the Big Beaver I Credit
Facility, on a pro rata basis, shall be deemed automatically for
purposes of this Section 9.6 to have sold such Bank and such Bank
shall be deemed to have purchased a participation in the obligations
owing to such other Banks and such lenders thereunder in an aggregate
amount equal to the Excess Setoff Amount, (ii) such purchased
participation shall be deemed to be an Obligation for purposes of
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this Agreement and (iii) such Bank shall be authorized to set off the
Excess Setoff Amount against such purchased participations. To the
extent that any Bank exercises its rights of set-off at a time when
the aggregate amount of the Deposits is in excess of the Required
Deposit Amount, then the amount set-off by such Bank shall be treated
in accordance with the Set-Off and Sharing Agreement. Each Bank
agrees promptly to notify the appropriate Borrower, as the case may
be, the Guarantor and the Documentation Agent after any set-off is
made by such Bank; provided, that the failure to give such notice
shall not affect the validity of such set-off and application.
Each Borrower expressly agrees that to the extent such
Borrower makes a payment or payments hereunder or under any Note and
such payment or payments, or any part thereof, are subsequently
invalidated, declared to be fraudulent or preferential, set aside or
are required to be repaid to a trustee, receiver, or any other party
under any bankruptcy act, state or federal law, common law or
equitable cause, then to the extent of such payment or repayment, the
Indebtedness to the Banks or part thereof intended to be satisfied
shall be revived and continued in full force and effect as if said
payment or payments had not been made.
(c) Paragraph (b) of Section 9.8 is hereby amended by adding the
following sentence at the end thereof:
Notwithstanding the foregoing, each Bank shall be permitted to sell
the participations referenced in Section 9.6(b) without compliance
with the foregoing provisions.
(d) Paragraph (c) of Section 9.8 is hereby amended by (1) relettering
clause (iii) in the first sentence thereof as clause (iv) and (2) adding the
following new clause (iii) immediately following clause (ii) thereof:
(iii) such Eligible Assignee shall acknowledge in a written instrument
that its rights and obligations with respect to the sharing of setoff
rights shall be subject to the terms of the Bank Setoff Sharing
Agreement.
2.9 The Schedules to the Loan Agreement are hereby amended by adding
Schedule 1.01(a), Schedule 1.01(b), Schedule 1.01(c), Schedule 5.1, Schedule
5.6 and Schedule 5.9 thereto as set forth in Schedule 1.01(a), Schedule
1.01(b), Schedule 1.01(c), Schedule 5.1, Schedule 5.6 and Schedule 5.9 hereto.
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3. Representations and Warranties. In order to induce the Banks and
the Agent to enter into this Amendment Agreement, the Guarantor and each
Borrower represents and warrants as to itself only that as of the Restructuring
Closing Date:
(a) the Guarantor and such Borrower has the right, power and
capacity and has been duly authorized and empowered by all requisite
corporate and shareholder action to enter into, execute, deliver and
perform this Amendment Agreement;
(b) this Amendment Agreement and the Loan Agreement (as
amended hereby) constitutes the Guarantor's and such Borrower's legal,
valid and binding obligation, enforceable against such Borrower and
the Guarantor in accordance with its terms, except as enforcement
thereof may be subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and general principles of equity
(regardless of whether such enforcement is sought in a proceeding in
equity or at law or otherwise);
(c) the Guarantor's and such Borrower's execution, and
delivery of this Amendment Agreement and performance of the Loan
Agreement (as amended hereby) do not and will not violate its articles
of incorporation or bylaws or any law, rule, regulation, order, writ,
judgment, decree or award applicable to it or any contractual
provision to which it is a party or to which it or any of its property
is subject;
(d) no authorization or approval or other action by, and no
notice to or filing or registration with, any governmental authority
or regulatory body (other than those which have been obtained and are
in force and effect) is required in connection with its execution,
delivery and performance of this Amendment Agreement and the Loan
Agreement (as amended hereby); and
(e) no Borrower Event of Default or Unmatured Borrower Event
of Default (except to the extent referenced in that certain letter
agreement dated December 22, 1995 among Kmart Corporation and the
financial institutions party thereto (the "Forebearance Agreement")
has occurred and is continuing under the Loan Agreement (as amended
hereby) or would exist after giving effect to the transactions
contemplated by this Amendment Agreement.
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(f) Except as disclosed in writing to each of the Banks, since
December 22, 1995, there has been no change in the financial
condition, operations, business, properties or prospects of the
Guarantor or any of its Subsidiaries (other than a downgrade in the
Guarantor's credit rating or a decline in Guarantor's stock price)
that individually or in the aggregate could reasonably be expected to
have a material adverse change in, or material adverse effect upon,
(i) the business, financial condition, operations, assets or prospects
of the Guarantor, or of the Guarantor and its Subsidiaries taken as a
whole, or (b) the Guarantor's ability to perform its obligations under
this Loan Agreement or the Loan Documents, or (c) the validity or
enforceability of this Agreement or any other Loan Documents (a
"Material Adverse Effect"). There is no fact known to Guarantor that
could reasonably be expected to have a Material Adverse Effect that
has not been set forth in writing to each of the Banks; and
(g) The representations and warranties made by each
Borrower in Section 4.1 of the Loan Agreement and by the Guarantor in
Section 5 of the Guaranty are true and correct in all material
respects (except to the extent such representations and warranties of
any Borrower refers to parties other than such Borrower expressly
refer to an earlier date, in which case they shall be true and correct
as of such earlier date).
The Guarantor and each Borrower agree and acknowledge that its
representations and warranties set forth in this Section 3 shall be considered
to be representations and warranties deemed made under the Loan Agreement for
purposes of the Borrower Event of Default set forth in Section 7.2(c) of the
Loan Agreement.
4. Conditions to Effectiveness. The effectiveness of all provisions
of this Amendment Agreement is specifically subject to the satisfaction of the
following conditions precedent or concurrent:
(a) No Defaults; Representations and Warranties True. No Borrower
Event of Default, Unmatured Borrower Event of Default, Guarantor Event of
Default or Unmatured Guarantor Event of Default (except to the extent
referenced in the Forebearance Agreement) under the Loan Agreement (as amended
hereby) shall have occurred and be continuing. The representations and
warranties set forth in Section 3 of this Amendment Agreement shall be true and
correct.
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(b) Execution of Amendment. The Guarantor, each Borrower and the
Required Banks shall have delivered to the Agent a counterpart of this
Amendment Agreement duly executed by the Guarantor, such Borrower or such Bank.
(c) Amendment Fee; Incremental Interest. The Guarantor shall have
paid or caused to be paid to the Agent for the account of (i) each Bank that
executed and delivered a counterpart hereof, an amendment fee equal to 1.0% of
the outstanding Obligations to such Bank as of December 22, 1995 and (ii) each
Bank, an amount equal to the difference between (A) the interest paid to such
Bank with respect to the outstanding Loans from December 22, 1995 through the
date of effectiveness of this Amendment Agreement and (B) the interest that
would have been payable with respect to such Loans had this Amendment Agreement
become effective on December 22, 1995.
(d) Other Amendments. The Agent shall have received evidence
reasonably satisfactory to it that (i) each of the agreements listed on
Schedule 1.01(a) hereto has been amended on substantially the terms and
conditions set forth in the Agreement in Principle dated as of December 18,
1995 and otherwise in form and substance reasonably satisfactory to the Agent,
(ii) amendments reflecting the provisions of the Forebearance Agreement and the
attached Summary of Indicative Terms dated 12/17/95 (the "Term Sheet") to the
agreements evidencing the Other Credit Facilities (other than the Seasonal
Credit Agreement dated as of October 5, 1995 (the "Seasonal Facility") shall
have been executed by the "Required Banks" thereunder (iii) an amendment to the
Seasonal Facility reflecting the provisions of the Forebearance Agreement and
the Term Sheet shall have been executed by all of the Banks thereunder and (iv)
an amendment to, or a forebearance agreement in respect of, the Big Beaver I
Credit Facility shall have been executed by financial institution party thereto
holding at least 85% of the outstanding loans thereunder; each on substantially
the terms and conditions set forth in the Term Sheet.
(e) Letter of Credit Facility; Bank Setoff Sharing Agreement. The
Letter of Credit Issuance Agreement dated as of the date hereof among the
Guarantor, the financial institutions signatory thereto and [ ], as agent
and the related collateral proceeds sharing agreement among such financial
institutions shall each have become effective. The Bank Setoff Sharing
Agreement shall have been executed and delivered by all Banks in which the
Guarantor shall have on deposit cash and Cash Equivalents.
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(f) Payment of Expenses. The Guarantor shall have paid all invoiced
fees and expenses referenced in Section 6(a) hereof and in Section 9.4 of the
Loan Agreement.
(g) Opinion of Counsel. The Agent shall have received an opinion of
internal counsel and of reasonably acceptable outside counsel and the
Guarantor's general counsel in favor of the Banks in form and substance
acceptable to the Agent with respect to (a) the legal existence and good
standing of the Guarantor and each Borrower, (b) the authority of the Guarantor
and each Borrower to enter into this Amendment Agreement and the due execution
and delivery thereof, (c) that the obligations of the Guarantor under this
Amendment Agreement are legal, valid, binding and enforceable in accordance
with their terms (subject to customary exceptions), (d) noncontravention with
applicable securities laws and other laws, rules and regulations and material
agreements, and (e) such other matters as the Agent may reasonably request.
5. Waivers of Borrower Defaults from Kmart Funding. The undersigned
Banks hereby waive as of December 22, 1995, the failure of any Borrower to
comply with Section 5.2(b) of the Loan Agreement solely by reason of the
incurrence of Indebtedness by such Borrower to the Guarantor in connection with
the Guarantor's funding of project construction and completion.
6. Miscellaneous. The parties hereto hereby further agree as follows:
(a) Costs, Expenses and Taxes. The Guarantor hereby agree to pay all
reasonable fees, costs and expenses of the Agent in connection with the
negotiation, preparation and execution of this Amendment Agreement and the
transactions contemplated hereby, and in connection with any future amendment,
modification or consents of or in respect of the Loan Agreement (whether or not
adopted), including, without limitation, the reasonable fees and expenses of
each of Winston & Strawn and Wachtell, Lipton, Rosen & Katz ("Wachtell,
Lipton"), counsel to the Agent and the Banks. Without limiting the generality
of the foregoing, the Guarantor hereby agrees to pay, upon receipt thereof,
each statement for reasonable fees and expenses of (i) Wachtell, Lipton and
(ii) any other advisor, counselor, consultant or accountant retained by
Wachtell, Lipton, the Banks or the Agent, rendered after the date hereof (x)
relating to the ongoing evaluation of the rights and status of the Banks with
respect to the matters contemplated by this Amendment Agreement and the
rendering of advice to the Banks with respect thereto, (y) relating to any
amendments, waivers or consents requested by the Guarantor (whether or not
adopted) pursuant to the provisions hereof or of any Loan Document or (z)
relating
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to any work-out or restructuring of Indebtedness of the Guarantor after
December 22, 1995. The Guarantor agrees to reasonably cooperate with and
provide information reasonably requested by any advisor, accountant, counselor,
consultant or accountant retained by the Banks, the Agent or Wachtell, Lipton.
The Guarantor also agrees to pay all reasonable fees and expenses (including
any attorneys' fees) of each of the Banks in connection with this Amendment
Agreement and the Forebearance Agreement.
(b) Counterparts. This Amendment Agreement may be executed in one or
more counterparts, each of which, when executed and delivered, shall be deemed
to be an original and all of which counterparts, taken together, shall
constitute but one and the same document with the same force and effect as if
the signatures of all of the parties were on a single counterpart, and it shall
not be necessary in making proof of this Amendment Agreement to produce more
than one (1) such counterpart.
(c) Headings. Headings used in this Amendment Agreement are for
convenience of reference only and shall not affect the construction of this
Amendment Agreement.
(d) Integration. This Agreement and the Loan Agreement (as amended
hereby) constitute the entire agreement among the parties hereto with respect
to the subject matter hereof.
(e) Governing Law. THIS AMENDMENT AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS AND DECISIONS
OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO CONFLICT OF LAWS PRINCIPLES).
(f) Binding Effect. This Amendment Agreement shall be binding upon
and inure to the benefit of and be enforceable by the Guarantor, the Agent and
the Banks and their respective successors and permitted assigns. This
Amendment Agreement shall not be construed so as to confer any right or benefit
upon any Person other than the Guarantor, the Borrowers, the Agent and the
Banks and their respective successors and permitted assigns.
(g) Amendment; Waiver; Status as Loan Document. The parties hereto
agree and acknowledge that nothing contained in this Amendment Agreement in any
manner or respect limits or terminates any of the provisions of the Loan
Agreement or the Guaranty other than as expressly set forth herein and further
agree and acknowledge that the Loan Agreement (as amended hereby) and the
Guaranty remains and continues in full force and effect and is hereby ratified
and confirmed. Except to the extent expressly set forth herein, the execution,
delivery and
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effectiveness of this Amendment Agreement shall not operate as a waiver of any
rights, power or remedy of the Banks or the Agent under the Loan Agreement or
the Guaranty or constitute a waiver of any provision of the Loan Agreement or
the Guaranty. No delay on the part of any Bank or the Agent in exercising any
of their respective rights, remedies, powers and privileges under the Loan
Agreement or partial or single exercise thereof, shall constitute a waiver
thereof. None of the terms and conditions of this Amendment Agreement may be
changed, waived, modified or varied in any manner whatsoever, except in
accordance with Section 9.1 of the Loan Agreement. The parties hereto agree
that this Amendment Agreement shall constitute a Loan Document for purposes of
the Loan Agreement and the Guaranty.
(h) Authorization Relating to Collateral and Intercreditor Agreement.
Each of the Banks hereby authorizes the Agent to (i) execute the Collateral and
Intercreditor Agreement dated as of the date hereof and relating to the sharing
of collateral pledged to secure Indebtedness under the Letter of Credit
Issuance Agreement among the financial institutions party to the Letter of
Credit Issuance Agreement, the Agent, and the agents under the Other Credit
Facilities (including the Agent) and the Big Beaver I Credit Facility and (ii)
distribute any amount received pursuant to the sharing provisions thereof in
the manner contemplated by the Loan Agreement.
7. Reaffirmation of Guaranty. The Guarantor hereby agrees and
acknowledges that the Guaranty is in full force and effect and shall continue
to be in full force and effect after any of the provisions of this Amendment
Agreement shall become effective. The Guaranty is hereby reaffirmed as of the
date hereof in all respects by Kmart Corporation and the obligations guaranteed
under the Guaranty shall include the Borrowers' Obligations under the Loan
Agreement as amended, restated, modified or supplemented and in effect from
time to time, including any amendment thereto contemplated by this Amendment
Agreement. The Guarantor agrees that the representations and warranties in the
Guaranty are true and correct in all material respects on and as of the date
hereof as if made on the date hereof.
[Balance of page left intentionally blank; signature pages follow.]
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IN WITNESS WHEREOF, the Borrowers, the Agent and the Banks have
executed this Amendment Agreement as of the date first above written.
THE GUARANTOR:
KMART CORPORATION
By:______________________
Title:___________________
THE BORROWERS:
KMART CORPORATION
By:______________________
Title:___________________
{OTHERS}
[Big Beaver II Signature Pages]
<PAGE> 274
AMENDMENT NO. 1 TO SEASONAL CREDIT AGREEMENT
This Amendment No. 1 to SEASONAL CREDIT AGREEMENT (this
"Amendment Agreement") is entered into as of December 22, 1995 by and among
Kmart Corporation (the "Company"), the undersigned financial institutions (the
"Banks") and [ ], as Documentation Agent (the "Agent").
W I T N E S S E T H:
WHEREAS, the Company, the Banks and the Agent entered into
that certain Seasonal Credit Agreement dated as of October 5, 1995 (as amended,
restated, modified, or supplemented and in effect from time to time, the
"Credit Agreement"); and
WHEREAS, the Company has requested that the Credit Agreement
be amended in certain respects as set forth herein, and the Banks and the Agent
are agreeable to the same, subject to the terms and conditions herein set
forth;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Defined Terms. Capitalized terms used herein and not
otherwise defined herein shall have the meanings attributed to such terms in
the Credit Agreement, as amended hereby.
2. Amendments to Credit Agreement.
2.1 Section 1.01 of the Credit Agreement is hereby
amended by
(a) amending and restating the definitions of "Consolidated Net Worth",
"EBITDAR", "Interest Payment Date", "Interest Period", "Material Adverse
Effect", "Other Credit Facilities", "Termination Date" and "Type" in their
entirety to read as follows:
"Consolidated Net Worth" means as of the date of any
determination thereof, the consolidated net worth of the Company,
determined in accordance with GAAP; provided, however, that any gains
or losses from the disposition of any Specialty Retail Subsidiary (or
from any write-downs of the Company's investment in any Specialty
Retail Subsidiary or in Builder's Square, Inc., Kmart Canada Ltd.,
Kmart CR a.s., Kmart SR a.s. and Kmart s.r.o. permitted
<PAGE> 275
under the Financial Accounting Standards Board Statement No. 121 prior
to any such disposition) and any changes after the Closing Date in the
foreign currency translation adjustment account as presented in the
Company's financial statements (and in accordance with GAAP) shall be
excluded from the determination of Consolidated Net Worth.
"EBITDAR" means, for any applicable period, for the Company
the aggregate of the following, without duplication: (a) consolidated
net income for such period, plus (b) consolidated interest expense
(net of any interest income) for such period, plus (c) consolidated
provision for taxes for such period, plus (d) consolidated
depreciation expense for such period, plus (e) consolidated
amortization expense for such period, plus (f) consolidated Rent
Expenses for such period, minus (or plus, as applicable) (g) on a
consolidated basis, any extraordinary gains (or plus extraordinary
losses) for such period (including any loss resulting from any
write-downs of the Company's investment in Builder's Square, Inc.,
Kmart Canada Ltd., Kmart CR a.s., Kmart SR a.s. or Kmart s.r.o.
permitted under the Financial Accounting Standards Board Statement No.
121), minus (or plus, as applicable) (h) any gains (or plus any
losses) attributable to the Specialty Retail Subsidiaries for such
period other than results of operations in the ordinary course of
business, plus (i) solely with respect to the four fiscal quarters
ending in October 1994, the $1.348 billion restructuring charge
recorded in the fourth fiscal quarter of the Company's fiscal year
ending January 26, 1994, minus (or plus, as applicable) (j) any gains
(or losses) realized from the sale of Kmart Canada Ltd. and each of
its Subsidiaries, Kmart CR a.s. (Czech operations), Kmart SR a.s.
(Slovak operations) and Kmart s.r.o. (servicer of Czech and Slovak
operations).
"Interest Payment Date" means, with respect to any LIBOR Loan,
the last day of each Interest Period applicable to such Loan, and,
with respect to any Reference Rate Loan, the last Business Day of each
calendar quarter and the Termination Date; provided, that if any
Interest Period for a LIBOR Loan exceeds three months, the date which
falls three months after the beginning of such Interest Period shall
also be an Interest Payment Date.
"Interest Period" means with respect to any LIBOR Loan, the
period commencing on the Business Day the LIBOR Loan is disbursed or
continued (or on the Conversion Date on which any Loan is converted to
a LIBOR Loan) and ending on the date one, two, three or six months
thereafter, as
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selected by the Company in its Notice of Borrowing, or Notice of
Conversion/Continuation;
provided, that:
(i) if any Interest Period would otherwise end on
a day which is not a Business Day, that Interest Period shall
be extended to the next succeeding Business Day unless, in the
case of a LIBOR Loan, 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;
(ii) any Interest Period pertaining to a LIBOR Loan
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 the calendar month which
is one, two, three or six months, as the case may be, after
the calendar month in which such Interest Period began; and
(iii) no Interest Period for any Loan shall extend
beyond the Termination Date.
"Material Adverse Effect" means a material adverse change in,
or material adverse effect upon, (a) the business, financial
condition, operations, assets or prospects of the Company, or of the
Company and its Subsidiaries taken as a whole, or (b) the Company's
ability to perform its obligations under this Agreement or the Loan
Documents, or (c) the validity or enforceability of this Agreement or
any other Loan Document; provided, however, that any past or future
reduction in the Company's credit rating or decline in the market
price of the Company's stock shall not of themselves be deemed to
constitute a Material Adverse Effect.
"Other Credit Facilities" means, collectively: (a) the 364 Day
Credit Facility, (b) the Three Year Credit Facility; and (c) the
Warehouse Facility Credit Agreement.
"Termination Date" means the earlier to occur of
(a) February 28, 1997; and
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(b) the date on which the Commitments shall
terminate in accordance with the provisions of this
Agreement.
"Type" means, with respect to any Loan, its nature as a
Reference Rate Loan or a LIBOR Loan.
and (b) deleting the definitions of "CD Rate" and "CD Rate Loan" in their
entirety;
and (c) adding the definitions of "Bank Setoff Sharing Agreement", "Big Beaver
Credit Facilities", "Capitalized Lease Obligations", "Cash Equivalents",
"Ceiling Amount", "Deposits", "Deposit Threshold", "Kmart Bank Group", "Letter
of Credit Issuance Agreement", "New Indebtedness", "Real Estate Debt", "Real
Estate Debt Documents", "Required Deposit Amount", "Restricted Payment",
"Restructuring and Repurchase Agreement", "Restructuring Closing Date",
"Restructuring Effective Date", "Scheduled Assets", "364 Day Credit Facility",
"Set-Off and Sharing Agreement", "Three Year Credit Facility" and "Warehouse
Facility Credit Agreement" as follows:
"Bank Setoff Sharing Agreement" means that certain Bank Setoff
Sharing Agreement dated as of the Restructuring Effective Date among
the Banks party thereto, the Company and [ ], as agent.
"Big Beaver Credit Facilities" means the revolving credit
facilities evidenced by: (a) that certain Loan Agreement dated
as of January 21, 1992 among the borrowers named therein, the
financial institutions signatory thereto and [ ], as Managing Agent,
and (b) that certain Loan Agreement dated as of August 7, 1992 among
the borrowers named therein, the financial institutions signatory
thereto, and [ ], as Agent.
"Capitalized Lease Obligations" means, in relation to any
Person, obligations for the payment of rent for any real or personal
property under leases or agreements to lease that, in accordance with
GAAP, have been or should be capitalized on the books of the lessee
and, for purposes hereof, the amount of any such obligation shall be
the capitalized amount thereof determined in accordance with GAAP.
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"Cash Equivalents" means investments substantially of the type
described on Schedule 1.01(c) hereof.
"Ceiling Amount" means, at any time of determination, three
hundred million dollars ($300,000,000) less the aggregate amount of
payments made in respect of the Loans after the Restructuring
Effective Date pursuant to Section 2.07(b), as such amount may be
increased from time to time with the written consent of all of the
Banks.
"Deposits" has the meaning specified in Section 6.09.
"Deposit Threshold" means, at any time, the sum of (a)
$400,000,000 plus (b) an amount equal to (i) the increase in the fair
market value (as determined based on appraisals satisfactory to the
Documentation Agent) of collateral securing the Real Estate Debt
arising from the substitution of collateral after the Restructuring
Effective Date to the extent permitted by Section 7.03(e) upon an
event of casualty, condemnation or eminent domain event, or upon the
existence of an environmental condition (but in any event excluding a
substitution of collateral resulting from the single store collateral
substitution obligation existing on the Restructuring Effective Date
and resulting from a store closing in September, 1995 with respect to
the Deal 2 Notes (as defined in the Restructuring and Repurchase
Agreement)), to the extent such substitution is permitted under the
Real Estate Debt Documents as in effect as of the Restructuring
Closing Date, multiplied by a fraction, the numerator of which is
equal to the sum of the outstanding obligations under this Agreement,
the Other Credit Facilities and the Big Beaver Credit Facilities at
the time of such substitution and the denominator of which is equal to
the Real Estate Debt outstanding at the time of such substitution,
less (ii) the fair market value (as determined based on appraisals
satisfactory to the Documentation Agent) of any property pledged to
secure the outstanding obligations under this Agreement, the Other
Credit Facilities and the Big Beaver Credit Facilities concurrently
with such pledge of substituted collateral to the holders of the Real
Estate Debt.
"Kmart Bank Group" means the lending institutions from time to
time party to one or more of this Agreement, the Other Credit
Facilities and the Big Beaver Credit Facilities.
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"Letter of Credit Issuance Agreement" means that certain
Letter of Credit Issuance Agreement dated as of February 29, 1996
between the Company and certain banks, pursuant to which such banks
agreed to issue trade letters of credit and standby letters of credit
on the terms and subject to the conditions provided for therein.
"New Indebtedness" means Indebtedness incurred by the Company
or any of its Subsidiaries after the Restructuring Effective Date
other than (i) any Indebtedness under this Agreement, the Other Credit
Facilities or the Big Beaver Credit Facilities, (ii) Indebtedness
under or Indebtedness refunding or refinancing the Real Estate Debt or
(iii) Indebtedness refunding or refinancing unsecured Indebtedness of
the Company outstanding on the Restructuring Effective Date.
Indebtedness outstanding under the Letter of Credit Issuance Agreement
shall constitute New Indebtedness.
"Real Estate Debt" means the Indebtedness outstanding under
the agreements listed on Schedule 1.01(a) hereto.
"Real Estate Debt Documents" means the Restructuring and
Repurchase Agreement and the documents and instruments relating to the
Real Estate Debt, as in effect as of the Restructuring Effective Date,
including the related note purchase agreements, indentures, trust
agreements, put agreements, promissory notes, mortgages, deeds of
trust, leases and other security documents and the documents described
as the "Existing Transaction Documents" in the Restructuring and
Repurchase Agreement.
"Required Deposit Amount" has the meaning specified in Section
6.09.
"Restricted Payment" means, with respect to any Person, (a)
any dividend or other distribution, direct or indirect, or the
incurrence of any liability to make any other payment or distribution
of cash or other property or assets in respect of such Person's
capital stock (which shall include, without limitation, preferred
stock, common stock, options, warrants or any other equity security),
(b) any payment on account of the purchase, prepayment, conversion,
exchange, redemption, retirement, surrender or acquisition of such
Person's capital stock or any other payment or distribution made in
respect thereof, either directly or indirectly, and (c) any purchase
or other acquisition or payment in respect of any option, warrant or
other right to acquire any of or any interest in such Person's capital
stock; provided, that "Restricted Payment"
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shall not include (i) any dividend payable solely in shares of its
capital stock, (ii) any purchase or exchange of existing employee
stock options for consideration consisting solely of new employee
stock options or (iii) any purchase of capital stock or options to
acquire the same from directors, officers and employees of the Company
and its Subsidiaries consistent with past practices in connection with
ordinary course employment and severance arrangements and in an
aggregate amount that shall not exceed $5,000,000 for all such
purchases pursuant to this clause (iii).
"Restructuring Closing Date" means the date upon which each of
the conditions precedent set forth in Section 4 of that certain
Amendment No. 1 to Seasonal Credit Agreement dated as of December 22,
1995 by and among the Company, the Banks and the Documentation Agent
have been satisfied.
"Restructuring and Repurchase Agreement" means that certain
Restructuring and Repurchase Agreement dated as of December 22, 1995
by and among the Company, certain holders of the Real Estate Debt and
certain other Persons parties thereto.
"Restructuring Effective Date" means December 22, 1995.
"Scheduled Assets" means the assets of the Company identified
on Schedule 1.01(b) hereto.
"364 Day Credit Facility" means the revolving credit facility
evidenced by that certain 364 Day Credit Agreement dated as of October
5, 1995 among the Company, [ ], as documentation agent thereunder,
and the financial institutions signatory thereto.
"Set-off and Sharing Agreement" means that certain Set-Off and
Sharing Agreement dated as of the Restructuring Closing Date, among
the holders of the Real Estate Debt and the institutions in the Kmart
Bank Group party thereto.
"Three Year Credit Facility" means the revolving credit
facility evidenced by that certain Three Year Credit Agreement dated
as of October 7, 1994 among the Company, [ ], as documentation agent
thereunder, and the financial institutions signatory thereto.
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"Warehouse Facility Credit Agreement" means the credit
facilities evidenced by that certain Warehouse Facility Credit
Agreement dated as of October 7, 1994 among the Company, the other
borrowers named therein, [ ], as documentation agent thereunder,
and the financial institutions signatory thereto.
2.2 Article II of the Credit Agreement is hereby amended
as follows:
(a) Section 2.01 is hereby amended and restated in its
entirety to read as follows:
2.01 Amounts and Terms of Commitments. Each Bank severally
agrees, on the terms and conditions hereinafter set forth, and upon
request by the Company, to make Loans in Dollars to the Company from
time to time on any Business Day during the period from the Closing
Date to the Termination Date, in an aggregate principal amount not to
exceed at any time outstanding the amount set forth opposite the
Bank's name in Schedule 2.01 (such amount as the same may be reduced
pursuant to Section 2.05 or Section 2.07 or as a result of one or
more assignments pursuant to Section 10.08, being herein referred to
as a Bank's "Commitment"); provided, that, after giving effect to any
Borrowing, the aggregate principal amount of all outstanding Loans
shall not exceed the Aggregate Commitment; and provided further that
without the prior written consent of all of the Banks, after giving
effect to any Borrowing, the aggregate principal amount of all
outstanding Loans shall not exceed the Ceiling Amount. Within the
limits of each Bank's Commitment (and subject in all cases to the
requirement that after giving effect to any Borrowing, the aggregate
principal amount of all outstanding Loans shall not exceed the Ceiling
Amount without the consent of all of the Banks), and subject to the
other terms and conditions hereof, the Company may borrow under this
Section 2.01, prepay pursuant to Section 2.06 and reborrow pursuant to
this Section 2.01.
(b) Section 2.03 is hereby amended by deleting paragraph
(a) thereof in its entirety and replacing it with the following:
(a) Each Borrowing shall be made upon the irrevocable
request of the Company by a facsimile to the Documentation Agent
(which shall be confirmed promptly by a telephone call) in the form of
a Notice of Borrowing which facsimile must be received by the
Documentation Agent
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prior to 11:00 a.m. (New York City time) (i) three (3) Business Days
prior to the requested borrowing date, in the case of LIBOR Loans, and
(ii) on the requested borrowing date, in the case of Reference Rate
Loans, specifying:
(A) the amount of the Borrowing, which shall be
in an aggregate minimum principal amount of Ten Million
Dollars ($10,000,000) or any multiple of Five Million Dollars
($5,000,000) in excess thereof;
(B) the requested borrowing date, which shall be
a Business Day;
(C) whether the Borrowing is to be comprised of
LIBOR Loans or Reference Rate Loans; and
(D) if the Borrowing is to be comprised of LIBOR
Loans, the duration of the initial Interest Period applicable
to such Loans. If the Notice of Borrowing shall fail to
specify the duration of the initial Interest Period for any
LIBOR Loans the Company shall be deemed to have elected an
Interest Period of one month;
provided, however, that with respect to any Borrowing to be
made on the Closing Date, a Notice of Borrowing shall be
delivered to the Documentation Agent not later than 11:00 a.m.
(New York City time) on the Closing Date (such Borrowing will
consist of Reference Rate Loans only); provided, further, that
no Borrowing shall be made without the prior written consent
of all of the Banks if after giving effect to any such
Borrowing, the aggregate principal amount of all Loans would
exceed the Ceiling Amount.
(c) Paragraphs (a) through (d) of Section 2.04 are hereby
deleted in their entirety and replaced with the following:
(a) The Company may upon notice to the Documentation
Agent in accordance with Section 2.04(b):
(i) elect to convert, as of any Business Day, any
Reference Rate Loans (or any part thereof in an aggregate
amount not less than Ten Million Dollars ($10,000,000), or
that is in an integral multiple of Five Million Dollars
($5,000,000) in excess thereof) (or such other outstanding
principal amount of such
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Loan as may result from mandatory prepayments of such Loan
hereunder) into LIBOR Loans; or
(ii) elect to convert, as of the last day of any
Interest Period, any LIBOR Loans maturing on such day (or any
part thereof in an aggregate amount not less than Ten Million
Dollars ($10,000,000), or that is in an integral multiple of
Five Million Dollars ($5,000,000) in excess thereof) (or such
other outstanding principal amount of such Loan as may result
from mandatory prepayments of such Loan hereunder) into
Reference Rate Loans; or
(iii) elect to continue as of the last day of any
Interest Period (a "Continuation Date") any LIBOR Loans
maturing on such day (or any part thereof in an aggregate
amount not less than Ten Million Dollars ($10,000,000), or
that is in an integral multiple of Five Million Dollars
($5,000,000) in excess thereof) (or such other outstanding
principal amount of such Loan as may result from mandatory
prepayments of such Loan hereunder);
provided, that if the aggregate amount of all LIBOR Loans comprised in
any Borrowing shall have been or would be reduced, by payment,
prepayment, or conversion of part thereof, to an amount less than Ten
Million Dollars ($10,000,000), such LIBOR Loans shall automatically
convert into Reference Rate Loans, on and as of the end of applicable
Interest Period.
(b) If the Company desires to convert or continue any
Loan pursuant to Section 2.04(a), it shall irrevocably request a
conversion or continuation by a facsimile (confirmed promptly by
telephone) of a Notice of Conversion/Continuation to be received by
the Documentation Agent not later than 11:00 a.m. (New York time) at
least (i) three (3) Business Days in advance of the Conversion Date or
Continuation Date, if the Loans are to be converted into or continued
as LIBOR Loans and (ii) on the same Business Day as the Conversion
Date, if the Loans are to be converted into Reference Rate Loans,
specifying:
(A) the proposed Conversion Date or Continuation
Date;
(B) the aggregate amount of Loans to be converted
or continued;
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(C) the nature of the proposed conversion or
continuation; and
(D) the duration of the requested Interest
Period, if the Loans are to be converted into or continued as
LIBOR Loans.
(c) If prior to the time set forth in Section 2.04(b),
(i) the Company has failed to give a timely Notice of
Conversion/Continuation with respect to such LIBOR Loans or (ii) the
Company has failed to select a new Interest Period to be applicable to
such LIBOR Loans, the Company shall be deemed to have elected to
convert such Loans into Reference Rate Loans effective as of the
expiration of the applicable Interest Period.
(d) During the existence of a Potential Default or Event
of Default, unless the Required Banks otherwise agree, the Company may
not elect to have a Loan be converted into or continued as a LIBOR
Loan pursuant to Section 2.04.
(d) Section 2.06 is hereby amended and restated in its entirety to
read as follows:
2.06 Optional Prepayments of Loans. Subject to Section 3.05,
the Company may at any time or from time to time, upon at least five
(5) Business Days' notice to the Documentation Agent prepay LIBOR
Loans or upon at least one Business Day's notice to the Documentation
Agent prepay Reference Rate Loans, in whole or in part, in minimum
amounts of Ten Million Dollars ($10,000,000) or in multiples of Five
Million Dollars ($5,000,000) in excess thereof. Such notice of
prepayment shall specify the date and amount of such prepayment and
whether such prepayment is of Reference Rate Loans or LIBOR Loans.
Such notice shall not thereafter be revocable by the Company, and the
Documentation Agent will promptly notify each Bank thereof and of such
Bank's Commitment Percentage of such prepayment. If such notice is
given, the Company shall make such prepayment and the payment amount
specified in such notice shall be due and payable on the date
specified therein, together with accrued interest to each such date on
the amount prepaid and the amounts required pursuant to Section 3.05.
(e) Section 2.07 is hereby amended and restated in its entirety to
read as follows:
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2.07 Repayment.
(a) Termination Date. The Company shall repay the aggregate
outstanding principal amount of the Loans on the Termination Date.
(b) Mandatory Commitments Reductions and Prepayments. The Company
shall make a permanent reduction in the Aggregate Commitment and to the Ceiling
Amount, concurrently with the making of any principal payment with respect to
the Real Estate Debt (except to the extent that such payment to the holders of
the Real Estate Debt was triggered by (x) a mandatory prepayment pursuant to
this Section 2.07(b) or (y) a prepayment under the Big Beaver Credit Facilities
and the Other Credit Facilities which results in a ratable reduction of the
Aggregate Commitment and the Ceiling Amount in accordance with the succeeding
sentence of this Section 2.07(b)), in an amount (the "RE Reduction Amount")
equal to such payment multiplied by a fraction, the numerator of which equals
the Ceiling Amount (as in effect immediately prior to such prepayment of
principal in respect of the Real Estate Debt) and the denominator of which
equals the aggregate amount outstanding under the Real Estate Debt immediately
prior to such payment. In addition, the Company shall make a permanent
reduction in the Aggregate Commitment and to the Ceiling Amount, concurrently
with the making of any principal payment in respect of the Other Credit
Facilities or the Big Beaver Credit Facilities (other than (i) mandatory
prepayments under the Big Beaver Credit Facilities or the Warehouse Facility
Credit Agreement as a result of a project disposition or project refinancing
and (ii) prepayments under the Other Credit Facilities and the Big Beaver
Credit Facilities required as a result of prepayments under the Real Estate
Debt or under this Agreement) in an amount, (the "Bank Reduction Amount") equal
to such payment multiplied by a fraction, the numerator of which equals the
Ceiling Amount (as in effect immediately prior to such prepayment of principal
under either of the Big Beaver Credit Facilities or any such Other Credit
Facility) and the denominator of which equals the aggregate amount outstanding
under the facility receiving the payment immediately prior to the making of
such payment. Concurrently with each such reduction, the Company shall ratably
prepay the outstanding Loans in an amount equal to the RE Reduction Amount or
the Bank Reduction Amount, as the case may be, together with accrued interest
to such date on the amount prepaid and the amounts required pursuant to Section
3.05. Such prepayment amount shall ratably reduce the outstanding Loans of
each Bank. Any reduction of the Aggregate Commitment shall be applied to each
Bank's Commitment pro rata in accordance with such Bank's relevant Commitment
Percentage. Furthermore, if, for any reason, the aggregate principal amount of
all outstanding Loans
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exceeds the Ceiling Amount, then, unless all of the Banks consent otherwise in
writing, the Company shall immediately prepay the Loans in the amount of such
excess.
(f) Section 2.08 is hereby amended and restated in its entirety to
read as follows:
2.08 Interest.
(a) Subject to Sections 2.08(c) and 2.08(d), each Loan
shall bear interest on the outstanding principal amount thereof from
the date when made until paid in full, at the option of the Company as
set forth in its Notice of Borrowing or Notice of
Conversion/Continuation,
(i) if such Loan is a Reference Rate Loan, at a
rate per annum equal to the Reference Rate plus two and
one-half percent (2.5%) (such interest margin being subject to
increase pursuant to Section 7.08 hereof); and
(ii) if such Loan is a LIBOR Loan, at a rate per
annum equal to the sum of LIBOR plus three and one-half
percent (3.5%) (such interest margin being subject to increase
pursuant to Section 7.08 hereof).
(b) Interest on each Loan shall be payable in arrears on
each applicable Interest Payment Date. Interest shall also be payable
on the date of any prepayment of Loans for the portion of the Loans so
prepaid and, in the case of conversion of any Reference Rate Loan, on
the date of conversion thereof into a LIBOR Loan.
(c) During the continuation of any Event of Default or
after acceleration, the Company shall pay, on demand, interest (after
as well as before judgment) on the principal amount of all Loans then
outstanding, at a rate per annum which is determined by increasing the
rate of interest then in effect by two percent (2.0%) per annum;
provided, however, that, on and after the expiration of the Interest
Period applicable to any LIBOR Loan on the date of occurrence of such
Event of Default or acceleration, the principal amount of such Loan
shall, during the continuation of such Event of Default or
acceleration, bear interest at a rate per annum equal to the Reference
Rate plus four and one-half percent (4.5%).
(d) Anything herein to the contrary notwithstanding, the
obligations of the Company hereunder shall be subject
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to the limitation that payments of interest shall not be required, for
any period for which interest is computed hereunder, to the extent
(but only to the extent) that contracting for or receiving such
payment by any Bank would be contrary to the provisions of any law
applicable to such Bank limiting the highest rate of interest which
may be lawfully contracted for, charged or received by such Bank, and
in such event the Company shall pay such Bank interest at the highest
rate permitted by applicable law.
(g) Section 2.10 is hereby amended by (i) replacing the
phrase "plus 2%" at the end of paragraph (a) thereof with the phrase "plus four
and one-half percent (4.5%)", (ii) deleting the reference to ", the CD Rate" in
paragraph (b) thereof and (iii) deleting the reference to "and the CD Rate" in
paragraph (d) thereof.
(h) Section 2.12 is hereby amended by deleting the
reference to "or CD Rate Loans" in paragraph (a) thereof.
(i) Section 2.13 is hereby amended by amending and
restating subsection (c) to read as follows:
(c) Except as set forth in Section 10.09, nothing herein
shall require any Bank to exercise any right of set-off or similar
rights or shall affect the right of any Bank to exercise, and retain
the benefits of exercising any such right with respect to any other
indebtedness or obligation of the Company.
2.3 Article III of the Credit Agreement is hereby amended
as follows:
(a) Section 3.02 is hereby deleted in its entirety and
replaced with the following:
3.02 Inability to Determine Rates. If and to the extent that
market or other conditions existing in the London interbank market
relevant to LIBOR Loans make it impossible or impracticable for the
Banks to make such Loans, then the obligations of the Banks to make
LIBOR Loans and the right of the Company to originate, continue or
convert any Loan as or to a LIBOR Loan shall be suspended until the
circumstances giving rise to such suspension shall no longer exist.
Upon receipt from the Documentation Agent of a notice of the
Banks' inability to make, convert or continue the requested Loan due
to any of the reasons referred to
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above, notwithstanding anything in this Agreement to the contrary, the
Company may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted by it. If the Company does not
revoke such notice relating to a LIBOR Loan, the Banks shall, with
respect to such LIBOR Loan only, make or convert such Loan in the
amount specified in the applicable notice submitted by the Company,
but such Loan shall be made as or converted into a Reference Rate Loan
instead of a LIBOR Loan. Except as provided in the immediately
preceding sentence, if, notwithstanding the provisions of this Section
3.02, any Bank has made available to the Company its Commitment
Percentage of any such proposed Loan, then the Company shall
immediately repay the amount so made available to it by such Bank,
together with accrued interest thereon, if any.
(b) Section 3.03 is hereby amended by deleting the
paragraph following clause (iii) of paragraph (a) in its entirety and replacing
it with the following:
and the result of any of the foregoing is to increase the cost to such
Bank or to reduce the amount of any sum receivable by such Bank with
respect to making or maintaining any LIBOR Loan by an amount
reasonably deemed by such Bank to be material, then the Company shall
from time to time, upon written demand by such Bank, pay to such Bank
additional amounts sufficient to compensate such Bank for any such
increased cost or reduced sum receivable to the extent resulting from
outstanding LIBOR Loans and not compensated in connection with the
computation of LIBOR.
(c) Section 3.04 is hereby amended by deleting the
reference to "or CD Rate Loan" in paragraph (c) thereof.
(d) Section 3.05 is hereby amended by deleting the
reference to "or a CD Rate Loan" in each of paragraphs (b) and (c) thereof.
2.4 Article VI of the Credit Agreement is hereby amended
as follows:
(a) Section 6.07 is hereby amended by (i) deleting the
word "and" at the end of paragraph (c), (ii) renumbering paragraph (d) as
paragraph (e) and (iii) adding the following new clause (d) as follows:
" (d) the financial statements, certificates, schedules,
documents and other information set forth on Schedule 6.07 within the
time periods therein specified; and"
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(b) New Sections 6.09 and 6.10 are hereby added as
follows:
6.09 Maintenance of Deposits. The Company shall at all
times maintain with one or more financial institutions that are
members of the Kmart Bank Group and that are party to the Bank Setoff
Sharing Agreement cash and Cash Equivalents on deposit (the
"Deposits") in an aggregate amount not less than the lesser of (a) the
Deposit Threshold and (b) the total amount of all cash and Cash
Equivalents of the Company and its Subsidiaries (other than cash and
Cash Equivalents maintained at Kmart Canada Ltd. and its subsidiaries
or at Kmart CR a.s. (Czech operations) in the ordinary course of
business, consistent with past practices) at such time (the "Required
Deposit Amount"); provided, that any amounts maintained in store
depository accounts with depository institutions which are not members
of the Kmart Bank Group as required by the Company's business
operations in the normal course of business consistent with past
practices shall not be considered cash or Cash Equivalents for the
purposes of clause (b) of this Section 6.09.
6.10 Most Favored Lender Status. If the Company, any
Subsidiary or any obligor under the Real Estate Debt shall at any
time, directly or indirectly, amend, restate or otherwise modify any
of the Real Estate Debt Documents, in any manner which would have the
effect of (i) adding any new or additional covenants or defaults
applicable to the Company or any Subsidiary, (ii) amending in a manner
more beneficial to the holders of such Real Estate Debt or in a manner
more onerous to the Company, any Subsidiary or any obligor under the
Real Estate Debt, any covenant or default applicable to the Company or
any Subsidiary under such Real Estate Debt or (iii) otherwise
enhancing the rights and benefits of any holder of the Real Estate
Debt against the Company or any Subsidiary, then, in each such event,
the Company shall concurrently enter into or cause to be entered into
such amendments to this Agreement and such other documents and
instruments, in form and substance reasonably satisfactory to the
Required Banks, as shall be necessary to afford the Banks the same or
equivalent benefits and rights as such amendments to, or other
agreements in respect of, the Real Estate Debt Documents afford the
holders of the Real Estate Debt; provided that any such new or
additional covenants or defaults, amended covenants or defaults, or
enhanced rights and benefits shall be deemed automatically
incorporated herein by reference in the event such modifications are
made to the Real Estate Debt Documents without the Company entering
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into concurrent amendments as required by this Section 6.10.
2.5 Article VII of the Credit Agreement is hereby amended as follows:
(a) Section 7.02 is hereby amended and restated in its entirety to
read as follows:
7.02 Disposition of Assets. The Company shall not, directly
or indirectly, sell, assign, lease, convey, transfer or otherwise
dispose of (whether in one or a series of transactions) any property
(including accounts and notes receivable, with or without recourse) or
enter into any agreement to do any of the foregoing except:
(a) dispositions of inventory, or used, worn-out
or surplus equipment, all in the ordinary course of business;
(b) the sale of equipment to the extent that such
equipment is exchanged for credit against the purchase price
of similar replacement equipment, or the proceeds of such sale
are reasonably promptly applied to the purchase price of such
replacement equipment;
(c) dispositions of inventory or equipment by the
Company to any Subsidiary pursuant to reasonable business
requirements;
(d) dispositions of Scheduled Assets; and
(e) other dispositions of assets having, in any
fiscal year of the Company, an aggregate book value not
exceeding 10% of the Company's consolidated total assets as of
the end of the most recently ended fiscal year of the Company,
as reflected in the Company's balance sheet contained in its
audited financial statements for such fiscal year;
provided, however, that this Section 7.02 shall not be deemed to
prohibit the sale of all, substantially all, or a part of the capital
stock or of all, substantially all, or a part of the assets of any
Specialty Retail Subsidiary of the Company, even if such an entity is
no longer a Subsidiary of the Company, if (x) consideration received
is equal to the fair market value (as reasonably determined
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by the Company), or (y) the Company's board of directors deems such
transaction to be necessary by reason of applicable laws, regulations
or governmental policies applicable to the Company.
(b) Section 7.03 is hereby amended and restated in its entirety to
read as follows:
7.03 Limitation on Liens. The Company shall not, and shall
not permit any Subsidiary (other than Liens granted by Kmart Canada
Ltd. and its subsidiaries or by Kmart CR a.s. on such Person's assets
prior to the Restructuring Effective Date) to, create, incur or suffer
to exist any Lien on any assets of the Company or any such Subsidiary
whether now owned or hereafter acquired; provided, however, that such
restriction shall not apply with respect to any of the following types
of Liens:
(a) Liens for taxes not delinquent or being contested in good
faith;
(b) Liens created and deposits made in connection with
workers' compensation, unemployment insurance and other social
security legislation, or to secure the performance of bids, tenders,
contracts (other than for the repayment of borrowed money), statutory
obligations, surety and appeal bonds and other similar obligations
incurred in the ordinary course and Liens securing obligations to
mechanics, materialmen, bailees, warehousemen and similar Liens
arising under operation of law and incurred in the ordinary course of
business;
(c) purchase money mortgages (including vendors' rights under
purchase or land contracts or under other agreements whereby title or
another interest is retained by the vendor for the purpose of securing
the purchase price thereof) on property acquired or constructed after
the Restructuring Effective Date, or the acquisition after the
Restructuring Effective Date of property subject to such a Lien which
is limited to such property and was not created in anticipation of
such acquisition;
(d) mortgages, security interests and Liens on assets of the
Company or any Subsidiary existing on the Restructuring Effective
Date, and set forth on Schedule 7.03, which secure any Indebtedness of
the Company or any such Subsidiary, or any refundings or extensions
for an amount not exceeding the principal amount of such Indebtedness
so long as such refundings or extensions are secured only by the same
property or assets;
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(e) Liens on property of the Company or any Subsidiary
created concurrently with the release of existing Liens on other
property of the Company or any such Subsidiary, as provided under the
Real Estate Debt Documents, but only (i) if such substitution is one
of several alternative actions available to the obligor under such
Real Estate Debt, of which such obligor must choose one, following the
occurrence of a condemnation, casualty or eminent domain event, or
upon the existence of an environmental condition or (ii) in respect of
a substitution of collateral resulting from the single store
collateral substitution obligation existing on the Restructuring
Effective Date and resulting from a store closing in September, 1995
with respect to the Deal 2 Notes (as defined in the Restructuring and
Repurchase Agreement); provided that the fair market value of the prop
erty subject to any such Lien permitted under clause (i) hereof does
not exceed one hundred ten percent (110%) of the fair market value of
the property as to which a Lien is concurrently being released (the
fair market value of the property being relieved of such Lien being
determined immediately prior to the occurrence of such casualty or
condemnation or eminent domain event, or the discovery of such
environmental condition, or the occurrence of such store closing);
(f) Liens on Deposits in favor of the Kmart Bank Group,
Liens on cash balances of Kmart Canada Ltd. and its subsidiaries or
Kmart CR a.s. (Czech operations) maintained in the ordinary course of
business, consistent with past practices in favor of the lenders to
such entities and Liens on monies held in the Paydown Trust Account
(as defined in the Restructuring and Repurchase Agreement) in favor of
the holders of the Real Estate Debt;
(g) Liens on the assets of Kmart Canada Ltd. and its
subsidiaries and Kmart CR a.s. (Czech operations) to secure New
Indebtedness incurred by such Persons and Liens to secure New
Indebtedness (including, without limitation, New Indebtedness incurred
pursuant to the Letter of Credit Issuance Agreement); provided that
such Liens to secure such New Indebtedness shall encumber only
(i) noncurrent assets including, without limitation,
Scheduled Assets (or cash collateral pledged to
secure the Indebtedness under the Letter of Credit
Issuance Agreement in substitution of a Lien on
noncurrent assets); and
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(ii) in the case of the Letter of Credit Issuance
Agreement, documents of title relating to goods which
are the subject of trade letters of credit issued by
the Trade B Banks (as defined therein) and securing
the Trade B Letters of Credit (as defined therein)
under the terms set forth in such agreement as in
effect on the Restructuring Closing Date; provided
that the percentage of the aggregate face amount of
all Trade B Letters of Credit that are so secured
shall not exceed thirty-five percent (35%) (or as
close to 35% as practicable in light of the face
amounts of Trade B Letters of Credit that are drawn
or paid as contemplated by the Letter of Credit
Issuance Agreement) of the Trade B Letters of Credit
issued by the Trade B Banks;
provided further that no such Lien shall be permitted under this
clause (g) to secure any unsecured Indebtedness of the Company or any
Subsidiary outstanding on the Restructuring Effective Date or any
refundings or extension thereof;
(h) easements, rights-of-way, zoning and similar restrictions
and other similar charges or encumbrances not interfering in any
material respect with the ordinary conduct of the business of the
Company and its Subsidiaries;
(i) Liens on cash collateral to secure the Company's
reimbursement obligations under letters of credit issued pursuant to
the Letter of Credit Issuance Agreement to the extent such cash
collateral is permitted under the terms thereof as in effect on the
Restructuring Closing Date; and
(j) Liens on cash collateral to secure the Company's
reimbursement obligations under two standby letters of credit issued
by [ ] after the Restructuring Effective Date in an aggregate amount
that shall not exceed the lesser of (x) 105% of the outstanding face
amount thereof or (y) $25,000,000.
(c) New sections 7.06, 7.07, 7.08 and 7.09 are hereby added as
follows:
7.06 Restricted Payments. The Company shall not, nor shall
it permit any Subsidiary to, declare, order, make or pay, or set aside
any sum for, any Restricted Payment, except that (a) any Subsidiary
may declare and pay
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dividends to the Company, (b) the Company may pay dividends in respect
of its common stock which were declared prior to December 31, 1995 and
(c) the Company may declare and pay dividends in respect of any of its
preferred stock issued and outstanding as of the Restructuring
Effective Date until, for any particular shares of preferred stock,
such time as the Company shall have declined any bona fide offer from
any holder of any such preferred stock to convert or enter into an
agreement to convert such preferred stock into common stock of the
Company.
7.07 Payment of Indebtedness. (a) During the period
from December 17, 1995 through February 28, 1997, the Company shall
not, nor shall it permit any Subsidiary (other than payments by Kmart
Canada, Ltd. or its subsidiaries or by Kmart CR a.s. (Czech
operations) in respect of such Person's respective Indebtedness in
existence as of the Restructuring Effective Date or New Indebtedness
incurred by such Persons in the ordinary course of business,
consistent with past practices) to, directly or indirectly, make any
principal payment, in respect of any Real Estate Debt or any other
Indebtedness (including by way of purchase, refinancing, defeasance or
other direct or indirect transfer of cash consideration to the holders
thereof; provided that the Company may exchange any of its outstanding
Indebtedness for money borrowed for shares of its capital stock and
make cash payments to the holders of such Indebtedness in respect of
fractional shares in connection with such exchange) other than (i)
scheduled payments on the Real Estate Debt set forth on Schedule 7.07
and capital lease payments relating to stores securing the Real Estate
Debt in an amount not to exceed $9,000,000 in the aggregate; provided
that concurrently with making such payments, the Company makes a
ratable repayment of the Loans hereunder as required pursuant to
Section 2.07(b) hereof, (ii) scheduled payments of other mortgage
indebtedness in existence as of the Restructuring Effective Date in an
amount not to exceed $12,000,000 in the aggregate, (iii) payments made
pursuant to guaranties of existing leases of former Subsidiaries of
the Company; provided; that such payments may only be made with
respect to rents so guaranteed as and when the same may become due in
the ordinary course (and not on any accelerated rents that may become
due as a result of a default on the underlying lease), (iv) payments
made with respect to Spin-Off Tenant Put Options (as defined in the
Restructuring and Repurchase Agreement as in effect on the
Restructuring Closing Date), (v) ratable payments of principal of the
Real Es tate Debt concurrently with the making of any payments or
reduction of commitments and ceiling amounts in respect of the
Indebtedness under this Agreement, the Other Credit Facilities or the
Big Beaver Credit Facilities or other Real Estate Debt, to the extent
required pursuant to Sections 2.2, 2.3 or 2.5 of the Restructuring and
Repurchase Agreement as in effect on the Restructuring Closing Date,
(vi) ratable payments of principal of the Other Credit Facilities and
the Big Beaver Credit Facilities concurrently with the making of any
prepayments or reduction of commitments under this Agreement, the Real
Estate Debt, any of the Other Credit Facilities or the Big Beaver
Credit Facilities to the extent required pursuant to the terms of the
Other Credit Facilities and the Big Beaver Facilities as in effect on
the Restructuring Closing Date, (vii) regular, ordinary course
payments of Capitalized Lease Obligations in amounts consistent with
past practices, (viii) payments in respect of the termination of
leases to the extent that the Company believes that such payments
provide a substantial benefit
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to the Company (provided that such lease termination payments do not
exceed the lesser of (a) One Hundred Million Dollars ($100,000,000) in
the aggregate in any fiscal year of the Company and (b) One Hundred
Twenty-Five Million Dollars ($125,000,000) in the aggregate for all
such payments), (ix) repayment of Indebtedness secured
by Liens on real property in connection with the sale or other
disposition of such real property provided that the Company or such
Subsidiary receives net cash proceeds from such sale or disposition in
excess of the Indebtedness require to be repaid, (x) mandatory
principal payments under the Big Beaver Credit Facilities and the
Warehouse Facility Credit Agreement as a result of project
dispositions or project refinancings, (xi) principal payments under
this Agreement, (xii) ratable principal payments under this Agreement,
the Other Credit Facilities and the Big Beaver Credit Facilities in
accordance with Section 7.09, (xiii) payments in respect of New
Indebtedness, (xiv) payments of reimbursement obligations under letters
of credit issued under the Letter of Credit Issuance Agreement
(provided that such payments do not reduce the commitments thereunder
except to the extent provided under the Letter of Credit Issuance
Agreement as in effect on the Restructuring Closing Date) and under
the Three Year Credit Facility and (xv) other payments of principal
in respect of Indebtedness in an aggregate amount that shall not
exceed the lesser of (a) Fifty Million Dollars ($50,000,000) in any
fiscal year of the Company and (b) Seventy-Five Million Dollars
($75,000,000) in the aggregate for all such payments, but
only with respect to Indebtedness other than (1) Real Estate Debt and
(2) Indebtedness under the Other Credit Facilities and the
Big Beaver Credit Facilities.
(b) During the period from December 17, 1995 through October
3, 1997, the Company shall not, nor shall it permit
any subsidiary (other than payments by Kmart Canada, Ltd. or its
subsidiaries or by Kmart CR a.s. (Czech operations) in respect of such
Person's respective Indebtedness in existence as of the Restructuring
Effective Date or New Indebtedness incurred by such Person in the
ordinary course of business, consistent with past practices) to,
directly or indirectly, make any principal payment in respect of any
Real Estate Debt or any other Indebtedness (including by way of
purchase, refinancing, defeasance or other direct or indirect transfer
of cash consideration to the holders thereof; provided that the Company
may exchange any of its outstanding Indebtedness for money borrowed for
shares of its capital stock and make cash payments to the holders of
such Indebtedness in respect of fractional shares) other than (i)
scheduled principal payments on such Indebtedness, (ii) repayments of
Indebtedness of the type permitted under Sections 7.07(a)(iii), (iv),
(v), (vi), (ix), (x), (xi), (xii), (xiii) and (xiv), (ii) payments in
respect of the termination of leases to the extent that the Company
believes that such payments provide a substantial benefit to the
Company, provided that such lease termination payments do not exceed
the lesser of (a) One Hundred Million Dollars ($100,000,000) in the
aggregate in any fiscal year of the Company and (b) One Hundred Twenty
Five Million Dollars ($125,000,000) in the aggregate for all such
payments and (iii) other payments of principal in respect of
Indebtedness in an aggregate amount that shall not exceed the lesser of
(a) Fifty Million Dollars ($50,000,000) in the aggregate in any fiscal
year of the Company and (b) Seventy Five Million Dollars ($75,000,000)
in the aggregate for all such payments, but only with respect to
Indebtedness other than (1) Real Estate Debt and (2) Indebtedness under
the Other Credit Facilities and the Big Beaver Credit Facilities.
7.08 Amendment of Real Estate Debt Documents. The Company
shall not, nor shall it permit any Subsidiary to amend, restate or
otherwise modify any of the documents relating to or governing any
Real Estate Debt in any manner which would, directly or indirectly,
(a) provide for an interest rate payable on such Real Estate Debt in
excess of the interest rate provided for in the Real Estate Debt
Documents unless this Agreement shall have been amended, concurrently
with such increase in the interest rate payable on such Real Estate
Debt, to increase the interest rates set forth herein by an amount
equal to such
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excess, (b) provide for the payment of any fees in addition to the
fees payable under such Real Estate Debt Documents (or provide for any
increase in existing fees payable thereunder) unless this Agreement
shall have been amended, concurrently with the agreement to pay such
new or increased fees, to provide for an equivalent fee to the Banks
in a dollar amount equal to such new fee (or the aggregate amount of
any increase in existing fees) multiplied by a fraction the numerator
of which equals the Ceiling Amount and the denominator of which equals
the aggregate amount outstanding under the Real Estate Debt at such
time or (c) provide for any clarification of any mortgagee's, tenant's
or landlord's rights and obligations under the federal bankruptcy code
or similar law with respect to ground leases or similar arrangements.
7.09 Ratable Payment of Bank Facilities. The Company shall
not, nor shall it permit any Subsidiary to, directly or indirectly,
make any principal payment in respect of the Big Beaver Credit
Facilities or the Other Credit Facilities (other than (i) mandatory
prepayments under the Big Beaver Credit Facilities or the Warehouse
Facility Credit Agreement as a result of a project disposition or
project refinancing, (ii) ratable payments of principal of the Other
Credit Facilities and the Big Beaver Credit Facilities concurrently
with the making of any prepayments or reduction of commitments under
this Agreement, the Real Estate Debt, any of the Other Credit
Facilities or the Big Beaver Credit Facilities to the extent required
pursuant to the provisions of the Other Credit Facilities and the Big
Beaver Facilities as in effect on the Restructuring Closing Date,
which provisions are substantially similar to Section 2.07(b) hereof)
and (iii) the scheduled principal payments due on February 28, 1997
under the Big Beaver Credit Facilities) unless the Company shall
concurrently make a permanent ratable reduction to the Aggregate
Commitment and the Ceiling Amount together with a repayment of the
outstanding Loans to the extent required by Section 2.07(b).
2.6 Article VIII of the Credit Agreement is hereby amended as
follows:
(a) Paragraph (c) of Section 8.01 is hereby deleted in its entirety
and replaced with the following:
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(c) Specific Defaults. The Company fails to perform or observe any
term, covenant or agreement contained in Sections 6.02, 6.03,
6.08(a), 6.09, 6.10, 7.01, 7.02, 7.03, 7.06, 7.07, 7.08 or 7.09 ; or
(b) Paragraph (f) of Section 8.01 is hereby deleted in its
entirety and replaced with the following:
(f) Cross Default; Cross-Acceleration. (i) the Company or
any Subsidiary fails to make any payment of principal or interest or
fees under any of the Other Credit Facilities when due after taking
into account any application of grace periods, or (ii) by reason of
any action taken by the Company or any Subsidiary with the intent and
capacity promptly to satisfy any obligation of the Company or any
Subsidiary resulting therefrom, including, without limitation, the
calling for payment by the Company of any of its Indebtedness or the
termination by the Company of any of its guaranty obligations, any
Indebtedness shall mature or be declared due and payable prior to its
stated maturity and such Indebtedness shall remain unpaid for a period
of two (2) Business Days thereafter, or (iii) the Company or any
Subsidiary fails to perform or observe any condition or covenant or
any other event shall occur or condition exist (other than with
respect to matters described under clause (ii) immediately preceding)
relating to Indebtedness (other than Indebtedness under the Other
Credit Facilities) having an aggregate principal amount (including
undrawn committed or available amounts) of more than Fifty Million
Dollars ($50,000,000) if the effect of any such failure, event or
condition is to cause such Indebtedness to be declared to be due and
payable or otherwise become due and payable prior to its stated
maturity, (iv) the Company or any Subsidiary fails to pay any such
other Indebtedness described in clause (iii) in full at its stated
maturity (except for any such Indebtedness under that certain Loan
Agreement dated as of January 21, 1992 among the borrowers named
therein, the financial institutions signatory thereto and Bankers
Trust Company, as Managing Agent, for so long as any forebearance
agreement contained in the "Fourth Amendment to Loan Agreement and
Limited Forebearance" dated as of the Restructuring Efffective Date as
in effect as of the Restructuring Effective Date in respect of such
Indebtedness remains in full force and effect) or (v) there shall
occur a "Triggering Event" (as defined in the Restructuring and
Repurchase Agreement) or all or any portion of any Real Estate Debt
shall otherwise mature or be declared or otherwise become
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due and payable prior to October 3, 1997 (except for principal
payments permitted in Section 7.07); or
(c) Paragraph (h) of Section 8.01 is hereby deleted in its
entirety and replaced with the following:
(h) Monetary Judgments. A final judgment or judgments in
excess of Fifty Million Dollars ($50,000,000) shall be entered against
the Company by a court of record and not discharged in accordance with
its terms or, within sixty (60) days from the date of entry thereof,
stayed from execution and (within said period of sixty (60) days or
such longer period during which execution of such judgment(s) shall
have been stayed) appeal taken therefrom and execution thereof stayed
during such appeal; or
(d) Section 8.01 is further amended by (i) deleting the
period at the end of clause (j) and replacing it with "; or" and (ii) adding
the following new clauses (k) through (n) as follows:
(k) Payments on Real Estate Debt. The Company or any
Subsidiary shall make or permit to be made (either voluntarily or
otherwise) any principal payment to any holder of any Real Estate Debt
and shall fail to make a concurrent repayment of the Obligations to
the extent required pursuant to Section 2.07; or
(l) Unreimbursed Put Payments. There shall have occurred
the expiration of ten (10) days after the satisfaction of the
following conditions:
(i) the exercise of a Spin-Off Tenant Put Option
against the Company by any Spin-Off Creditor and
(ii) the expiration of the one hundred twenty (120)
day period following the payment by the Company of the
Purchase Amount in respect of such exercise, if, upon such
expiration, the aggregate amount of Unreimbursed Put Payments
(after giving effect to all amounts received by the Company
from (i) the sale or other disposition of the relevant
tendered securities and/or any asset or assets securing the
same and (ii) any other Person that is obligated, directly or
indirectly, in respect of the relevant Spin-Off Tenant Put
Option or otherwise makes any payment with respect thereto) in
respect of (1) such exercise and (2) all Spin-Off Tenant Put
Options which have been exercised at any time
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prior to the commencement of such 120-day period, exceeds
fifteen million dollars ($15,000,000),
For purposes of this Section 8.01(l), the terms "Spin-Off Tenant Put
Option", "Spin-Off Creditor", "Purchase Amount", and "Unreimbursed
Put Payments" shall have the meanings ascribed to such terms in the
Restructuring and Repurchase Agreement as in effect on the
Restructuring Closing Date (including as such terms are further
defined by reference to any other agreements), and not as
such terms or other agreements may subsequently be amended or
otherwise modified; or
(m) Breach of Financing Agreements. The Company or any
Subsidiary shall fail to perform or observe any term, covenant or
agreement with respect to any New Indebtedness having an aggregate
principal amount of more than Fifty Million Dollars ($50,000,000), and
such default shall continue unremedied or unwaived, or the term or
covenant in respect of such failure shall not have been amended, as
the case may be, within forty five (45) days after the first date upon
which any holder or holders thereof (or any representative of such
holder(s)) shall have the right, on account of such failure and after
giving effect to any required notice and the lapse of any applicable
cure periods, to declare such Indebtedness to be immediately due and
payable;
(n) Underutilized Capacity Under Letter of Credit Issuance
Agreement. On any date on and after October 31, 1996, until February
28, 1997, (a) the sum of, without duplication, (i) the aggregate face
amount of the outstanding letters of credit on such date issued
pursuant to the Letter of Credit Issuance Agreement and that certain
predecessor letter agreement dated as of the Restructuring Effective
Date and (ii) the aggregate face amount of the Existing Trade A
Letters of Credit, Existing Trade B Letters of Credit and Existing
Standby Letters of Credit (as such terms are defined in the Letter of
Credit Issuance Agreement) still outstanding on such date minus (b)
any such letters of credit that are cash collateralized shall be less
than the product of (i) eighty percent (.80) and (ii) the sum of (x)
the Maximum Trade A L/C Commitment Amounts, (y) the Maximum Trade B
L/C Commitment Amount and (z) the Maximum Standby L/C Commitment
Amounts (as such terms are defined in the Letter of Credit Issuance
Agreement as in effect on the Restructuring Closing Date), each
determined as of such date.
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2.7 Article IX of the Credit Agreement is hereby amended as
follows:
(a) Section 9.03 is amended by replacing the parenthetical in clause
(i) thereof with the following parenthetical:
(except for its own gross negligence or willful misconduct)
2.8 Article X of the Credit Agreement is hereby amended as
follows:
(a) Subsection (a) of 10.01 is hereby amended and
restated to read as follows:
"(a) increase the Commitment of any Bank or the Ceiling Amount
or amend the definition of Ceiling Amount in any manner which would
result in the Ceiling Amount being greater at any time than it would
be absent such amendment;"
(b) Paragraph (a) of Section 10.08 is hereby amended by
(i) relettering clause (D) thereof as clause (E) and adding the following new
clause (D) immediately following clause (C):
(D) Such Assignee shall acknowledge in the Assignment and
Acceptance or otherwise in a written instrument that its
rights and obligations with respect to the sharing of setoff
rights shall be subject to the terms of the Bank Setoff
Sharing Agreement.
(c) Paragraph (e) of Section 10.08 is hereby amended by
adding the following sentence at the end thereof:
Notwithstanding the foregoing, each Bank shall be permitted to sell
the participations referenced in Section 10.09 without compliance
with the foregoing provisions.
(d) Section 10.09 is hereby deleted in its entirety and
replaced with the following:
10.09 Set-off. In addition to any rights and remedies of the
Banks provided by law, if any of the Obligations shall have become due
and payable, each Bank is authorized at any time and from time to
time, without prior notice to the Company, any such notice being
waived by the Company to the fullest extent permitted by law, to
set-off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held by, and other
indebtedness at any time owing to or by, such Bank
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or any affiliate of such Bank to or for the credit or the account of
the Company against any and all Obligations owing to such Bank
(including without limitation Obligations owing to such Bank by way of
participations deemed purchased pursuant to the second proviso of this
sentence), and subject to the sharing provisions of Section 2.13 and
any other sharing arrangements agreed to by any of the Banks
(including the provisions of the Bank Setoff Sharing Agreement), now
or hereafter existing, irrespective of whether or not the
Documentation Agent or such Bank shall have made demand under this
Agreement or any Loan Document; provided, that to the extent that the
Company owes any amounts to such Bank other than the obligations owing
under this Agreement (including obligations under the Other Credit
Facilities and the Big Beaver Credit Facilities and obligations in
respect of other Indebtedness) at the time of such set-off, then such
Bank is authorized to and shall apportion and apply the amounts
set-off ratably based on the relative aggregate amounts owing under
this Agreement, the Other Credit Facilities and the Big Beaver Credit
Facilities to all of the lenders thereunder and the amount of such
other Indebtedness; provided, further, that to the extent that any
Bank has amounts available to be set-off in excess of the aggregate of
all outstanding obligations of the Company to such Bank under this
Agreement (an "Excess Setoff Amount") after making the apportionment
and application of set-off amounts described in the preceding proviso,
then (i) the other Banks and the lenders under the Other Credit
Facilities and the Big Beaver Credit Facilities, on a pro rata basis,
shall be deemed automatically for purposes of this Section 10.09 to
have sold such Bank and such Bank shall be deemed to have purchased a
participation in the obligations owing to such other Banks and such
lenders thereunder in an aggregate amount equal to the Excess Setoff
Amount, (ii) such purchased participation shall be deemed to be an
Obligation for purposes of this Agreement and (iii) such Bank shall be
authorized to set off the Excess Setoff Amount against such purchased
participations. To the extent that any Bank exercises its rights of
set-off at a time when the aggregate amount of the Deposits is in
excess of the Required Deposit Amount, then the amount set-off by such
Bank shall be treated in accordance with the Set-Off and Sharing
Agreement. Each Bank agrees promptly to notify the Company and the
Documentation Agent after any set-off is made by such Bank; provided,
that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Bank under this
Section 10.09 are in addition to the other
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rights and remedies (including other rights of set-off) which such
Bank may have.
(c) A new Section 10.17 is added as follows:
10.17 Termination of This Agreement. Upon (i) the payment in
full in cash of the outstanding principal amount of each Loan and all
other Obligations then due and payable and (ii) the mandatory or
voluntary permanent termination of the Commitments this Agreement and
all of the provisions thereof (other than this Section 10.17, Section
2.13, Article III, Section 9.07, Section 10.04, Section 10.05 and any
other provision hereof which, by its terms, survive the termination of
this Agreement and the payment in full of the Obligations) shall
terminate and shall be of no further force or effect. In the event
that any payment or distribution in respect of the Obligations is
avoided or otherwise rescinded, the Obligations and this Agreement
shall be immediately revived and reinstated and the Company shall
perform such acts as may be requested by the Banks to consummate such
revival and reinstatement.
2.9 The Schedules to the Credit Agreement are hereby amended
by (a) deleting Schedule 7.03 in its entirety and replacing it with Schedule
7.03 to this Amendment Agreement, (b) adding Schedule 1.01(a), Schedule 1.01(b)
and Schedule 1.01(c) thereto as set forth in Schedule 1.01(a), Schedule 1.01(b)
and Schedule 1.01(c) to this Amendment Agreement, (c) adding Schedule 6.07
thereto as set forth in Schedule 6.07 to this Amendment Agreement and (d)
adding Schedule 7.07 thereto as set forth in Schedule 7.07 to this Amendment
Agreement.
3. Company's Representations and Warranties. In order to
induce the Banks and the Agent to enter into this Amendment Agreement, the
Company hereby represents and warrants that as of the Restructuring Closing
Date hereof:
(a) the Company has the right, power and capacity and has
been duly authorized and empowered by all requisite corporate and
shareholder action to enter into, execute, deliver and perform this
Amendment Agreement;
(b) this Amendment Agreement and the Credit Agreement (as
amended hereby) constitutes the Company's legal, valid and binding
obligation, enforceable against the Company in accordance with its
terms, except as enforcement thereof may be subject to the effect of
any applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws
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affecting creditors' rights generally and general principles of equity
(regardless of whether such enforcement is sought in a proceeding in
equity or at law or otherwise);
(c) the Company's execution and delivery of this Amendment
Agreement and the performance of this Amendment Agreement and the
Credit Agreement (as amended hereby) do not and will not violate its
articles of incorporation or bylaws or any law, rule, regulation,
order, writ, judgment, decree or award applicable to it or any
contractual provision to which it is a party or to which it or any of
its property is subject;
(d) no authorization or approval or other action by, and no
notice to or filing or registration with, any governmental authority
or regulatory body (other than those which have been obtained and are
in force and effect) is required in connection with its execution,
delivery and performance of this Amendment Agreement and the Credit
Agreement (as amended hereby);
(e) no Event of Default or Potential Default (except to the
extent referenced in that certain letter agreement dated December 22,
1995 among the Company and the financial institutions thereto (the
"Forebearance Agreement") has occurred and is continuing under the
Credit Agreement (as amended hereby) or would exist after giving
effect to the transactions contemplated by this Amendment Agreement;
(f) Except as disclosed in writing to each of the Banks,
since December 22, 1995, there has been no change in the financial
condition, operations, business, properties or prospects of the
Company or any Subsidiary except changes that individually or in the
aggregate could not reasonably be expected to have a Material Adverse
Effect (as defined in Section 2.1(a) of this Amendment Agreement).
There is no fact known to the Company that could reasonably be
expected to have a Material Adverse Effect (as defined in Section
2.1(a) of this Amendment Agreement) that has not been set forth in
writing to each of the Banks; and
(g) The representations and warranties made by the Company
contained in Article V of the Credit Agreement are true and correct in
all material respects (except to the extent such representations and
warranties expressly refer to an earlier date, in which case they
shall be true and correct as of such earlier date).
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The Company agrees and acknowledges that the representations and warranties set
forth in this Section 3 shall be considered to be representations and
warranties deemed made under the Credit Agreement for purposes of the Event of
Default set forth in Section 8.01(e) of the Credit Agreement.
4. Conditions to Effectiveness. The effectiveness of this
Amendment Agreement is specifically subject to the satisfaction of the
following conditions precedent or concurrent:
(a) No Defaults; Representations and Warranties True. No
Potential Default or Event of Default (except to the extent referenced in the
Forebearance Agreement) under the Credit Agreement (as amended hereby) shall
have occurred and be continuing. The representations and warranties set forth
in Section 3 of this Amendment Agreement shall be true and correct on the date
hereof.
(b) Execution of Amendment. The Company and each Bank shall
have duly executed and delivered to the Agent a counterpart of this Amendment
Agreement.
(c) Amendment Fee; Incremental Interest. The Company shall
have paid to the Agent (i) for the account of each Bank that executes and
delivers a counterpart hereof, an amendment fee equal to 1.0% of the
outstanding Obligations to such Bank as of December 22, 1995 and (ii) for the
account of each Bank under the Credit Agreement, an amount equal to the
difference between (A) the interest paid to such Bank with respect to the
outstanding Loans from December 22, 1995 through the date of effectiveness of
this Amendment Agreement and (B) the interest that would have been payable with
respect to such Loans had this Amendment Agreement become effective on December
22, 1995. The Company agrees and acknowledges that such amendment fee and such
incremental interest shall be deemed to be fees and interest required to be
paid under the Credit Agreement pursuant to the Event of Default in Section
8.01(b) of the Credit Agreement.
(d) Other Amendments. The Agent shall have received evidence
reasonably satisfactory to it that (i) each of the agreements listed on
Schedule 1.01(a) hereto has been amended on substantially the terms and
conditions set forth in the Agreement in Principle dated as of December 18,
1995 and otherwise in form and substance reasonably satisfactory to the Agent,
(ii) amendments to the agreements evidencing the Other Credit Facilities and
reflecting the provisions of the Forebearance Agreement and the attached
Summary of Indicative Terms dated 12/17/95 (the "Term Sheet") shall have been
executed and
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delivered by the "Required Banks" thereunder, (iii) an amendment to, or a
forbearance agreement in respect of, the Big Beaver I Credit Facility and
reflecting the provisions of the Forebearance agreement and the Term Sheet
shall have been executed and delivered by financial institutions party thereto
holding at least 85% of the outstanding loans thereunder and (iv) an amendment
to the Big Beaver II Credit Facility and reflecting the provisions of the
Forebearance agreement and the Term Sheet shall have been executed by the
"Required Banks" thereunder; each on substantially, the terms and conditions
set forth in the Term Sheet. Each of the undersigned Banks agrees and
acknowledges that their execution and delivery of a counterpart of this
Amendment Agreement shall be also deemed to be the execution and delivery by
such Bank of the amendments to the Other Credit Facilities contemplated by
clause (ii) above for purposes of ascertaining whether such amendments were
executed and delivered by the "Required Banks" under the Other Credit
Facilities.
(e) Letter of Credit Facility; Setoff Sharing Agreement.
The Letter of Credit Issuance Agreement dated as of the date hereof among the
Borrower, the financial institutions signatory thereto and [ ], as agent and
the related collateral proceeds sharing agreement among such financial
institutions shall each have become effective. The Bank Setoff Sharing
Agreement shall have been executed and delivered by all Banks in which the
Company shall have on deposit cash and Cash Equivalents.
(f) Payment of Expenses. The Company shall have paid all
invoiced fees and expenses referenced in section 5(a) hereof and in Section
10.04 of the Credit Agreement.
(g) Opinion of Counsel. The Agent shall have received an
opinion of internal counsel and of reasonably acceptable outside counsel and
the Company's general counsel in favor of the Banks in form and substance
acceptable to the Agent with respect to (a) the legal existence and good
standing of the Company, (b) the authority of the Company to enter into this
Amendment Agreement and the due execution and delivery thereof, (c) that the
obligations of the Company under the Amendment Agreement are legal, valid,
binding and enforceable in accordance with their terms (subject to customary
exceptions), (d) noncontravention with applicable securities laws and other
laws, rules and regulations and material agreements applicable to the Company
and (e) such other matters as the Agent may reasonably request.
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5. Miscellaneous. The parties hereto hereby further agree as
follows:
(a) Costs, Expenses and Taxes. The Company hereby agrees to
pay all reasonable fees, costs and expenses of the Agent and [ ] incurred in
connection with the negotiation, preparation and execution of this Amendment
Agreement and the transactions contemplated hereby, and in connection with any
future amendment, modification or consents of or in respect of the Credit
Agreement (whether or not adopted), including, without limitation, the
reasonable fees and expenses of each of Winston & Strawn and Wachtell, Lipton,
Rosen & Katz ("Wachtell, Lipton"), counsel to the Agent and the Banks. Without
limiting the generality of the foregoing, the Company hereby agrees to pay,
upon receipt thereof, each statement for reasonable fees and expenses of (i)
Wachtell, Lipton and (ii) any other advisor, counselor, consultant or
accountant retained by Wachtell, Lipton, the Banks collectively or the Agent,
rendered after the date hereof (x) relating to the ongoing evaluation of the
rights and status of the Banks with respect to the matters contemplated by this
Amendment Agreement and the rendering of advice to the Banks with respect
thereto, (y) relating to any amendments, waivers or consents requested by the
Company (whether or not adopted) pursuant to the provisions hereof or of any
Loan Document or (z) relating to any work-out or restructuring of Indebtedness
of the Company after December 22, 1995. The Company agrees to reasonably
cooperate with and provide information reasonably requested by any advisor,
accountant, counselor, consultant or accountant retained by the Banks, the
Agent or Wachtell, Lipton. The Company also agrees to pay all reasonable fees
and expenses (including any Attorney Costs) of each of the Banks in connection
with this Amendment Agreement and the Forebearance Agreement.
(b) Counterparts. This Amendment Agreement may be executed
in one or more counterparts, each of which, when executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together,
shall constitute but one and the same document with the same force and effect
as if the signatures of all of the parties were on a single counterpart, and it
shall not be necessary in making proof of this Amendment Agreement to produce
more than one (1) such counterpart.
(c) Headings. Headings used in this Amendment Agreement are
for convenience of reference only and shall not affect the construction of this
Amendment Agreement.
(d) Integration. This Agreement and the Credit Agreement (as
amended hereby) constitute the entire agreement among the parties hereto with
respect to the subject matter hereof.
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(e) Governing law. THIS AMENDMENT AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS AND DECISIONS OF
THE STATE OF NEW YORK (WITHOUT REFERENCE TO CONFLICT OF LAWS PRINCIPLES).
(f) Binding Effect. This Amendment Agreement shall be binding upon and
inure to the benefit of and be enforceable by the Company, the Agent and the
Banks and their respective successors and permitted assigns. This Amendment
Agreement shall not be construed so as to confer any right or benefit upon any
Person other than the Company, the Agent and the Banks and their respective
successors and permitted assigns.
(g) Amendment; Waiver; Status as Loan Document. The parties hereto
agree and acknowledge that nothing contained in this Amendment Agreement in any
manner or respect limits or terminates any of the provisions of the Credit
Agreement other than as expressly set forth herein and further agree and
acknowledge that the Credit Agreement (as amended hereby) remains and continues
in full force and effect and is hereby ratified and confirmed. Except to the
extent expressly set forth herein, the execution, delivery and effectiveness of
this Amendment Agreement shall not operate as a waiver of any rights, power or
remedy of the Banks or the Agent under the Credit Agreement or constitute a
waiver of any provision of the Credit Agreement. No delay on the part of any
Bank or the Agent in exercising any of their respective rights, remedies,
powers and privileges under the Credit Agreement or partial or single exercise
thereof, shall constitute a waiver thereof. None of the terms and conditions
of this Amendment Agreement may be changed, waived, modified or varied in any
manner whatsoever, except in accordance with Section 10.01 of the Credit
Agreement. The parties hereto agree that this Amendment Agreement shall
constitute a Loan Document for purposes of the Credit Agreement.
(h) Authorization Relating to Collateral and Intercreditor Agreement.
Each of the Banks hereby authorizes the Agent to (i) execute the Collateral and
Intercreditor Agreement dated as of the date hereof and relating to the sharing
of collateral pledged to secure Indebtedness under the Letter of Credit
Issuance Agreement among the financial institutions party to the Letter of
Credit Issuance Agreement and the agents under the Other Credit Facilities
(including the Agent) and the Big Beaver Credit Facilities and (ii) distribute
any amount received pursuant to the sharing provisions thereof in the manner
contemplated by Section 2.11 of the Credit Agreement.
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[Balance of page left intentionally blank; signature pages follow.]
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IN WITNESS WHEREOF, the Company, the Agent and the Banks have
executed this Amendment Agreement as of the date first above written.
KMART CORPORATION
By: _______________________
Title: ___________________
[Seasonal Signature Pages]
<PAGE> 310
FIRST AMENDMENT TO WAREHOUSE FACILITY CREDIT AGREEMENT
This First Amendment to Warehouse Facility Credit Agreement (this
"Amendment Agreement") is entered into as of December 22, 1995 by and among the
undersigned borrowers including Kmart Corporation in its capacity as a borrower
(collectively, the "Borrowers"), Kmart Corporation in its capacity as the
guarantor of the Borrowers' obligations (together, with its capacity as a
Borrower, the "Guarantor"), the undersigned financial institutions (the
"Banks") and [ ] as Documentation Agent (the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrowers, the Banks and the Agent are parties to that
certain Warehouse Facility Credit Agreement dated as of October 7, 1994 (as
amended, restated, modified, or supplemented and in effect from time to time,
the "Loan Agreement") pursuant to which the Banks have provided to the
Borrowers certain credit facilities; and
WHEREAS, the Borrowers have requested that the Loan Agreement be amended
in certain respects as set forth herein, and the Banks and the Agent are
agreeable to the same, subject to the terms and conditions herein set forth;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. Defined Terms. Capitalized terms used herein and not otherwise
defined herein shall have the meanings attributed to such terms in the Loan
Agreement, as amended hereby.
2. Amendments to Loan Agreement.
2.1 Section 1.01 of the Loan Agreement is hereby amended by
(a) amending and restating the definitions of "Consolidated Net Worth",
"EBITDAR", "Interest Payment Date", "Interest Period", "Loan", "Material
Adverse Effect", "Other Credit Facilities", "Termination Date", "Swingline
Interest Rate", and "Type" to read as follows:
"Consolidated Net Worth" means as of the date of any determination
thereof, the consolidated net worth of the Guarantor, determined in
accordance with GAAP; provided, however, that any gains or losses from
the disposition of
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any Specialty Retail Subsidiary (or from any write-downs of the
Guarantor's investment in any Specialty Retail Subsidiary or in Builder's
Square, Inc., Kmart Canada, Ltd., Kmart CR a.s., Kmart SR a.s and Kmart
s.r.o. permitted under the Financial Accounting Standards Board Statement
No. 121 prior to any such disposition) and any changes after the Closing
Date in the foreign currency translation adjustment account as presented
in the Guarantor's financial statements (and in accordance with GAAP)
shall be excluded from the determination of Consolidated Net Worth.
"EBITDAR" means, for any applicable period, for the Guarantor the
aggregate of the following, without duplication: (a) consolidated net
income for such period, plus (b) consolidated interest expense (net of
any interest income) for such period, plus (c) consolidated provision for
taxes for such period, plus (d) consolidated depreciation expense for
such period, plus (e) consolidated amortization expense for such period,
plus (f) consolidated Rent Expenses for such period, minus (or plus, as
applicable) (g) on a consolidated basis, any extraordinary gains (or plus
extraordinary losses) for such period (including any loss resulting from
any write-downs of the Guarantor's investment in Builder's Square, Inc.,
Kmart Canada Ltd., Kmart CR a.s., Kmart SR a.s. or Kmart s.r.o. permitted
under the Financial Accounting Standards Board Statement No. 121), minus
(or plus, as applicable) (h) any gains (or plus any losses) attributable
to the Specialty Retail Subsidiaries for such period other than results
of operations in the ordinary course of business, plus (i) solely with
respect to the four fiscal quarters ending in October 1994, the $1.348
billion restructuring charge recorded in the fourth fiscal quarter of the
Guarantor's fiscal year ending January 26, 1994, minus (or plus, as
applicable) (j) any gains (or losses) realized from the sale of Kmart
Canada Ltd. and each of its Subsidiaries, Kmart CR a.s. (Czech
operations), Kmart SR a.s. (Slovak operations) and Kmart s.r.o. (servicer
of Czech and Slovak operations).
"Interest Payment Date" means, with respect to any LIBOR Loan, the
last day of each Interest Period applicable to such Loan, with respect to
any Reference Rate Loan, the last Business Day of each calendar quarter
and the Termination Date, and with respect to any Swingline Loan, the
last day of each calendar month and the Termination Date; provided, that
if any Interest Period for a LIBOR Loan exceeds three months, the date
which falls
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three months after the beginning of such Interest Period shall also be
an Interest Payment Date.
"Interest Period" means: with respect to any LIBOR Loan, the period
commencing on the Business Day the LIBOR Loan is disbursed or continued
(or on the Conversion Date on which any Loan is converted to a LIBOR
Loan) and ending on the date one, two, three or six months thereafter, as
selected by the Kmart Borrower with respect to any Notice of Borrowing or
Notice of Conversion/Continuation;
provided, that:
(i) if any Interest Period would otherwise end on a day which
is not a Business Day, that, Interest Period shall be extended to
the next succeeding Business Day unless, in the case of a LIBOR
Loan, 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;
(ii) any Interest Period pertaining to a LIBOR Loan 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 the calendar month which is one, two, three or six
months, as the case may be, after the calendar month in which such
Interest Period began; and
(iii) no Interest Period for any Loan shall extend beyond the
Termination Date.
"Loan" means a Loan under Section 2.1, and may be a LIBOR Loan, a
Swingline Loan or a Reference Rate Loan, and, with respect to any
Borrower, means the loans by each of the Banks to such Borrower under
Section 2.1 and, with respect to any Bank, the loans made by such Bank to
a Borrower or all the Borrowers, as the context may require, and "Loans"
means all of such Loans to all Borrowers collectively.
"Material Adverse Effect" means a material adverse change in, or
material adverse effect upon, (a) the business, financial condition,
operations, assets or prospects of the Guarantor, or of the Guarantor and
its Subsidiaries taken as a whole, or (b) the Guarantor's ability
to perform its obligations under this Agreement or the Loan
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Documents, or (c) the validity or enforceability of this Agreement or any
other Loan Document; provided, however, that any past or future reduction
in the Guarantor's credit rating or decline in the market price of the
Guarantor's stock shall not of themselves be deemed to constitute a
Material Adverse Effect.
"Other Credit Facilities" means, collectively: (a) the revolving
credit facility evidenced by that certain Three Year Credit Agreement
dated as of October 7, 1994 among the Guarantor, [ ], as documentation
agent thereunder, and the financial institutions signatory thereto; (b)
the revolving credit facility evidenced by that certain 364 Day Credit
Agreement dated as of October 5, 1995 among the Guarantor, [ ], as
documentation agent thereunder, and the financial institutions signatory
thereto, and (c) the revolving credit facility evidenced by that certain
Seasonal Credit Agreement dated as of October 5, 1995 among the
Guarantor, [ ], as documentation agent thereunder, and the financial
institutions signatory thereto (the "Seasonal Credit Facility");
"Swingline Interest Rate" means with respect to each Swingline Loan,
a rate equal to the Average One Month LIBOR plus two percent (2.0%);
"Termination Date" means the earlier to occur of:
(i) October 3, 1997, or
(ii) the date on which the Commitments shall terminate in
accordance with the provisions of this Agreement.
"Type" means, with respect to any Loan, its nature as a Reference
Rate Loan or a LIBOR Loan.
(b) deleting the definition of "CD Rate", "CD Rate Loan" and "Deposited
Monies";
and (c) adding the definitions of "Bank Setoff Sharing Agreement", "Big Beaver
I Credit Facility", "Big Beaver II Credit Facility", "Big Beaver Credit
Facilities", "Capitalized Lease Obligations", "Cash Equivalents", "Ceiling
Amount", "Deposits", "Deposit Threshold", "Kmart Bank Group", "Letter of Credit
Issuance Agreement", "New Indebtedness", "Real Estate Debt",
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"Real Estate Debt Documents", "Required Deposit Amount", "Restricted Payment",
"Restructuring Closing Date", "Restructuring Effective Date", "Restructuring
and Repurchase Agreement", "Scheduled Assets" and "Set-off and Sharing
Agreement" :
"Bank Setoff Sharing Agreement" means that certain Bank Setoff
Sharing Agreement dated as of the Restructuring Effective Date among the
Banks party thereto, the Guarantor and [ ], as agent.
"Big Beaver I Credit Facility" means the revolving credit facilities
evidenced by that certain Loan Agreement dated as of January 21, 1992
among the borrowers named therein, the financial institutions signatory
thereto, and [ ], as managing agent.
"Big Beaver II Credit Facility" means the revolving credit
facilities evidenced by that certain Loan Agreement dated as of August 7,
1992 among the borrowers named therein, the financial institutions
signatory thereto, and [ ], as agent.
"Big Beaver Credit Facilities" means the Big Beaver I Credit
Facility and the Big Beaver II Credit Facility.
"Capitalized Lease Obligations" means, in relation to any Person,
obligations for the payment of rent for any real or personal property
under leases or agreements to lease that, in accordance with GAAP, have
been or should be capitalized on the books of the lessee and, for
purposes hereof, the amount of any such obligation shall be the
capitalized amount thereof determined in accordance with GAAP.
"Cash Equivalents" means investments substantially of the type
described on Schedule 1.01(c) hereof.
"Ceiling Amount" means, at any time of determination, three hundred
eighty four million, nine hundred twenty two thousand, five hundred
nineteen dollars ($384,922,519) less the aggregate amount of payments
made in respect of the Loans after the Restructuring Effective Date
pursuant to Section 2.12(c) as such amount may be increased from time to
time with the written consent of all of the Banks.
"Deposits" has the meaning specified in Section 5.3(i).
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"Deposit Threshold" means, at any time, the sum of (a) $400,000,000
plus (b) an amount equal to (i) the increase in the fair market value (as
determined based on appraisals satisfactory to the Documentation Agent)
of collateral securing the Real Estate Debt arising from the substitution
of collateral after the Restructuring Effective Date to the extent
permitted by Section 5.4(c)(v) upon an event of casualty, condemnation
or eminent domain event, or upon the existence of an environmental
condition, (but in any event excluding a substitution of collateral
resulting from the single store collateral substitution obligation
existing on the Restructuring Effective Date and resulting from a store
closing in September, 1995 with respect to the Deal 2 Notes (as defined
in the Restructuring and Repurchase Agreement); to the extent such
substitution is permitted under the Real Estate Debt Documents as in
effect as of the Restructuring Closing Date, multiplied by a fraction,
the numerator of which is equal to the sum of the outstanding obligations
under this Agreement, the Other Credit Facilities and the Big Beaver
Credit Facilities at the time of such substitution and the denominator of
which is equal to the Real Estate Debt outstanding at the time of such
substitution, less (ii) the fair market value (as determined based on
appraisals satisfactory to the Documentation Agent) of any property
pledged to secure the outstanding obligations under this Agreement, the
Other Credit Facilities and the Big Beaver Credit Facilities concurrently
with such pledge of substituted collateral to the holders of the Real
Estate Debt.
"Kmart Bank Group" means the lending institutions from time to time
party to one or more of this Agreement, the Other Credit Facilities and
the Big Beaver Credit Facilities.
"Letter of Credit Issuance Agreement" means that certain Letter of
Credit Issuance Agreement dated as of February 29, 1996 between Kmart
Corporation and certain banks, pursuant to which such banks agreed to
issue trade letters of credit and standby letters of credit on the terms
and subject to the conditions provided for therein, as amended, restated,
supplemented or modified from time to time.
"New Indebtedness" means Indebtedness incurred by the Guarantor or
any of its Subsidiaries after the Restructuring Effective Date other than
(i) any Indebtedness under this Agreement, the Other Credit Facilities or
the Big Beaver Credit Facilities, (ii) Indebtedness under or Indebtedness
refunding or refinancing the Real Estate Debt
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or (iii) Indebtedness refunding or refinancing unsecured Indebtedness of
the Guarantor outstanding on the Restructuring Effective Date.
Indebtedness outstanding under the Letter of Credit Issuance Agreement
shall constitute New Indebtedness.
"Real Estate Debt" means the Indebtedness outstanding under the
agreements listed on Schedule 1.01(a) hereto.
"Real Estate Debt Documents" means the Restructuring and Repurchase
Agreement and the documents and instruments relating to the Real Estate
Debt, as in effect as of the Restructuring Effective Date, including the
related note purchase agreements, indentures, trust agreements, put
agreements, promissory notes, mortgages, deeds of trust, leases and other
security documents and the documents described as the "Existing
Transaction Documents" in the Restructuring and Repurchase Agreement.
"Required Deposit Amount" has the meaning specified in Section
5.3(i).
"Restricted Payment" means, with respect to any Person, (a) any
dividend or other distribution, direct or indirect, or the incurrence of
any liability to make any other payment or distribution of cash or other
property or assets in respect of such Person's capital stock (which shall
include, without limitation, preferred stock, common stock, options,
warrants or any other equity security), (b) any payment on account of the
purchase, prepayment, conversion, exchange, redemption, retirement,
surrender or acquisition of such Person's capital stock or any other
payment or distribution made in respect thereof, either directly or
indirectly, and (c) any purchase or other acquisition or payment in
respect of any option, warrant or other right to acquire any of or any
interest in such Person's capital stock; provided, that "Restricted
Payment" shall not include (i) any dividend payable solely in shares of
its capital stock, (ii) any purchase or exchange of existing employee
stock options for consideration consisting solely of new employee stock
options or (iii) any purchase of capital stock or options to acquire the
same from directors, officers and employees of the Guarantor and its
Subsidiaries consistent with past practices in connection with ordinary
course employment and severance arrangements and in an aggregate amount
that shall not exceed $5,000,000 for all such purchases pursuant to this
clause (iii).
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"Restructuring and Repurchase Agreement" means that certain
Restructuring and Repurchase Agreement dated as of December 22, 1995 by
and among Kmart Corporation and certain holders of the Real Estate Debt
and certain other Persons parties thereto.
"Restructuring Closing Date" means the date upon which each of the
conditions precedent set forth in Section 4 of that certain First
Amendment to Warehouse Facility Credit Agreement dated as of December 22,
1995 by and among the Guarantor, the Banks and the Documentation Agent
have been satisfied.
"Restructuring Effective Date" means December 22, 1995.
"Scheduled Assets" means the assets of the Guarantor identified on
Schedule 1.01(b) hereto.
"Set-off and Sharing Agreement" means that certain Set-Off and
Sharing Agreement dated as of the Restructuring Effective Date among the
holders of the Real Estate Debt and the institutions in the Kmart Bank
Group party thereto.
2.2 Article II of the Loan Agreement is hereby amended as follows:
(a) Section 2.1 is hereby amended and restated in its entirety to
read as follows:
Section 2.1 Loans.
(a) Banks' Commitments. Each Bank, severally and for itself
alone, hereby agrees, on the terms and subject to the conditions
hereinafter set forth to make loans to one or more of the Borrowers, on
the date requested from time to time from and after the date of this
Agreement to, but not including, the Termination Date, in the Pro Rata
Share of such Bank of such amounts as a Borrower may request with
Guarantor's written approval, but not exceeding: (i) in the aggregate at
any one time outstanding, the Commitment of such Bank; or (ii) with
respect to any Project, such Bank's Project Commitment for such Project;
or (iii) with respect to any Non-Project Commitment, such Bank's Pro Rata
Share of such Non-Project Commitment. In addition, notwithstanding
anything to the contrary in this Agreement, without the written consent
of all of the Banks, none of the Borrowers
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may request a Loan, and none of the Banks shall make a Loan, if the
aggregate amount of Loans outstanding (after giving effect to such Loan)
would exceed the Ceiling Amount.
(b) Project Borrowings to Initially be Made as Swingline Loans.
Notwithstanding the provisions of Section 2.1(a), unless otherwise
required by the Documentation Agent, each Project Borrowing under this
Agreement shall initially be made as a Swingline Loan pursuant to Section
2.1(c).
(c) Swingline Commitment.
(i) Subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties of the Borrowers set
forth herein and in the other Loan Documents, Swingline Lender hereby
agrees to make a portion of the Total Commitments of the Banks available
to the Borrowers for Project Loans at any time and from time to time on
and after the date hereof and prior to the Termination Date, upon notice
as set forth in Section 2.1(c)(v) below, in an aggregate principal amount
of up to $100 million by making Swingline Loans, notwithstanding the fact
that the amount of such Swingline Loans, when aggregated with Swingline
Lender's outstanding Loans and its Pro Rata Share of the Unused
Commitments, may exceed Swingline Lender's Commitment in effect from time
to time. Swingline Lender's commitment to make Swingline Loans pursuant
to this Section 2.1(c) is herein called its "Swingline Commitment."
Swingline Lender's Swingline Commitment shall expire on the Termination
Date and all Swingline Loans shall be paid in full no later than the
Termination Date.
(ii) In no event shall the aggregate principal amount of Swingline
Loans outstanding at any time exceed the Swingline Commitment and in no
event shall (i) the sum of the aggregate principal amount of Loans
(including Swingline Loans) and the aggregate Total Unused Commitment
outstanding at any one time exceed the Total Commitments of all the Banks
or (ii) the sum of the aggregate principal amount of Loans (including
Swingline Loans) at any one time exceed the Ceiling Amount. In no event
shall the Swingline Commitment exceed the Total Commitments of all the
Banks or the Ceiling Amount without the prior written consent of all of
the Banks, and any reduction of the Total Commitments which reduces the
Total Commitments or reduction of the Ceiling Amount which reduces the
Ceiling
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Amount below the then current amount of the Swingline Commitment shall
result in an automatic corresponding reduction of the Swingline
Commitment to the amount of the Total Commitments or Ceiling Amount as so
reduced, without any further action, on the part of Swingline Lender.
(iii) Amounts borrowed under this Section 2.1(c) may be
repaid and reborrowed, provided that no amounts may be reborrowed on or
after the Termination Date, and provided further that amounts borrowed and
repaid hereunder shall not be available to be reborrowed hereunder in
respect of the same Project and amounts may not be reborrowed if the
aggregate amount of Loans (after giving effect to such Borrowing) would
exceed the Ceiling Amount.
(iv) All Swingline Loans shall bear interest at the
Swingline Interest Rate.
(v) Subject to Section 2.1(a), whenever a Borrower desires to
borrow under this Section 2.1(c), it shall deliver to the Swingline
Lender and the Documentation Agent a Swingline Notice of Borrowing no
later than 11:00 a.m. (New York City time) one Business Day prior to the
proposed Borrowing date (which shall be a Business Day). The Swingline
Notice of Borrowing shall specify the amount of the proposed Swingline
Loan. In lieu of delivering the above-described Swingline Notice of
Borrowing, a Borrower may give the Agent telephonic notice by the required
time of any proposed Borrowing under this Section 2.1(c), provided, that
such notice shall be promptly confirmed in writing by delivery of a
Swingline Notice of Borrowing to the Documentation Agent on or prior to
the proposed Borrowing Date of the requested Swingline Loan.
(vi) Swingline Lender shall not incur any liability to any
Borrower in acting upon any telephonic notice referred to above which
Swingline Lender believes in good faith to have been given by a duly
authorized officer or other person authorized to borrow on behalf of a
Borrower or for otherwise acting in good faith under this Section 2.1(c)
and, upon the making of a Swingline Loan by Swingline Lender in
accordance with this Agreement pursuant to any telephonic notice, the
applicable Borrower shall be deemed to have borrowed such Swingline Loan
hereunder.
(vii) Each Swingline Notice of Borrowing given pursuant to this
Section 2.1(c) shall be deemed a representation that the Closing Date
shall have occurred and that all conditions to such Borrowing set forth
in Sections 6.2
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and 6.3 (if applicable) and 6.4 of this Agreement have been complied with.
(viii) Promptly after receipt of a Swingline Notice of Borrowing
pursuant to Section 2.1(c)(v) (or telephonic notice in lieu thereof), and
upon satisfaction or waiver by the Banks, the Required Banks or the
Documentation Agent, as applicable, of the conditions precedent specified
in Sections 6.2 and 6.3 (if applicable) and 6.4, and the consent of all
the Banks, the Swingline Lender shall make the proceeds of such Swingline
Loan available to the applicable Borrower on such Borrowing date by
crediting the same to the account of the Borrower at the Payment Office
of the Documentation Agent.
(ix) Swingline Lender, at any time in its sole and absolute
discretion may, and not less often than once each month shall, on three
(3) Business Days', notice, require each Bank, including Swingline
Lender, either (A) to make a Loan to such Borrower (which, provided that
no Unmatured Guarantor Event of Default or Guarantor Event of Default
shall have occurred and be continuing, shall be of a Type selected by
Kmart Corporation, acting as agent for the applicable Borrower), for
which the applicable Borrower(s) shall be deemed to have given a Notice
of Borrowing pursuant to Section 2.5, in an amount equal to such Bank's
Pro Rata Share of such Swingline Loan, the proceeds of which Loan shall
be applied to repay such Swingline Loan, or (B) if for any reason such
Bank shall fail to make, or shall be prevented from making, such Loan, to
purchase from Swingline Lender a participation in such Swingline Loan,
and any such Bank hereby agrees to and shall be deemed to have
irrevocably purchased from Swingline Lender, such participation in an
amount equal to such Bank's Pro Rata Share of the amount of such
Swingline Loan; provided, however, that in no event shall any Bank be
required to make a Loan to refinance a Swingline Loan or to purchase a
participation in a Swingline Loan if (i) such Bank's Loan or its Pro Rata
Share of the amount of such Swingline Loan plus its outstanding Loans
(including its Pro Rata Share of any other Swingline Loans outstanding)
and its Pro Rata Share of the Total Unused Commitment outstanding would
exceed such Bank's Commitment or (ii) such Bank's Loan or its Pro Rata
Share of the amount of such Swingline Loan plus its outstanding Loans
(including its Pro Rata Share of any other Swingline Loans outstanding)
would exceed such Bank's Pro Rata Share of the Ceiling Amount. In the
event that such refinancing Loans or such purchases of participations are
made by Banks other than Swingline Lender under the two immediately
preceding sentences, each
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such Bank shall make available to Swingline Lender an amount equal to
its respective Loan or participation in same day funds, at the office of
Swingline Lender located at [ ], not later than 1:00 P.M. (New York City
time) on the Business Day after the date notified by Swingline Lender.
Each Bank which purchases such a participation shall be deemed to have
the same rights of set-off and obligation to share pursuant to Section
9.11 hereof as it would have had if it were an assignee of Swingline
Lender hereunder. In the event that any Bank fails to make available to
Swingline Lender the amount of such Bank's Loan to refinance or
participation in such Swingline Loan as provided in this Section
2.1(c)(ix), Swingline Lender shall be entitled to recover such amount on
demand from such Bank together with interest for each day after the date
when such funds were required to be made available hereunder at the
Federal Funds Rate. Each Borrower authorizes the Documentation Agent to,
upon one Business Day's prior written or telephone notice, charge such
Borrower's account with the Documentation Agent (up to the amount
available in each such account) in order immediately to pay Swingline
Lender the amount of such Swingline Loans to the extent amounts received
from the Banks are not sufficient to repay in full or purchase
participations in the full amount of such Swingline Loans. Each Bank's
obligation to make the refinancing Loan or to purchase the participation
referred to in this Section 2.1(c)(ix) shall be absolute and
unconditional and shall not be affected by any circumstance, including,
without limitation:
(1) any set-off, counterclaim, recoupment, defense or other
right which such Bank may have against Swingline Lender, the
applicable Borrower(s) or any other Person for any reason
whatsoever;
(2) the occurrence or continuance of an Unmatured Borrower
Event of Default or a Borrower Event of Default with respect to any
Swingline Borrower;
(3) the occurrence or continuance of an Unmatured Guarantor
Event of Default or a Guarantor Event of Default;
(4) any adverse change in the condition (financial or
otherwise) of the applicable Borrower or any of its Subsidiaries or
the condition of Guarantor;
(5) any breach of this Agreement by the applicable Borrower
or any other Bank;
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(6) the failure to satisfy any of the conditions set forth in
Sections 6.1, 6.2, 6.3 or 6.4, as applicable; or
(7) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.
A copy of each notice given by Swingline Lender to the Banks in
respect of any Swingline Loan pursuant to this Section 2.1(c)(ix) shall
be promptly delivered by Swingline Lender to the applicable Borrower,
with a copy to Guarantor.
(x) The Swingline Lender shall record it a register (the "Swingline
Register") the Swingline Commitment from time to time of Swingline
Lender, the Swingline Loans made by Swingline Lender and each repayment
with respect to the principal amount of the Swingline Loans of Swingline
Lender. Any such recordation shall be conclusive, absent manifest error.
(d) Project Borrowings. All Loans made with respect to a Project
made hereunder (other than Roll-Over Borrowings) shall be made in a
single drawing on the Borrowing Date for such Borrowing and no Borrower
shall have any right hereunder to borrow more than once with respect to
any particular Project. Amounts borrowed and repaid hereunder shall not
be available to be reborrowed hereunder in respect of the same Project
but, during the period prior to the Termination Date and subject to the
other terms and conditions hereof, may be reborrowed with respect to a
different Project.
(e) Section 2.2 is hereby amended by deleting the term "and CD Rate
loans" at the end of subsection (a) thereof.
(f) Section 2.4 is hereby amended by deleting the phrase ", CD Rate
Loans" in the first sentence thereof.
(g) Section 2.5 is hereby amended and restated in its entirety to read as
follows:
Section 2.5 Notice of Borrowing.
(a) Subject to Section 2.1 hereof, each Borrowing other than a
Swingline Borrowing shall be made upon the
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irrevocable request of the applicable Borrower by a facsimile to the
Documentation Agent (which shall be confirmed promptly by a telephone
call) in the form of a Notice of Borrowing, appropriately completed, which
specifies the Project for which such Borrowing will be used, if any, or if
such Borrowing is requested by the Kmart Borrower for other purposes shall
so state, which facsimile must be received by the Documentation Agent
prior to 11:00 a.m. (New York City time) (i) three (3) Business Days prior
to the requested borrowing date, in the case of LIBOR Loans and (ii) on
the requested borrowing date, in the case of Reference Rate Loans, and
shall specify:
(i) the amount of the Borrowing, which shall be in an aggregate
minimum principal amount of Five Million Dollars ($5,000,000) or any
amount in excess thereof for any Project Loan, and shall be in an
aggregate minimum principal amount of Ten Million Dollars ($10,000,000)
or any multiple of Five Million Dollars ($5,000,000) in excess thereof
for any Loan for other purposes;
(ii) the requested Borrowing Date, which shall be a Business Day;
(iii) whether the Borrowing is to be comprised of LIBOR Loans or
Reference Rate Loans; and
(iv) if the Borrowing is to be comprised of LIBOR Loans, the
duration of the initial Interest Period applicable to such Loans. If the
Notice of Borrowing shall fail to specify the duration of the initial
Interest Period for any LIBOR Loans, the applicable Borrower shall be
deemed to have elected an Interest Period of one month or 30 days,
respectively;
provided, however, that with respect to any Borrowing to be made on the
Closing Date, a Notice of Borrowing shall be delivered to the
Documentation Agent not later than 11:00 a.m. (New York City time) on the
Closing Date (such Borrowing will consist of Swingline Rate Loans only).
(b) Upon receipt of the Notice of Borrowing, the Documentation
Agent shall promptly notify each Bank thereof and of the amount of such
Bank's share of the requested Borrowing based on such Bank's Pro Rata
Share thereof.
(c) Each Bank will make its share of each Borrowing available to
the Documentation Agent for the account of
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the applicable Borrower at the Documentation Agent's Payment Office
specified on the signature page hereto or at such other address as the
Documentation Agent shall hereafter specify to the Banks by 2:00 p.m. (New
York City time) on the borrowing date requested by the applicable Borrower
by payment in Dollars and in funds immediately available to the
Documentation Agent. Unless any applicable condition specified in
Sections 6.2 and 6.3 (if applicable) and Section 6.4 has not been
satisfied, the proceeds of all such Loans will then be made available to
the applicable Borrower by the Documentation Agent at such office by
crediting the account of such Borrower with the aggregate of the amounts
made available to the Documentation Agent by the Banks and in like funds
as received by the Documentation Agent.
(d) After giving effect to any Borrowing, unless consented to by
the Documentation Agent in its sole discretion, there shall not be more
than six (6) different Interest Periods in effect in respect of all LIBOR
Loans then outstanding, and not more than twelve (12) Interest Periods in
respect of all Loans then outstanding.
(h) Section 2.6 is hereby amended and restated in its entirety to
read as follows:
Section 2.6 Conversion and Continuation Elections for Borrowings.
(a) The Kmart Borrower (and Kmart Corporation, as agent for each
Non-Kmart Borrower) may, upon notice to the Documentation Agent in
accordance with Section 2.6(b):
(i) elect to convert, on any Business Day, any Reference
Rate Loans (or any part thereof) in an aggregate amount not less
than Five Million Dollars ($5,000,000) (or such other outstanding
principal amount of such Loan as may result from mandatory
prepayments of such Loan hereunder) into LIBOR Loans; or
(ii) elect to convert, as of the last day of any Interest
Period, any LIBOR Loans maturing on such day (or any part
thereof) in an aggregate amount not less than Five Million
Dollars ($5,000,000) (or such other outstanding principal amount
of such Loan as may result from mandatory prepayments of such
Loan hereunder) into Reference Rate Loans; or
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(iii) elect to continue as of the last day of any Interest
Period (a "Continuation Date") any LIBOR Loans maturing on such
day (or any part thereof) in an aggregate amount not less than
Five Million Dollars ($5,000,000) (or such other outstanding
principal amount of such Loan as may result from mandatory
prepayments of such Loan hereunder);
provided, that if the aggregate amount of all LIBOR Loans comprised in
any Borrowing shall have been or would be reduced, by payment,
prepayment, or conversion of part thereof to an amount less than Five
Million Dollars ($5,000,000), such LIBOR Loans shall automatically
convert into Reference Rate Loans, on and as of the end of the applicable
Interest Period.
(b) If Kmart Corporation, as each Borrower's agent, desires
to convert or continue any Loan pursuant to Section 2.6(a), it shall
irrevocably request at conversion or continuation by a facsimile
(confirmed promptly by telephone) of a Notice of Conversion/Continuation
to be received by the Documentation Agent not later than 11:00 a.m. (New
York City time) at least (i) three (3) Business Days in advance of the
Conversion Date or Continuation Date, if the Loans are to be converted
into or continued as LIBOR Loans and (ii) on the same Business Day as the
Conversion Date, if the Loans are to be converted into Reference Rate
Loans, specifying:
(A) the proposed Conversion Date or Continuation Date;
(B) the aggregate amount of Loans to be converted or
continued;
(C) the nature of the proposed conversion or continuation;
and
(D) the duration of the requested Interest Period, if the
Loans are to be converted into or continued as LIBOR Loans.
(c) If prior to the time set forth in Section 2.6(b), Kmart
Corporation, as agent for each Borrower, has failed to (i) give a timely
Notice of Conversion/Continuation with respect to such LIBOR Loans or
(ii) select a new Interest Period to be applicable to such LIBOR Loans,
such Borrower shall be deemed to have elected to
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convert such Loans into LIBOR Loans with an Interest Period of one month
effective as of the expiration of the applicable Interest Period.
(d) During the existence of an Unmatured Guarantor Event of Default
or a Guarantor Event of Default (or, with respect to a particular
Borrower, an Unmatured Borrower Event of Default or a Borrower Event of
Default), unless the Required Banks agree otherwise, the affected
Borrower(s) (or Kmart Corporation (which the Borrowers hereby jointly and
severally irrevocably designate as their collective agent for such
purpose), acting as their agent) may not elect to have a Loan be
converted into or continued as a LIBOR Loan.
(e) Upon receipt of a Notice of Conversion/Continuation, the
Documentation Agent will promptly notify each Bank thereof, or, if no
timely notice is provided, the Documentation Agent will promptly notify
each Bank of the details of any automatic conversion or continuation.
All conversions and continuations pursuant to this Section 2.6 shall be
made pro rata according to the respective outstanding principal amounts
of the Loans being converted or continued held by each Bank.
(i) Section 2.7 is hereby amended and restated in its entirety to read as
follows:
Section 2.7 Interest.
(a) Subject to Sections 2.7(d) and (e), each Loan (other than
Swingline Loans) shall bear interest on the outstanding principal amount
thereof from the date when made until paid in full, at the option of the
applicable Borrower or Kmart Corporation (as agent for the Borrowers) as
set forth in the applicable Notice of Borrowing or Notice of
Conversion/Continuation:
(i) if such Loan is a Reference Rate Loan, at a rate per annum
equal to the Reference Rate plus one percent (1.0%); and
(ii) if such Loan is a LIBOR Loan, at a rate per annum equal to the
sum of LIBOR plus two percent (2.0%);
(b) Subject to Sections 2.7(d) and (e), each Swingline Loan shall
bear interest on the outstanding principal amount thereof from the date
when made until paid in full at the Swingline Interest Rate.
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(c) Interest on each Loan shall be payable in arrears on each
applicable Interest Payment Date. Interest shall also be payable on the
date of any prepayment of any LIBOR Loans for the portion of the Loans so
prepaid, and, in the case of conversion of any Reference Rate Loan, on
the date of conversion thereof into a LIBOR Loan.
(d) After acceleration, and after as well as before any entry of
judgment thereon, and at the election of the Documentation Agent or the
Required Banks during any period while a Guarantor Event of Default or,
with respect to a particular Borrower, a Borrower Event of Default as to
such Borrower, is continuing, each Borrower affected shall pay interest
(after as well as before judgment to the extent permitted by law) on the
principal amount of all Loans made to it which are due and unpaid, at a
rate per annum which is determined by increasing the rate(s) of interest
then in effect by two percent (2.0%) per annum; provided, that, if a
Guarantor Event of Default (or, with respect to such Borrower, a Borrower
Event of Default) has occurred and is continuing and the Documentation
Agent or the Required Banks have so elected, on and after the expiration
of the Interest Period applicable to any LIBOR Loan outstanding on the
date of occurrence of such Event of Default or acceleration, the
principal amount of such Loan shall, during the continuation of such
Event of Default, bear interest at a fluctuating rate per annum equal to
the Reference Rate plus three percent (3.0%) (the "Default Rate").
(e) Anything herein to the contrary notwithstanding, the
obligations of the Borrowers hereunder shall be subject to the limitation
that payments of interest shall not be required, for any period for which
interest is computed hereunder, to the extent (but only to the extent)
that contracting for or receiving such payment by the respective Bank
would be contrary to the provisions of any law applicable to such Bank
limiting the highest rate of interest which may be lawfully contracted
for, charged or received by such Bank, and in such event the applicable
Borrower(s) shall pay such Bank interest at the highest rate permitted by
applicable law.
(j) Section 2.8 is hereby amended by (i) deleting the phrase ", the CD
Rate" in subsection (b) thereof and (ii) deleting the phrase "and the CD Rate"
in subsection (d) thereof.
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(k) Section 2.12 is hereby amended by (i) relettering subsection (c) as
subsection (d), (ii) deleting the reference to "CD Rate Loans" in subsection
(d) (as relettered) and (iii) adding the following new subsection (c):
(c) If any principal payment is made to the holders of the Real
Estate Debt (except to the extent that such payment to the holders of the
Real Estate Debt was triggered by (x) a mandatory prepayment pursuant to
this Section 2.12(c) or (y) a prepayment made under the Big Beaver Credit
Facilities and the Other Credit Facilities which results in a ratable
reduction of the Total Commitment and to the Ceiling Amount in accordance
with the next sentence of this Section 2.12(c)), the Guarantor shall
cause to be made concurrently a permanent reduction in the Total
Commitment and to the Ceiling Amount, in an amount (the "RE Reduction
Amount") equal to such payment multiplied by a fraction, the numerator of
which equals the Ceiling Amount (as in effect immediately prior to such
prepayment of principal in respect of the Real Estate Debt) and the
denominator of which equals the aggregate amount outstanding under the
Real Estate Debt immediately prior to such payment. In addition, the
Guarantor shall cause to be made a permanent reduction in the Total
Commitment and to the Ceiling Amount, concurrently with the making of any
principal payment in respect of the Big Beaver Credit Facilities or the
Other Credit Facilities (other than (i) mandatory prepayments under the
Big Beaver Credit Facilities as a result of a project disposition or
project refinancing, (ii) principal payments due on February 28, 1997
under the Seasonal Credit Facility and the Big Beaver Credit Facilities
and (iii) prepayments under the Other Credit Facilities and the Big
Beaver Credit Facilities required as a result of prepayments under the
Real Estate Debt or under this Agreement), in an amount, (the "Bank
Reduction Amount") equal to such payment multiplied by a fraction, the
numerator of which equals the Ceiling Amount (as in effect immediately
prior to such prepayment of principal under either of the Big Beaver
Credit Facilities or any such Other Credit Facility) and the denominator
of which equals the aggregate amount outstanding under the facility
receiving the payment immediately prior to the making of such payment.
Concurrently with each such reduction, the Guarantor shall cause the
outstanding Loans to be ratably prepaid in an amount equal to the RE
Reduction Amount or the Bank Reduction Amount as the case may be,
together with accrued interest to such date on the amount prepaid and the
amounts required pursuant to Section 3.5. Such prepayment amount and
reduction of the Total Commitment shall ratably reduce each Bank's
outstanding Loans and
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Commitment in accordance with its Pro Rata Share. Furthermore, if for
any reason, the aggregate principal amount of all outstanding Loans
exceeds the Ceiling Amount, then, unless all of the Banks otherwise
consent in writing, the Guarantor shall immediately prepay the Loans in
the amount of such excess. Any such prepayment made by the Guarantor
pursuant to this Section 2.12(c) shall be treated and accounted solely
for the purposes hereof as a payment by the Guarantor under the Guaranty.
(l) Section 2.13 is hereby amended and restated to read as follows:
Section 2.13 Other Provisions With Respect to Prepayments. Except
as otherwise provided herein, any repayment of a LIBOR Loan which shall
be made prior to the end of the applicable Interest Period for such Loan
shall be subject to the provisions of Article III hereof.
(m) Section 2.14 is hereby amended and restated to read as follows:
Section 2.14 Order of Prepayments and Payments.
(a) All prepayments of principal made by any Borrower pursuant to
Sections 2.12 and 2.13 shall be applied to the payment of the outstanding
balance of any applicable Project Loan and the Note evidencing the same
as directed by such Borrower with respect to breakage of Interest
Periods, provided that no Guarantor Event of Default has occurred and is
then continuing and no Borrower Event of Default as to such Borrower has
occurred and is then continuing. Any prepayment of principal made after
the occurrence and during the continuance of a Guarantor Event of Default
or a Borrower Event of Default as to the applicable Borrower shall be
applied against the Loan Obligations of such Borrower and the Notes
evidencing the same as the Documentation Agent shall, in its sole
discretion, determine.
(b) Any prepayments of a Loan pursuant to Sections 2.12 and 2.13
shall permanently reduce by a like amount the pro rata Project Commitment
of each of the Banks corresponding to the Project Loan so prepaid.
(n) Section 2.20 is hereby amended by amending and restating
subsection (c) to read as follows:
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(c) Except as set forth in Section 9.11, nothing herein shall
require any Bank to exercise any right of set-off or similar rights
or shall affect the right of any Bank to exercise, and retain the
benefits of exercising any such right with respect to any other
indebtedness or obligation of any Borrower or the Guarantor.
2.3 Article III of the Loan Agreement is hereby amended as follows:
(a) Section 3.2 is hereby amended by (i) deleting the phrases (x)
"in the domestic money market relevant to CD Rate Loans or", (y) "CD Rate Loans
or" and (z) "CD Rate Loan or a" in the first paragraph thereof each time they
appear and (ii) deleting the phrases (x) "or CD Rate Loan" and (y) "or a CD
Rate Loan" in the second paragraph thereof each time they appear.
(b) Section 3.3 is hereby amended by amending and restating
subsection (a) thereof to read as follows:
(a) If, after the Closing Date, a Bank shall reasonably determine
that any change in applicable laws, rules or regulations or in the
interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof (whether or not
having the force of law):
(i) shall change the basis of taxation to such Bank of any
amounts payable by amy Borrower under this Agreement (other than
taxes imposed on or measured by the overall income of such Bank
in the jurisdiction in which such Bank has its principal office),
or
(ii) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, such
Bank with respect to this Agreement or any Note, or
(iii) shall impose any other condition with respect to this
Agreement or any Note,
and the result of any of the foregoing is to increase the cost to such
Bank or to reduce the amount of any sum receivable by such Bank with
respect to making or maintaining any LIBOR Loan by an amount reasonably
deemed by such
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Bank to be material, then such Borrower shall from time to time, upon
written demand by such Bank, pay to such Bank additional amounts
sufficient to compensate such Bank for any such increased cost or
reduced sum receivable to the extent resulting from outstanding LIBOR
Loans and not compensated in connection with the computation of LIBOR.
(c) Section 3.4 is hereby amended by deleting the phrase "or CD Rate Loan"
in the third paragraph thereof.
(d) Section 3.5 is hereby amended by deleting the phrase "or a CD Rate
Loan" in each place where it appears therein.
2.4 Article V of the Loan Agreement is hereby amended as follows:
(a) Section 5.3(g) shall be amended by adding the following clause
(v):
(v) the financial statements, certificates, schedules, documents and
other information set forth on Schedule 5.3(g) within the time periods
therein specified.
(b) The section titled "Notices" and currently designated as Section
5.3(e) [sic] shall be relettered as Section 5.3(h).
(c) New sections 5.3(i) and 5.3(j) are hereby added as follows:
5.3(i) Maintenance of Deposits. The Guarantor shall at all times
maintain with one or more members of the Kmart Bank Group and that are
party to the Bank Setoff Sharing Agreement cash and Cash Equivalents on
deposit (the "Deposits") in an aggregate amount not less than the lesser
of (a) the Deposit Threshold and (b) the total amount of all cash and
Cash Equivalents of the Guarantor and its Subsidiaries (other than cash
and Cash Equivalents maintained at Kmart Canada, Ltd. and its
subsidiaries or at Kmart CR a.s. (Czech operations) in the ordinary
course, consistent with past practices) at such time (the "Required
Deposit Amount"); provided, that any amounts maintained in store
depository accounts with depository institutions which are not members of
the Kmart Bank Group as required by the Guarantor's business operations
in the normal course of business consistent with past practices shall not
be considered cash or Cash Equivalents for the purposes of clause (b) of
this Section 5.3(i).
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5.3(j) Most Favored Lender Status. If the Guarantor, any
Subsidiary or any obligor under the Real Estate Debt shall at any time,
directly or indirectly, amend, restate or otherwise modify any of the
Real Estate Debt Documents, in any manner which would have the effect of
(i) adding any new or additional covenants or defaults applicable to the
Guarantor or any Subsidiary, (ii) amending in a manner more beneficial to
the holders of such Real Estate Debt or in a manner more onerous to the
Guarantor, any Subsidiary or any obligor under the Real Estate Debt, any
covenant or default under such Real Estate Debt applicable to the
Guarantor or any Subsidiary or (iii) otherwise enhancing the rights and
benefits of any holder of the Real Estate Debt against the Guarantor or
any Subsidiary, then, in each such event, the Guarantor shall
concurrently enter into or cause to be entered into such amendments to
this Agreement and such other documents and instruments, in form and
substance reasonably satisfactory to the Required Banks, as shall be
necessary to afford the Banks the same or equivalent benefits and rights
as such amendments to, or other agreements in respect of, the Real Estate
Debt Documents afford the holders of the Real Estate Debt; provided that
any such new or additional covenants or defaults, amended covenants or
defaults, or enhanced rights and benefits shall be deemed automatically
incorporated herein by reference in the event such modifications are made
to the Real Estate Debt Documents without the Guarantor entering into
concurrent amendments as required by this Section 5.3(j).
(d) Section 5.4(b) is hereby amended and restated to read as follows:
(b) Disposition of Assets. The Kmart Borrower shall not, directly
or indirectly, sell, assign, lease, convey, transfer or otherwise dispose
of (whether in one or a series of transactions) any property (including
accounts and notes receivable, with or without recourse) or enter into
any agreement to do any of the foregoing except:
(i) dispositions of inventory, or used, worn-out or surplus
equipment, all in the ordinary course of business;
(ii) the sale of equipment to the extent that such equipment
is exchanged for credit against the purchase price of similar
replacement equipment, or the proceeds of such sale are reasonably
promptly
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applied to the purchase price of such replacement equipment;
(iii) dispositions of inventory or equipment by the Kmart
Borrower to any Subsidiary pursuant to reasonable business
requirements;
(iv) dispositions of Scheduled Assets; and
(v) other dispositions of assets having, in any fiscal year of
the Kmart Borrower, an aggregate book value not exceeding 10% of
the Kmart Borrower's consolidated total assets as of the end of the
most recently ended fiscal year of the Kmart Borrower, as reflected
in the Kmart Borrower's balance sheet contained in its audited
financial statements for such fiscal year;
provided, however, that this Section 5.4(b) shall not be deemed to prohibit the
sale of all, substantially all, or a part of the capital stock or of all,
substantially all, or a part of the assets of any Specialty Retail Subsidiary
of the Kmart Borrower, even if such an entity is no longer a Subsidiary of the
Kmart Borrower, if (x) consideration received is equal to the fair market value
(as reasonably determined by the Kmart Borrower), or (y) the Kmart Borrower's
board of directors deems such transaction to be necessary by reason of
applicable laws, regulations or governmental policies applicable to the Kmart
Borrower.
(e) Section 5.4(c) is hereby amended and restated to read as follows:
(c) Limitation on Liens. The Kmart Borrower shall not, and shall
not permit any Subsidiary (other than Liens granted by Kmart Canada Ltd.
and its subsidiaries or by Kmart CR a.s. (Czech operations) on such
Person's respective assets prior to the Restructuring Effective Date) to,
create, incur or suffer to exist any Lien on any assets of the Kmart
Borrower or any such Subsidiary whether now owned or hereafter acquired;
provided, however, that such restriction shall not apply with respect to
any of the following types of Liens:
(i) Liens for taxes not delinquent or being contested in good
faith;
(ii) Liens created and deposits made in connection with workers'
compensation, unemployment insurance
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and other social security legislation, or to secure the performance
of bids, tenders, contracts (other than for the repayment of
borrowed money), statutory obligations, surety and appeal bonds
and other similar obligations to mechanics, materialmen, bailees,
warehousemen and similar Liens arising under operation of law and
incurred in the ordinary course of business;
(iii) purchase money mortgages (including vendors' rights under
purchase or land contracts or under other agreements whereby title
or another interest is retained by the vendor for the purpose of
securing the purchase price thereof) on property acquired or
constructed after the Restructuring Effective Date, or the
acquisition after the Restructuring Effective Date of property
subject to such a Lien which is limited to such property and was
not created in anticipation of such acquisition;
(iv) mortgages, security interests and Liens on assets of the
Kmart Borrower or any Subsidiary existing on the Restructuring
Effective Date, and set forth on Schedule 5.4(c), which secure any
Indebtedness of the Kmart Borrower or any such Subsidiary, or any
refundings or extensions for an amount not exceeding the principal
amount of such Indebtedness so long as such refundings or
extensions are secured only by the same property or assets;
(v) Liens on property of the Kmart Borrower or any Subsidiary
created concurrently with the release of existing Liens on other
property of the Kmart Borrower or any such Subsidiary, as provided
under the Real Estate Debt Documents, but only (i) if such
substitution is one of several alternative actions available to the
obligor under such Real Estate Debt, of which such obligor must
choose one, following the occurrence of a condemnation, casualty or
eminent domain event, or upon the existence of an environmental
condition or (ii) in respect of a substitution of collateral
resulting from the single store collateral substitution obligation
existing on the Restructuring Effective Date and resulting from a
store closing in September, 1995 with respect to the Deal 2 Notes
(as defined in the Restructuring and Repurchase Agreement); provided
that the fair market value of the property subject to any such Lien
permitted under clause (i) hereof does not exceed one hundred ten
percent (110%) of the fair market value of the property as to which
a Lien is concurrently being
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released (the fair market value of the property being relieved of
such Lien being determined immediately prior to the occurrence of
such casualty, condemnation or eminent domain event, the discovery
of such environmental condition or the occurrence of such store
closing);
(vi) Liens on Deposits in favor of the Kmart Bank Group and Liens
on cash balances of Kmart Canada Ltd. and its subsidiaries or Kmart
CR a.s. (Czech operations) maintained in the ordinary course of
business, consistent with past practices in favor of the lenders of
such entities and Liens on monies held in the Paydown Trust Account
(as defined in the Restructuring and Repurchase Agreement) in favor
of the holders of the Real Estate Debt;
(vii) Liens on the assets of Kmart Canada Ltd. and its subsidiaries
or Kmart CR a.s. (Czech operations) to secure New Indebtedness
incurred by such Persons and Liens to secure New Indebtedness
(including, without limitation, New Indebtedness incurred pursuant
to the Letter of Credit Issuance Agreement); provided that such
Liens to secure New Indebtedness shall encumber only
(A) noncurrent assets including, without limitation,
Scheduled Assets (or cash collateral pledged to secure the
Indebtedness under the Letter of Credit Issuance Agreement
in substitution of a Lien on noncurrent assets); and
(B) in the case of the Letter of Credit Issuance Agreement,
documents of title relating to goods which are the subject of
trade letters of credit issued by the Trade B Banks (as defined
therein) and securing the Trade B Letters of Credit (as defined
therein) under the terms set forth in such agreement as in effect
on the Restructuring Closing Date; provided that the percentage
of the aggregate face amount of all Trade B Letters of Credit
that are so secured shall not exceed thirty-five percent (35%)
(or as close to 35% as practicable in light of the face amounts
of Trade B Letters of Credit that are drawn or paid as
contemplated by the Letter of Credit Issuance Agreement) of the
Trade B Letters of Credit issued by the Trade B Banks;
provided further that no such Lien shall be permitted under this clause (vii)
to secure any unsecured Indebtedness
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of the Guarantor or any of its Subsidiary outstanding on the
Restructuring Effective Date or any refundings or extension
thereof;
(viii) easements, rights-of-way, zoning and similar restrictions and
other similar charges or encumbrances not interfering in any material
respect with the ordinary conduct of the business of the Guarantor and
its Subsidiaries;
(ix) Liens on cash collateral to secure the Guarantor's reimbursement
obligations under letters of credit issued pursuant to the Letter of
Credit Issuance Agreement to the extent such cash collateral is permitted
under the terms thereof as in effect on the Restructuring Closing Date;
and
(x) Liens on cash collateral to secure the Guarantor's reimbursement
obligations under two standby letters of credit issued by [ ] after the
Restructuring Effective Date in an aggregate amount that shall not exceed
the lesser of (x) 105% of the outstanding face amount thereof or (y)
$25,000,000.
(f) New sections 5.4(f), 5.4(g), 5.4(h) and 5.4(i) are hereby added as
follows:
(f) Restricted Payments. The Kmart Borrower shall not, nor shall
it permit any Subsidiary to, declare, order, make or pay, or set aside
any sum for, any Restricted Payment, except that (a) any Subsidiary may
declare and pay dividends to the Kmart Borrower, (b) the Kmart Borrower
may pay dividends in respect of its common stock which were declared
prior to December 31, 1995 and (c) the Kmart Borrower may declare and pay
dividends in respect of any of its preferred stock issued and outstanding
as of the Restructuring Effective Date until, for any particular shares
of preferred stock, such time as the Kmart Borrower shall have declined
any bona fide offer from any holder of any such preferred stock to
convert or enter into an agreement to convert such preferred stock into
common stock of the Kmart Borrower.
(g) Payment of Indebtedness. (1) During the period from December
17, 1995 through February 28, 1997, the Kmart Borrower shall not, nor
shall it permit any Subsidiary (other than payments by Kmart Canada Ltd.
or its subsidiaries or by Kmart CR a.s. (Czech operations) in respect of
such Person's respective Indebtedness in existence as of the Restructuring
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Effective Date or New Indebtedness incurred by such Persons in
the ordinary course of business consistent with past practices) to,
directly or indirectly, make any principal payment, in respect of any
Real Estate Debt or any other Indebtedness (including by way of
purchase, refinancing or other direct or indirect transfer of cash
consideration to the holders thereof; provided that the Guarantor may
exchange any of its outstanding Indebtedness for money borrowed for
shares of its capital stock and make cash payments to the holders of
such Indebtedness in respect of fractional shares in connection with
such exchange) other than (i) scheduled payments on the Real Estate
Debt set forth on Schedule 5.4(g) and capital lease payments relating
to stores securing the Real Estate Debt in an amount not to exceed
$9,000,000 in the aggregate; provided that concurrently with making
such payments, the Guarantor makes a ratable repayment of the Loans
hereunder as required pursuant to Section 2.12(c) hereof, (ii)
scheduled payments of other mortgage indebtedness in existence as of
the Restructuring Effective Date in an amount not to exceed
$12,000,000 in the aggregate, (iii) payments made pursuant to
guaranties of existing leases of former Subsidiaries of the Guarantor;
provided; that such payments may only be made with respect to rents so
guaranteed as and when the same may become due in the ordinary course
(and not on any accelerated rents that may become due as a result of a
default on the underlying lease), (iv) payments made with respect to
Spin-Off Tenant Put Options (as defined in the Restructuring and
Repurchase Agreement as in effect on the Restructuring Closing Date,
(v) ratable payments of principal of the Real Estate Debt concurrently
with the making of any payments or reduction of commitments in respect
of the Indebtedness under this Agreement, the Other Credit Facilities
or the Big Beaver Credit Facilities or other Real Estate Debt, to the
extent required pursuant to Sections 2.2, 2.3 or 2.5 of the
Restructuring and Repurchase Agreement as in effect on the
Restructuring Closing Date, (vi) ratable payments of principal of the
Other Credit Facilities and the Big Beaver Credit Facilities
concurrently with the making of any prepayments or reduction of
commitments under this Agreement, the Real Estate Debt, any of the
Other Credit Facilities or the Big Beaver Credit Facilities to the
extent required pursuant to the terms of the Other Credit Facilities
and the Big Beaver Credit Facilities as in effect on the Restructuring
Closing Date, (vii) regular, ordinary course payments of Capitalized
Lease Obligations in amounts consistent with past practices, (viii)
payments in respect of the termination of leases to the extent that
the Guarantor believes that such payments provide a substantial
benefit to the Guarantor (provided that such lease termination
payments do not exceed the lesser of (a) One Hundred Million Dollars
($100,000,000) in the aggregate in any fiscal year of the Guarantor
and (b) One Hundred Twenty-Five Million Dollars ($125,000,000) in the
aggregate for all such payments), (ix) repayment of Indebtedness
secured by Liens on real property in connection with the sale or other
disposition of such real property provided that the Guarantor or such
Subsidiary receives net cash proceeds from such sale or disposition in
excess of the Indebtedness required to be repaid, (x) mandatory
principal payments under the Big Beaver Credit Facilities and the this
Agreement as a result of a project disposition or project refinancing,
(xi) principal payments under this Agreement and principal payments
due on the February 28,
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1997 scheduled maturity of the Seasonal Credit Facility and the Big
Beaver Credit Facility, (xii) ratable principal payments under this
Agreement, the Other Credit Facilities and the Big Beaver Credit
Facilities in accordance with Section 5.4(i), (xiii) payments in respect
of New Indebtedness, (xiv) payments of reimbursement obligations under
letters of credit issued under the Letter of Credit Issuance Agreement;
provided that such payments do not reduce the commitments thereunder
except to the extent provided under the Letter of Credit Issuance
Agreement as in effect on the Restructuring Closing Date, (xv) payments
of reimbursement obligations under letters of credit issued under the
credit facility described in clause (a) of the definition of Other Credit
Facilities and (xvi) other payments of principal in respect of
Indebtedness in an aggregate amount that shall not exceed the lesser of
(a) Fifty Million Dollars ($50,000,000) in any fiscal year of the
Guarantor and (b) Seventy-Five Million Dollars ($75,000,000) in the
aggregate for all such payments, but only with respect to Indebtedness
other than (1) Real Estate Debt and (2) Indebtedness under the Other
Credit Facilities and the Big Beaver Credit Facilities.
(2) During the period from December 17, 1995 through October 3, 1997,
the Kmart Borrower shall not, nor shall it permit any Subsidiary (other
than payments by Kmart Canada, Ltd. or its subsidiaries or by Kmart CR
a.s. (Czech operations) in respect of such Person's respective
Indebtedness in existence as of the Restructuring Effective Date or New
Indebtedness incurred by such Person in the ordinary course of business,
consistent with past practices) to, directly or indirectly, make any
principal payment in respect of any Real Estate Debt or any other
Indebtedness (including by way of purchase, refinancing, defeasance or
other direct or indirect transfer of cash consideration to the holders
thereof; provided that the Guarantor may exchange any of its outstanding
Indebtedness for money borrowed for shares of its capital stock and make
cash payments to the holders of such Indebtedness in respect of
fractional shares) other than (i) scheduled principal payments on such
Indebtedness, (ii) repayments of Indebtedness of the type permitted under
Sections 5.04(g) (1) (iii), (iv), (v), (vi), (ix), (x), (xi), (xii),
(xiii), (xiv) and (xv), (ii) payments in respect of the termination of
leases to the extent that the Guarantor believes that such payments
provide a substantial benefit to the Guarantor, provided that such lease
termination payments do not exceed the lesser of (a) One Hundred Million
Dollars ($100,000,000) in the aggregate in any fiscal year of the
Guarantor and (b) One Hundred Twenty-Five Million Dollars ($125,000,000)
in the aggregate for all such payments and (iii) other payments of
principal in respect of Indebtedness in an aggregate amount that shall
not exceed the lesser of (a) Fifty Million Dollars ($50,000,000) in the
aggregate in any fiscal year of the Guarantor and (b) Seventy-Five
Million Dollars ($75,000,000) in the aggregate for all such payments,
but only with respect to Indebtedness other than (1) Real Estate Debt and
(2) Indebtedness under the Other Credit Facilities and the Big Beaver
Credit Facilities.
(h) Amendment of Real Estate Debt Documents. The Kmart Borrower
shall not, nor shall it permit any Subsidiary, to amend, restate or
otherwise modify any of the documents relating to or governing any Real
Estate Debt in any manner which would, directly or indirectly, (a)
provide for an interest rate payable on such Real Estate Debt in excess
of the interest rate provided for in the Real Estate Debt Documents
unless this Agreement shall have been amended, concurrently with such
increase in the interest rate payable on such Real Estate Debt, to
increase the interest rates set forth herein by an amount equal to such
excess, (b) to provide for the payment of any fees in addition to the
fees payable under such Real Estate Debt Documents (or provide for any
increase in existing fees payable thereunder) unless this Agreement shall
have been amended, concurrently with the agreement to pay such new or
increased fees, to provide for an equivalent fee to the Banks in a dollar
amount equal to such new fee (or the aggregate amount of any increase in
existing fees) multiplied by a fraction the numerator of which equals the
Ceiling Amount and the denominator of which equals the aggregate amount
outstanding under the Real Estate Debt at such time or (c) provide for
any clarification of any mortgagee's, tenant's or landlord's rights and
obligations under the federal bankruptcy code or similar law with respect
to ground leases or similar arrangements.
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(i) Ratable Payment of Bank Facilities. The Kmart Borrower shall
not, nor shall it permit any Subsidiary to, directly or indirectly, make
any principal payment, in respect of the Big Beaver Credit Facilities or
the Other Credit Facilities (other than (i) mandatory prepayments under
the Big Beaver Credit Facilities as a result of a project disposition or
project refinancing, (ii) ratable payments of principal of the Other
Credit Facilities and the Big Beaver Credit Facilities concurrently with
the making of any prepayments or reduction of commitments under this
Agreement, the Real Estate Debt, any of the Other Credit Facilities or
the Big Beaver Credit Facilities to the extent required pursuant to the
provisions of the Other Credit Facilities and the Big Beaver Facilities
as in effect on the Restructuring Closing Date, which provisions are
substantially similar to Section 3.4(c) hereof and (iii) the scheduled
principal payments due on February 28, 1997 under the Seasonal Credit
Facility and the Big Beaver Credit Facilities) unless the Kmart Borrower
shall concurrently make a permanent ratable reduction to the Aggregate
Commitment and the Ceiling Amount together with a repayment of the
outstanding Loans to the extent required by Section 2.12(c).
2.5 Article VII of the Loan Agreement is hereby amended as
follows:
(a) Paragraph (c) of Section 7.1 is hereby amended and restated
to read as follows:
(c) the Guarantor or any of its Subsidiaries fails to make any
payment of principal or interest or fees under any of the Other Credit
Facilities when due after taking into account any application of grace
periods, or (ii) by reason of any action taken by the Guarantor with the
intent and capacity promptly to satisfy any obligation of the Guarantor
resulting therefrom, including, without limitation, the calling for
payment by the Guarantor of any of its Indebtedness or the termination by
the Guarantor of any of its guaranty obligations, any Indebtedness shall
mature or be declared due and payable prior to its stated maturity and
such Indebtedness shall remain unpaid for a period of two (2) Business
Days thereafter, or (iii) the Guarantor or any Subsidiary of the
Guarantor fails to perform or observe any condition or covenant or any
other event shall occur or condition exist (other than with respect to
matters described under clause (ii) immediately
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preceding) relating to Indebtedness (other than Indebtedness under the
Other Credit Facilities) having an aggregate principal amount
(including undrawn committed or available amounts) of more than Fifty
Million Dollars ($50,000,000) if the effect of any such failure, event or
condition is to cause such Indebtedness to be declared to be due and
payable or otherwise become due and payable prior to its stated maturity,
(iv) the Guarantor or any Subsidiary of the Guarantor fails to pay any
such other Indebtedness in full at its stated maturity (except for any
such Indebtedness under that certain Loan Agreement dated as of January
21, 1992 among the borrowers named therein, the financial institutions
signatory thereto and [ ], as Managing Agent, for so long as any
forebearance agreement contained in the "Fourth Amendment to Loan
Agreement and Limited Forebearance" dated as of the Restructuring
Effective Date as in effect as of the Restructuring Effective Date in
respect of such Indebtedness remains in full force and effect) or (v)
there shall occur a "Triggering Event" (as defined in the Restructuring
and Repurchase Agreement) or all or any portion of any Real Estate Debt
shall otherwise mature or be declared or otherwise become due and payable
prior to October 3, 1997 (except for principal payments permitted in
Section 5.4(g));
(b) Paragraphs (e) of Section 7.1 is hereby deleted in its
entirety and replaced with the following:
(e) A final judgment or judgments in excess of Fifty Million
Dollars ($50,000,000) shall be entered against the Guarantor by a court
of record and not discharged in accordance with its terms or, within
sixty (60) days from the date of entry thereof, stayed from execution and
(within said period of sixty (60) days or such longer period during which
execution of such judgment(s) shall have been stayed) appeal taken
therefrom and execution thereof stayed during such appeal; or
(c) Paragraphs (i) through (m) are hereby added to Section
7.1 as follows:
(i) Payments on Real Estate Debt. The Guarantor or any
Subsidiary shall make or permit to be made (either voluntarily or
otherwise) any principal payment to any holder of any Real Estate
Debt and shall fail to make a concurrent repayment of the
Obligations to the extent required pursuant to Section 2.12(c); or
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(j) Unreimbursed Put Payments. There shall have occurred
the expiration of ten (10) days after the satisfaction of the
following conditions:
(i) the exercise of a Spin-Off Tenant Put Option against the
Guarantor by any Spin-Off Creditor and
(ii) the expiration of the one hundred twenty (120) day
period following the payment by the Guarantor of the Purchase
Amount in respect of such exercise, if, upon such expiration,
the aggregate amount of Unreimbursed Put Payments (after giving
effect to all amounts received by the Guarantor from (i) the
sale or other disposition of the relevant tendered securities
and/or any asset or assets securing the same and (ii) any other
Person that is obligated, directly or indirectly, in respect of
the relevant Spin-Off Tenant Put Option or otherwise makes any
payment with respect thereto) in respect of (1) such exercise
and (2) all Spin-Off Tenant Put Options which have been
exercised at any time prior to the commencement of such 120-day
period, exceeds fifteen million dollars ($15,000,000),
For purposes of this Section 7.1(j), the terms "Spin-Off Tenant Put Option",
"Spin-Off Creditor", "Purchase Amount", and "Unreimbursed Put Payments" shall
have the meanings ascribed to such terms in the Restructuring and Repurchase
Agreement as in effect on the Restructuring Closing Date (including as such
terms are further defined by reference to any other agreements), and not as
such terms or other agreements may subsequently be amended or otherwise
modified; or
(k) Breach of Financing Agreements. The Guarantor or any Subsidiary
shall fail to perform or observe any term, covenant or agreement with respect
to any New Indebtedness having an aggregate principal amount of more than fifty
million dollars ($50,000,000), and such default shall continue unremedied or
unwaived, or the term or covenant in respect of such failure shall not have
been amended, as the case may be, within forty five (45) days after the first
date upon which any holder or holders thereof (or any representative of such
holder(s)) shall have the right, on account of such failure and after giving
effect to any required notice and the lapse of any applicable cure periods, to
declare such Indebtedness to be immediately due and payable; or
(l) Underutilized Capacity Under Letter of Credit Issuance Agreement. On
any date on and after October 31, 1996, until February 28, 1997, (a) the sum
of, without duplication, (i) the
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aggregate face amount of the outstanding letters of credit on such date issued
pursuant to the Letter of Credit Issuance Agreement and that certain
predecessor letter agreement dated as of the Restructuring Effective Date
and (ii) the aggregate face amount of the Existing Trade A Letters of Credit,
Existing Trade B Letters of Credit and Existing Standby Letters of Credit (as
such terms are defined in the Letter of Credit Issuance Agreement) still
outstanding on such date minus (b) any such letters of credit that are cash
collateralized shall be less than the product of (i) eighty percent (.80) and
(ii) the sum of (x) the Maximum Trade A L/C Commitment Amounts, (y) the Maximum
Trade B L/C Commitment Amount and (z) the Maximum Standby L/C Commitment
Amounts (as such terms are defined in the Letter of Credit Issuance Agreement
as in effect on the Restructuring Closing Date), each determined as of such
date.
(m) Other Defaults. The Guarantor shall fail to perform or observe any
term, covenant or agreement contained in Section 5.4.
2.6 Article IX of the Loan Agreement is hereby amended as follows:
(a) Clause (i) of Section 9.1 is hereby amended and restated to read
as follows:
(iii) changing the Commitment of any Bank hereunder or the definition of
"Ceiling Amount" in any manner which would result in the Ceiling Amount
being greater at any time than it would be absent such amendment;
(b) Paragraph (a) of Section 9.9 is hereby amended by (i) renumbering
clause (ii) thereof as clause (iii) and adding the following new clause (ii)
immediately following clause (i):
(ii) such Assignee shall acknowledge in a written instrument that its
rights and obligations with respect to the sharing of setoff rights shall
be subject to the terms of the Bank Setoff Sharing Agreement.
(c) Paragraph (c) of Section 9.9 is hereby amended by adding the
following sentence at the end thereof:
Notwithstanding the foregoing, each Bank shall be permitted to sell the
participations referenced in Section 9.11 without compliance with the
foregoing provisions.
(c) Section 9.11 is hereby amended and restated to read as follows:
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Section 9.11 Set-off. In addition to any rights and remedies of
the Banks provided by law, if any of the Obligations shall have become
due and payable, each Bank is authorized at any time and from time to
time, without prior notice to the Guarantor or any Borrower, any such
notice being waived by the Borrower to the fullest extent permitted by
law, to set-off and apply any and all deposits (general or special, time
or demand, provisional or final) at any time held by, and other
indebtedness at any time owing to or by, such Bank or any affiliate of
such Bank to or for the credit or the account of the Guarantor or such
Borrower against any and all obligations owing to such Bank (including
without limitation Obligations owing to such Bank by way of
participations deemed purchased pursuant to the second proviso of this
sentence), and subject to the sharing provisions of Section 2.20 and any
other sharing arrangements agreed to by any of the Banks (including the
provisions of the Bank Setoff Sharing Agreement), now or hereafter
existing, irrespective of whether or not the Documentation Agent or such
Bank shall have made demand under this Agreement or any Loan Document;
provided, that to the extent that the Guarantor or any Borrower owes any
amounts to such Bank other than the obligations owing under this
Agreement (including obligations under the Other Credit Facilities and
the Big Beaver Credit Facilities and obligations in respect of other
Indebtedness) at the time of such set-off, then such Bank is authorized
to and shall apportion and apply the amounts set-off ratably based on the
relative aggregate amounts owing under this Agreement, the Other Credit
Facilities and the Big Beaver Credit Facilities to all of the lenders
thereunder and the amount of such other Indebtedness; provided, further,
that to the extent that any Bank has amounts available to be set-off in
excess of the aggregate of all outstanding obligations of the Guarantor
to such Bank under this Agreement (an "Excess Setoff Amount") after
making the apportionment and application of set-off amounts described in
the preceding proviso, then (i) the other Banks and the lenders under the
Other Credit Facilities and the Big Beaver Credit Facilities, on a pro
rata basis, shall be deemed automatically for purposes of this Section
9.11 to have sold such Bank and such Bank shall be deemed to have
purchased a participation in the obligations owing to such other Banks
and such lenders thereunder in an aggregate amount equal to the Excess
Setoff Amount, (ii) such purchased participation shall be deemed to be an
Obligation for purposes of this Agreement and (iii) such Bank shall be
authorized to set off the Excess Setoff Amount against such purchased
participations. To the extent that any Bank exercises its rights of
set-off
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at a time when the aggregate amount of the Deposits is in excess
of the Required Deposit Amount, then the amount set-off by such Bank
shall be treated in accordance with the Set-Off and Sharing Agreement.
Each Bank agrees promptly to notify the Guarantor and the Documentation
Agent after any set-off is made by such Bank; provided, that the failure
to give such notice shall not affect the validity of such set-off and
application. The rights of each Bank under this Section 9.11 are in
addition to the other rights and remedies (including other rights of
set-off) which such Bank may have.
2.7 The Schedules to the Loan Agreement are hereby amended by adding
(a) deleting Schedule 5.4(c) thereto in its entirety and replacing it with
Schedule 5.4(c) hereto and (b) adding Schedule 1.01(a), Schedule 1.01(b),
Schedule 1.01(c), Schedule 5.3(g) and Schedule 5.4(g) thereto, respectively, as
set forth in Schedule 1.01(a), Schedule 1.01(b), Schedule 1.01(c), Schedule 5.3
(g), and Schedule 5.4(g) hereto, respectively.
3. Representations and Warranties. In order to induce the Banks and
the Agent to enter into this Amendment Agreement, the Guarantor and each
Borrower hereby represents and warrants as to itself only that as of the
Restructuring Closing Date:
(a) the Guarantor and such Borrower has the right, power and
capacity and has been duly authorized and empowered by all requisite
corporate and shareholder action to enter into, execute, deliver and
perform this Amendment Agreement;
(b) this Amendment Agreement and the Loan Agreement (as amended
hereby) constitutes the Guarantor's and such Borrower's legal, valid and
binding obligation, enforceable against such Borrower and the Guarantor
in accordance with its terms, except as enforcement thereof may be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally and general principles of equity (regardless of whether such
enforcement is sought in a proceeding in equity or at law or otherwise);
(c) the Guarantor's and such Borrower's execution and delivery and
performance of this Amendment Agreement and the performance of this
Amendment Agreement and the Loan Agreement (as amended hereby) do not and
will not violate its articles of incorporation or bylaws or any law,
rule,
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regulation, order, writ, judgment, decree or award applicable to it
or any contractual provision to which it is a party or to which it or any
of its property is subject;
(d) no authorization or approval or other action by, and no notice
to or filing or registration with, any governmental authority or
regulatory body (other than those which have been obtained and are in
force and effect) is required in connection with its execution, delivery
and performance of this Amendment Agreement; and
(e) no Borrower Event of Default or Unmatured Borrower Event of
Default (except to the extent referenced in that certain letter agreement
dated December 22, 1995 among Kmart Corporation and the financial
institutions party thereto (the "Forebearance Agreement")) has occurred
and is continuing as of the date hereof under the Loan Agreement (as
amended hereby) or would exist after giving effect to the transactions
contemplated by this Amendment Agreement.
(f) Except as disclosed in writing to each of the Banks, since
December 22, 1995, there has been no change in the financial condition,
operations, business, properties or prospects of the Guarantor or any of
its Subsidiaries (other than a downgrade in the Guarantor's credit rating
or a decline in the Guarantor's stock price) that individually or in the
aggregate could reasonably be expected to have a material adverse change
in, or material adverse effect upon, (i) the business, financial
condition, operations, assets or prospects of the Guarantor, or of the
Guarantor and its Subsidiaries taken as a whole, or (b) the Guarantor's
ability to perform its obligations under this Loan Agreement or the Loan
Documents, or (c) the validity or enforceability of this Agreement or any
other Loan Documents (a "Material Adverse Effect"). There is no fact
known to the Guarantor that could reasonably be expected to have a
Material Adverse Effect that has not been set forth in writing to each of
the Banks; and
(g) The representations and warranties made by each Borrower in
Section 4.1 of the Loan Agreement and by the Guarantor in Section 3 of
the Guaranty are true and correct on and as of the date hereof (except to
the extent such representations and warranties of any Borrower refers to
parties hereto other than such Borrower or expressly refer to an earlier
date, in which case they shall be true and correct as of such earlier
date).
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The Guarantor and each Borrower agrees and acknowledges that its
representations and warranties set forth in this Section 3 shall be considered
to be representations and warranties deemed made under the Loan Agreement as of
the date hereof for purposes of the Guarantor Event of Default in 7.1(b) of the
Loan Agreement and the Borrower Event of Default set forth in Section 7.2(b) of
the Loan Agreement.
4. Conditions to Effectiveness. The effectiveness of all
provisions of this Amendment Agreement is specifically subject to the
satisfaction of the following conditions precedent or concurrent:
(a) No Defaults; Representations and Warranties True. No
Borrower Event of Default, Unmatured Borrower Event of Default, Guarantor Event
of Default or Unmatured Guarantor Event of Default (except to the extent
referenced in the Forebearance Agreement) under the Loan Agreement (as amended
hereby) shall have occurred and be continuing. The representations and
warranties set forth in Section 3 of this Amendment Agreement shall be true and
correct.
(b) Execution of Amendment. The Guarantor, and the Required
Banks shall have delivered to the Agent a counterpart of this Amendment
Agreement duly executed by the Guarantor, such Borrower or such Bank.
(c) Incremental Interest. The Guarantor shall have paid or
caused to be paid to the Agent for the account of each Bank under the Loan
Agreement an amount equal to the difference between (A) the interest paid to
such Bank with respect to the outstanding Loans from December 22, 1995 through
the date of effectiveness of this Amendment Agreement and (B) the interest that
would have been payable with respect to such Loans had this Amendment Agreement
become effective on December 22, 1995.
(d) Other Amendments. The Agent shall have received evidence
reasonably satisfactory to it that (i) each of the agreements listed on
Schedule 1.01(a) hereto has been amended on substantially the terms and
conditions set forth in the Agreement in Principle dated as of December 18,
1995 and otherwise in form and substance reasonably satisfactory to the
Agent, (ii) amendments to the agreements evidencing the Other Credit Facilities
(other than the Seasonal Credit Agreement dated as of October 5, 1995 (the
"Seasonal Facility")) and reflecting the provisions of the Forebearance
Agreement and the attached Summary of Indicative Terms dated 12/17/95 (the
"Term Sheet") shall have been executed and delivered by the "Required
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Banks" thereunder and (iii) an amendment to the Seasonal Facility reflecting the
provisions of the Forebearance Agreement and the Term Sheet shall have been
executed and delivered by all of the Banks thereunder, (iv) an amendment to the
Loan Agreement dated as of January 21, 1992 among Guarantor, the borrowers
named therein and [ ], as Agent, as amended prior to the date hereof, or a
forebearance agreement in respect thereof, and reflecting the provisions of the
Forebearance Agreement and the Term Sheet, shall have been executed by
financial institution party thereto holding at least 85% of the outstanding
loans thereunder and (v) an amendment to the Big Beaver II Credit Facility
reflecting the provisions of the Forebearance Agreement and the Term Sheet
shall have been executed and delivered by the "Required Banks" thereunder; each
on substantially the terms and conditions set forth in the Term Sheet. Each of
the undersigned Banks agrees and acknowledges that their execution and delivery
of a counterpart of this Amendment Agreement shall be also deemed to be the
execution and delivery by such Bank of the amendments to the Other Credit
Facilities contemplated by clause (ii) above for purposes of ascertaining
whether such amendments were executed and delivered by the "Required Banks"
under the Other Credit Facilities.
(e) Letter of Credit Facility; Setoff Sharing Agreement. The Letter of
Credit Issuance Agreement dated as of the date hereof among the Guarantor, the
financial institutions signatory thereto and [ ], as agent and the related
collateral proceeds sharing agreement among such financial institutions shall
each have become effective. The Bank Setoff Sharing Agreement shall have been
executed and delivered by all Banks in which the Guarantor shall have on
deposit cash and Cash Equivalents.
(f) Payment of Expenses. The Guarantor shall have paid all invoiced fees
and expenses referenced in section 6(a) hereof and Section 9.5 of the Loan
Agreement.
(g) Opinion of Counsel. The Agent shall have received an opinion of
internal counsel and of reasonably acceptable outside counsel and the
Guarantor's general counsel in favor of the Banks in form and substance
acceptable to the Agent with respect to (a) the legal existence and good
standing of the Guarantor, (b) the authority of the Guarantor to enter into
this Amendment Agreement and the due execution and delivery thereof, (c) that
the obligations of the Guarantor under this Amendment Agreement are legal,
valid, binding and enforceable in accordance with their terms (subject to
customary exceptions), (d) noncontravention with applicable securities laws and
other laws, rules and regulations and material agreements, and (e) such other
matters as the Agent may reasonably request.
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5. Superseded Guaranty Covenants. Each of the Banks signatory below
agrees that it will not exercise any right or remedy (including under the
Guaranty) arising solely from any breach by the Guarantor of the covenants set
forth in Sections 4(b)(2) or 4(b)(3) of the Guaranty provided that the
Guarantor is in compliance with Section 5.4(b) or 5.4(c) of the Loan Agreement
(as amended hereby) as to the subject matters set forth therein.
6. Miscellaneous. The parties hereto hereby further agree as follows:
(a) Costs, Expenses and Taxes. The Guarantor hereby agree to pay all
reasonable fees, costs and expenses of the Agent in connection with the
negotiation, preparation and execution of this Amendment Agreement and the
transactions contemplated hereby, and in connection with any future amendment,
modification or consents of or in respect of the Loan Agreement (whether or not
adopted), including, without limitation, the reasonable fees and expenses of
each of Winston & Strawn and Wachtell, Lipton, Rosen & Katz ("Wachtell,
Lipton"), counsel to the Agent and the Banks. Without limiting the generality
of the foregoing, the Guarantor hereby agrees to pay, upon receipt thereof,
each statement for reasonable fees and expenses of (i) Wachtell, Lipton and
(ii) any other advisor, counselor, consultant or accountant retained by
Wachtell, Lipton, the Banks or the Agent, rendered after the date hereof (x)
relating to the ongoing evaluation of the rights and status of the Banks with
respect to the matters contemplated by this Amendment Agreement and the
rendering of advice to the Banks with respect thereto, (y) relating to any
amendments, waivers or consents requested by the Guarantor (whether or not
adopted) pursuant to the provisions hereof or of any Loan Document or (z)
relating to any work-out or restructuring of Indebtedness of the Guarantor
after December 22, 1995. The Guarantor agrees to reasonably cooperate with and
provide information reasonably requested by any advisor, accountant, counselor,
consultant or accountant retained by the Banks, the Agent or Wachtell, Lipton.
The Guarantor also agrees to pay all reasonable fees and expenses (including
any Attorney Costs) of each of the Banks in connection with this Amendment
Agreement and the Forebearance Agreement.
(b) Counterparts. This Amendment Agreement may be executed in one or
more counterparts, each of which, when executed and delivered, shall be deemed
to be an original and all of which counterparts, taken together, shall
constitute but one and the same document with the same force and effect as if
the signatures of all of the parties were on a single counterpart,
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and it shall not be necessary in making proof of this Amendment Agreement to
produce more than one (1) such counterpart.
(c) Headings. Headings used in this Amendment Agreement are for
convenience of reference only and shall not affect the construction of this
Amendment Agreement.
(d) Integration. This Agreement and the Loan Agreement (as amended
hereby) constitute the entire agreement among the parties hereto with respect
to the subject matter hereof.
(e) Governing law. THIS AMENDMENT AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS AND DECISIONS OF
THE STATE OF NEW YORK (WITHOUT REFERENCE TO CONFLICT OF LAWS PRINCIPLES).
(f) Binding Effect. This Amendment Agreement shall be binding upon and
inure to the benefit of and be enforceable by the Guarantor, the Agent and the
Banks and their respective successors and permitted assigns. This Amendment
Agreement shall not be construed so as to confer any right or benefit upon any
Person other than the Guarantor, the Borrowers, the Agent and the Banks and
their respective successors and permitted assigns.
(g) Amendment; Waiver; Status as Loan Document. The parties hereto agree
and acknowledge that nothing contained in this Amendment Agreement in any
manner or respect limits or terminates any of the provisions of the Loan
Agreement or the Guaranty other than as expressly set forth herein and further
agree and acknowledge that the Loan Agreement (as amended hereby) and the
Guaranty remains and continues in full force and effect and is hereby ratified
and confirmed. Except to the extent expressly set forth herein, the execution,
delivery and effectiveness of this Amendment Agreement shall not operate as a
waiver of any rights, power or remedy of the Banks or the Agent under the Loan
Agreement or the Guaranty or constitute a waiver of any provision of the Loan
Agreement or the Guaranty. No delay on the part of any Bank or the Agent in
exercising any of their respective rights, remedies, powers and privileges
under the Loan Agreement or partial or single exercise thereof, shall
constitute a waiver thereof. None of the terms and conditions of this
Amendment Agreement may be changed, waived, modified or varied in any manner
whatsoever, except in accordance with Section 9.1 of the Loan Agreement. The
parties hereto agree that this Amendment Agreement shall constitute a Loan
Document for purposes of the Loan Agreement and the Guaranty.
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(h) Authorization Relating to Collateral and Intercreditor Agreement.
Each of the Banks hereby authorizes the Agent to (i) execute the Collateral and
Intercreditor Agreement dated as of the date hereof and relating to the sharing
of collateral pledged to secure Indebtedness under the Letter of Credit
Issuance Agreement among the financial institutions party to the Letter of
Credit Issuance Agreement and the agents under the Other Credit Facilities
(including the Agent) and the Big Beaver Credit Facilities and (ii) distribute
any amount received pursuant to the sharing provisions thereof in the manner
contemplated by the Loan Agreement.
7. Reaffirmation of Guaranty. The Guarantor hereby agrees and
acknowledges that the Guaranty is in full force and effect and shall continue
to be in full force and effect after any of the provisions of this Amendment
Agreement shall become effective. The Guaranty is hereby reaffirmed as of the
date hereof in all respects by Kmart Corporation and the obligations guaranteed
under the Guaranty shall include the Borrowers' Obligations under the Loan
Agreement as amended, restated, modified or supplemented and in effect from
time to time, including any amendment thereto contemplated by this Amendment
Agreement. The Guarantor agrees that the representations and warranties in the
Guaranty are true and correct in all material respects on and as of the date
hereof as if made on the date hereof.
[Balance of page left intentionally blank; signature pages follow.
-41-
<PAGE> 351
IN WITNESS WHEREOF, the Borrowers, the Agent and the Banks have executed
this Amendment Agreement as of the date first above written.
THE GUARANTOR:
KMART CORPORATION
By:
---------------------
Title: ---------------------
THE BORROWERS:
KMART CORPORATION
By: ---------------------
Title: ---------------------
[Warehouse Signature Pages]
