<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1997
--------------
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------- ---------
Commission File No. 1-327
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KMART CORPORATION
---------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S><C>
Michigan 38-0729500
- ----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3100 West Big Beaver Road - Troy, Michigan 48084
- ----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (810) 643-1000
--------------
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed, by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
As of May 28, 1997, 486,863,452 shares of Common Stock of the Registrant were
outstanding.
1
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
- ------ --------------------- ------
<S> <C> <C>
Item 1. Financial Statements
Consolidated Statements of Operations -- 13 weeks ended April 3
30, 1997 and May 1, 1996
Consolidated Balance Sheets -- 4
April 30, 1997, May 1, 1996 and
January 29, 1997
Consolidated Statements of Cash Flows -- 5
13 weeks ended April 30, 1997 and
May 1, 1996
Notes to Consolidated Financial 6 - 7
Statements
Item 2. Management's Discussion and Analysis of Results of Operations 8 - 11
and Financial
Condition
PART II OTHER INFORMATION
- ------- -----------------
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
KMART CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
13 WEEKS ENDED
-----------------------------
APRIL 30, 1997 MAY 1, 1996
<S> <C> <C>
Sales $ 7,263 $ 6,975
Cost of sales, buying and occupancy 5,637 5,398
------------ ------------
Gross margin 1,626 1,577
Selling, general and administrative expenses 1,491 1,519
------------ ------------
Continuing income before interest, income taxes and dividends on
convertible preferred securities of securities of subsidary 135 58
Interest expense, net 98 113
Income tax provision (credit) 11 (19)
Dividends on convertible preferred securities of subsidiary, net of
income taxes of $6 12 -
------------ ------------
Net income (loss) from continuing operations 14 (36)
Discontinued operations, net of income taxes of $(1) - (2)
Loss on disposal of discontinued operations, net of income taxes
of $(33) - (61)
------------ ------------
Net income (loss) $ 14 $ (99)
============ ============
Primary earnings (loss) per common share:
Continuing operations $ 0.03 $ (0.08)
Discontinued operations - -
Loss on disposal of discontinued operations - (0.13)
------------ ------------
Net income (loss) $ 0.03 $ (0.21)
============ ============
Primary weighted average shares (millions) 489.8 482.1
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
The Consolidated Statement of Operations for the prior period has been
restated for discontinued operations.
3
<PAGE> 4
KMART CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 30, MAY 1, JANUARY 29,
1997 1996 1997
--------- ------ -----------
<S> <C> <C> <C>
Current Assets:
Cash and equivalents $ 316 $ 1,544 $ 406
Merchandise inventories 7,263 6,667 6,354
Other current assets 955 879 973
Net current assets of discontinued operations - 650 -
-------- --------- ---------
Total current assets 8,534 9,740 7,733
Property and equipment, net 5,667 5,156 5,740
Property held for sale or financing 200 468 200
Other assets and deferred charges 490 428 613
-------- --------- ---------
Total Assets $ 14,891 $ 15,792 $ 14,286
======== ========= =========
Current Liabilities:
Long-term debt due within one year $ 104 $ 248 $ 156
Trade accounts payable 2,949 2,438 2,009
Accrued payroll and other liabilities 1,212 1,127 1,298
Taxes other than income taxes 232 211 139
-------- --------- ---------
Total current liabilities 4,497 4,024 3,602
Long-term debt and notes payable 1,839 3,661 2,121
Capital lease obligations 1,450 1,558 1,478
Other long-term liabilities 960 1,218 1,013
Net long-term liabilities of discontinued operations - 134 -
Company-obligated mandatorily redeemable convertible preferred
securities of a subsidiary Trust holding solely 7% convertible
junior subordinated debentures of Kmart (redemption value
$1,000 at April 30, 1997) 980 - 980
Common stock, 1,500,000,000 shares authorized; shares issued
487,849,549; 486,576,469 and 486,996,145, respectively 488 486 486
Capital in excess of par value 1,614 1,611 1,608
Retained earnings 3,119 3,227 3,105
Treasury shares and restricted stock (26) (59) (37)
Foreign currency translation adjustment (30) (68) (70)
-------- --------- ---------
Total Liabilitites and Shareholders' Equity $ 14,891 $ 15,792 $ 14,286
======== ========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
The Consolidated Balance Sheet as of May 1, 1996 has been restated for
discontinued operations.
4
<PAGE> 5
KMART CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
13 WEEKS ENDED
APRIL 30, 1997 MAY 1, 1997
-------------- -----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss) from continuing operations $ 14 $ (36)
Adjustments to reconcile net income (loss) from continuing
operations to net cash provided by operating activities:
Depreciation and amortization 170 159
Deferred income taxes 13 48
Undistributed equity income and dividends received 32 62
Increase (decrease) in other long-term liabilities 3 (36)
Increase in inventories (909) (647)
Increase in accounts payable 940 646
Changes in certain assets and liabilities (42) 100
--------- ---------
Net cash provided by continuing operations 221 296
Discontinued operations 2 57
--------- ---------
Net cash provided by operating activities 223 353
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (128) (50)
Decrease in property held for resale 88 -
Proceeds from asset sales and subsidiary public offerings 113 177
Other - net (27) 4
--------- ---------
Net cash provided by investing activities 46 131
--------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt and notes payable 335 -
Reduction in long-term debt and notes payable (668) (19)
Reduction in capital lease obligations (29) (24)
Other - net 3 20
--------- ---------
Net cash used for financing activities (359) (23)
Net increase (decrease) in cash and equivalents (90) 461
Cash and equivalents at beginning of year 406 1,083
--------- ---------
Cash and equivalents at end of period $ 316 $ 1,544
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
The Consolidated Statement of Cash Flow for the prior period has been restated
for discontinued operations.
5
<PAGE> 6
KMART CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1.) BASIS OF PRESENTATION
These interim unaudited consolidated financial statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission, and, in the opinion of management, reflect all adjustments
(which include normal recurring adjustments) necessary for a fair statement of
the results for the interim periods. These consolidated financial statements
should be read in conjunction with the financial statements and the notes
thereto included in the Company's 1996 Annual Report and Form 10-K filed for
the fiscal year ended January 29, 1997.
Certain reclassifications of the May 1, 1996 consolidated balance sheet
have been made to conform to current year presentation.
2.) SUBSEQUENT EVENT
In May 1997, the Company amended its revolving credit agreement. The
amendment primarily involved the following: i) extension of the term by one
year, ii) a reduction in interest rate spreads, commitment fee and letter of
credit fees, and iii) revised covenants to provide the Company with more
operational flexibility.
3.) DISCONTINUED OPERATIONS AND DIVESTITURES
In March 1997, the Company completed the sale of its portion of a Mexican
joint venture to Controladora Comercial Mexicana, S.A. C.V. ("CCM"). Under the
terms of the agreement, CCM purchased the Company's interest in Kmart Mexico
S.A. de C.V. for $74 million, which approximated book value.
4.) COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
On March 4, 1997 the Company transferred to Troy CMBS Property, L.L.C., an
affiliated Delaware limited liability company, 81 store properties (the
"Properties") with a net book value of $964 million which were then leased back
to the Company. Simultaneously with such transfer of the Properties, Troy CMBS
Property, L.L.C. completed a $335 million financing secured by mortgages on the
Properties. The mortgages and the mortgage note have been purchased by Kmart
CMBS Financing, Inc., a Delaware corporation wholly owned by the Company, and
assigned to the trustee of the security holders.
The mortgage loan is subject to monthly payments of interest and
principal, according to a schedule which amortizes the initial outstanding
principal amount over approximately 15 years, and a balloon payment of
approximately $260.8 million on the scheduled maturity date in February 2002.
The CMBS weighted average floating interest rate is LIBOR plus 47 basis points.
Troy CMBS Property, L.L.C. and Kmart CMBS Financing, Inc. each maintain a
separate legal existence from that of Kmart. Neither the assets of Troy CMBS
Property, L.L.C., nor the assets of Kmart CMBS Financing, Inc., are commingled
with those of Kmart. The assets of Troy CMBS Property, L.L.C. and the assets of
Kmart CMBS Financing, Inc. will not be available to satisfy the obligations of
either Troy CMBS Property, L.L.C. or Kmart CMBS Financing, Inc.
6
<PAGE> 7
5.) INVENTORIES AND COST OF MERCHANDISE SOLD
A substantial portion of the Company's inventory is accounted for using
the last-in, first-out (LIFO) method. Since LIFO costs can only be determined
at the end of each fiscal year when inflation rates and inventory levels are
finalized, estimates are used for LIFO purposes in the interim consolidated
financial statements. Inventories valued on LIFO at April 30, 1997, May 1,
1996 and January 29, 1997 were $445 million, $494 million and $440 million
lower than the amounts that would have been reported under the first-in,
first-out (FIFO) method, respectively.
6.) STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128 "EARNINGS PER SHARE"
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standard No. 128, "Earnings per Share", ("FAS 128"). This statement
establishes standards for computing and presenting earnings per share. The
statement is effective for all financial statements issued for periods ending
after December 15, 1997, with earlier application not permitted. Based on the
Company's preliminary analysis, the adoption of FAS 128 would not have a
material impact on the earnings per share reported for the quarter ended April
30, 1997.
7
<PAGE> 8
ITEM 2
KMART CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
FOR THE 13 WEEKS ENDED APRIL 30, 1997
RESULTS OF OPERATIONS
Store Activity
The Company's store activity for the 13 weeks ended April 30, 1997 is
summarized as follows:
<TABLE>
<CAPTION>
FIRST QUARTER
JANUARY 29, ACTIVITY APRIL 30, MAY 1,
----------------
General Merchandise 1997 OPENED CLOSED 1997 1996
- ------------------- ----------- ------- ------- ----- -----
<S> <C> <C> <C> <C> <C>
Kmart:
United States 2,134 2 (14) 2,122 2,157
Canada 123 123 127
Other 2
----------- ----- ------ ----- -----
Total General Merchandise 2,257 2 (14) 2,245 2,286
Other International 4 (4) 7
----------- ----- ------ ----- -----
Total Stores 2,261 2 (18) 2,245 2,293
=========== ===== ====== ===== =====
</TABLE>
8
<PAGE> 9
KMART CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
Sales
<TABLE>
<CAPTION>
% CHANGE
----------------------------
APRIL 30, MAY 1, COMPARABLE
($ Millions) 1997 1996 ALL STORES STORES
--------- ------ ---------- -------------
<S> <C> <C> <C> <C>
General Merchandise
United States $ 7,061 $ 6,692 5.5 5.7
International 202 283 (28.7)(b) (0.7)(a)
-------- -------
Consolidated Sales $ 7,263 $ 6,975 4.1 5.5
======== =======
</TABLE>
(a) International comparable store sales change is calculated on sales in the
applicable local currency.
(b) Prior year international sales include 16 locations that have been sold
or closed prior to fiscal 1997.
Sales
Sales for the 13 weeks ended April 30, 1997 were $7,263 million, a 4.1%
increase from sales of $6,975 million in the same period of the prior year.
Comparable store sales increased 5.5% over the same period of the prior year.
The increase in comparable sales resulted from the strong performance in home
fashions and decor with the introduction of Martha Stewart Everyday products,
and strong performance in consumables related to the roll out, during the
quarter, of approximately 110 Big Kmart conversions, discussed as the Company's
high frequency conversions in its 1996 Annual Report to shareholders.
Gross Margin
Gross margin for the 13 weeks ended April 30, 1997 was $1,626 million as
compared to $1,577 million in the same period of the prior year. Gross margin
as a percentage of sales was 22.4% and 22.6% in the 1997 and 1996 13 week
periods, respectively. The 20 basis point gross margin rate decline was the
result of higher levels of promotional and competitive markdowns and a shift in
sales towards lower margin goods.
Selling, General and Administrative ("SG&A") Expenses
SG&A expenses decreased $28 million for the 13 weeks ended April 30, 1997
to $1,491 million, or 20.5% of sales, from $1,519 million, or 21.8% of sales,
in the same period of the prior year. Of the $28 million net savings, $40
million was related to stores closed or sold since the prior year period and
$13 million relates to reductions in expenses for comparable U.S. Kmart stores.
These savings were partially offset by additional expenses of $25 million
related to investments associated with operations of newer stores.
9
<PAGE> 10
KMART CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
Operating Income
<TABLE>
<CAPTION>
13 WEEKS ENDED
----------------------------
APRIL 30, MAY 1,
($ Millions) 1997 1996
--------- ------
<S> <C> <C>
United States $ 139 $ 58
International (4) -
-------- -------
Consolidated Operating Income $ 135 $ 58
======== =======
</TABLE>
Operating income for the 13 weeks ended April 30, 1997 was $135 million,
or 1.9% of sales, as compared to operating income of $58 million, or 0.8% of
sales, in the same period of the prior year. This increase was the direct
result of the 4.1% increase in sales which generated $49 million of additional
gross margin together with the $28 million reduction of SG&A expenses.
Interest Expense
Net interest expense for the 13 weeks ended April 30, 1997 was $98
million, or 1.4% of sales, as compared to $113 million, or 1.6% of sales, for
the same period of the prior year. The net interest expense on borrowings
decreased as a result of lower levels of debt partially offset by lower levels
of interest income and the refinancing of certain debt with trust convertible
preferred securities in June of 1996. See "Liquidity and Financial Condition".
Income Tax Expense
Income tax expense for the 13 weeks ended April 30, 1997 was $11 million
with an effective tax rate of 29.7% as compared to a credit of $19 million with
an effective tax rate of 34.5% in the same period of the prior year.
Discontinued Operations
Discontinued operations for the thirteen weeks ended May 1, 1996 includes
$2 million of net losses of Builders Square, Inc. and a net loss of $61 million
related to the sale of a portion of the Company's investment in Thrifty PayLess
Holdings, Inc. together with the revaluation of the Company's remaining
holdings.
10
<PAGE> 11
KMART CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION CONTINUED
LIQUIDITY AND FINANCIAL CONDITION
For the previous six quarters, Kmart's primary sources of working capital
have been cash flows from operations and borrowings under its credit
facilities. The Company had working capital of $4,037, $5,716 and $4,131
million at April 30, 1996, May 1, 1996 and January 29, 1997, respectively. The
Company's working capital fluctuates in relation to profitability, seasonal
inventory levels net of trade accounts payable and the level of new store
openings and closings.
In March 1997, the Company issued, through a subsidiary, $335 million in
Commercial Mortgage Pass Through Certificates ("CMBS"). The CMBS weighted
average floating interest rate is LIBOR plus 47 basis points. Net proceeds were
used to repay a portion of the term loan under the credit facilities, with the
remaining portion of the term loan being repaid in April 1997 with accumulated
cash from operations.
In May 1997, the Company amended its revolving credit agreement. The
amendment primarily involved an extension of the term by one year, a reduction
to interest rate spreads, commitment fee and letter of credit fees and revised
covenants providing the Company additional operational flexibility.
Net cash provided by operating activities for the 13 weeks ended April 30,
1997 was $223 million as compared to $353 million for the same period of 1996.
The decrease in cash provided by operating activities compared to the prior
period was primarily the result of various accruals and income taxes payable,
and a decrease in cash from discontinued operations. Merchandise inventories,
net of trade accounts payable, increased 2% to $4,314 million at April 30, 1997
from $4,229 million at May 1, 1996. This increase is primarily related to
increases in the Company's in-stock position, the conversions of the Big Kmart
format in approximately 110 stores, support of higher sales levels and the
launch of Martha Stewart Everyday products. Certain levels of fashion
merchandise are high due to lower than expected sell-through. The Company
anticipates selling this merchandise during the second quarter by incurring
additional markdowns if necessary.
Net cash provided by investing activities was $46 million for the 13 weeks
ended April 30, 1997 compared to $131 million for the 13 weeks ended May 1,
1996. The decrease in cash provided by investing activities was mainly caused
by an increase in capital expenditures, primarily related to the rollout of the
Big Kmart concept in approximately 110 stores during the period, partially
offset by a decrease in property held for sale due to sale-lease back
transactions completed during the period and a decrease in proceeds from asset
sales in the prior year.
Net cash used for financing activities amounted to $359 million during the
13 weeks ended April 30, 1997 compared to $23 million for the 13 weeks ended
May 1, 1996. The increase in cash used for financing activities was
essentially a result of the pay down of a $600 million outstanding balance on
the term loan partially offset by the issuance of Commercial Mortgage Pass
Through Certificates in the first quarter of 1997.
Management believes the funds generated by operations, together with funds
available under existing credit arrangements, are sufficient to meet the
Company's currently anticipated funding requirements.
11
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as a part of this report:
Exhibit 11 - Information on Computation of Per Share Earnings
Exhibit 99 - Amended and Restated Credit Agreement
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K: No reports were filed on Form 8-K by the Registrant
during the 13 weeks ended April 30, 1997.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
The signatory hereby acknowledges and adopts the typed form of his name in the
electronic filing of this document with the Securities and Exchange Commission.
Date: June 4, 1997
Kmart Corporation
-------------------------------
(Registrant)
By: /s/ M.E. Welch, III
-------------------------------
M.E. Welch, III
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(Duly Authorized Officer,
Principal Financial Officer)
By: /s/ William C. Najdecki
--------------------------------
William C. Najdecki
VICE PRESIDENT, CONTROLLER
(Duly Authorized Officer,
Principal Accounting Officer)
13
<PAGE> 14
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
11 Information on Computation of Per Share Earnings
99 Amended and Restated Credit Agreement
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 11
<TABLE>
<CAPTION>
($ Millions, except per share data) 13 Weeks Ended
------------------------
April 30, May 1,
1997 1996
<S> <C> <C>
I. Earnings per common and common equivalent share:
Income (loss) from continuing retail operations $ 26 $ (36)
Deduct trust convertible preferred dividends (12) 0
-------- -------
(a) Adjusted net income (loss) from continuing retail operations 14 (36)
(b) Discontinued operations, net of income taxes 0 (2)
(c) Disposal of discontinued operations, net of income taxes 0 (61)
-------- -------
(d) Adjusted net income (loss) $ 14 $ (99)
======== =======
Weighted average common shares outstanding 485.3 482.0
Stock Options --
Common shares assumed issued 16.6 0.7
Less--common shares assumed repurchased (12.1) (0.6)
-------- -------
4.5 0.1
-------- -------
(e) Applicable common shares, as adjusted 489.8 482.1
======== =======
Earnings per common and common equivalent share:
Income (loss) from continuing retail operations (a)/(e) $ 0.03 $ (0.08)
Discontinued operations, net of income taxes (b)/(e) 0.00 (0.00)
Disposal of discontinued operations, net of income taxes (c)/(e) 0.00 (0.13)
-------- -------
Net income (loss) (d)/(e) $ 0.03 $ (0.21)
======== =======
II. Earnings per common and common equivalent share
assuming full dilution:
(f) Income (loss) from continuing retail operations $ 26 $ (36)
(g) Discontinued operations, net of income taxes 0 (2)
(h) Disposal of discontinued operations, net of income taxes 0 (61)
-------- -------
(i) Net income (loss) $ 26 $ (99)
======== =======
Weighted average common shares outstanding 485.3 482.0
Weighted average assumed common shares outstanding upon conversion
of convertible preferred shares outstanding 66.7 0.0
Stock options--
Common shares assumed issued 18.0 1.1
Less--common shares assumed repurchased (12.3) (0.9)
-------- -------
5.7 0.2
-------- -------
(j) Applicable common shares, as adjusted 557.7 482.2
======== =======
Earnings per common and common equivalent share
assuming full dilution:
Income (loss) from continuing retail operations (f)/(j) $ 0.05 $ (0.08)
Discontinued operations, net of income taxes (g)/(j) 0.00 (0.00)
Disposal of discontinued operations, net of income taxes (h)/(j) 0.00 (0.13)
-------- -------
Net income (loss) (i)/(j) $ 0.05 $ (0.21)
======== =======
(1) (1)
</TABLE>
(1) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15
because it produces an anti-dilutive result.
<PAGE> 1
EXHIBIT 99
KMART CORPORATION
$2,500,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
May 6, 1997
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
THE BANK OF NEW YORK
as Co-Arrangers
CHASE SECURITIES INC.
as Arranger
THE CHASE MANHATTAN BANK
as Administrative Agent
<PAGE> 2
TABLE OF CONTENTS
Page
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SECTION 1. DEFINITIONS 1
1.1 Defined Terms 1
1.2 Other Definitional Provisions 39
SECTION 2. [INTENTIONALLY OMITTED] 39
SECTION 3. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS 40
3.1 Revolving Credit Commitments 40
3.2 Procedure for Revolving Credit Borrowing 40
3.3 Commitment Fee 40
3.4 Termination or Reduction of Commitments 41
3.5 Repayment of Revolving Credit Loans 41
3.6 L/C Commitment 41
3.7 Procedure for Issuance of Letters of Credit 42
3.8 Letter of Credit Fees, Commissions and Other Charges 42
3.9 L/C Participations 43
3.10 Letter of Credit Reimbursement Obligations 44
3.11 Obligations Absolute 44
3.12 Letter of Credit Payments 45
3.13 Letter of Credit Applications 45
3.14 CAF Advances 45
3.15 Procedure for CAF Advance Borrowing 45
3.16 CAF Advance Payments 48
3.17 Certain Restrictions With Respect to CAF Advances 48
3.18 Requests for Bilateral Loan Offers 49
3.19 Reports to Administrative Agent 49
3.20 Repayments 49
3.21 Swing Line Commitment 49
3.22 Procedure for Swing Line Borrowing 50
3.23 Annual Revolving Credit Clean-Down 51
SECTION 4. GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF
CREDIT 51
4.1 Optional and Mandatory Prepayments 51
4.2 Conversion and Continuation Options 52
4.3 Minimum Amounts and Maximum Number of Tranches 53
4.4 Interest Rates and Payment Dates 53
4.5 Computation of Interest and Fees 53
4.6 Inability to Determine Interest Rate 54
4.7 Pro Rata Treatment and Payments 54
4.8 Illegality 55
4.9 Requirements of Law 55
</TABLE>
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<TABLE>
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<S> <C>
4.10 Indemnification for Taxes 56
4.11 Indemnity 58
4.12 Change of Lending Office 59
4.13 Evidence of Debt 59
SECTION 5. REPRESENTATIONS AND WARRANTIES 61
5.1 Financial Condition 61
5.2 No Change 61
5.3 Corporate Existence; Compliance with Law 61
5.4 Corporate Power; Authorization; Enforceable Obligations 61
5.5 No Legal Bar 62
5.6 No Material Litigation 62
5.7 No Default 62
5.8 No Burdensome Restrictions 62
5.9 Taxes 62
5.10 Federal Regulations 63
5.11 ERISA 63
5.12 Investment Company Act; Other Regulations 63
5.13 Subsidiaries 63
5.14 Environmental Matters 63
5.15 The Security Documents 65
5.16 Ownership of Property; Liens 66
5.17 Intellectual Property 66
5.18 Pledged Stock 66
5.19 Real Estate Matters 66
5.20 Continuing Letters of Credit 66
5.21 Solvency 67
5.22 Purpose of Loans 67
5.23 Accuracy of Information 67
SECTION 6. CONDITIONS 67
6.1 Conditions to Effectiveness 67
6.2 Conditions to Each Extension of Credit 69
SECTION 7. AFFIRMATIVE COVENANTS 70
7.1 Financial Statements 70
7.2 Certificates; Other Information 70
7.3 Payment of Obligations 71
7.4 Conduct of Business and Maintenance of Existence 71
7.5 Maintenance of Property; Insurance 71
7.6 Inspection of Property; Books and Records; Discussions 72
7.7 Notices 72
7.8 Environmental Laws 73
7.9 Further Assurances 73
7.10 Mortgages; Etc 73
</TABLE>
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<TABLE>
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<S> <C>
7.11 Additional Collateral 74
7.12 Cash Equivalents 75
SECTION 8. NEGATIVE COVENANTS 75
8.1 Financial Condition Covenants 76
8.2 Limitation on Indebtedness 76
8.3 Limitation on Guarantee Obligations 77
8.4 Limitation on Liens 77
8.5 Limitation on Fundamental Changes 79
8.6 Limitation on Sale of Assets 80
8.7 Limitation on Dividends 81
8.8 Limitation on Capital Expenditures and "Property held for Resale" 81
8.9 Limitation on Investments, Loans and Advances 81
8.10 Limitation on Optional Payments and Modifications of Debt Instruments 83
8.11 Limitation on Transactions with Affiliates 83
8.12 Limitation on Sales and Leasebacks 83
8.13 Joint Ventures 83
SECTION 9. EVENTS OF DEFAULT 84
SECTION 10. THE ADMINISTRATIVE AGENT 87
10.1 Appointment 87
10.2 Delegation of Duties 87
10.3 Exculpatory Provisions 88
10.4 Reliance by Administrative Agent 88
10.5 Notice of Default 88
10.6 Non-Reliance on Administrative Agent and Other Lenders 88
10.7 Indemnification 89
10.8 Administrative Agent in Its Individual Capacity 89
10.9 Successor Administrative Agent 89
SECTION 11. MISCELLANEOUS 90
11.1 Amendments and Waivers 90
11.2 Notices 90
11.3 No Waiver; Cumulative Remedies 91
11.4 Survival of Representations and Warranties 92
11.5 Payment of Expenses and Taxes; Indemnity 92
11.6 Successors and Assigns; Participations and Assignments 92
11.7 Replacement of Lenders under Certain Circumstances 95
11.8 Adjustments; Set-off 95
11.9 Counterparts 96
11.10 Severability 96
11.11 Integration 96
11.12 Termination 96
11.13 Collateral Release 96
</TABLE>
- iii -
<PAGE> 5
Page
<TABLE> ----
<S> <C>
11.14 GOVERNING LAW 96
11.15 Submission To Jurisdiction; Waivers 96
11.16 Acknowledgements 97
11.17 WAIVERS OF JURY TRIAL 97
11.18 Confidentiality 97
11.19 Judgment Currency 98
11.20 Section Headings 98
11.21 Exhibits 98
11.22 Special Provisions 99
</TABLE>
- iv -
<PAGE> 6
ANNEXES
<TABLE>
<S> <C>
Annex A Pricing Grid
SCHEDULES
Schedule 1.1(a) Commitments
Schedule 1.1(b) Real Estate Eligibility Conditions
Schedule 1.1(c) Repurchased Put Bonds
Schedule 5.1 Charges and Changes
Schedule 5.4 Consents
Schedule 5.13 Subsidiaries
Schedule 5.15 Filing Jurisdictions and Chief Executive Offices
Schedule 5.17 Intellectual Property Matters
Schedule 5.19(a) Material Real Property
Schedule 5.19(b) Put Bond Mortgages
Schedule 5.19(c) Designated Big Beaver Real Property
Schedule 5.20 Continuing Letters of Credit
Schedule 8.4(f) Existing Liens
Schedule 8.6(f) Scheduled Asset Sales
Schedule 8.9(i)(A) Existing Investments
Schedule 8.11 Transactions with Affiliates
Schedule 11.2 Addresses
EXHIBITS
Exhibit A Form of Addendum
Exhibit B Form of CAF Advance Confirmation
Exhibit C Form of CAF Advance Offer
Exhibit D Form of CAF Advance Request
Exhibit E Form of Subsidiaries Guarantee
Exhibit F Form of Trust Agreement
Exhibit G Form of Revolving Credit Note
Exhibit H Form of CAF Advance Note
Exhibit I Form of Borrower Closing Certificate
Exhibit J-1 Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
Exhibit J-2 Form of Opinion of General Counsel to Borrower
Exhibit J-3 Form of Opinion of Simpson Thacher & Bartlett
Exhibit K Form of Borrowing Base Certificate
Exhibit L Form of Assignment and Acceptance
Exhibit M Form of Swing Line Participation Certificate
</TABLE>
- v -
<PAGE> 7
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of May 6, 1997,
among KMART CORPORATION, a Michigan corporation (the "Borrower"), the several
banks, financial institutions and other entities from time to time parties to
this Agreement (collectively, the "Lenders"; individually, a "Lender") and THE
CHASE MANHATTAN BANK, a New York banking corporation, as Administrative Agent
(as hereinafter defined) for the Lenders hereunder.
W I T N E S S E T H :
WHEREAS, the Borrower, the Lenders and the Administrative Agent are
parties to that certain Credit Agreement, dated as of June 6, 1996 (the
"Existing Credit Agreement"); and
WHEREAS, subject to the terms and conditions of this Agreement, the
Borrower, the Lenders and the Administrative Agent wish to amend and restate
the Existing Credit Agreement in its entirety as provided herein;
NOW, THEREFORE, subject to the satisfaction of the conditions set
forth in subsection 6.1, the Borrower, the Lenders and the Administrative Agent
hereby agree to amend and restate the Existing Credit Agreement in its entirety
to read as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in
effect on such day, (b) the Base CD Rate in effect on such day plus 1% and
(c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%.
For purposes hereof: "Prime Rate" shall mean the rate of interest per
annum publicly announced from time to time by the Administrative Agent as
its prime rate in effect at its principal office in New York City (the
Prime Rate not being intended to be the lowest rate of interest charged by
the Administrative Agent in connection with extensions of credit to
debtors); "Base CD Rate" shall mean the sum of (a) the product of (i) the
Three-Month Secondary CD Rate and (ii) a fraction, the numerator of which
is one and the denominator of which is one minus the CD Reserve
Percentage and (b) the CD Assessment Rate; "Three-Month Secondary CD Rate"
shall mean, for any day, the secondary market rate for three-month
certificates of deposit reported as being in effect on such day (or, if
such day shall not be a Business Day, the next preceding Business Day) by
the Board of Governors through the public information telephone line of
the Federal Reserve Bank of New York (which rate will, under the current
practices of the Board of Governors, be published in Federal Reserve
Statistical Release H.15(519) during the week following such day), or,
if such rate shall not be so reported on such day or such next preceding
Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New
York City received at approximately 10:00 A.M., New York City time, on
such day (or, if such day shall not be a Business Day, on the next
preceding Business Day) by the Administrative Agent from three New York
City negotiable certificate of deposit dealers of recognized standing
selected by it; "CD Assessment Rate" shall mean, for any day, the annual
assessment rate in effect on such day which is payable by a member of the
Bank Insurance Fund maintained by the FDIC classified as well-capitalized
and within supervisory subgroup
<PAGE> 8
2
"B" (or a comparable successor assessment risk classification) within the
meaning of 12 C.F.R. Section 327.4 (or any successor provision) to the
FDIC for the FDIC's insuring time deposits at offices of such institution
in the United States; "CD Reserve Percentage" shall mean, for any day,
that percentage (expressed as a decimal) which is in effect on such day,
as prescribed by the Board of Governors, for determining the maximum
reserve requirement for a Depositary Institution (as defined in Regulation
D of the Board of Governors or any successor provisions) in respect of new
non-personal time deposits in Dollars having a maturity of 30 days or
more; and "Federal Funds Effective Rate" shall mean, for any day, the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers,
as published on the next succeeding Business Day by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for the day of such
transactions received by the Administrative Agent from three federal funds
brokers of recognized standing selected by it. Any change in the ABR due
to a change in the Prime Rate, the Three-Month Secondary CD Rate, the CD
Assessment Rate, the CD Reserve Percentage or the Federal Funds Effective
Rate shall be effective as of the opening of business on the effective day
of such change in the Prime Rate, the Three-Month Secondary CD Rate, the
CD Assessment Rate, the CD Reserve Percentage or the Federal Funds
Effective Rate, respectively.
"ABR Loans": Revolving Credit Loans the rate of interest applicable
to which is based upon the ABR.
"Acquisition": as to any Person, the acquisition by such Person of
(a) all the Capital Stock of any other Person, (b) all or substantially
all of the assets of any other Person or (c) assets constituting one or
more business units of any other Person.
"Addendum": an instrument, substantially in the form of Exhibit A,
by which a Lender becomes a party to this Agreement.
"Additional Permitted Capital Expenditure Amount": (a) with respect
to the 1997 Fiscal Year, an amount equal to 50% of the amount (if any) by
which EBITDA for the 1996 Fiscal Year exceeds $1,000,000,000 and (b) with
respect to each Fiscal Year thereafter, an amount equal to 50% of the
amount (if any) by which EBITDA for the immediately preceding Fiscal Year
exceeds $1,150,000,000.
"Adjusted Eligible Inventory Amount": as of the last day of any
fiscal month, (a) the Inventory Value of all Inventory of the Borrower and
the Subsidiary Guarantors that consists of finished goods as of such day
minus (b) the sum of (i) the Ineligible Inventory Borrowing Base Amount as
of such day plus (ii) the Markdown Reserve for such fiscal month.
"Adjustment Date": the second Business Day following receipt by the
Administrative Agent of both (i) the financial statements (other than
copies of the Form 10-K or Form 10-Q for the relevant fiscal period)
required to be delivered pursuant to subsection 7.1(a) or 7.1(b), as the
case may be, for the most recently completed fiscal period and (ii) the
certificate required to be delivered pursuant to subsection 7.2(b) with
respect to such fiscal period.
"Administrative Agent": Chase, together with its affiliates, as the
arranger of the Commitments and as the agent for the Lenders under this
Agreement and the other Loan Documents.
<PAGE> 9
3
"Affiliate": as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" of a Person
means the power, directly or indirectly, either to (a) vote 10% or more of
the securities having ordinary voting power for the election of directors
of such Person or (b) direct or cause the direction of the management and
policies of such Person, whether by contract or otherwise. For the
purposes of this Agreement, the Borrower and its Restricted Subsidiaries
shall not be deemed to be Affiliates of each other.
"Aggregate Revolving Credit Outstandings": at any time, an amount
equal to the sum of (a) the Committed Revolving Credit Extensions of
Credit of all the Lenders at such time, (b) the aggregate outstanding
principal amount of CAF Advances of all the Lenders at such time and (c)
the aggregate outstanding principal amount of Bilateral Option Loans of
all the Lenders at such time.
"Agreement": this Amended and Restated Credit Agreement, as amended,
supplemented or otherwise modified from time to time.
"Agreement Currency": as defined in subsection 11.19.
"Applicable Commitment Fee Rate": 0.30%, provided that, from and
after the last day of the first fiscal quarter of the 1997 Fiscal Year,
the Applicable Commitment Fee Rate will be adjusted, on each Adjustment
Date, to the Commitment Fee Rate set forth on Annex A opposite the Margin
Level Status of the Borrower in effect on such Adjustment Date, and,
provided, further, that, in the event the financial statements (other than
copies of the Form 10-K or 10-Q for the relevant fiscal period) required
to be delivered pursuant to subsection 7.1(a) or 7.1(b), as applicable,
and the related certificate required pursuant to subsection 7.2(b) are not
delivered when due, then, during the period from the date on which such
financial statements were required to be delivered until two Business Days
following the date upon which they actually are delivered, the Applicable
Commitment Fee Rate shall be 0.50%.
"Applicable Margin": for each Type of Revolving Credit Loan, the
rate per annum set forth under the relevant column heading below:
<TABLE>
<CAPTION>
ABR Loans Eurodollar Loans
--------- ----------------
<S> <C>
0.25% 1.25%
</TABLE>
provided that, from and after the last day of the first fiscal quarter of
the 1997 Fiscal Year, the Applicable Margin for all Types of Revolving
Credit Loans will be adjusted, on each Adjustment Date, to the Applicable
Margin set forth on Annex A opposite the Margin Level Status of the
Borrower in effect on such Adjustment Date, and provided, further, that,
in the event that the financial statements (other than the copies of the
Form 10-K or 10-Q for the relevant fiscal period) required to be delivered
pursuant to subsection 7.1(a) or 7.1(b), as applicable, and the related
certificate required pursuant to subsection 7.2(b), are not delivered when
due, then, during the period from the date upon which such financial
statements were required to be delivered until two Business Days following
the date upon which they actually are delivered, the Applicable Margin for
ABR Loans shall be 1.00% and the Applicable Margin for Eurodollar Loans
will be 2.00%.
<PAGE> 10
4
"Applicant": with respect to any Letter of Credit, the Borrower or
any of its Subsidiaries.
"Application": an application or request, in such form as an Issuing
Bank may specify from time to time, requesting such Issuing Bank to open a
Letter of Credit.
"Asset Sale": any sale, transfer or other disposition (including any
sales, transfers or other dispositions in connection with Sale-Leasebacks
or Securitization Transactions) by the Borrower or any of its Restricted
Subsidiaries of any property of the Borrower or any such Restricted
Subsidiary (including property subject to any Lien under any Security
Document).
"Assignee": as defined in subsection 11.6(c).
"Assignment Financing Statement": with respect to each Mortgage
Assignment, a uniform commercial code financing statement naming the
Trustee as the "secured party", on the appropriate state form, executed by
the Borrower or a Subsidiary, as appropriate, and describing the
appropriate Mortgage Assignment.
"Available Revolving Credit Commitment": as to any Lender, at any
time, an amount equal to the excess, if any, of (a) such Lender's
Revolving Credit Commitment over (b) such Lender's Committed Revolving
Credit Extensions of Credit at such time; collectively, as to all the
Lenders, the "Available Revolving Credit Commitments".
"Big Beaver Companies": the collective reference to [ ]
"Big Beaver Joint Ventures": the collective reference to [ ]
"Big Beaver Joint Venture Agreements": the collective reference to
[ ]
<PAGE> 11
5
"Big Beaver Loan Agreements": the collective reference to (a) the
Loan Agreement dated as of January 21, 1992, among the borrowers
thereunder, certain financial institutions party thereto, and [ ],
as managing agent, and (b) the Loan Agreement dated as of August 7, 1992,
among the borrowers thereunder, certain financial institutions party
thereto, and, [ ] as agent, in each case as the same may be amended,
supplemented or otherwise modified from time to time.
"Bilateral Option Loan": a Loan made by a Lender to the Borrower
pursuant to subsection 3.18.
"Bilateral Option Loan Report": as defined in subsection 3.19.
"Board of Governors": the Board of Governors of the Federal Reserve
System and any Governmental Authority which succeeds to the powers and
functions thereof.
"Borrowing Base": at any time, an amount, calculated based upon the
most recent Borrowing Base Certificate delivered pursuant to this
Agreement (or, until the first Borrowing Base Certificate is delivered
pursuant to subsection 7.2(c) subsequent to the Effective Date, subsection
7.2(c) of the Existing Credit Agreement), equal to the sum of (a) the
Eligible Inventory Borrowing Base Amount at such time, plus (b) 60% of the
excess of (i) the sum of (A) the aggregate Mortgage Value of Eligible
Mortgaged Real Property at such time, (B) the aggregate Mortgage Value of
Eligible Put Bond Real Property at such time, (C) the aggregate Designated
Value of Eligible Big Beaver Real Property at such time and (D) the
aggregate Mortgage Value of Eligible California Real Property at such
time over (ii) the Environmental Reserve Amount. The Borrowing Base
established based upon a particular Borrowing Base Certificate shall
remain in effect until the delivery of a subsequent Borrowing Base
Certificate.
"Borrowing Base Certificate": as defined in subsection 7.2(c).
"Borrowing Date": any Business Day specified in a notice pursuant to
subsection 3.2, 3.15(a), 3.18 or 3.22 as a date on which the Borrower
requests the Lenders to make Loans hereunder.
"Business": as defined in subsection 5.14(b).
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law
to close; provided, that when such term is used to describe a day on which
a borrowing, payment or interest rate [ ]
<PAGE> 12
6
determination is to be made in respect of a LIBO Rate CAF Advance, such
day shall also be a day on which dealings in foreign currencies and
exchange between banks may be carried on in London, England.
"CAF Advance": as defined in subsection 3.14.
"CAF Advance Availability Period": the period from and including the
Initial Closing Date to and including the date which is 14 days prior to
the Revolving Credit Termination Date.
"CAF Advance Confirmation": each confirmation by the Borrower of its
acceptance of CAF Advance Offers, which confirmation shall be
substantially in the form of Exhibit B and shall be delivered to the
Administrative Agent by facsimile transmission.
"CAF Advance Interest Payment Date": as to each CAF Advance, each
interest payment date specified by the Borrower for such CAF Advance in
the related CAF Advance Request.
"CAF Advance Maturity Date": as to any CAF Advance, the date
specified by the Borrower in the related CAF Advance Request and confirmed
pursuant to subsection 3.15(d)(ii) in its acceptance of the related CAF
Advance Offer.
"CAF Advance Note": as defined in subsection 4.13(f).
"CAF Advance Offer": each offer by a Lender to make CAF Advances
pursuant to a CAF Advance Request, which offer shall contain the
information specified in Exhibit C and shall be delivered to the
Administrative Agent by telephone, immediately confirmed by facsimile
transmission.
"CAF Advance Request": each request by the Borrower for Lenders to
submit bids to make CAF Advances, which request shall contain the
information in respect of such requested CAF Advances specified in
Exhibit D and shall be delivered to the Administrative Agent in writing,
by facsimile transmission, or by telephone, immediately confirmed by
facsimile transmission.
"California Mortgage Note": any promissory note, bond or other
instrument issued by the Borrower to a Subsidiary Guarantor on terms
reasonably satisfactory to the Administrative Agent which is secured by a
Lien on one or more parcels of Material Real Property of the Borrower
located in the State of California, Alaska, Nevada or Washington, as
amended, supplemented or otherwise modified from time to time with the
prior written consent of the Administrative Agent (which shall not be
unreasonably withheld).
"Capital Funds": of any Person, as of the date of determination
thereof, the sum of Consolidated Net Worth of such Person at such date of
determination and Consolidated Funded Debt of such Person at such date of
determination.
"Capital Stock": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants or options to purchase
<PAGE> 13
7
any of the foregoing, provided that the Convertible Debentures shall not
constitute Capital Stock of the Borrower.
"Cash Collateral Account": as defined in subsection 4.1(b).
"Cash Interest Expense": of any Person for any period, Consolidated
Interest Expense of such Person for such period (a) minus, in each case to
the extent included in determining such Consolidated Interest Expense for
such period, the sum of the following: (i) non-cash expenses for interest
payable in kind and non-cash interest expense related to closed stores and
(ii) amortization of debt discount and fees and (b) plus the sum of the
following in each case to the extent previously subtracted pursuant to
clause (a) of this definition: cash payments made by such Person or any
Consolidated Subsidiary of such Person during such period in respect of
the items referred to in such clause (a), provided that Cash Interest
Expense shall in no event include any fees or amortization of debt
discount associated with the transactions contemplated hereby or the
Convertible Preferred Securities.
"Chase": The Chase Manhattan Bank, a New York banking corporation,
and its successors.
"Co-Arrangers": collectively, Morgan Guaranty Trust Company of New
York and The Bank of New York.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": the collective reference to the Pledged Stock, the
Mortgaged Properties, the Mortgage Assignments, all Security (as defined
in each Security Agreement), all Pledged Securities (as defined in the
Pledge Agreement) and all other property which is part of the Trust
Estate.
"Collateral Release Date": the date upon which the Liens on the
Collateral granted pursuant to the Security Documents are released
pursuant to subsection 11.13.
"Collateral Release Event": shall occur at any time, so long as no
Default or Event of Default shall have occurred and be continuing at such
time: (a) if the senior long-term unsecured debt of the Borrower is rated
at least Baa3 by Moody's and the corporate credit rating of the Borrower
is rated at least BBB- by S&P; or (b) if, as of the last day of the most
recent fiscal quarter of the Borrower ending on or prior to such time:
(i) the Fixed Charge Coverage Ratio as of such day and as of the last day
of the immediately preceding fiscal quarter is greater than or equal to
2.0 to 1.0 and (ii) the Leverage Ratio as of such day is less than or
equal to 0.375 to 1.0.
"Commercial L/C Fee Rate": at any time, the rate per annum equal to
50% of the Applicable Margin then in effect for Eurodollar Loans.
"Commercial Letter of Credit": as defined in subsection 3.6(b)(i).
"Committed Loan": any Revolving Credit Loan or Swing Line Loan, as
the case may be.
<PAGE> 14
8
"Committed Revolving Credit Extensions of Credit": as to any Lender
at any time, an amount equal to the sum of (a) the aggregate principal
amount of all Revolving Credit Loans made by such Lender then outstanding
and (b) such Lender's Revolving Credit Commitment Percentage of the sum of
(i) the aggregate principal amount of Swing Line Loans then outstanding
and (ii) the L/C Obligations then outstanding.
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Borrower within the
meaning of Section 4001 of ERISA or is part of a group which includes the
Borrower and which is treated as a single employer under Section 414 of
the Code.
"Confectionery Reserve": as of the last day of any fiscal month, an
amount equal to the amount, if any, by which the Inventory Value of
Inventory consisting of candy and other confectionery items exceeds an
amount equal to 2% of the Inventory Value of all Inventory as of such day.
"Confidential Information": as defined in subsection 11.18.
"Consolidated": when used in connection with any defined term, and
not otherwise defined, means such term as it applies to any Person and its
Subsidiaries on a consolidated basis, after eliminating all intercompany
items.
"Continuing Directors": as defined in Section 9(j).
"Continuing Letter of Credit": each letter of credit outstanding on
the date hereof that was issued pursuant to the Existing Credit Agreement
by an Issuing Bank which is a Lender.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Convertible Debentures": the Convertible Junior Subordinated
Debentures issued by the Borrower to the Convertible Trust pursuant to the
Convertible Debenture Indenture, including any Convertible Junior
Subordinated Debentures issued in connection with the exercise of the
underwriters' over-allotment option, and any debentures (with the same
terms) issued in exchange therefor pursuant to the Convertible Debenture
Indenture as in effect on the Initial Closing Date.
"Convertible Debenture Indenture": the Indenture, dated as of June
6, 1996, between the Borrower and The Bank of New York, as Trustee, as
amended, supplemented or otherwise modified from time to time in
accordance with this Agreement.
"Convertible Preferred Securities": the Trust Convertible Preferred
Securities issued by the Convertible Trust on the Initial Closing Date and
any Trust Convertible Preferred Securities issued by the Convertible Trust
in connection with the exercise of the underwriters' over-allotment
option.
"Convertible Trust": Kmart Financing I, a Delaware statutory
business trust.
<PAGE> 15
9
"Corporate Trustee": [ ] and its successors as Corporate
Trustee under the Trust Agreement, for the benefit of the Secured Parties,
unless express reference herein is made to, or the context hereof requires
that the reference be to, the Individual Trustee.
"Cost Complement": with respect to any fiscal month, the percentage
which the Inventory Value of all Inventory purchased by the Borrower and
the Subsidiary Guarantors from the beginning of the relevant Fiscal Year
through the end of such fiscal month represents of total original selling
price (exclusive of markdowns) of such Inventory. For the purposes of the
definition of "Markdown Reserve", the Cost Complement shall be calculated
separately for Builders Square, Inc. and its Subsidiaries which are
Subsidiary Guarantors, on the one hand, and the Borrower and the other
Subsidiary Guarantors, on the other hand.
"Debt": as to any Person at the date of any determination thereof,
the sum of the following to the extent such items should be reflected on
the consolidated balance sheet of such Person (excluding any such items
which appear only in the notes to such consolidated balance sheet) at such
date (without duplication): (a) all indebtedness for borrowed money or for
the deferred purchase price of property or services (other than current
trade liabilities incurred in the ordinary course of business and payable
in accordance with customary practices), (b) any other indebtedness which
is evidenced by a note, bond, debenture or similar instrument, (c) all
obligations under Financing Leases, (d) all obligations in respect of
acceptances issued or created for the account of such Person, and (e) all
liabilities secured by any Lien on any property owned by such Person even
though such Person has not assumed or otherwise become liable for the
payment thereof, provided that (i) the item which in conformity with GAAP
would reflect the amount of Convertible Preferred Securities and/or the
Convertible Debentures (and the obligations of such Person with respect
thereto) on the consolidated balance sheet of such Person at such date of
determination shall in no event constitute Debt of such Person and (ii)
Debt of the Borrower shall include any outstanding Qualified Big Beaver
Indebtedness.
"Default": any of the events specified in Section 9, whether or not
any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Designated Big Beaver Real Property": the collective reference to
the real property owned by the Big Beaver Joint Ventures as of the Initial
Closing Date and designated as such on Schedule 5.19(c).
"Designated Lenders": as defined in subsection 6.1(a).
"Designated Value": with respect to any parcel of Eligible Big
Beaver Real Property at any time, the lesser of (a) the aggregate of the
aggregate then outstanding principal amount of Purchased Credit Facilities
and amounts advanced by the Borrower prior to and after the Initial
Closing Date to complete construction of the related projects (i) owed by
the owner of such Eligible Big Beaver Real Property and (ii) with respect
to which the related promissory note or other evidence of indebtedness is
then subject to a perfected security interest in favor of the Trustee
subject to no prior Liens other than as permitted by subsection 8.4(a) and
(b) the value of such Eligible Big Beaver Real Property set forth in the
Final Appraisal or Preliminary Appraisal delivered with respect thereto,
provided that, (x) if a Final Appraisal was not delivered with respect to
any parcel of Eligible Big Beaver Real Property as of the [ ]
<PAGE> 16
10
Initial Closing Date, then upon delivery of such Final Appraisal (i) the
value of such parcel of Eligible Big Beaver Real Property for purposes of
this clause (b) shall be the value of such parcel of Eligible Big Beaver
Real Property set forth in such Final Appraisal and (ii) the Borrowing
Base shall (to the extent required) be adjusted to reflect such value
effective as of the delivery of the Borrowing Base Certificate in respect
of the fiscal month in which such Final Appraisal is delivered to the
Administrative Agent and (y) if, at the time such Final Appraisal is
delivered, the relevant parcel of Eligible Big Beaver Real Property is
still under construction, (i) the Borrower may request that the
Administrative Agent obtain another Final Appraisal with respect to such
parcel of Eligible Big Beaver Real Property and (ii) if the Administrative
Agent obtains any such Final Appraisal, then, upon delivery of such Final
Appraisal (A) the value of such parcel of Eligible Big Beaver Real
Property for purposes of this clause (b) shall be the value of such parcel
of Eligible Big Beaver Real Property set forth in such Final Appraisal and
(B) the Borrowing Base shall be adjusted to reflect such value effective
as of the last day of the fiscal month in which such Final Appraisal is
delivered.
"Discontinued Inventory Reserve": as of the last day of any fiscal
month, an amount equal to 75% of the Inventory Value of all Inventory
which has been designated as "discontinued" by the Borrower or any
Subsidiary Guarantor at least 18 months prior to such day on a basis
consistent with the Borrower's or the relevant Subsidiary Guarantor's
current and historical accounting practice.
"Dollar Equivalent": at any date of determination thereof with
respect to the face amount of any Letter of Credit issued in any currency
other than Dollars or any Reimbursement Obligations in respect of any such
Letter of Credit, an amount in Dollars equivalent to such face amount
calculated at the rate of exchange quoted by the Administrative Agent on
such date of determination (at the hour on such date of determination at
which it customarily makes such determination) to prime banks in the
interbank market where its foreign currency exchange operations in respect
of the currency in which such Letter of Credit is issued are then being
conducted for the spot purchase of such currency with Dollars.
"Dollars" and "$": dollars in lawful currency of the United States
of America.
"Domestic Subsidiary": any Subsidiary of the Borrower organized
under the laws of any jurisdiction (including territories) within the
United States of America, excluding the Convertible Trust, Securitization
Entities, Inactive Subsidiaries, Special Purpose Subsidiaries and Foreign
Holding Companies.
"EBITDA": with respect to any period, EBITDAR for such period minus,
to the extent included in EBITDAR for such period, the Consolidated Rental
Expense of the Borrower for such period.
"EBITDAR": with respect to any period, Consolidated Net Income of
the Borrower for such period (a) plus, in each case to the extent deducted
in determining such Consolidated Net Income for such period, the sum of
the following: (i) Consolidated Interest Expense of the Borrower, (ii)
consolidated income tax expense of the Borrower and its Consolidated
Subsidiaries, (iii) consolidated depreciation and amortization expense of
the Borrower and its Consolidated Subsidiaries, (iv) Consolidated Rental
Expense of the Borrower, (v) other consolidated non-recurring non-cash
charges of the Borrower and its Consolidated Subsidiaries and non-cash
losses realized by the Borrower and its Consolidated Subsidiaries upon the
sale,
<PAGE> 17
11
disposition or refinancing of Existing Real Properties and/or Repurchased
Put Bonds and (vi) cash payments received by the Borrower or any
Consolidated Subsidiary during such period in respect of non-recurring
non-cash gains of the Borrower taken subsequent to the first day of
February 1996, and (b) minus the sum of the following: (i) cash payments
made by the Borrower or any Consolidated Subsidiary during such period in
respect of non-recurring non-cash charges taken subsequent to the first
day of February 1996 and (ii) consolidated non-recurring non-cash gains of
the Borrower and its Consolidated Subsidiaries during such period.
"Effective Date": the date on which the conditions set forth in
subsection 6.1 are satisfied.
"Eligible Big Beaver Real Property": at any time, any parcel of
Designated Big Beaver Real Property as to which each of the following
conditions shall have been satisfied at such time:
(a) the Administrative Agent shall have received a copy of an
as-built survey of such parcel of Designated Big Beaver Real
Property, if available;
(b) the Administrative Agent shall have received in respect of
such parcel of Designated Big Beaver Real Property a title report,
preliminary title certificate or commitment dated a date reasonably
satisfactory to the Administrative Agent to the effect that title to
such real property is vested in the owner thereof free and clear of
all mortgage liens and all defects and encumbrances (other than those
of a type that would constitute Permitted Mortgage Liens), except
such defects and encumbrances as may be approved by the
Administrative Agent;
(c) the Administrative Agent shall have received a Final
Appraisal or Preliminary Appraisal with respect to such parcel of
Designated Big Beaver Real Property; and
(d) such parcel of Designated Big Beaver Real Property shall be
in compliance with all of the terms, covenants, conditions,
representations and warranties set forth in Schedule 1.1(b), provided
that, (i) if any such term, covenant, condition, representation or
warranty shall reference any provision of this Agreement, such
reference shall be read without giving effect to any qualification
or limitation contained therein regarding a Material Adverse Effect
and (ii) if such parcel of Designated Big Beaver Real Property
ceases to be in compliance with any of the terms, covenants,
conditions, representations or warranties set forth in Schedule
1.1(b), such parcel of Designated Big Beaver Real Property shall
cease (effective as of the delivery of the next succeeding Borrowing
Base Certificate) to be Eligible Big Beaver Real Property during the
continuation of such non-compliance if such non-compliance could
reasonably be expected to have a material adverse effect on the value
of such parcel of Designated Big Beaver Real Property, but such
non-compliance shall not constitute, in and of itself, a Default or
Event of Default.
If a parcel of Designated Big Beaver Real Property becomes a parcel of
Eligible Big Beaver Real Property and is thereafter subsequently developed
or the development thereof is subsequently completed, the Borrower may, at
its option deliver a notice to the Administrative Agent to the effect that
the Borrower wishes to cause such parcel of Designated Big Beaver Real
Property to satisfy the requirements of this definition as if (x) such
parcel of Designated
<PAGE> 18
12
Big Beaver Real Property became a parcel of Designated Big Beaver Real
Property as of the date of such notice and (y) such parcel of Designated
Big Beaver Real Property was not then a parcel of Eligible Big Beaver Real
Property. Upon delivery of any such notice, the Administrative Agent
shall commission a new Final Appraisal with respect to such parcel of
Designated Big Beaver Real Property. Upon satisfaction of the conditions
set forth in this definition following such date with respect to such
parcel of Designated Big Beaver Real Property (other than the condition
set forth in clause (a) above and, in satisfaction of clause (b) above,
the Borrower may provide an updated title report, preliminary title
certificate or commitment dated from and after the date of the title
report, preliminary title certificate or commitment delivered as of the
Initial Closing Date on the same conditions as such title report,
preliminary title certificate or commitment and otherwise satisfying the
requirements of such clause (b)), such parcel of Designated Big Beaver
Real Property shall, without duplication, be deemed to become a parcel of
Eligible Big Beaver Real Property as of the date such conditions are
satisfied and the Designated Value of such parcel of Eligible Big Beaver
Real Property shall be included in the Borrowing Base effective as of the
delivery of the Borrowing Base Certificate in respect of the fiscal month
in which such conditions are satisfied.
"Eligible California Real Property": at any time, any parcel of
Material Real Property of the Borrower located in the State of California,
Alaska, Nevada or Washington as to which each of the following conditions
has been satisfied at such time:
(a) (i) Such parcel of Material Real Property (A) is comprised
of a developed retail store, distribution center, shopping center or
office building with respect to which a certificate of occupancy or
temporary certificate of occupancy or the local equivalent thereof
(or any other similar proof of completion) shall have been issued by
the relevant Governmental Authority or (B) is undeveloped and has a
book value (excluding soft costs) of at least $1,000,000, (ii) a Lien
on such parcel of Material Real Property shall have been granted by
the Borrower, in favor of a Subsidiary Guarantor pursuant to a
Subsidiary Mortgage securing California Mortgage Notes, (iii) such
Subsidiary Mortgage shall be in full force and effect in favor of
such Subsidiary Guarantor at such time, (iv) such Subsidiary Mortgage
shall have been recorded in the appropriate jurisdiction or
jurisdictions to perfect the Lien granted pursuant to such Subsidiary
Mortgage, (v) all applicable mortgage recording taxes shall have been
paid, provided that such Subsidiary Mortgage need not have been so
recorded (and any such mortgage recording taxes need not have been so
paid) if an effective title insurance policy (naming such Subsidiary
Guarantor as the insured thereunder) shall have been issued that
otherwise complies with the requirements of clause (c) of this
definition and that provides "gap" coverage insuring against any
exceptions that may arise prior to the actual recording of such
Subsidiary Mortgage (and the payment of any such recording taxes),
(vi) the California Mortgage Note or Notes secured by the applicable
Subsidiary Mortgage shall have been pledged and delivered to the
Trustee pursuant to the Pledge Agreement at such time and (vii) a
Mortgage Assignment, in recordable form, and Assignment Financing
Statements, in recordable form, shall have been executed and
delivered with respect to such California Mortgage Note or Notes and
shall be in full force and effect in favor of the Trustee at such
time;
(b) the Administrative Agent shall have received (i) and the
title insurance company issuing the policy referred to in clause (c)
of this definition shall have received, maps or plats of an as-built
survey of the sites of the Material Real Property
<PAGE> 19
13
covered by such Subsidiary Mortgage certified to the Administrative
Agent and such title insurance company in a manner reasonably
satisfactory to them, dated a date reasonably satisfactory to the
Administrative Agent and such title insurance company, by an
independent professional licensed land surveyor reasonably
satisfactory to the Administrative Agent and such title insurance
company, which maps or plats and the surveys on which they are based
shall be made in accordance with the Minimum Standard Detail
Requirements for Land Title Surveys jointly established and adopted
by the American Land Title Association and the American Congress on
Surveying and Mapping in 1992, and, without limiting the generality
of the foregoing, there shall be surveyed and shown on such maps,
plats or surveys the following: (A) the locations on such sites of
all the buildings, structures and other improvements and the
established building setback lines (where setback information is
readily obtainable); (B) the lines of streets abutting such sites and
the width thereof; (C) all access and other easements appurtenant to
such sites or necessary to use such sites; (D) all roadways, paths,
driveways, easements, encroachments and overhanging projections and
similar encumbrances affecting such sites, whether recorded, apparent
from a physical inspection of such sites or otherwise known to the
surveyor; (E) any encroachments on any adjoining property by the
building structures and improvements on such sites; and (F) if such
sites are described as being on a filed map, a legend or other
information relating the survey to said map or (ii) in the case of
any such parcel of Material Real Property subject to a Subsidiary
Mortgage as of the Initial Closing Date, a copy of an as-built survey
of such parcel of Material Real Property if such parcel of Material
Real Property was developed as of the Initial Closing Date or a
boundary survey of such parcel of Material Real Property if such
parcel of Material Real Property was undeveloped as of the Initial
Closing Date, in each case prepared within five years prior to the
Initial Closing Date;
(c) the Administrative Agent shall have received in respect of
such parcel of Material Real Property a mortgagee's title policy (or
policies) or marked up unconditional binder for such insurance dated
the Initial Closing Date (in the case of any such parcel of Material
Real Property subject to a Subsidiary Mortgage as of the Initial
Closing Date) or a date reasonably satisfactory to the Administrative
Agent otherwise. Each such policy shall (i) be in an amount equal
to the Mortgage Value (as of the date such parcel of Material Real
Property becomes a parcel of Eligible California Real Property) of
such parcel of Material Real Property; (ii) be issued at ordinary
rates; (iii) insure that the Subsidiary Mortgage insured thereby
creates a valid first Lien on such parcel of Material Real Property
free and clear of all defects and encumbrances, except such as may be
approved by the Administrative Agent, Permitted Mortgage Liens and
any Mortgage Assignment; (iv) name the applicable Subsidiary
Guarantor and the Trustee as the insured as their interests may
appear thereunder; (v) be in the form of ALTA Loan Policy - 1992;
(vi) contain a comprehensive lender's endorsement and (vii) be issued
by Chicago Title Insurance Company, First American Title Insurance
Company or any other title company reasonably satisfactory to the
Administrative Agent (including any such title companies acting as
co-insurers or reinsurers, at the option of the Administrative
Agent). The Administrative Agent shall have received (x) evidence
satisfactory to it that all premiums in respect of each such policy
have been paid and (y) a copy of all documents referred to, or listed
as exceptions to title, in such title policy (or policies);
<PAGE> 20
14
(d) the Administrative Agent shall have received a Final
Appraisal with respect to such parcel of Material Real Property or,
in the case of any such parcel of Material Real Property subject to a
Subsidiary Mortgage as of the Initial Closing Date, a Preliminary
Appraisal with respect to such parcel of Material Real Property;
(e) with respect to any parcel of Material Real Property (other
than any parcel of Material Real Property subject to a Subsidiary
Mortgage as of the Initial Closing Date), a Phase I environmental
report with respect to such parcel of Material Real Property, dated a
date not more than one year prior to the date of delivery of the
related Subsidiary Mortgage, showing no material condition of
environmental concern shall have been delivered to the Administrative
Agent and in form reasonably satisfactory to the Administrative
Agent;
(f) if such parcel of Material Real Property is subject to a
ground lease in favor of the Borrower as lessee, no consent shall be
required under such ground lease to mortgage or foreclose upon such
parcel of Material Real Property (or such consent shall have been
obtained); and
(g) such parcel of Material Real Property shall be in
compliance, or, as applicable, the owner or lessee thereof, shall be
in compliance, with all of the terms, covenants, conditions,
representations and warranties set forth in Schedule 1.1(b), provided
that, (i) if any such term, covenant, condition, representation or
warranty shall reference any provision of this Agreement, such
reference shall be read without giving effect to any qualification or
limitation contained therein regarding a Material Adverse Effect, and
(ii) if such parcel of Material Real Property or, as applicable, the
owner or lessee thereof ceases to be in compliance with any of the
terms, covenants, conditions, representations or warranties set forth
in Schedule 1.1(b), such parcel of Material Real Property shall cease
(effective as of the delivery of the next succeeding Borrowing Base
Certificate) to be Eligible California Real Property during the
continuation of such non-compliance if such non-compliance could
reasonably be expected to have a material adverse effect on the value
of such parcel of Material Real Property, but such non-compliance
shall not constitute, in and of itself, a Default or Event of Default.
If a parcel of Material Real Property of the type described in clause
(a)(i)(B) of this definition becomes a parcel of Eligible California Real
Property and is thereafter subsequently developed such that such parcel of
Material Real Property satisfies the requirements of clause (a)(i)(A) of
this definition, the Borrower may, at its option, deliver a notice to the
Administrative Agent to the effect that the Borrower wishes to cause such
parcel of Material Real Property to satisfy the requirements of this
definition as if (x) such parcel of Material Real Property became a parcel
of Material Real Property as of the date of such notice, (y) such parcel
of Material Real Property was not then a parcel of Eligible California
Real Property and (z) if applicable, such parcel of Material Real Property
was not subject to a Subsidiary Mortgage as of the Initial Closing Date.
Upon delivery of any such notice, the Administrative Agent shall
commission a new Final Appraisal with respect to such parcel of Material
Real Property. Upon satisfaction of the conditions set forth in this
definition following such date with respect to such parcel of Material
Real Property (other than the condition set forth in clause (e) above and,
in satisfaction of clause (c) above, the Borrower may provide a date-down
endorsement to the mortgagee's title policy or binder delivered as of the
Initial Closing Date on the same conditions as such policy or binder and
otherwise satisfying the requirements of such clause as
<PAGE> 21
15
to title insurance), such parcel of Material Real Property shall, without
duplication, be deemed to become a parcel of Eligible California Real
Property as of the date such conditions are satisfied and the Mortgage
Value of such parcel of Eligible California Real Property shall be
included in the Borrowing Base effective as of the delivery of the
Borrowing Base Certificate in respect of the fiscal month in which such
conditions are satisfied.
"Eligible Inventory Amount": as of the last day of any fiscal month,
(a) the Inventory Value of all Inventory of the Borrower and the
Subsidiary Guarantors that consists of finished goods as of such day minus
(b) the Ineligible Inventory Borrowing Base Amount as of such day. For
the purposes of the definition of "Markdown Reserve", Builders Square,
Inc. and its Subsidiaries which are Subsidiary Guarantors shall be treated
as an entity separate from the Borrower and the other Subsidiary
Guarantors, and such amounts shall be calculated separately for Builders
Square, Inc. and its Subsidiaries which are Subsidiary Guarantors, on the
one hand, and the Borrower and the other Subsidiary Guarantors, on the
other hand.
"Eligible Inventory Borrowing Base Amount": as of the last day of
any fiscal month, an amount equal to (a) 55% of the Adjusted Eligible
Inventory Amount as of such day minus (b) the sum of (i) the Flow Through
Center Reserve for such fiscal month, (ii) the Special Order Reserve for
such fiscal month and (iii) the aggregate amount of gift certificates then
outstanding entitling the holder thereof to use all or a portion thereof
to pay all or a portion of the purchase price for any Inventory as of such
day which are not being held for escheatment or which have not been
escheated as of such day.
"Eligible Mortgaged Real Property": at any time, any parcel of
Material Real Property of the Borrower or any Subsidiary Guarantor (other
than parcels of Material Real Property of the Borrower located in the
State of California, Alaska, Nevada or Washington) as to which each of the
following conditions has been satisfied at such time:
(a) (i) Such parcel of Material Real Property (A) is comprised
of a developed retail store, distribution center, shopping center or
office building with respect to which a certificate of occupancy or
temporary certificate of occupancy or the local equivalent thereof
(or any other similar proof of completion) shall have been issued by
the relevant Governmental Authority or (B) is undeveloped and has a
book value (excluding soft costs) of at least $1,000,000, (ii) a
Lien on such parcel of Material Real Property shall have been granted
by the Borrower or such Subsidiary Guarantor, as the case may be,
in favor of the Trustee pursuant to a Mortgage, (iii) such Mortgage
shall be in full force and effect in favor of the Trustee at such
time, (iv) such Mortgage shall have been recorded in the appropriate
jurisdiction or jurisdictions to perfect the Lien granted pursuant to
such Mortgage and (v) all applicable mortgage recording taxes shall
have been paid, provided that such Mortgage need not have been so
recorded (and any such mortgage recording taxes need not have been so
paid) if an effective title insurance policy (naming the Trustee for
the benefit of the Secured Parties as the insured thereunder) shall
have been issued that otherwise complies with the requirements of
clause (c) of this definition and that provides "gap" coverage
insuring against any exceptions that may arise prior to the actual
recording of such Mortgage (and the payment of any such recording
taxes);
(b) the Administrative Agent shall have received (i) and the
title insurance company issuing the policy referred to in clause (c)
of this definition shall have received, maps or plats of an as-built
survey of the sites of the Material Real Property
<PAGE> 22
16
covered by such Mortgage certified to the Administrative Agent and
such title insurance company in a manner reasonably satisfactory to
them, dated a date reasonably satisfactory to the Administrative
Agent and such title insurance company, by an independent
professional licensed land surveyor reasonably satisfactory to the
Administrative Agent and such title insurance company, which maps or
plats and the surveys on which they are based shall be made in
accordance with the Minimum Standard Detail Requirements for Land
Title Surveys jointly established and adopted by the American Land
Title Association and the American Congress on Surveying and Mapping
in 1992, and, without limiting the generality of the foregoing, there
shall be surveyed and shown on such maps, plats or surveys the
following: (A) the locations on such sites of all the buildings,
structures and other improvements and the established building
setback lines (where setback information is readily obtainable); (B)
the lines of streets abutting such sites and the width thereof; (C)
all access and other easements appurtenant to such sites or necessary
to use such sites; (D) all roadways, paths, driveways, easements,
encroachments and overhanging projections and similar encumbrances
affecting such sites, whether recorded, apparent from a physical
inspection of such sites or otherwise known to the surveyor; (E) any
encroachments on any adjoining property by the building structures
and improvements on such sites; and (F) if such sites are described
as being on a filed map, a legend or other information relating the
survey to said map or (ii) in the case of any such parcel of Material
Real Property subject to a Mortgage as of the Initial Closing Date, a
copy of an as-built survey of such parcel of Material Real Property
if such parcel of Material Real Property was developed as of the
Initial Closing Date or a boundary survey of such parcel of Material
Real Property if such parcel of Material Real Property was
undeveloped as of the Initial Closing Date, in each case prepared
within five years prior to the Initial Closing Date;
(c) the Administrative Agent shall have received in respect of
such parcel of Material Real Property a mortgagee's title policy (or
policies) or marked up unconditional binder for such insurance dated
the Initial Closing Date (in the case of any such parcel of Material
Real Property subject to a Mortgage as of the Initial Closing Date)
or a date reasonably satisfactory to the Administrative Agent
otherwise. Each such policy shall (A) be in an amount equal to the
Mortgage Value (as of the date such parcel of Material Real Property
becomes a parcel of Eligible Mortgaged Real Property) of such
parcel of Material Real Property, (B) be issued at ordinary rates,
(C) insure that the Mortgage insured thereby creates a valid first
Lien on such parcel of Material Real Property free and clear of all
defects and encumbrances, except such as may be approved by the
Administrative Agent and Permitted Mortgage Liens, (D) name the
Trustee for the benefit of the Secured Parties as the insured
thereunder, (E) be in the form of ALTA Loan Policy - 1992, (F)
contain a comprehensive lender's endorsement and (G) be issued by
Chicago Title Insurance Company, First American Title Insurance
Company or any other title company reasonably satisfactory to the
Administrative Agent (including any such title companies acting as
co-insurers or reinsurers, at the option of the Administrative
Agent). The Administrative Agent shall have received (x) evidence
satisfactory to it that all premiums in respect of each such policy
have been paid and (y) a copy of all documents referred to, or listed
as exceptions to title, in such title policy (or policies);
(d) the Administrative Agent shall have received a Final
Appraisal with respect to such parcel of Material Real Property or,
in the case of any such parcel of Material
<PAGE> 23
17
Real Property subject to a Mortgage as of the Initial Closing Date, a
Preliminary Appraisal with respect to such parcel of Material Real
Property;
(e) with respect to any parcel of Material Real Property (other
than any parcel of Material Real Property subject to a Mortgage as of
the Initial Closing Date), a Phase I environmental report with
respect to such parcel of Material Real Property, dated a date not
more than one year prior to the date of delivery of the related
Mortgage, showing no material condition of environmental concern
shall have been delivered to the Administrative Agent and in form
reasonably satisfactory to the Administrative Agent;
(f) if such parcel of Material Real Property is subject to a
ground lease in favor of the Borrower or any Subsidiary Guarantor as
lessee, no consent shall be required under such ground lease to
mortgage or foreclose upon such parcel of Material Real Property (or
such consent shall have been obtained); and
(g) such parcel of Material Real Property shall be in
compliance, or, as applicable, the owner or lessee thereof, shall be
in compliance, with all of the terms, covenants, conditions,
representations and warranties set forth in Schedule 1.1(b), provided
that, (i) if any such term, covenant, condition, representation or
warranty shall reference any provision of this Agreement, such
reference shall be read without giving effect to any qualification or
limitation contained therein regarding a Material Adverse Effect, and
(ii) if such parcel of Material Real Property or, as applicable, the
owner or lessee thereof ceases to be in compliance with any of the
terms, covenants, conditions, representations or warranties set forth
in Schedule 1.1(b), such parcel of Material Real Property shall cease
(effective as of the delivery of the next succeeding Borrowing Base
Certificate) to be Eligible Mortgaged Real Property during the
continuation of such non-compliance if such non-compliance could
reasonably be expected to have a material adverse effect on the value
of such parcel of Material Real Property, but such non-compliance
shall not constitute, in and of itself, a Default or Event of
Default.
If a parcel of Material Real Property of the type described in clause
(a)(i)(B) of this definition becomes a parcel of Eligible Mortgaged Real
Property and is thereafter subsequently developed such that such parcel of
Material Real Property satisfies the requirements of clause (a)(i)(A) of
this definition, the Borrower may, at its option, deliver a notice to the
Administrative Agent to the effect that the Borrower wishes to cause such
parcel of Material Real Property to satisfy the requirements of this
definition as if (x) such parcel of Material Real Property became a parcel
of Material Real Property as of the date of such notice, (y) such parcel
of Material Real Property was not then a parcel of Eligible Mortgaged Real
Property and (z) if applicable, such parcel of Material Real Property was
not subject to a Mortgage as of the Initial Closing Date. Upon delivery
of any such notice, the Administrative Agent shall commission a new Final
Appraisal with respect to such parcel of Material Real Property. Upon
satisfaction of the conditions set forth in this definition following
such date with respect to such parcel of Material Real Property (other
than the condition set forth in clause (e) above and, in satisfaction
of clause (c) above, the Borrower may provide a date-down endorsement to
the mortgagee's title policy or binder delivered as of the Initial Closing
Date on the same conditions as such policy or binder and otherwise
satisfying the requirements of such clause as to title insurance), such
parcel of Material Real Property shall, without duplication, be deemed to
become a parcel of Eligible Mortgaged Real Property as of the date such
conditions are
<PAGE> 24
18
satisfied and the Mortgage Value of such parcel of Eligible Mortgaged Real
Property shall be included in the Borrowing Base effective as of the
delivery of the Borrowing Base Certificate in respect of the fiscal month
in which such conditions are satisfied.
"Eligible Put Bond Real Property": at any time, any parcel of Put
Bond Real Property as to which each of the following conditions shall have
been satisfied at such time:
(a) (i) such parcel of Put Bond Real Property shall be subject
to a Lien granted under a Put Bond Mortgage or Mortgages and such
Lien shall be in full force and effect and shall not have been
released, (ii) the Repurchased Put Bonds secured by such parcel of
Put Bond Real Property shall have been pledged and delivered to the
Trustee pursuant to the Pledge Agreement at such time and (iii) to
the extent required to perfect the Lien in the Repurchased Put Bonds
created in favor of the Trustee pursuant to the Pledge Agreement, a
Mortgage Assignment and Assignment Financing Statements, in
recordable form, shall have been executed and delivered with respect
to such Put Bond Mortgages and shall be in full force and effect in
favor of the Trustee at such time;
(b) the Administrative Agent shall have received a copy of an
as-built survey of such parcel of Put Bond Real Property, if
available;
(c) the Administrative Agent shall have received in respect of
such parcel of Put Bond Real Property a title report, preliminary
title certificate or commitment dated a date reasonably satisfactory
to the Administrative Agent to the effect that the mortgage lien
securing the relevant Repurchased Put Bonds is a first priority
mortgage Lien;
(d) the Administrative Agent shall have received a Final
Appraisal or Preliminary Appraisal with respect to such parcel of Put
Bond Real Property;
(e) if such parcel of Put Bond Real Property is subject to a
ground lease in favor of the Borrower or any Subsidiary Guarantor as
lessee, no consent shall have been required under such ground lease
to mortgage or foreclose upon such parcel of Put Bond Real Property
(or such consent shall have been obtained); and
(f) such parcel of Put Bond Real Property shall be in
compliance with all of the terms, covenants, conditions,
representations and warranties set forth in Schedule 1.1(b), provided
that, (i) if any such term, covenant, condition, representation or
warranty shall reference any provision of this Agreement, such
reference shall be read without giving effect to any qualification or
limitation contained therein regarding a Material Adverse Effect, or
(ii) if such parcel of Put Bond Real Property ceases to be in
compliance with any of the terms, covenants, conditions,
representations or warranties set forth in Schedule 1.1(b), such
parcel of Put Bond Real Property shall cease (effective as of the
delivery of the next succeeding Borrowing Base Certificate) to be
Eligible Put Bond Real Property during the continuation of such
non-compliance if such non-compliance could reasonably be expected to
have a material adverse effect on the value of such parcel of Put
Bond Real Property, but such non-compliance shall not constitute, in
and of itself, a Default or Event of Default.
<PAGE> 25
19
"Environmental Laws": any and all foreign, federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements
of Law (including common law) regulating, relating to or imposing
liability or standards of conduct concerning protection of human health or
the environment, as are now or may at any time hereafter be in effect.
"Environmental Reserve Amount": at any time, an amount equal to the
product of (a) $150,000 and (b) the number of parcels of Eligible
Mortgaged Real Property, Eligible Big Beaver Real Property, Eligible Put
Bond Real Property and Eligible California Real Property which is included
in the Borrowing Base at such time.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal) of reserve requirements in effect on such day
(including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors or
other Governmental Authority having jurisdiction with respect thereto)
prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Board of Governors)
maintained by a member bank of the Federal Reserve System.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum equal
to the rate for deposits in Dollars for the period commencing on the first
day of such Interest Period and ending on the last day of such Interest
Period which appears on Telerate Page 3750 as of 10:00 A.M., New York City
time, two Business Days prior to the beginning of such Interest Period.
If at least two rates appear on such Telerate Page for such Interest
Period, the "Eurodollar Base Rate" shall be the arithmetic mean of such
rates. If the "Eurodollar Base Rate" cannot be determined in accordance
with the immediately preceding sentences with respect to any Interest
Period, the "Eurodollar Base Rate" with respect to each day during such
Interest Period shall be the rate per annum equal to the average (rounded
upward to the nearest 1/100th of 1%) of the respective rates notified to
the Administrative Agent by each of the Reference Lenders as the rate at
which such Reference Lender is offered Dollar deposits at or about
10:00 A.M., New York City time, two Business Days prior to the beginning
of such Interest Period in the interbank eurodollar market where the
eurodollar and foreign currency and exchange operations in respect of its
Eurodollar Loans are then being conducted for delivery on the first day
of such Interest Period for the number of days comprised therein and in
an amount comparable to the amount of its Eurodollar Loan to be
outstanding during such Interest Period.
"Eurodollar Loans": Revolving Credit Loans the rate of interest
applicable to which is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
<PAGE> 26
20
"Event of Default": any of the events specified in Section 9,
provided that any requirement for the giving of notice, the lapse of time,
or both, or any other condition, has been satisfied.
"Existing Credit Facilities": collectively, the Refinanced Credit
Facilities, the Purchased Credit Facilities and the Letter of Credit
Issuance Agreement.
"Existing Real Property": the collective reference to all parcels of
Material Real Property as of the Initial Closing Date other than any
parcel of Material Real Property which was undeveloped as of the Initial
Closing Date.
"Existing Issuing Bank": each Person that has issued one or more
Continuing Letters of Credit.
"Existing Receivables Transactions": collectively, the transactions
contemplated under (i) the [ ] Program Agreement, dated April
12, 1996, by and between [ ] and Builders Square, Inc. and (ii)
various store programs pursuant to which receivables generated in
connection with the sale of Inventory are sold to various financing
companies, in each case as such agreements and programs may be amended,
replaced, supplemented or otherwise modified from time to time.
"Exiting Revolving Credit Lenders": as defined in subsection 6.1(h).
"Extension of Credit": with respect to any Lender, (a) the making of
a Loan by such Lender and (b) the issuance or extension of a Letter of
Credit; collectively, as to all the Lenders, the "Extensions of Credit".
"FDIC": the Federal Deposit Insurance Corporation and any
Governmental Authority which succeeds to the powers and functions thereof.
"Federal Funds Effective Rate": as defined in the definition of
"ABR" contained in this subsection 1.1.
"Final Appraisal": with respect to any parcel of Material Real
Property, Put Bond Real Property or Designated Big Beaver Real Property, a
final complete appraisal of the value of such parcel of Material Real
Property, Put Bond Real Property or Designated Big Beaver Real Property,
as the case may be, commissioned in connection with the Existing
Credit Agreement or this Agreement and valued on an "alternative use"
basis which in the reasonable judgment of the Administrative Agent
satisfies all applicable requirements of FIRREA and the Uniform Standards
of Professional Appraisal Practice.
"Financing Lease": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance
with GAAP to be capitalized on a balance sheet of such lessee.
"FIRREA": the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as amended.
<PAGE> 27
21
"Fiscal Year": each fiscal year of the Borrower. Fiscal Years are
referred to herein by reference to the calendar year in which the first
day of such Fiscal Year falls.
"Fixed Charge Coverage Ratio": as of the last day of any fiscal
quarter of the Borrower, the quotient of (A) EBITDAR for the period of
four fiscal quarters ending on the last day of such quarter divided by (B)
the sum of (i) Consolidated Cash Interest Expense of the Borrower plus
(ii) Consolidated Rental Expense of the Borrower, in each case for such
period. For purposes of computing the "Fixed Charge Coverage Ratio" for
any fiscal quarter, Builder's Square Inc. and its Subsidiaries shall, for
so long as Builder's Square, Inc. remains a Subsidiary of the Borrower or
until the Borrower and the Administrative Agent otherwise agree, be
accounted for as Consolidated Subsidiaries of the Borrower notwithstanding
anything to the contrary under GAAP.
"Fixed Rate CAF Advance": any CAF Advance made pursuant to a Fixed
Rate CAF Advance Request.
"Fixed Rate CAF Advance Request": any CAF Advance Request requesting
the Lenders to offer to make CAF Advances at an absolute rate which is not
determined by reference to an external source.
"Flow Through Center Reserve": with respect to any fiscal month, the
sum of (a) the average monthly amount paid by the Borrower and any
Subsidiary Guarantors in respect of fees charged by flow through centers
or distribution centers during the immediately preceding 12 fiscal month
period and (b) any such fees which are then overdue for less than 60 days.
"Foreign Holding Company": any Subsidiary organized under the laws
of any jurisdiction (including territories) within the United States of
America whose sole assets (exclusive of assets with an aggregate book
value not exceeding $10,000,000 and assets consisting of advances or loans
to the Borrower or any of its Subsidiaries) consist of the Capital Stock
of one or more Foreign Subsidiaries or other Foreign Holding Companies.
"Foreign Subsidiary": any Subsidiary of the Borrower organized under
the laws of any jurisdiction outside the United States of America,
excluding Securitization Entities, Inactive Subsidiaries and Special
Purpose Subsidiaries, but including in any event Foreign Holding Companies.
"Foreign L/C Commitment Sublimit": at any time (a) prior to January
1, 1998, $150,000,000 and (b) thereafter, $200,000,000.
"Funded Debt": as to any Person at the date of any determination
thereof, all Debt of such Person which by its terms or by the terms of any
instrument or agreement relating thereto matures more than one year after
the date of determination thereof, and any such Debt maturing within one
year from such date of determination which is directly or indirectly
renewable or extendible at the option of such Person to a date more than
one year from such date of determination (including an option of such
Person under a revolving credit or similar agreement obligating the lender
or lenders to extend credit over a period of more than one year from such
date of incurrence); provided, however, that for the purposes of any
determination of the Leverage Ratio hereunder the amount of Funded Debt
attributable to the Revolving Credit Loans, the Swing Line Loans, the CAF
Advances and the Bilateral Option Loans shall
<PAGE> 28
22
be the average daily outstanding amounts thereof for the period of four
fiscal quarters ending on or immediately preceding such date of
determination, except that in connection with any determination of the
Leverage Ratio prior to the end of the second fiscal quarter of the 1997
Fiscal Year, the amount of Funded Debt attributable to the Revolving
Credit Loans, the Swing Line Loans, the CAF Advances and the Bilateral
Option Loans shall be (a) $692,000,000 for each day during the fourth
fiscal quarter of the 1995 Fiscal Year, (b) $322,000,000 for each day
during the first fiscal quarter of the 1996 Fiscal Year,
and (c) $104,000,000 for each day during the second fiscal quarter of the
1996 Fiscal Year.
"GAAP": generally accepted accounting principles in the United
States of America in effect from time to time, provided that, solely for
purposes of determining compliance with subsection 8.1, "GAAP" shall mean
generally accepted accounting principles in the United States of America
as in effect on the date hereof.
"Governmental Authority": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Greeting Card Reserve": as of the last day of any fiscal month, the
excess of (a) the Inventory Value of all Inventory consisting of greeting
cards as of such day over (b) $37,500,000.
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another
Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has issued
a guarantee, reimbursement, counterindemnity or similar obligation, in
either case guaranteeing or in effect guaranteeing any Indebtedness
(collectively, the "primary obligations") of any other third Person (the
"primary obligor"), in any manner, whether directly or indirectly, or
which guarantee, reimbursement, counterindemnity or similar obligation
should be reflected in a consolidated balance sheet of the guaranteeing
person (or in the notes thereto); provided, however, that the term
Guarantee Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount
of any Guarantee Obligation of any guaranteeing person shall be deemed to
be the lower of (a) an amount equal to the stated or determinable amount
of the primary obligation in respect of which such Guarantee Obligation is
made and (b) the maximum amount for which such guaranteeing person may be
liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for
which such guaranteeing person may be liable are not stated or
determinable, in which case the amount of such Guarantee Obligation shall
be such guaranteeing person's maximum reasonably anticipated liability in
respect thereof as determined by the Borrower in good faith.
"Inactive Subsidiary": any Subsidiary of the Borrower which (and
only for so long as such Subsidiary) (a) does not own assets with an
aggregate book value in excess of $10,000,000 and (b) is not then engaged
in any business.
"Indebtedness": of any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of
property or services (other than current trade liabilities and current
accounts payable incurred in the ordinary course of business and payable
in accordance with customary practices), (b) any other indebtedness of
such Person
<PAGE> 29
23
which is evidenced by a note, bond, debenture or similar instrument, (c)
all obligations (to the extent capitalized for accounting purposes) of
such Person under Financing Leases, (d) all obligations of such Person in
respect of acceptances issued or created for the account of such Person,
(e) all obligations of the types described in the other clauses of this
definition secured by any Lien on any property owned by such Person even
though such Person has not assumed or otherwise become liable for the
payment thereof and (f) all obligations of such Person in respect of
interest rate and currency hedging agreements. For purposes of this
Agreement, the amount of any Indebtedness referred to in clause (f) of the
preceding sentence shall be the net amounts, including any net termination
payments, required to be paid to a counterparty rather than any notional
amount with regard to which payments may be calculated.
"Indemnified Liabilities": as defined in subsection 11.5.
"Individual Trustee": [ ] and his successors as Individual
Trustee under the Trust Agreement, for the benefit of the Secured Parties.
"Ineligible Inventory": as of the last day of any fiscal month, all
Inventory of the Borrower and the Subsidiary Guarantors that falls in any
one or more of the following categories as of such day:
(a) the Inventory (i) is not owned solely by the Borrower or
any such Subsidiary Guarantor, (ii) is leased by or on consignment to
the Borrower or any Subsidiary Guarantor or (iii) is contained in a
vending machine;
(b) the Inventory (including Inventory in transit from vendors)
that is not located at property that is owned or leased by the
Borrower or any Subsidiary Guarantor, other than with respect to (i)
Inventory which is located at flow through centers or distribution
centers (excluding timber reload centers) or (ii) Inventory which is
in transit from one property that is owned or leased by the Borrower
or any Subsidiary Guarantor (or a flow through center or a
distribution center) to another property that is owned or leased by
the Borrower or any Subsidiary Guarantor (or a flow through center or
a distribution center);
(c) the Inventory consists of packaged delicatessen goods,
dairy goods, meat products, produce or seafood;
(d) the Inventory is intended for sale through the restaurant,
bakery or delicatessen operations of the Borrower or any Subsidiary
Guarantor;
(e) the Inventory consists of (i) books available for sale in
connection with the "Reader's Market" operations of the Borrower or
any Subsidiary Guarantor or (ii) magazines;
(f) the Inventory is subject to a layaway purchase by any
customer;
(g) the Inventory is located at any return center used by the
Borrower or any Subsidiary Guarantor;
<PAGE> 30
24
(h) the Inventory (i) is not located in the United States of
America (excluding territories and possessions thereof) or (ii)
without limiting clause (i) above, is located in Puerto Rico, the
Virgin Islands or Guam; or
(i) the Inventory is not subject to a perfected security
interest in favor of the Trustee or is subject to Liens other than
Permitted Inventory Liens.
"Ineligible Inventory Amount": as of the last day of any fiscal
month, the sum of (a) the Inventory Value of all Ineligible Inventory of
the Borrower and the Subsidiary Guarantors that consists of finished goods
as of such day, plus (b) any profit included in the Inventory Value of
Inventory as a result of a transfer of such Inventory from the Borrower to
a Subsidiary or by any Subsidiary to the Borrower or any other Subsidiary,
plus (c) the Confectionery Reserve at such time, plus (d) the Discontinued
Inventory Reserve at such time, plus (e) the Shrinkage Reserve at such
time, plus (f) the Return Reserve at such time, plus (g) the Greeting Card
Reserve at such time, plus (h) the Packaway Reserve, plus (i) the
Prescription Drug Reserve at such time.
"Ineligible Inventory Borrowing Base Amount": as of the last day of
any fiscal month, the Ineligible Inventory Percentage of the Inventory
Value of all Inventory of the Borrower and the Subsidiary Guarantors that
consists of finished goods as of such day.
"Ineligible Inventory Percentage": as of the last day of any fiscal
month, (a) with respect to the Inventory of the Borrower and its
Subsidiaries (other than Builders' Square, Inc. and its Subsidiaries),
11.4% and (b) with respect to the Inventory of Builder's Square, Inc. and
its Subsidiaries, 12.8%, provided that the "Ineligible Inventory
Percentage" shall be recalculated in connection with the delivery of the
Borrowing Base Certificate with respect to the sixth and twelfth fiscal
months of each Fiscal Year as follows: (i) such Borrowing Base
Certificate shall include a calculation of the Ineligible Inventory Amount
with respect to the Inventory of the Borrower and its Subsidiaries (other
than Builders' Square, Inc. and its Subsidiaries) and of Builder's Square,
Inc. and its Subsidiaries, in each case as of the last day of such fiscal
month; and (ii) if the sum of (x) the percentage which the Ineligible
Inventory Amount with respect to the Inventory of the Borrower and its
Subsidiaries (other than Builders' Square, Inc. and its Subsidiaries) and
of Builder's Square, Inc. and its Subsidiaries, in each case as of such
last day, then constitutes of the Inventory Value of all Inventory of
the Borrower and its Subsidiaries (other than Builders' Square, Inc. and
its Subsidiaries) and of Builder's Square, Inc. and its Subsidiaries,
respectively, in each case that consists of finished goods as of such last
day, plus (y) in each case, 2.5%, is greater than the Ineligible Inventory
Percentage then in effect with respect to the Inventory of the Borrower
and its Subsidiaries (other than Builders' Square, Inc. and its
Subsidiaries) or with respect to the Inventory of Builder's Square, Inc.
and its Subsidiaries, then the Ineligible Inventory Percentage with
respect to such Inventory of the Borrower and its Subsidiaries (other than
Builders' Square, Inc. and its Subsidiaries) or of Builder's Square, Inc.
and its Subsidiaries, as the case may be, shall be changed (effective at
the end of such fiscal month) to be equal to such higher percentage
(rounded to the nearest 1/10 of 1%), provided that, in the event that the
excess of the Borrowing Base over the Aggregate Revolving Credit
Outstandings shall be less than $1,000,000,000 for any period of five
consecutive Business Days, the Ineligible Inventory Percentage shall also
thereafter be recalculated in accordance with the foregoing in connection
with the delivery of the Borrowing Base Certificate with respect to the
third and ninth fiscal months of each Fiscal Year thereafter unless
subsequent to the end of such period there shall occur a period of ten
consecutive Business Days during which the excess of the Borrowing
<PAGE> 31
25
Base over the Aggregate Revolving Credit Outstandings shall be greater
than or equal to $1,000,000,000. In addition, (A) the Borrower may, at
its option by so indicating in the relevant Borrowing Base Certificate,
require that the Ineligible Inventory Percentage with respect to the
Inventory of the Borrower and its Subsidiaries (other than Builders'
Square, Inc. and its Subsidiaries) and/or of Builder's Square, Inc. and
its Subsidiaries be calculated based upon the actual Ineligible Inventory
Amount as of the last day of any fiscal month (and the Borrowing Base
Certificate with respect to such fiscal month shall include a calculation
of the Ineligible Inventory Amount with respect to the Inventory of the
Borrower and its Subsidiaries (other than Builders' Square, Inc. and its
Subsidiaries) and/or of Builder's Square, Inc. and its Subsidiaries or, if
a Borrowing Base Certificate shall have been delivered with respect to the
immediately preceding fiscal month, the Borrower may redeliver such
Borrowing Base Certificate to include such calculation) in which case the
Ineligible Inventory Percentage solely with respect to such fiscal month
shall be the Ineligible Inventory Percentage as so calculated and the
Ineligible Inventory Percentage with respect to any other fiscal month for
which an election is not made pursuant to this clause (A) shall be
determined in accordance with the first sentence of this definition and
(B) in the event that in the reasonable judgment of the Administrative
Agent there are any changes in the business of the Borrower or any of the
Subsidiaries that impact in any material respect the composition or
ownership of the Inventory, the Administrative Agent may require that the
Ineligible Inventory Percentage with respect to the Inventory of the
Borrower and its Subsidiaries (other than Builders' Square, Inc. and its
Subsidiaries) and/or of Builder's Square, Inc. and its Subsidiaries be
recalculated based upon the actual Ineligible Inventory Amount as of the
last day of any fiscal month (and the Borrowing Base Certificate with
respect to such fiscal month shall include a calculation of the Ineligible
Inventory Amount with respect to the Inventory of the Borrower and its
Subsidiaries (other than Builders' Square, Inc. and its
Subsidiaries) and/or of Builder's Square, Inc. and its Subsidiaries in
which case the Ineligible Inventory Percentage with respect to such
fiscal month shall be the Ineligible Inventory Percentage as so
calculated and the Ineligible Inventory Percentage with respect to any
other fiscal month for which recalculation is not required pursuant to
this clause (B) shall be determined in accordance with the first sentence
of this definition.
"Initial Closing Date": June 17, 1996.
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Intellectual Property": as defined in subsection 5.17.
"Interest Expense": of any Person for any period, (a) the amount of
interest expense, both expensed and capitalized, of such Person and its
Consolidated Subsidiaries determined on a consolidated basis in accordance
with GAAP for such period minus (b) the amount of interest income of such
Person and its Consolidated Subsidiaries determined on a consolidated
basis in accordance with GAAP for such period, provided that (i) in no
event shall Interest Expense include any distributions in respect of the
Convertible Preferred Securities or interest payments on the Convertible
Debentures or any fees or amortization of debt discount associated with
the transactions contemplated hereby, by the Existing Credit Agreement or
by the Convertible Preferred Securities, and the calculation of Interest
Expense shall not be impacted or affected by the sale or other disposition
of the Repurchased Put Bonds and (ii) Interest Expense of the Borrower for
any period shall include any Interest Expense in respect of Qualified Big
Beaver Indebtedness for such period.
<PAGE> 32
26
"Interest Payment Date": (a) as to any ABR Loan, the last day of
each April, July, October and January, (b) as to any Eurodollar Loan
having an Interest Period of three months or less, the last day of such
Interest Period, (c) as to any Eurodollar Loan having an Interest Period
longer than three months, each day which is three months, or a whole
multiple thereof, after the first day of such Interest Period and the last
day of such Interest Period and (d) as to any Swing Line Loan, the fifth
Business Day following the day on which such Swing Line Loan is made.
"Interest Period": with respect to any Eurodollar Loan:
(a) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurodollar
Loan and ending one, two, three or six months thereafter, as selected
by the Borrower in its notice of borrowing or notice of conversion,
as the case may be, given with respect thereto; and
(b) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Eurodollar Loan and
ending one, two, three or six months thereafter, as selected by the
Borrower by irrevocable notice to the Administrative Agent not less
than three Business Days prior to the last day of the then current
Interest Period with respect thereto;
provided that, all of the foregoing provisions relating to Interest
Periods are subject to the following:
(1) if any Interest Period would otherwise end on a day
that is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless the result
of such extension would be to carry such Interest Period into
another calendar month in which event such Interest Period shall
end on the immediately preceding Business Day;
(2) any Interest Period that would otherwise extend beyond
the Revolving Credit Termination Date shall end on the Revolving
Credit Termination Date; and
(3) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Business Day of a
calendar month.
"Inventory Security Agreement": the Inventory Security Agreement,
dated as of June 17, 1996, made by the Borrower and the Subsidiary
Guarantors (other than the Big Beaver Companies) in favor of the Trustee,
substantially in the form of Exhibit A-2 to the Trust Agreement, as the
same may be amended, supplemented or otherwise modified from time to time.
"Inventory Value": with respect to any Inventory of the Borrower or
any Subsidiary Guarantor, the value of such Inventory valued at cost on a
basis consistent with the Borrower's or such Subsidiary Guarantor's
current and historical accounting practice (without giving effect to LIFO
reserves, general ledger reserves for discontinued inventory, markdowns,
inter-company profit, rebates and discounts, any cut off adjustments,
revaluation adjustments,
<PAGE> 33
27
purchase price adjustments or adjustments with respect to the
capitalization of buying, occupancy, distribution and other overhead costs
reflected on the consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries in respect of Inventory) plus freight charges
incurred in connection therewith. The value of the Inventory as set forth
above will, without duplication, be calculated net of the reserve
established by the Borrower or any Subsidiary Guarantor on a basis
consistent with the Borrower's or such Subsidiary Guarantor's current and
historical accounting practice in respect of lost, misplaced or stolen
Inventory at such time.
"Investment": as defined in subsection 8.9.
"Issuing Banks": initially, (a) each Lender specified on Schedule
1.1(a) as an Issuing Bank and (b) each Existing Issuing Bank listed on
Schedule 5.20, in each case in its capacity as issuer of a Letter of
Credit. Additional Lenders may from time to time be designated as
"Issuing Banks" by the Borrower (with the consent of such Lender and with
the consent (which shall not be unreasonably withheld) of the
Administrative Agent) by written notice to such effect from the Borrower
to the Administrative Agent.
"Judgment Currency": as defined in subsection 11.19.
"L/C Commitment": at any time, the lesser of (a)(i) prior to
January 1, 1998, $1,250,000,000 and (ii) thereafter, $1,500,000,000, and
(b) the Revolving Credit Commitments then in effect.
"L/C Fee Payment Date": the last day of each April, July, October
and January and the Revolving Credit Termination Date.
"L/C Obligations": at any time, an amount equal to the sum of (a)
the aggregate then undrawn and unexpired amount of the then outstanding
Letters of Credit issued in Dollars, (b) the Dollar Equivalent of the
aggregate then undrawn and unexpired amount of the then outstanding
Letters of Credit issued in currencies other than Dollars (such Dollar
Equivalent to be calculated as of the date of issuance of such Letters of
Credit), (c) the aggregate amount of Reimbursement Obligations in respect
of Letters of Credit issued in Dollars which have not then been paid
pursuant to subsection 3.10(a) and (d) the Dollar Equivalent of the
aggregate amount of Reimbursement Obligations in respect of Letters of
Credit issued in currencies other than Dollars which have not then been
paid pursuant to subsection 3.10(a) (such Dollar Equivalent to be
calculated as of the date such Reimbursement Obligation becomes due and
payable).
"L/C Participants": the collective reference to all the Lenders.
"Lenders": as defined in the preamble to this Agreement.
"Letter of Credit Issuance Agreement": the Letter of Credit Issuance
Agreement, dated as of February 29, 1996, among the Borrower, [ ]
as agent, and the financial institutions parties thereto, as amended.
"Letters of Credit": as defined in subsection 3.6(a).
<PAGE> 34
28
"Leverage Ratio": as of any date of determination thereof, the
quotient of (a) Consolidated Funded Debt of the Borrower as of such date
of determination divided by (b) Consolidated Capital Funds of the Borrower
as of such date of determination.
"LIBO Rate": in respect of any LIBO Rate CAF Advance, the London
interbank offered rate for deposits in Dollars for the period commencing
on the date of such CAF Advance and ending on the CAF Advance Maturity
Date with respect thereto which appears on Telerate Page 3750 as of 11:00
A.M., London time, two Business Days prior to the beginning of such
period.
"LIBO Rate CAF Advance": any CAF Advance made pursuant to a LIBO
Rate CAF Advance Request.
"LIBO Rate CAF Advance Request": any CAF Advance Request requesting
the Lenders to offer to make CAF Advances at an interest rate equal to the
LIBO Rate plus (or minus) a margin.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention
agreement and any Financing Lease having substantially the same economic
effect as any of the foregoing).
"Loan": any Revolving Credit Loan, Swing Line Loan, Bilateral Option
Loan or CAF Advance, as the case may be.
"Loan Documents": this Agreement, any Notes, the Trust Agreement,
the Subsidiaries Guarantee, the Security Documents and any Applications.
"Loan Parties": the collective reference to the Borrower, the
Subsidiary Guarantors and any other Subsidiary from time to time party to
any Loan Document.
"Majority Lenders": at any time, Lenders the Voting Percentages of
which aggregate more than 50%.
"Margin Level Status": as to the Borrower, the existence of Margin
Level I Status, Margin Level II Status, Margin Level III Status, Margin
Level IV Status, Margin Level V Status, Margin Level VI Status or Margin
Level VII Status, as the case may be.
"Margin Level I Status": as to the Borrower, shall exist on an
Adjustment Date if the Fixed Charge Coverage Ratio as of the last day of
the period covered by the financial statements relating to such Adjustment
Date is less than or equal to 1.75 to 1.00.
"Margin Level II Status": as to the Borrower, shall exist on an
Adjustment Date if the Fixed Charge Coverage Ratio as of the last day of
the period covered by the financial statements relating to such Adjustment
Date is greater than 1.75 to 1.00 but less than or equal to 2.00 to 1.00.
<PAGE> 35
29
"Margin Level III Status": as to the Borrower, shall exist on an
Adjustment Date if the Fixed Charge Coverage Ratio as of the last day of
the period covered by the financial statements relating to such Adjustment
Date is greater than 2.00 to 1.00 but less than or equal to 2.25 to 1.00.
"Margin Level IV Status": as to the Borrower, shall exist on an
Adjustment Date if the Fixed Charge Coverage Ratio as of the last day of
the period covered by the financial statements relating to such Adjustment
Date is greater than 2.25 to 1.00 but less than or equal to 2.50 to 1.00.
"Margin Level V Status": as to the Borrower, shall exist on an
Adjustment Date if the Fixed Charge Coverage Ratio as of the last day of
the period covered by the financial statements relating to such Adjustment
Date is greater than 2.50 to 1.00 but less than or equal to 2.75 to 1.00.
"Margin Level VI Status": as to the Borrower, shall exist on an
Adjustment Date if the Fixed Charge Coverage Ratio as of the last day of
the period covered by the financial statements relating to such Adjustment
Date is greater than 2.75 to 1.00 but less than or equal to 3.00 to 1.00.
"Margin Level VII Status": as to the Borrower, shall exist on an
Adjustment Date if the Fixed Charge Coverage Ratio as of the last day of
the period covered by the financial statements relating to such Adjustment
Date is greater than 3.00 to 1.00.
"Markdown Percentage": with respect to any fiscal month, the
percentage which the aggregate amount of markdowns by the Borrower and the
Subsidiary Guarantors from the beginning of the relevant Fiscal Year
through the end of such fiscal month represents of total sales of the
Borrower and the Subsidiary Guarantors from the beginning of the relevant
Fiscal Year through the end of such fiscal month. The "Markdown
Percentage" shall be calculated separately for Builders Square, Inc. and
its Subsidiaries which are Subsidiary Guarantors, on the one hand, and the
Borrower and the other Subsidiary Guarantors, on the other hand.
"Markdown Reserve": with respect to any fiscal month, an amount
equal to the product of (x) an amount equal to 50% of the Eligible
Inventory Amount as of the last day of such fiscal month times (y) the
product of (i) the Markdown Percentage for such fiscal month and (ii) the
Cost Complement for such fiscal month. The "Markdown Reserve" shall be
calculated separately for Builders Square, Inc. and its Subsidiaries which
are Subsidiary Guarantors, on the one hand, and the Borrower and the other
Subsidiary Guarantors, on the other hand, and then combined to produce
the "Markdown Reserve".
"Material Adverse Effect": a material adverse effect on (a) the
business, operations, property, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole or (b) the
validity or enforceability of this Agreement or any of the other Loan
Documents or the material rights or remedies of the Trustee, the
Administrative Agent or the Lenders hereunder or thereunder; it being
understood that any past or future reduction in the Borrower's or any
Subsidiary's credit rating or decline in the market price of the
Borrower's or any Subsidiary's equity securities shall not in and of
themselves be deemed to constitute a Material Adverse Effect.
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"Material Real Property": real property not subject to a mortgage,
deed of trust or other similar instrument (other than pursuant hereto)
that (a) (i) is owned in fee by the Borrower or any Subsidiary Guarantor
and is not subject to a ground lease in favor of any other Person as
lessee, (ii) is located in the United States or Puerto Rico and (iii) (A)
has been developed with a retail store, distribution center, shopping
center or office building with respect to which a certificate of occupancy
or temporary certificate of occupancy shall have been issued by the
relevant Governmental Authority, (B) is being developed with a retail
store, distribution center, shopping center or office building which is
under construction as of the Initial Closing Date or (C) is undeveloped
and has a book value (excluding soft costs) of at least $1,000,000 or (b)
(i) (A) consists of a developed retail store, distribution center,
shopping center or office building with respect to which a certificate of
occupancy or temporary certificate of occupancy shall have been issued by
the relevant Governmental Authority, or (B) is being developed with a
retail store, distribution center, shopping center or office building
which was under construction as of the Initial Closing Date, (ii) is
located on property which is subject to a ground lease in favor of the
Borrower or any Subsidiary Guarantor as lessee and no consent shall be
required under such ground lease to mortgage or foreclose upon such
property (or such consent shall have been obtained), (iii) is or, upon
completion, will be classified as an owned retail store, distribution
center, shopping center or office building by the Borrower or such
Subsidiary Guarantor and (iv) is located in the United States or Puerto
Rico.
"Materials of Environmental Concern": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated
as such in or under any Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"Meldisco": the collective reference to the Meldisco Shoe Company
subsidiaries which operate the footwear departments in the Borrower's
retail stores.
"Moody's": Moody's Investors Service, Inc.
"Mortgage Value": (a) with respect to any parcel of Eligible
Mortgaged Real Property or Eligible California Real Property, the
lesser of (i) the maximum amount secured by the Lien on such parcel of
Eligible Mortgaged Real Property or Eligible California Real Property, as
the case may be, granted in favor of the applicable secured mortgagee
pursuant to the relevant Mortgage or Subsidiary Mortgage, as the case may
be, and (ii) the value of such parcel of Eligible Mortgaged Real Property
or Eligible California Real Property, as the case may be, set forth in the
Final Appraisal delivered with respect thereto or, in the case of any
parcel of Eligible Mortgaged Real Property or Eligible California Real
Property as of the Initial Closing Date, set forth in the Preliminary
Appraisal with respect thereto, provided that, if a Final Appraisal was
not delivered with respect to any parcel of Eligible Mortgaged Real
Property or Eligible California Real Property as of the Initial Closing
Date, then upon delivery of such Final Appraisal (A) the value of such
parcel of Eligible Mortgaged Real Property or Eligible California Real
Property, as the case may be, for purposes of clause (ii) above shall be
the value of such parcel of Eligible Mortgaged Real Property or Eligible
California Real Property, as the case may be, set forth in such Final
Appraisal and (B) the Borrowing Base shall be adjusted to reflect such
value effective as of the delivery of the Borrowing Base Certificate in
respect of the fiscal month in which such Final Appraisal is delivered to
the Administrative Agent, provided, further, that in no event shall the
Mortgage Value of any parcel of Eligible California Real Property exceed
the amount secured by the Lien on such parcel of Eligible
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California Real Property under the related California Mortgage Note or
Notes and (b) with respect to any parcel of Eligible Put Bond Real
Property at any time, the least of (i) the aggregate principal amount of
Repurchased Put Bonds (not including any principal which has not accreted
on the date of valuation) (A) which is secured by a Lien on such parcel of
Eligible Put Bond Real Property created pursuant to the applicable Put
Bond Mortgages and (B) with respect to which the related promissory note
or other evidence of indebtedness is then subject to a perfected security
interest in favor of the Trustee, (ii) the maximum amount secured by the
Lien on such parcel of Eligible Put Bond Real Property created pursuant to
the applicable Put Bond Mortgages and (iii) the value of such parcel of
Eligible Put Bond Real Property set forth in the Final Appraisal or
Preliminary Appraisal delivered with respect thereto, provided that, if a
Final Appraisal was not delivered with respect to any parcel of Eligible
Put Bond Real Property as of the Initial Closing Date, then upon delivery
of such Final Appraisal (A) the value of such parcel of Eligible Put Bond
Real Property for purposes of this clause (iii) shall be the value of such
parcel of Eligible Put Bond Real Property set forth in such Final
Appraisal and (B) the Borrowing Base shall (to the extent required) be
adjusted to reflect such value effective as of the delivery of the
Borrowing Base Certificate in respect of the fiscal month in which such
Final Appraisal is delivered to the Administrative Agent.
"Mortgages": the collective reference to the fee and ground
leasehold mortgages, deeds of trust and other similar documents executed
and delivered from time to time by the Borrower and the Subsidiary
Guarantors in favor of the Trustee, pursuant to the Trust Agreement or
this Agreement, substantially in the form of Exhibit B to the Trust
Agreement or, if such Exhibit is not appropriate under applicable law in
the jurisdiction in which the relevant real property is located, in such
other form as shall be reasonably satisfactory to the Borrower and the
Administrative Agent, as each of the same may be amended, supplemented or
otherwise modified from time to time.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Income": of any Person for any period, net income of such
Person and its Consolidated Subsidiaries, determined on a consolidated
basis in accordance with GAAP for such period.
"Net Revenue": of any Person for any period, net revenue of such
Person and its Consolidated Subsidiaries, determined on a consolidated
basis in accordance with GAAP for such period.
"Net Worth": of any Person, as of the date of determination thereof,
the sum of (without duplication) (a) Shareholders' Equity of such Person
as of such date of determination, and (b) the excess, if any, of (i) the
aggregate amount of net after-tax non-cash charges resulting from the
write-down of assets that have the effect of reducing the amount set forth
in clause (a) above, taken after the end of the 1995 Fiscal Year in
connection with the sale or other disposition of any asset the sale of
which would constitute a Scheduled Asset Sale over (ii) any reversal of
any of the foregoing charges.
"Non-Excluded Taxes": as defined in subsection 4.10.
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"Non-Executing Persons": as defined in subsection 6.1(a).
"Notes": the collective reference to any Revolving Credit Notes, any
Swing Line Notes and any CAF Advance Notes.
"Packaway Reserve": $10,000,000.
"parcel": when used in connection with any parcel of real property,
means such parcel of real property, together with all of the structures,
buildings and other improvements located thereon and all other property
associated therewith and, when used in connection with any parcel of real
property subject to a ground lease in favor of the Borrower or any
Subsidiary Guarantor as lessee, means the leasehold interest in such
ground lease.
"Participant": as defined in subsection 11.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA, or any Governmental Authority
which succeeds to the powers and functions thereof.
"Permitted Inventory Liens": the collective reference to Liens
permitted by subsections 8.4(a), 8.4(b) and 8.4(m).
"Permitted Mortgage Liens": the collective reference to Liens
permitted by subsections 8.4(a), 8.4(b), 8.4(e) and 8.4(m).
"Permitted Sale-Leaseback": as defined in subsection 8.12.
"Person": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
limited liability company, Governmental Authority or other entity of
whatever nature.
"Plan": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Pledge Agreement": the Securities Pledge Agreement, dated as of
June 17, 1996, made by the Borrower and certain of the Subsidiary
Guarantors in favor of the Trustee, in substantially the form of Exhibit C
to the Trust Agreement, as the same may be amended, supplemented or
otherwise modified from time to time.
"Pledgors": the collective reference to the pledgors parties to the
Pledge Agreement.
"Preliminary Appraisal": with respect to any parcel of Material Real
Property, Put Bond Real Property or Designated Big Beaver Real Property as
of the Initial Closing Date, a preliminary appraisal in summary form of
the value of such parcel of Material Real Property, Put Bond Real Property
or Designated Big Beaver Real Property, as the case may be, commissioned
in connection with the Existing Credit Agreement and valued on an
"alternative use" basis which in the reasonable judgment of the
Administrative Agent satisfies all
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33
applicable requirements of FIRREA and the Uniform Standards of
Professional Appraisal Practice.
"Prescription Drug Reserve": as of the last day of any fiscal month,
an amount equal to 50% of the Inventory Value of all Inventory consisting
of prescription drugs as of such day.
"Purchased Credit Facilities": collectively, the credit facilities
under the Big Beaver Loan Agreements.
"Put Bond Mortgages": as defined in subsection 5.19(b).
"Put Bond Real Property": any parcel of real property subject to a
Lien created pursuant to the Put Bond Mortgages to secure the repayment of
all or a portion of the Repurchased Put Bonds.
"Qualified Big Beaver Indebtedness": as defined in subsection 8.13
"Reference Lenders": Chase, Bank of America National Trust and
Savings Association and The Bank of New York.
"Register": as defined in subsection 11.6(d).
"Regulation U": Regulation U of the Board of Governors as in effect
from time to time.
"Reimbursement Obligation": the obligation of the Borrower pursuant
to subsection 3.10(a) to reimburse each Issuing Bank for amounts drawn
under any Letter of Credit issued by such Issuing Bank.
"Rental Expense": of any Person for any period, the aggregate amount
of fixed and contingent rentals payable by such Person for such period in
accordance with GAAP with respect to leases of real property minus the
aggregate amount of rental income (including licensee related income from
licensees operating on the store premises of the Borrower and its
Subsidiaries) payable to such Person for such period in accordance with
GAAP with respect to leases of real and personal property.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(b)
of ERISA, other than those events as to which the thirty day notice period
is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg.
Section 2615.
"Repurchased Put Bonds": collectively, the bonds or notes or
certificates issued pursuant to the agreements described on Schedule
1.1(c) under the heading "Repurchased Put Bonds", as amended,
supplemented, substituted, replaced or otherwise modified from time to
time.
"Requested Bilateral Lender": as defined in subsection 3.18.
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"Required Lenders": at any time, Lenders the Voting Percentages of
which aggregate more than 66-2/3%.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents
of such Person, and any law, statute, ordinance, code, decree, treaty,
rule or regulation or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its
property is subject (including, without limitation, laws, ordinances and
regulations pertaining to the zoning, occupancy and subdivision of real
property).
"Responsible Officer": the chief executive officer, the president,
any executive vice president, the chief financial officer or the treasurer
of the Borrower or, with respect to financial matters, the chief executive
officer, the president, the executive vice president-finance, the chief
financial officer or treasurer of the Borrower, provided that, for
purposes of Section 9(d) only, a "Responsible Officer" shall also include
any other senior executive officer of the Borrower, as well as the general
counsel, vice president - real estate finance, vice president - real
estate and any assistant treasurer of the Borrower.
"Restricted Payments": as defined in subsection 8.7.
"Restricted Subsidiaries": collectively, the Domestic Subsidiaries
and Significant Foreign Subsidiaries.
"Return Reserve": with respect to any fiscal month, the average
monthly amount of Inventory transferred by the Borrower and the Subsidiary
Guarantors to return centers during the immediately preceding 12 fiscal
month period.
"Revolving Credit Commitment": as to any Lender, the obligation of
such Lender to make Revolving Credit Loans to and/or participate in Swing
Line Loans to and/or issue or participate in Letters of Credit issued on
behalf of the Borrower hereunder in an aggregate principal and/or face
amount at any one time outstanding not to exceed the amount set forth
opposite such Lender's name on Schedule 1.1(a) under the heading
"Revolving Credit Commitment", as such amount may be reduced from time to
time pursuant to this Agreement or as such amount may be adjusted from
time to time pursuant to subsection 11.6; collectively, as to all such
Lenders, the "Revolving Credit Commitments".
"Revolving Credit Commitment Percentage": as to any Lender (a) at
any time prior to the termination of the Revolving Credit Commitments, the
percentage of the Revolving Credit Commitments then constituted by such
Lender's Revolving Credit Commitment and (b) at any time after the
termination of the Revolving Credit Commitments, the percentage which (i)
the sum of (x) such Lender's Revolving Credit Loans then outstanding plus
(y) the product of such Lender's Revolving Credit Commitment Percentage
immediately prior to the termination of the Revolving Credit Commitments
(after giving effect to any permitted assignment pursuant to subsection
11.6) times the sum of (1) the aggregate principal amount of Swing Line
Loans then outstanding plus (2) the L/C Obligations then outstanding then
constitutes of (ii) the sum of (x) the aggregate principal amount of
Revolving Credit Loans of all the Lenders then outstanding plus (y) the
aggregate principal amount of all Swing Line Loans then outstanding plus
(z) the aggregate L/C Obligations then outstanding.
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35
"Revolving Credit Commitment Period": the period from and including
the Initial Closing Date to but not including the Revolving Credit
Termination Date or such earlier date on which the Revolving Credit
Commitments shall terminate as provided herein.
"Revolving Credit Loans": as defined in subsection 3.1.
"Revolving Credit Note": as defined in subsection 4.13(d).
"Revolving Credit Termination Date": June 17, 2000.
"Sale-Leaseback": as defined in subsection 8.12.
"S&P": Standard & Poor's Ratings Group.
"Scheduled Asset Sales": as defined in subsection 8.6(f).
"SEC": the Securities and Exchange Commission and any Governmental
Authority which succeeds to the powers and functions thereof.
"Securitization Entity": with respect to the Borrower or any
Subsidiary, a corporation, partnership, trust, limited liability company
or other entity that is formed by the Borrower or such Subsidiary for the
purpose of effecting or facilitating a Securitization Transaction and
which engages in no business and incurs no Indebtedness or other
liabilities other than those related to or incidental to a Securitization
Transaction.
"Securitization Transactions": a transaction or series of related
transactions pursuant to which a corporation, partnership, trust, limited
liability company or other entity incurs obligations or issues interests,
the proceeds of which are used to finance a discrete pool (which may be
fixed or revolving) of receivables, leases or other financial assets, or a
discrete portfolio of real property or equipment.
"Security Agreement": the Security Agreement, dated as of June 17,
1996, made by the Borrower and the Subsidiary Guarantors (other than the
Big Beaver Companies) in favor of the Trustee, substantially in the form
of Exhibit A-1 to the Trust Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"Shareholders' Equity": of any Person, as of the date of
determination thereof, the sum of (a) all items which in conformity with
GAAP would be included under shareholders' equity on a consolidated
balance sheet of such Person and its Consolidated Subsidiaries at such
date of determination and (b) the item which in conformity with GAAP would
reflect the amount of Convertible Preferred Securities and/or the
Convertible Debentures (and the obligations of such Person with respect
thereto) on the consolidated balance sheet of such Person and its
Consolidated Subsidiaries at such date of determination.
"Shrinkage Reserve": at any time, an amount equal to the excess, if
any, of (a) an amount equal to the product of (i) the average percentage
of Inventory which was identified as lost, misplaced or stolen Inventory
(expressed as a percentage of total sales of the Borrower and the
Subsidiary Guarantors for the relevant period) in connection with the then
two most recent year-end physical inventories conducted by the Borrower
and the Subsidiary Guarantors
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and (ii) the product of (A) the total sales of the Borrower and the
Subsidiary Guarantors for the period commencing at the beginning of the
Fiscal Year in which such determination is made and ending at the end of
the most recently ended fiscal month and (B) the Cost Complement with
respect to the most recently ended fiscal month over (b) the reserve
established by the Borrower or any Subsidiary Guarantor on a basis
consistent with the Borrower's or such Subsidiary Guarantor's current and
historical accounting practice in respect of lost, misplaced or stolen
Inventory at such time.
"Significant Foreign Subsidiary": any Foreign Subsidiary which is a
Significant Subsidiary.
"Significant Subsidiary": any Subsidiary (a) the Total Assets of
which exceed 10% of the Total Assets of the Borrower and its Consolidated
Subsidiaries as of the end of the most recently completed Fiscal Year or
(b) the Net Revenue of which exceeds 10% of the Net Revenue of the
Borrower and its Consolidated Subsidiaries as of the end of the most
recently completed Fiscal Year.
"Single Employer Plan": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that, as of
any date of determination, (a) the amount of the "present fair saleable
value" of the assets of such Person and its Subsidiaries, taken as a
whole, will, as of such date, exceed the amount that will be required to
pay all "liabilities of such Person and its Subsidiaries, taken as a
whole, contingent or otherwise", as of such date (as such quoted terms are
determined in accordance with applicable federal and state laws governing
determinations of the insolvency of debtors) as such debts become absolute
and matured, (b) such Person and its Subsidiaries, taken as a whole, will
not have, as of such date, an unreasonably small amount of capital with
which to conduct their businesses, and (c) such Person and its
Subsidiaries, taken as a whole, will be able to pay their debts as they
mature, taking into account the timing of and amounts of cash to be
received by such Person and its Subsidiaries, taken as a whole, and the
timing of and amounts of cash to be payable on or in respect of
indebtedness of such Person and its Subsidiaries, taken as a whole; in
each case after giving effect to (A) as of the Effective Date the making
of the extensions of credit to be made on the Effective Date and to the
application of the proceeds of such extensions of credit and (B) on any
date after the Effective Date, the making of any extension of credit to
be made on such date, and to the application of the proceeds of such
extension of credit. For purposes of this definition, (i) "debt" means
liability on a "claim", and (ii) "claim" means any (x) right to payment,
whether or not such a right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal or equitable, secured or unsecured or (y) right to an equitable
remedy for breach of performance if such breach gives rise to a right to
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured or unmatured, disputed, undisputed,
secured or unsecured. For purposes of representations and warranties made
pursuant to subsection 5.21 on any date after the Effective Date on which
an Extension of Credit is made hereunder, the Borrower may, in making such
representation, assume that the Aggregate Revolving Credit Outstandings
will be refinanced at the maturity thereof.
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"Special Order Reserve": with respect to any fiscal month, an amount
equal to 50% of the average monthly special order sales of the Borrower
and the Subsidiary Guarantors during the immediately preceding 12 fiscal
month period.
"Special Purpose Subsidiary": any Subsidiary of the Borrower
organized solely for the purpose of (a) holding a license or permit issued
by any Governmental Authority and used in connection with the business of
the Borrower and/or its Subsidiaries or (b) providing employee services
for use in the foreign operations of the Borrower or any of its
Subsidiaries, provided that such Subsidiary shall only be a "Special
Purpose Subsidiary" for so long as such Subsidiary does not own any assets
(other than any such license or permit and other than other assets with a
book value not exceeding $10,000,000 in the aggregate) and does not engage
in any business (other than holding such license or permit and activities
directly related thereto).
"Standby L/C Fee Rate": at any time, the rate per annum equal to the
Applicable Margin then in effect for Eurodollar Loans.
"Standby Letter of Credit": as defined in subsection 3.6(b)(i).
"Subsidiaries Guarantee": the Guarantee, dated as of June 17, 1996,
executed and delivered by each Subsidiary Guarantor, substantially in the
form of Exhibit E, as the same may be amended, supplemented or otherwise
modified from time to time.
"Subsidiary": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by such Person. Unless
otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries"
in this Agreement shall refer to a Subsidiary or Subsidiaries of the
Borrower.
"Subsidiary Guarantor": each Subsidiary set forth on Schedule 5.13
under the heading "Initial Subsidiary Guarantors", together with each
other Subsidiary that becomes a party to the Subsidiaries Guarantee in
compliance with subsection 7.11(b).
"Subsidiary Mortgage": with respect to any parcel of Material Real
Property of the Borrower located in the State of California, Alaska,
Nevada or Washington, a Mortgage (otherwise satisfying the requirements of
the definition thereof, except that such Mortgage shall be executed and
delivered by the Borrower in favor of a Subsidiary Guarantor and shall
secure the applicable California Mortgage Note or Notes instead of the
Senior Secured Obligations) on such parcel of Material Real Property.
"Swing Line Commitment": the lesser of (a) $150,000,000 and (b) the
Revolving Credit Commitments then in effect.
"Swing Line Lender": Chase, in its capacity as provider of the Swing
Line Loans.
"Swing Line Loans": as defined in subsection 3.21.
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"Swing Line Loan Participation Certificate": a certificate,
substantially the form of Exhibit M.
"Swing Line Note": as defined in subsection 4.13(e).
"Swing Line Rate": with respect to any Swing Line Loan, an interest
rate equal to the sum of (a) the rate of interest determined by the Swing
Line Lender in respect thereof (which determination shall be conclusive
absent manifest error) to be the cost to the Swing Line Lender of funding
such Swing Line Loan, (b) the Applicable Margin then in effect for
Eurodollar Loans and (c) 0.75%.
"Telerate Page 3750": the display page currently so designated on
the Dow Jones Telerate Service (or such other page as may replace that
service for the purpose of displaying comparable rates or prices).
"Temporary Cash Equivalent Investments": Cash Equivalents with a
maturity of less than 14 days.
"Term Loan": as defined in the Existing Credit Agreement.
"Total Assets": of any Person for any period, the total assets of
such Person and its Consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP for such period.
"Tranche": the collective reference to Eurodollar Loans the then
current Interest Periods with respect to all of which begin on the same
date and end on the same later date (whether or not such Eurodollar Loans
shall originally have been made on the same day).
"Transferee": as defined in subsection 11.6(f).
"Trust Agreement": the Trust Agreement, dated as of June 17, 1996,
made by the Borrower and each other Obligor in favor of the Trustee, in
substantially the form of Exhibit F, as the same may be amended,
supplemented or otherwise modified from time to time.
"Trustee": collectively, the Corporate Trustee and the Individual
Trustee.
"Type": as to any Revolving Credit Loan, its nature as an ABR Loan
or a Eurodollar Loan.
"UCC": the Uniform Commercial Code as in effect in the State of New
York from time to time.
"UCC Filing Collateral": Collateral (other than fixtures) as to
which filing financing statements under the uniform commercial code of the
applicable jurisdiction is an appropriate method of perfection of a
security interest in such Collateral.
"UCC Local Filing Collateral": with respect to any State, UCC Filing
Collateral located in such State as to which a security interest may be
perfected only by filing a uniform
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39
commercial code financing statement in each county or other local filing
office of such State in which such Collateral is located.
"Uniform Customs": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No.
500, as the same may be amended or revised from time to time.
"Voting Percentage": as to any Lender (a) at any time prior to the
termination of the Revolving Credit Commitments, the percentage which (i)
such Lender's Revolving Credit Commitment then constitutes of the
Revolving Credit Commitments of all the Lenders, and (b) at any time after
the termination of the Revolving Credit Commitments, the percentage which
(i) the sum of (x) the principal amount of such Lender's Revolving Credit
Loans then outstanding plus (y) the product of such Lender's Revolving
Credit Commitment Percentage times the sum of (A) the aggregate principal
amount of Swing Line Loans then outstanding plus (B) the L/C Obligations
then outstanding then constitutes of (ii) the sum of (x) the aggregate
principal amount of Committed Loans of all the Lenders then outstanding
plus (y) the aggregate L/C Obligations of all the Lenders then
outstanding.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in any Loan Document or any certificate or other document made or
delivered pursuant hereto or thereto.
(b) As used herein and in any other Loan Document, and any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Borrower and its Subsidiaries not defined in
subsection 1.1 and accounting terms partly defined in subsection 1.1, to the
extent not defined, shall have the respective meanings given to them under
GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(e) The definitions of "Debt" and "Indebtedness" in subsection 1.1
shall be independent in construction, interpretation and application.
(f) As used in this Agreement, the following terms defined in the
Trust Agreement shall have the meanings set forth therein: Cash Equivalents,
Collateral Account, Instruments, Inventory, Investment Securities, Kmart Credit
Agreement Obligations, Mortgage Assignment, Mortgaged Property, Notice of
Acceleration, Notice of Default, Obligor, Pledged Stock, Related Patents and
Trademarks, Restricted Jurisdictions, Secured Obligations, Secured Parties,
Securities Account, Security Documents, Trustee Fees and Trust Estate.
SECTION 2. [INTENTIONALLY OMITTED]
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SECTION 3. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS
3.1 Revolving Credit Commitments. (a) Subject to the terms and
conditions hereof, each Lender severally agrees to make revolving credit loans
("Revolving Credit Loans") to the Borrower from time to time during the
Revolving Credit Commitment Period in an aggregate principal amount at any one
time outstanding which, when added to such Lender's Revolving Credit Commitment
Percentage of an amount equal to the sum of the sum of (i) the aggregate
principal amount of Swing Line Loans then outstanding plus (ii) the then
outstanding L/C Obligations plus (iii) the aggregate principal amount of all
Bilateral Option Loans and CAF Advances then outstanding (after giving effect
to the use of proceeds of such Revolving Credit Loans), does not exceed the
amount of such Lender's Revolving Credit Commitment, provided that no Lender
shall be required to make a Revolving Credit Loan prior to the Collateral
Release Date to the extent that, after giving effect thereto, the Aggregate
Revolving Credit Outstandings at such time would exceed the Borrowing Base at
such time. During the Revolving Credit Commitment Period, the Borrower may use
the Revolving Credit Commitments by borrowing, prepaying and reborrowing the
Revolving Credit Loans in whole or in part, all in accordance with the terms
and conditions hereof.
(b) The Revolving Credit Loans may from time to time be (i)
Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as determined
by the Borrower and notified to the Administrative Agent in accordance with
subsections 3.2 and 4.2, provided that no Revolving Credit Loan shall be made
as a Eurodollar Loan after the day that is one month prior to the Revolving
Credit Termination Date.
3.2 Procedure for Revolving Credit Borrowing. The Borrower may
borrow under the Revolving Credit Commitments during the Revolving Credit
Commitment Period on any Business Day, provided that the Borrower shall give
the Administrative Agent irrevocable notice (which notice must be received by
the Administrative Agent prior to 11:00 A.M., New York City time, (a) three
Business Days prior to the requested Borrowing Date, if all or any part of the
requested Revolving Credit Loans are to be initially Eurodollar Loans or (b) on
the requested Borrowing Date, otherwise), specifying (i) the amount to be
borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is to
be of Eurodollar Loans, ABR Loans or a combination thereof and (iv) if the
borrowing is to be entirely or partly of Eurodollar Loans, the respective
amounts of each such Type of Loan and the respective lengths of the initial
Interest Periods therefor. Each borrowing under the Revolving Credit
Commitments shall be in an amount equal to (x) in the case of ABR Loans,
$5,000,000 or a whole multiple of $1,000,000 in excess thereof (or, if the
excess of the then Available Revolving Credit Commitments over the aggregate
principal amount of all Bilateral Option Loans and CAF Advances then
outstanding is less than $5,000,000, such lesser amount) and (y) in the case of
Eurodollar Loans, $10,000,000 or a whole multiple of $1,000,000 in excess
thereof. Upon receipt of any such notice from the Borrower, the Administrative
Agent shall promptly notify each Lender thereof. Each Lender will make the
amount of its pro rata share of each borrowing available to the Administrative
Agent for the account of the Borrower at the office of the Administrative Agent
specified in subsection 11.2 prior to 12:00 noon, New York City time, on the
Borrowing Date requested by the Borrower in Dollars and in funds immediately
available to the Administrative Agent. Such borrowing will be made available
to the Borrower on or prior to 1:00 P.M., New York City time, by the
Administrative Agent crediting the account of the Borrower on the books of such
office of the Administrative Agent with the aggregate of the amounts made
available to the Administrative Agent by the Lenders and in like funds as
received by the Administrative Agent.
3.3 Commitment Fee. The Borrower agrees to pay to the
Administrative Agent for the account of each Lender a commitment fee for the
period from and including the first day of the
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41
Revolving Credit Commitment Period to but not including the Revolving
Credit Termination Date, computed at a rate per annum equal to the Applicable
Commitment Fee Rate then in effect on the average daily amount of the Available
Revolving Credit Commitment of such Lender during the period (calculated as if
no Swing Line Loans were outstanding during such period) for which payment is
made, payable quarterly in arrears on the last day of each April, July, October
and January and on the Revolving Credit Termination Date or such earlier
date as the Revolving Credit Commitments shall terminate as provided herein,
commencing on the first of such dates to occur after the date hereof.
3.4 Termination or Reduction of Commitments. The Borrower
shall have the right, upon not less than two Business Days' notice to the
Administrative Agent, to terminate the Revolving Credit Commitments or, from
time to time, to reduce the amount of the Revolving Credit Commitments,
provided that no such termination or reduction shall be permitted if, after
giving effect thereto and to any prepayments of the Revolving Credit Loans
made on the effective date thereof, the aggregate principal amount of the
Revolving Credit Loans then outstanding, when added to the then outstanding
L/C Obligations, Swing Line Loans, Bilateral Option Loans and CAF
Advances, would exceed the Revolving Credit Commitments then in effect.
Any such reduction shall be in an amount equal to $10,000,000 or a whole
multiple of $1,000,000 in excess thereof and shall reduce permanently the
Revolving Credit Commitments then in effect. Upon receipt of any notice
pursuant to this subsection 3.4, the Administrative Agent shall promptly
notify each Lender thereof.
3.5 Repayment of Revolving Credit Loans. The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the
account of each Lender the then unpaid principal amount of each Revolving
Credit Loan of such Lender on the Revolving Credit Termination Date (or
such earlier date on which the Revolving Credit Loans become due and payable
pursuant to Section 9). The Borrower hereby further agrees to pay interest
on the unpaid principal amount of the Revolving Credit Loans from time to time
outstanding from the date hereof until payment in full thereof at the rates
per annum, and on the dates, set forth in subsection 4.4.
3.6 L/C Commitment. (a) Subject to the terms and conditions
hereof, each Issuing Bank, in reliance on the agreements of the other
Lenders set forth in subsection 3.9(a), agrees to issue letters of credit
("Letters of Credit") for the account of the Borrower on any Business Day
during the Revolving Credit Commitment Period in such form as may be approved
from time to time by such Issuing Bank; provided that no Issuing Bank shall
have any obligation to issue any Letter of Credit if, after giving effect
to such issuance, (i) the L/C Obligations at such time would exceed the
L/C Commitment, (ii) the Aggregate Revolving Credit Outstandings at such
time would exceed the aggregate amount of the Revolving Credit Commitments
at such time, (iii) in the case of Letters of Credit issued prior to the
Collateral Release Date, the Aggregate Revolving Credit Outstandings at such
time would exceed the Borrowing Base at such time or (iv) in the case of
Letters of Credit issued in currencies other than Dollars only, the L/C
Obligations in respect of Letters of Credit issued in currencies other than
Dollars would exceed the Foreign L/C Commitment Sublimit at such time. Each
Continuing Letter of Credit shall be deemed to be issued under this
Agreement on the Effective Date (to the extent such Continuing Letter of Credit
has not been fully drawn or has not expired or been terminated as of the
Effective Date) and shall be (x) a Letter of Credit for all purposes hereof
(other than subsection 3.7) and the other Loan Documents and (y) a
Commercial Letter of Credit or a Standby Letter of Credit, as applicable,
for purposes of subsections 3.8(b) and 3.8(c), respectively.
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(b) Each Letter of Credit shall:
(i) be denominated in Dollars or such other currency that
as of the date of issuance thereof is in the reasonable judgment of
the relevant Issuing Bank (which shall be binding on the L/C
Participants) freely convertible or exchangeable into Dollars as the
Borrower, the relevant Issuing Bank and the Administrative Agent may from
time to time agree, and shall be either (A) a standby letter of
credit issued to support obligations of the Borrower or a Subsidiary,
contingent or otherwise (a "Standby Letter of Credit"), or (B) a
commercial letter of credit issued in respect of the purchase of
inventory or other goods or services by the Borrower and its
Subsidiaries in the ordinary course of business (a "Commercial
Letter of Credit"), and
(ii) expire no later than the earlier of (A) five Business Days
prior to the Revolving Credit Termination Date and (B) one year after
the date of issuance thereof, provided that, subject to clause (A)
above, any Letter of Credit may, at the request of the Applicant as set
forth in the applicable Application, be automatically renewed on each
anniversary of the issuance thereof for an additional period of one year
unless the Issuing Bank which issued such Letter of Credit shall have
given prior written notice to the Borrower and the beneficiary of such
Letter of Credit that such Letter of Credit will not be renewed.
(c) Each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State
of New York.
(d) No Issuing Bank shall at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause
such Issuing Bank or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
3.7 Procedure for Issuance of Letters of Credit. An Applicant
may from time to time request that an Issuing Bank issue a Letter of
Credit by delivering (a) to such Issuing Bank at its address for notices
specified herein in such manner as may be agreed by or be acceptable to such
Issuing Bank (including by electronic transmission) an Application therefor,
completed to the satisfaction of such Issuing Bank, and such other
certificates, documents and other papers and information as such Issuing Bank
may request and (b) a notice to the Administrative Agent that such Letter
of Credit has been requested. Upon receipt of any Application, each
Issuing Bank agrees to process such Application and the certificates,
documents and other papers and information delivered to it in connection
therewith in accordance with its customary procedures and shall promptly
issue the Letter of Credit requested thereby (but in no event shall such
Issuing Bank be required to issue any Letter of Credit earlier than two
Business Days after its receipt of the Application therefor and all such
other certificates, documents and other papers and information relating
thereto) by issuing the original of such Letter of Credit to the beneficiary
thereof or as otherwise may be agreed by such Issuing Bank and the Borrower.
Each Issuing Bank shall furnish a copy of each Letter of Credit issued by
such Issuing Bank to the Borrower and the Administrative Agent promptly
following the issuance thereof.
3.8 Letter of Credit Fees, Commissions and Other Charges. (a)
The Borrower shall pay to the relevant Issuing Bank with respect to each
Letter of Credit issued by such Issuing Bank under this Agreement, for the
account of such Issuing Bank, a fronting fee with respect to the period
from the date of issuance of such Letter of Credit to the expiration or
termination date of such Letter of Credit, computed at a rate per annum to be
agreed upon by the Borrower and such Issuing Bank on the average aggregate
amount available to be drawn under such Letter of Credit during the period for
which such fee is calculated. Such fronting fee shall be payable in arrears
on each L/C Fee Payment
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43
Date to occur after the issuance of such Letter of Credit and on the Revolving
Credit Termination Date (or on such earlier date as the Revolving Credit
Commitments shall terminate as provided herein) and shall be nonrefundable.
(b) The Borrower shall pay to the Administrative Agent, for
the account of the L/C Participants, a letter of credit commission with
respect to each Commercial Letter of Credit issued under this Agreement
with respect to the period from the date of issuance of such Commercial
Letter of Credit to the expiration or termination date of such Letter of
Credit, computed at a rate per annum equal to the Commercial L/C Fee Rate on
the average aggregate amount available to be drawn under such Commercial
Letter of Credit during the period for which such fee is calculated. Such
commission shall be shared ratably among the L/C Participants in accordance
with their respective Revolving Credit Commitment Percentages. Such
commission shall be payable in arrears on each L/C Fee Payment Date to
occur after the issuance of such Letter of Credit and on the Revolving
Credit Termination Date (or on such earlier date as the Revolving Credit
Commitments shall terminate as provided herein) and shall be
nonrefundable.
(c) The Borrower shall pay to the Administrative Agent, for
the account of the L/C Participants, a letter of credit commission with
respect to each Standby Letter of Credit with respect to the period from
the date of issuance of such Standby Letter of Credit to the expiration or
termination date of such Letter of Credit, computed at a rate per annum equal
to the Standby L/C Fee Rate of the average aggregate amount available to be
drawn under such Standby Letter of Credit during the period for which such
fee is calculated. Such commission shall be shared ratably among the
L/C Participants in accordance with their respective Revolving Credit
Commitment Percentages. Such commission shall be payable in arrears on each
L/C Fee Payment Date to occur after the issuance of such Letter of Credit and
on the Revolving Credit Termination Date (or on such earlier date as the
Revolving Credit Commitments shall terminate as provided herein) and shall
be nonrefundable.
(d) In addition to the foregoing fees and commissions, the Borrower
shall pay or reimburse each Issuing Bank for such normal and customary costs
and expenses as may be agreed upon by the Borrower and such Issuing Bank in
connection with issuing, effecting payment under, amending or otherwise
administering any Letter of Credit issued by such Issuing Bank.
(e) The Administrative Agent shall, promptly following its receipt
thereof, distribute to each Issuing Bank and the L/C Participants all fees
and commissions received by the Administrative Agent for their
respective accounts pursuant to this subsection.
3.9 L/C Participations. (a) Each Issuing Bank irrevocably
agrees to grant and hereby grants to each L/C Participant (other than
such Issuing Bank), and, to induce such Issuing Bank to issue Letters of
Credit hereunder, each such L/C Participant irrevocably agrees to accept and
purchase and hereby accepts and purchases from such Issuing Bank, on the
terms and conditions hereinafter stated, for such L/C Participant's own
account and risk an undivided interest equal to such L/C Participant's
Revolving Credit Commitment Percentage in such Issuing Bank's obligations
and rights under each Letter of Credit issued by such Issuing Bank hereunder
and the amount of each draft paid by such Issuing Bank thereunder. Each
such L/C Participant unconditionally and irrevocably agrees with each
Issuing Bank that, if a draft is paid under any Letter of Credit issued by such
Issuing Bank for which such Issuing Bank is not reimbursed in full by the
Borrower in accordance with the terms of this Agreement, such L/C
Participant shall pay to the Administrative Agent for the account of such
Issuing Bank upon demand an amount equal to such L/C Participant's Revolving
Credit Commitment Percentage of the amount of such draft, or any part
thereof, which is not so reimbursed.
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(b) If any amount required to be paid by any L/C Participant to
any Issuing Bank pursuant to subsection 3.9(a) in respect of any unreimbursed
portion of any payment made by such Issuing Bank under any Letter of Credit
issued by such Issuing Bank is paid to such Issuing Bank within three Business
Days after the date such payment is due, such L/C Participant shall pay to
such Issuing Bank on demand an amount equal to the product of (i) such amount,
times (ii) the daily average Federal Funds Effective Rate, during the period
from and including the date such payment is required to the date on which such
payment is immediately available to such Issuing Bank, times (iii) a
fraction the numerator of which is the number of days that elapse during such
period and the denominator of which is 360. If any such amount required to be
paid by any L/C Participant pursuant to subsection 3.9(a) is not in fact made
available to any Issuing Bank by such L/C Participant within three Business
Days after the date such payment is due, such Issuing Bank shall be entitled
to recover from such L/C Participant, on demand, such amount with interest
thereon calculated from such due date at the rate per annum applicable to ABR
Loans hereunder. A certificate of any Issuing Bank submitted to any L/C
Participant with respect to any amounts owing under this subsection shall be
conclusive in the absence of manifest error.
(c) Whenever, at any time after any Issuing Bank has made payment
under any Letter of Credit issued by such Issuing Bank and has received from
any L/C Participant its pro rata share of such payment in accordance with
subsection 3.9(a), such Issuing Bank receives any payment related to such
Letter of Credit (whether directly from the Borrower or otherwise, including
proceeds of collateral applied thereto by such Issuing Bank), or any payment
of interest on account thereof, such Issuing Bank will distribute to such L/C
Participant its pro rata share thereof.
(d) If any payment received by any Issuing Bank pursuant to
subsection 3.10 with respect to any Letter of Credit issued by it shall be
required to be returned by such Issuing Bank, each L/C Participant shall pay
to such Issuing Bank its pro rata share thereof.
3.10 Letter of Credit Reimbursement Obligations. (a) The Borrower
agrees to reimburse each Issuing Bank for the amount of (i) any draft paid by
such Issuing Bank under any Letter of Credit issued by such Issuing Bank
and (ii) any taxes, fees, charges or other costs or expenses incurred by
such Issuing Bank in connection with such payment. Each such payment shall be
made to the relevant Issuing Bank at its address for notices specified herein
in the currency in which the relevant Letter of Credit was issued and in
immediately available funds in such currency.
(b) If any draft shall be presented for payment under any Letter of
Credit issued by any Issuing Bank, such Issuing Bank shall promptly notify
the Borrower of the date and amount thereof. The Borrower shall reimburse
each Issuing Bank pursuant to subsection 3.10(a) with respect to any
drawing under any Letter of Credit issued by such Issuing Bank on the next
Business Day following the date of such drawing and interest shall be
payable on the amount of such drawing for such period at the rate then
applicable to ABR Loans hereunder. If any amount payable under this
subsection is not paid when due, interest shall be payable on such amount
from the date such amount becomes payable under this subsection until payment
in full thereof at the rate which would be payable on any outstanding ABR
Loans which were then overdue.
3.11 Obligations Absolute. (a) The Borrower's obligations under
this Section 3 in respect of Letters of Credit shall be absolute and
unconditional under any and all circumstances and irrespective of any set-off,
counterclaim or defense to payment which the Borrower or any Applicant may
have or have had against any Issuing Bank or any beneficiary of any Letter of
Credit.
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(b) The Borrower also agrees with each Issuing Bank that such
Issuing Bank shall not be responsible for, and the Borrower's
Reimbursement Obligations shall not be affected by, among other things, (i)
the validity or genuineness of documents or of any endorsements thereon, even
though such documents shall in fact prove to be invalid, fraudulent or
forged, or (ii) any dispute between or among the Borrower, any Applicant
and any beneficiary of any Letter of Credit or any other party to which such
Letter of Credit may be transferred or (iii) any claims whatsoever of the
Borrower or any Applicant against any beneficiary of such Letter of
Credit or any such transferee.
(c) No Issuing Bank shall be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any
message or advice, however transmitted, in connection with any Letter of
Credit issued by such Issuing Bank, except for errors or omissions caused by
such Issuing Bank's gross negligence or willful misconduct.
(d) The Borrower agrees that any action taken or omitted by
any Issuing Bank under or in connection with any Letter of Credit issued
by such Issuing Bank or the related drafts or documents, if done in the
absence of gross negligence or willful misconduct and in accordance with
the standards of care specified in the UCC, shall be binding on the Borrower
and shall not result in any liability of such Issuing Bank to the Borrower.
3.12 Letter of Credit Payments. The responsibility of each Issuing
Bank to the Borrower in connection with any draft presented for payment under
any Letter of Credit issued by such Issuing Bank shall, in addition to
any payment obligation expressly provided for in such Letter of Credit, be
limited to determining that the documents (including each draft) delivered
under such Letter of Credit in connection with such presentment are in
conformity with such Letter of Credit.
3.13 Letter of Credit Applications. To the extent that any
provision of any Application related to any Letter of Credit is inconsistent
with the provisions of this Section 3 or any other terms of this Agreement or
any other Loan Document, the provisions of this Section 3 shall apply.
3.14 CAF Advances. Subject to the terms and conditions of
this Agreement, the Borrower may request advances ("CAF Advances") from time
to time on any Business Day during the CAF Advance Availability Period. CAF
Advances may be requested and made in amounts such that, after giving effect
to the making of such CAF Advance and the application of proceeds thereof, (a)
the Aggregate Revolving Credit Outstandings at any time do not exceed the
aggregate amount of the Revolving Credit Commitments at such time and (b) in
the case of CAF Advances requested or made prior to the Collateral
Release Date, the Aggregate Revolving Credit Outstandings at such time do
not exceed the Borrowing Base at such time. Within the limits and on
the conditions hereinafter set forth with respect to CAF Advances, the
Borrower from time to time may borrow, repay and reborrow CAF Advances.
3.15 Procedure for CAF Advance Borrowing. (a) The Borrower
shall request CAF Advances by delivering a CAF Advance Request to the
Administrative Agent, not later than 12:00 Noon (New York City time) four
Business Days prior to the proposed Borrowing Date (in the case of a LIBO
Rate CAF Advance Request), and not later than 10:00 A.M. (New York City
time) one Business Day prior to the proposed Borrowing Date (in the case of a
Fixed Rate CAF Advance Request). The Borrower shall pay to the
Administrative Agent a fee of $2,000 in connection with each CAF Advance
Request delivered by the Borrower to the Administrative Agent. Each CAF
Advance Request in respect of any Borrowing Date may solicit bids for CAF
Advances on such Borrowing Date in an aggregate principal amount of
$10,000,000 or an integral multiple of $1,000,000
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in excess thereof and having not more than three alternative CAF Advance
Maturity Dates. The CAF Advance Maturity Date for each CAF Advance shall be
the date set forth therefor in the relevant CAF Advance Request, which date
shall be (i) not less than 14 days nor more than 180 days after the Borrowing
Date therefor, in the case of a Fixed Rate CAF Advance, (ii) one, two, three or
six months after the Borrowing Date therefor, in the case of a LIBO Rate CAF
Advance and (iii) not later than the Revolving Credit Termination Date, in
the case of any CAF Advance. The Administrative Agent shall notify each
Lender promptly by facsimile transmission of the contents of each CAF Advance
Request received by the Administrative Agent.
(b) In the case of a LIBO Rate CAF Advance Request, upon receipt
of notice from the Administrative Agent of the contents of such CAF
Advance Request, each Lender may elect, in its sole discretion, to offer
irrevocably to make one or more CAF Advances at the applicable LIBO Rate plus
(or minus) a margin determined by such Lender in its sole discretion for
each such CAF Advance. Any such irrevocable offer shall be made by delivering
a CAF Advance Offer to the Administrative Agent, before 10:30 A.M. (New York
City time) on the day that is three Business Days before the proposed
Borrowing Date, setting forth:
(i) the maximum amount of CAF Advances for each CAF Advance
Maturity Date and the aggregate maximum amount of CAF Advances for all
CAF Advance Maturity Dates which such Lender would be willing to make
(which amounts may, subject to subsection 3.14, exceed such Lender's
Revolving Credit Commitments); and
(ii) the margin above or below the applicable LIBO Rate at
which such Lender is willing to make each such CAF Advance.
The Administrative Agent shall advise the Borrower before 11:00 A.M. (New
York City time) on the date which is three Business Days before the proposed
Borrowing Date of the contents of each such CAF Advance Offer received by
it. If the Administrative Agent, in its capacity as a Lender, shall
elect, in its sole discretion, to make any such CAF Advance Offer, it shall
advise the Borrower of the contents of its CAF Advance Offer before 10:15
A.M. (New York City time) on the date which is three Business Days before
the proposed Borrowing Date.
(c) In the case of a Fixed Rate CAF Advance Request, upon receipt
of notice from the Administrative Agent of the contents of such CAF
Advance Request, each Lender may elect, in its sole discretion, to offer
irrevocably to make one or more CAF Advances at a rate of interest determined
by such Lender in its sole discretion for each such CAF Advance. Any such
irrevocable offer shall be made by delivering a CAF Advance Offer to the
Administrative Agent before 9:30 A.M. (New York City time) on the proposed
Borrowing Date, setting forth:
(i) the maximum amount of CAF Advances for each CAF Advance
Maturity Date, and the aggregate maximum amount for all CAF Advance
Maturity Dates, which such Lender would be willing to make (which amounts
may, subject to subsection 3.14, exceed such Lender's Revolving Credit
Commitments); and
(ii) the rate of interest at which such Lender is willing to
make each such CAF Advance.
The Administrative Agent shall advise the Borrower before 10:00 A.M. (New York
City time) on the proposed Borrowing Date of the contents of each such CAF
Advance Offer received by it. If the Administrative Agent, in its capacity as
a Lender, shall elect, in its sole discretion, to make any such
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CAF Advance Offer, it shall advise the Borrower of the contents of its CAF
Advance Offer before 9:15 A.M. (New York City time) on the proposed Borrowing
Date.
(d) Before 11:30 A.M. (New York City time) three Business
Days before the proposed Borrowing Date (in the case of CAF Advances requested
by a LIBO Rate CAF Advance Request) and before 10:30 A.M. (New York City
time) on the proposed Borrowing Date (in the case of CAF Advances requested by
a Fixed Rate CAF Advance Request), the Borrower, in its absolute
discretion, shall:
(i) cancel the relevant CAF Advance Request by giving the
Administrative Agent telephonic notice to that effect, or
(ii) by giving telephonic notice to the
Administrative Agent (immediately confirmed by delivery to the
Administrative Agent of a CAF Advance Confirmation by facsimile
transmission) (A) subject to the provisions of subsection 3.15(e),
accept one or more of the offers made by any Lender or Lenders pursuant
to subsection 3.15(b) or subsection 3.15(c), as the case may be, and
(B) reject any remaining offers made by Lenders pursuant to
subsection 3.15(b) or subsection 3.15(c), as the case may be.
(e) The Borrower's acceptance of CAF Advances in response to any
CAF Advance Offers shall be subject to the following limitations:
(i) the amount of CAF Advances accepted for each CAF Advance
Maturity Date specified by any Lender in its CAF Advance Offer shall not
exceed the maximum amount for such CAF Advance Maturity Date specified
in such CAF Advance Offer;
(ii) the aggregate amount of CAF Advances accepted for all CAF
Advance Maturity Dates specified by any Lender in its CAF Advance Offer
shall not exceed the aggregate maximum amount specified in such CAF
Advance Offer for all such CAF Advance Maturity Dates;
(iii) the Borrower may not accept offers for CAF Advances for
any CAF Advance Maturity Date in an aggregate principal amount in
excess of the maximum principal amount of CAF Advances requested for such
CAF Advance Maturity Date in the related CAF Advance Request; and
(iv) if the Borrower accepts any of such CAF Advance
Offers, it must accept offers based solely upon pricing for each
relevant CAF Advance Maturity Date and upon no other criteria whatsoever,
and if two or more Lenders submit CAF Advance Offers for any CAF
Advance Maturity Date at identical pricing and the Borrower accepts any
of such CAF Advance Offers but does not wish to (or, by reason of the
limitations set forth in subsection 3.14 or this subsection 3.15,
cannot) borrow the total amount offered by such Lenders with such
identical pricing, the Borrower shall accept CAF Advance Offers from
all of such Lenders in amounts allocated among them pro rata
according to the amounts offered by such Lenders (with appropriate
rounding, in the sole discretion of the Borrower, to assure that each
accepted CAF Advance is an integral multiple of $1,000,000); provided
that if the number of Lenders that submit CAF Advance Offers for
any CAF Advance Maturity Date with identical pricing is such that,
after the Borrower accepts such offers pro rata in accordance with
the foregoing provisions of this paragraph, the CAF Advance to be made
by any such Lender would be less than $5,000,000 principal amount,
the number of such Lenders shall be reduced
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by the Administrative Agent by lot until the CAF Advances to be made by
each such remaining Lender would be in a principal amount of
$5,000,000 or an integral multiple of $1,000,000 in excess thereof.
(f) If the Borrower notifies the Administrative Agent that a CAF
Advance Request is cancelled pursuant to subsection 3.15(d)(i), the
Administrative Agent shall give prompt telephonic notice thereof to the
Lenders.
(g) If the Borrower accepts pursuant to subsection 3.15(d)(ii)
one or more of the CAF Advance Offers made by any Lender or Lenders, the
Administrative Agent promptly shall notify each Lender which has made such a
CAF Advance Offer of (i) the aggregate amount of such CAF Advances to be made
on the relevant Borrowing Date and the CAF Advance Maturity Date for each
such CAF Advance and (ii) the acceptance or rejection of any CAF Advance Offers
to make such CAF Advances made by such Lender. Before 12:00 Noon (New York
City time) on the Borrowing Date specified in the applicable CAF Advance
Request, each Lender whose CAF Advance Offer has been accepted shall
make available to the Administrative Agent at its office set forth in
subsection 11.2 the amount of CAF Advances to be made by such Lender, in
Dollars and in immediately available funds. The Administrative Agent will
make such funds available to the Borrower as soon as practicable on
such date at such office of the Administrative Agent in like funds. As soon
as practicable after each Borrowing Date, the Administrative Agent shall
notify each Lender of the aggregate amount of CAF Advances advanced on such
Borrowing Date and the respective CAF Advance Maturity Dates thereof.
3.16 CAF Advance Payments. (a) The Borrower shall pay to the
Administrative Agent, for the account of each Lender which has made a CAF
Advance, on the CAF Advance Maturity Date of such CAF Advance (or on such
earlier date on which such CAF Advance becomes due and payable pursuant to
Section 9) the principal amount of such CAF Advance. The Borrower shall
not have the right to prepay any principal amount of any CAF Advance without
the consent of the Lender to which such CAF Advance is owed.
(b) The Borrower shall pay to the Administrative Agent for the
account of each Lender which has made a CAF Advance interest on the
unpaid principal amount of such CAF Advance from the Borrowing Date with
respect thereto to the CAF Advance Maturity Date of such CAF Advance
at the rate of interest specified in the CAF Advance Offer accepted by
the Borrower in connection with such CAF Advance (calculated on the basis of
a 360-day year for actual days elapsed), payable on each applicable CAF Advance
Interest Payment Date.
(c) If any principal of, or interest on, any CAF Advance
shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such CAF Advance shall, without limiting any
rights of any Lender under this Agreement, bear interest from the date on
which such payment was due at a rate per annum which is 2% above the rate
which would otherwise be applicable to such CAF Advance until the stated
CAF Advance Maturity Date of such CAF Advance, and for each day after such
stated CAF Advance Maturity Date at a rate per annum which is 2% above the
ABR, in each case until paid in full (as well after as before judgment).
Interest accruing pursuant to this subsection 3.16(c) shall be payable from
time to time on demand.
3.17 Certain Restrictions With Respect to CAF Advances.
A CAF Advance Request may request CAF Advance Offers for CAF Advances to be
made on not more than one Borrowing Date and to mature on not more than three
CAF Advance Maturity Dates. No CAF Advance Request
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may be submitted earlier than five Business Days after submission
of any other CAF Advance Request.
3.18 Requests for Bilateral Loan Offers. (a) From time to time
during the period from the Effective Date until the Revolving Credit
Termination Date, the Borrower may request any or all of the Lenders (each
such Lender to which such a request is made, a "Requested Bilateral Lender")
to make offers to make Bilateral Option Loans, provided that (i)
immediately after giving effect to the making of any such Bilateral Option Loan
and the use of proceeds thereof, (A) the aggregate principal amount of all
Bilateral Option Loans then outstanding do not exceed $250,000,000, (B)
the Aggregate Revolving Credit Outstandings at such time do not exceed the
aggregate amount of the Revolving Credit Commitments at such time and (C) in
the case of Bilateral Option Loans made prior to the Collateral Release
Date, the Aggregate Revolving Credit Outstandings at such time do not
exceed the Borrowing Base at such time and (ii) the aggregate principal
amount of each such Bilateral Option Loan shall be equal to $5,000,000 or
a whole multiple of $1,000,000 in excess thereof. Any such request shall
specify the principal amount and maturity date of the Bilateral Option
Loans for which the Borrower is requesting offers, and the time by which
offers to make such Bilateral Option Loans must be made by such Requested
Bilateral Lender and by which such offers shall be accepted or rejected by
such Borrower. Each Requested Bilateral Lender may, but shall have no
obligation to, make such offers on such terms and conditions as are
satisfactory to such Requested Bilateral Lender, and the Borrower may, but
shall have no obligation to, accept any such offers. No Bilateral Option
Loan may mature after the Revolving Credit Termination Date.
(b) The Borrower and Requested Bilateral Lender shall separately
agree as to the procedures, documentation, lending office and other matters
relating to any Bilateral Option Loan.
3.19 Reports to Administrative Agent. The Borrower shall
deliver to the Administrative Agent a report in respect of each Bilateral
Option Loan (a "Bilateral Option Loan Report") by 2:00 P.M. (New York City
time) on the date on which the Borrower accepts any Bilateral Option Loan, on
the date on which any principal amount thereof is repaid prior to the scheduled
maturity date, or on the scheduled maturity date if payment thereof is not made
on such scheduled maturity date, specifying for such Bilateral Option Loan the
date on which such Bilateral Option Loan was or will be made, such amount of
principal is or will be repaid or such payment was not made, as the case may
be, and the principal amount of such Bilateral Option Loan or principal
prepayment or repayment or the amount paid.
3.20 Repayments. Each Borrower shall repay to each Lender which
has made a Bilateral Option Loan on the maturity date of each Bilateral
Option Loan (such maturity date being that specified in the documentation
referred to in subsection 3.19, but in any event not later than fourteen
Business Days after such Bilateral Option Loan is made) the then unpaid
principal amount of such Bilateral Option Loan.
3.21 Swing Line Commitment. Subject to the terms and conditions
hereof, the Swing Line Lender agrees to make swing line loans ("Swing Line
Loans") to the Borrower from time to time during the Revolving Credit
Commitment Period in an aggregate principal amount at any one time
outstanding not to exceed the Swing Line Commitment, provided that, after
giving effect to any such Swing Line Loans, (a) the Aggregate Revolving
Credit Outstandings at such time would not exceed the Revolving Credit
Commitments in effect at such time and (b) in the case of Swing Line Loans
made prior to the Collateral Release Date, the Aggregate Revolving
Credit Outstandings at such time would not exceed the Borrowing Base at
such time. During the Revolving Credit Commitment Period,
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the Borrower may use the Swing Line Commitment by borrowing, prepaying
the Swing Line Loans in whole or in part, and reborrowing, all in
accordance with the terms and conditions hereof.
3.22 Procedure for Swing Line Borrowing. (a) The Borrower may
borrow under the Swing Line Commitment during the Revolving Credit
Commitment Period on any Business Day, provided that the Borrower shall
give the Swing Line Lender and the Administrative Agent irrevocable
notice (which notice must be received by the Swing Line Lender prior to
11:00 A.M., New York City time) on the requested Borrowing Date specifying the
amount of the requested Swing Line Loan which shall be in an aggregate
minimum amount of $5,000,000 or a whole multiple of $1,000,000 in excess
thereof. The proceeds of the Swing Line Loan will be made available by the
Swing Line Lender to the Borrower at the office of the Swing Line Lender by
12:00 Noon, New York City time, on the Borrowing Date by crediting the
account of the Borrower at such office with such proceeds. The Borrower may
at any time and from time to time prepay the Swing Line Loans, in whole or
in part, without premium or penalty, by notifying the Swing Line Lender
prior to 11:00 A.M., New York City time, on any Business Day of the date and
amount of prepayment. If any such notice is given, the amount specified in
such notice shall be due and payable on the date specified therein. Partial
prepayments shall be in an aggregate principal amount of $5,000,000 or a
whole multiple of $1,000,000 in excess thereof.
(b) The Swing Line Lender shall, on behalf of the Borrower
(which hereby irrevocably directs the Swing Line Lender to act on its
behalf) and on the earlier of (i) the fifth Business Day following the
Borrowing Date with respect to any Swing Line Loan or (ii) on the date on
which the Revolving Credit Commitments shall terminate pursuant to Section 9,
request each Lender (including the Swing Line Lender) to make a Revolving
Credit Loan (which shall be an ABR Loan, unless the Borrower notified the
Administrative Agent pursuant to subsection 3.2 that such Revolving Credit
Loans shall be Eurodollar Loans) in an amount equal to such Lender's
Revolving Credit Commitment Percentage of the principal amount of such
Swing Line Loan. Unless any of the events described in paragraph (f) of
Section 9 shall have occurred with respect to the Borrower (in which event the
procedures of paragraph (d) of this subsection 3.22 shall apply) each
Lender shall make the proceeds of its Revolving Credit Loan available to
the Administrative Agent for the account of the Swing Line Lender at the
Administrative Agent's office specified in or pursuant to subsection 11.2
prior to 11:00 A.M., New York City time, in funds immediately available in
Dollars on the Business Day next succeeding the date such notice is given.
The proceeds of such Revolving Credit Loans shall be immediately applied to
repay the relevant Swing Line Loan. Effective on the day such Revolving Credit
Loans are made, the relevant Swing Line Loan so paid shall no longer be
outstanding as a Swing Line Loan and shall no longer be due under the Swing
Line Note. The Borrower authorizes the Swing Line Lender to charge the
Borrower's accounts with the Swing Line Lender (up to the amount available
in each such account) in order to immediately pay the amount of its
outstanding Swing Line Loans to the extent amounts received from the Lenders
are not sufficient to repay in full such outstanding Swing Line Loans.
(c) Notwithstanding anything herein to the contrary, the Swing
Line Lender shall not make any Swing Line Loans if the Swing Line Lender has
received written notice that the conditions set forth in subsection 6.2 have
not been satisfied in connection with the making of such Swing Line Loans.
(d) If prior to the making of a Revolving Credit Loan pursuant to
paragraph (b) of subsection 3.22 one of the events described in paragraph (f)
of Section 9 shall have occurred and be continuing with respect to the
Borrower, each Lender will, on the date such Revolving Credit Loan was to
have been made pursuant to the notice in subsection 3.22, purchase an
undivided participating
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interest in the outstanding Swing Line Loans in an amount equal to (i) its
Revolving Credit Commitment Percentage times (ii) the aggregate principal
amount of Swing Line Loans then outstanding. Each Lender will immediately
transfer to the Swing Line Lender, in immediately available funds, the amount
of its participation, and upon receipt thereof the Swing Line Lender will
deliver to such Lender a Swing Line Loan Participation Certificate dated the
date of receipt of such funds and in such amount.
(e) Whenever, at any time after any Lender has purchased a
participating interest in a Swing Line Loan, the Swing Line Lender
receives any payment on account thereof, the Swing Line Lender will
distribute to such Lender its participating interest in such amount
(appropriately adjusted, in the case of interest payments, to reflect the
period of time during which such Lender's participating interest was
outstanding and funded); provided, however, that in the event that such
payment received by the Swing Line Lender is required to be returned,
such Lender will return to the Swing Line Lender any portion thereof
previously distributed by the Swing Line Lender to it.
(f) Each Lender's obligation to make the Revolving Credit Loans
referred to in subsection 3.22(b) and to purchase participating interests
pursuant to subsection 3.22(d) shall be absolute and unconditional and
shall not be affected by any circumstance, including, without limitation,
(i) any set-off, counterclaim, recoupment, defense or other right which
such Lender or the Borrower may have against the Swing Line Lender, the
Borrower or any other Person for any reason whatsoever, (ii) the occurrence
or continuance of a Default or an Event of Default, (iii) any adverse
change in the condition (financial or otherwise) of the Borrower, (iv) any
breach of this Agreement or any other Loan Document by the Borrower, any
Subsidiary or any other Lender, or (v) any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing.
3.23 Annual Revolving Credit Clean-Down. The Borrower agrees that
during each Fiscal Year there shall be a period of at least 30 consecutive days
during which the sum of the aggregate principal amount of all outstanding
Committed Loans plus the aggregate principal amount of all outstanding
Bilateral Option Loans plus the aggregate principal amount of all outstanding
CAF Advances shall not exceed $750,000,000.
SECTION 4. GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT
4.1 Optional and Mandatory Prepayments. (a) The Borrower may,
at any time and from time to time, prepay the Revolving Credit Loans, in
whole or in part, without premium or penalty (except, with respect to
Eurodollar Loans that are prepaid on a date other than the last day of the
Interest Period with respect thereto, as provided under subsection 4.11),
upon (in the case of prepayments of Eurodollar Loans) at least two Business
Days' irrevocable notice to the Administrative Agent and upon (in the case of
prepayments of ABR Loans) irrevocable notice to the Administrative Agent prior
to 11:00 A.M., New York City time, on the date of such prepayment, specifying
the date and amount of prepayment and whether the prepayment is of Eurodollar
Loans, ABR Loans or a combination thereof, and, if of a combination thereof,
the amount allocable to each. Upon receipt of any such notice the
Administrative Agent shall promptly notify each affected Lender thereof. If
any such notice is given, the amount specified in such notice shall be due and
payable on the date specified therein, together with any amounts payable
pursuant to subsection 4.11 in connection therewith. Partial prepayments
under this subsection 4.1(a) shall be in an aggregate principal amount of
$10,000,000 or a whole multiple of $1,000,000 in excess thereof.
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(b) If, at any time prior to the Collateral Release Date, the
Aggregate Revolving Credit Outstandings at such time exceed the Borrowing
Base at such time, the Borrower shall, without notice or demand,
immediately repay the Revolving Credit Loans and/or Swing Line Loans in an
aggregate principal amount equal to the lesser of (i) the amount of such excess
and (ii) the aggregate principal amount of Revolving Credit Loans and Swing
Line Loans then outstanding, together with interest accrued to the date of
such payment or prepayment on the principal so prepaid and any amounts
payable under subsection 4.11 in connection therewith. To the extent that
after giving effect to any prepayment of the Revolving Credit Loans and Swing
Line Loans required by the preceding sentence, the Aggregate Revolving
Credit Outstandings at such time exceed the Borrowing Base at such time,
the Borrower shall, without notice or demand, immediately deposit in a
Cash Collateral Account upon terms reasonably satisfactory to the
Administrative Agent an amount equal to the lesser of (i) the
aggregate then outstanding Bilateral Option Loans, CAF Advances and L/C
Obligations and (ii) the amount of such remaining excess. The
Administrative Agent shall apply any cash deposited in the Cash Collateral
Account (to the extent thereof) to repay each Bilateral Option Loan on the
date such Bilateral Option Loan becomes due, to repay on each CAF Advance
Maturity Date to occur thereafter the CAF Advances which become due on such
CAF Advance Maturity Dates and/or to pay any Reimbursement Obligations which
become due thereafter, provided that the Administrative Agent shall release
to the Borrower (x) from time to time such portion of the amount on deposit
in the Cash Collateral Account which is equal to the amount by which the
Borrowing Base at such time plus the amount on deposit in the Cash
Collateral Account exceeds the Aggregate Revolving Credit Outstandings at
such time and (y) all amounts on deposit in the Cash Collateral Account on
the Collateral Release Date. "Cash Collateral Account" means an account
established by the Borrower with the Administrative Agent and over which the
Administrative Agent shall have exclusive dominion and control, including
the right of withdrawal for application in accordance with this
subsection 4.1(b). The Borrower shall also prepay the Revolving Credit Loans
to the extent required to comply with subsection 3.23.
4.2 Conversion and Continuation Options. (a) The Borrower
may, subject to paragraph (b) below, elect from time to time to convert
Eurodollar Loans to ABR Loans by giving the Administrative Agent
irrevocable notice of such election prior to 11:00 A.M. on the date of
conversion, provided that any such conversion of Eurodollar Loans may only
be made on the last day of an Interest Period with respect thereto. The
Borrower may elect from time to time to convert ABR Loans to Eurodollar Loans
by giving the Administrative Agent at least three Business Days' prior
irrevocable notice of such election. Any such notice of conversion to
Eurodollar Loans shall specify the length of the initial Interest Period or
Interest Periods therefor. Upon receipt of any such notice the
Administrative Agent shall promptly notify each affected Lender thereof. All
or any part of outstanding Eurodollar Loans and ABR Loans may be converted
as provided herein, provided that (i) no ABR Loan may be converted into a
Eurodollar Loan when any Event of Default has occurred and is continuing and
the Administrative Agent has notified the Borrower that it has determined
that such a conversion is not appropriate and (ii) no ABR Loan may be
converted into a Eurodollar Loan after the date that is one month prior
to the Revolving Credit Termination Date.
(b) Any Eurodollar Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Borrower giving notice to the Administrative Agent, in accordance with the
applicable provisions of the term "Interest Period" set forth in subsection
1.1, of the length of the next Interest Period to be applicable to such
Eurodollar Loans, provided that no Eurodollar Loan may be continued as such
(i) when any Event of Default has occurred and is continuing and the
Administrative Agent has notified the Borrower that it has determined that
such a continuation is not appropriate or (ii) after the date that is one
month prior to the Revolving Credit Termination Date, and provided, further,
that if the Borrower shall fail to give such notice or if such
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continuation is not permitted such Eurodollar Loans shall be automatically
converted to ABR Loans on the last day of such then expiring Interest Period.
Upon receipt of any notice pursuant to this subsection 4.2(b), the
Administrative Agent shall notify each affected Lender thereof.
4.3 Minimum Amounts and Maximum Number of Tranches. All
borrowings, conversions and continuations of Revolving Credit Loans hereunder
and all selections of Interest Periods hereunder shall be in such amounts and
be made pursuant to such elections so that, after giving effect thereto,
the aggregate principal amount of Eurodollar Loans comprising each Tranche
shall be equal to $10,000,000 or a whole multiple of $1,000,000 in
excess thereof. In no event shall there be more than 30 Tranches
outstanding at any time.
4.4 Interest Rates and Payment Dates. (a) Each Eurodollar Loan
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such
day plus the Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum equal
to the ABR plus the Applicable Margin.
(c) Each Swing Line Loan shall bear interest at a rate per annum
equal to the Swing Line Rate.
(d) If all or a portion of (i) any principal of any Loan or (ii)
any interest payable thereon shall not be paid when due (whether at the
stated maturity, by acceleration or otherwise), the principal of all
Loans shall bear interest at a rate per annum which is the rate that
would otherwise be applicable thereto pursuant to this Agreement plus 2%
from the date of such non-payment until such overdue principal and/or
interest is paid in full (as well after as before judgment). If all or a
portion of (i) any interest payable on any Loan, (ii) any commitment fee or
(iii) any other amount payable hereunder shall not be paid when due
(whether at the stated maturity, by acceleration or otherwise), any such
overdue interest, commitment fee or other amount shall bear interest at a rate
per annum which is the rate described in paragraph (b) of this subsection
plus 2%, in each case from the date of such non-payment until such overdue
interest, commitment fee or other amount is paid in full (as well after as
before judgment).
(e) Interest shall be payable in arrears on each Interest
Payment Date, provided that (i) interest accruing pursuant to subsection
4.4(d) shall be payable from time to time on demand, and (ii) interest on the
Revolving Credit Loans shall also be due and payable on the Revolving Credit
Termination Date (or such earlier date on which the Revolving Credit Loans
become due and payable pursuant to Section 9).
4.5 Computation of Interest and Fees. (a) Whenever it is
calculated on the basis of the Prime Rate, interest shall be calculated on
the basis of a 365- (or 366-, as the case may be) day year for the
actual days elapsed; and, otherwise, interest, commitment fees and fees and
commissions in respect of Letters of Credit shall be calculated on the basis
of a 360-day year for the actual days elapsed. The Administrative Agent shall
as soon as practicable notify the Borrower and the affected Lenders of
each determination of a Eurodollar Rate. Any change in the interest rate on
a Revolving Credit Loan resulting from a change in the ABR or the
Eurocurrency Reserve Requirements shall become effective as of the opening of
business on the day on which such change becomes effective. The
Administrative Agent shall as soon as practicable notify the Borrower and the
affected Lenders of the effective date and the amount of each such change in
interest rate.
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(b) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrower and the affected Lenders in the absence
of manifest error.
(c) If any Reference Lender shall for any reason no longer have
a Commitment or any Loans, such Reference Lender shall thereupon cease to
be a Reference Lender, and if, as a result, there shall only be one
Reference Lender remaining, the Administrative Agent (after consultation
with the Lenders and with the consent of the Borrower (which shall not be
unreasonably withheld)) shall, by notice to the Borrower and the Lenders,
designate another Lender that is a commercial bank as a Reference Lender so
that there shall at all times be at least two Reference Lenders.
(d) Each Reference Lender shall use its best efforts to furnish
quotations of rates to the Administrative Agent as contemplated hereby. If
any of the Reference Lenders shall be unable or shall otherwise fail to
supply such rates to the Administrative Agent upon its request, the
rate of interest shall, subject to the provisions of this subsection 4.5,
be determined on the basis of the quotations of the remaining Reference
Lenders or Reference Lender.
4.6 Inability to Determine Interest Rate. If prior to the first day
of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that,
by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for
such Interest Period, or
(b) the Administrative Agent shall have received notice from
the Majority Lenders that the Eurodollar Rate determined or to be
determined for such Interest Period will not adequately and fairly
reflect the cost to the Majority Lenders (as conclusively certified by
such Lenders) of making or maintaining their affected Revolving Credit
Loans during such Interest Period,
the Administrative Agent shall give facsimile or telephonic notice
thereof to the Borrower and the affected Lenders as soon as practicable
thereafter. If such notice is given (x) any Eurodollar Loans requested to
be made on the first day of such Interest Period shall be made as ABR
Loans, (y) any ABR Loans that were to have been converted on the first
day of such Interest Period to Eurodollar Loans shall be continued as ABR
Loans and (z) any outstanding Eurodollar Loans which the Borrower has requested
to continue as such pursuant to subsection 4.2(b) shall be converted, on the
first day of such Interest Period, to ABR Loans. Until such notice has been
withdrawn by the Administrative Agent, no further Eurodollar Loans shall be
made or continued as such, nor shall the Borrower have the right to convert
ABR Loans to Eurodollar Loans.
4.7 Pro Rata Treatment and Payments. (a) Except as otherwise
provided in subsections 3.14 through 3.22, all payments (including
prepayments) to be made by the Borrower hereunder, whether on account of
principal, interest, fees or otherwise, shall be made without set off or
counterclaim and shall be made prior to 12:00 Noon, New York City time, on
the due date thereof to the Administrative Agent, for the account of the
Lenders at the Administrative Agent's office specified in or pursuant to
subsection 11.2 (except as otherwise provided herein) in Dollars and in
immediately available funds. The Administrative Agent shall distribute such
payments to the Lenders entitled to receive the same promptly upon receipt in
like funds as received. If any payment hereunder (other than payments on
Eurodollar Loans or LIBO Rate CAF Advances) becomes due and payable on a day
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other than a Business Day, such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
If any payment on a Eurodollar Loan or a LIBO Rate CAF Advance becomes due and
payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day (and, with respect to payments of
principal, interest thereon shall be payable at the then applicable rate
during such extension) unless the result of such extension would be to extend
such payment into another calendar month, in which event such payment shall be
made on the immediately preceding Business Day.
(b) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its portion of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If such amount is not made available to
the Administrative Agent by the required time on the Borrowing Date therefor,
such Lender shall pay to the Administrative Agent, on demand, such amount
with interest thereon at a rate equal to the daily average Federal
Funds Effective Rate for the period until such Lender makes such amount
immediately available to the Administrative Agent. A certificate of the
Administrative Agent submitted to any Lender with respect to any amounts owing
under this subsection shall be conclusive in the absence of manifest error.
If such Lender's portion of such borrowing is not made available to the
Administrative Agent by such Lender within three Business Days of such
Borrowing Date, the Administrative Agent shall also be entitled to recover
such amount with interest thereon at the rate per annum applicable to ABR
Loans hereunder, on demand, from the Borrower.
(c) Each borrowing by the Borrower of Revolving Credit Loans shall
be made ratably from the Lenders in accordance with their respective
Revolving Credit Commitment Percentages. Any reduction of the Revolving
Credit Commitments shall be made ratably among the Lenders, in accordance
with their respective Revolving Credit Commitment Percentages. Each payment
(including each prepayment) by the Borrower on account of principal of and
interest on the Revolving Credit Loans shall be made pro rata according to
the respective outstanding principal amounts of the Revolving Credit Loans
then held by the Lenders.
4.8 Illegality. Notwithstanding any other provision herein, if
the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any Lender to
make or maintain Eurodollar Loans or LIBO Rate CAF Advances as contemplated by
this Agreement, (a) the commitment of such Lender hereunder to make
Eurodollar Loans, continue Eurodollar Loans as such and convert ABR
Loans to Eurodollar Loans shall forthwith be suspended during the period of
illegality, (b) such Lender's Loans then outstanding as Eurodollar Loans,
if any, shall be converted automatically to ABR Loans on the respective last
days of the then current Interest Periods with respect to such Loans or
within such earlier period as required by law and (c) the Borrower shall,
with respect to any LIBO Rate CAF Advance of such Lender, take such action
as such Lender may reasonably request. If any such conversion of a Eurodollar
Loan occurs on a day which is not the last day of the then current Interest
Period with respect thereto, the Borrower shall pay to such Lender such
amounts, if any, as may be required pursuant to subsection 4.11.
4.9 Requirements of Law. (a) If the adoption of or any change in
any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof (or, in the case of LIBO Rate CAF Advances, made
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subsequent to acceptance by the Borrower of the CAF Advance Offer relating to
such LIBO Rate CAF Advance):
(i) shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement, any Note, any Eurodollar
Loan, any Swing Line Loan or any LIBO Rate CAF Advance made by it,
any Letter of Credit issued or participated in by it or any
Application, or change the basis of taxation of payments to such
Lender in respect thereof (except for Non-Excluded Taxes covered by
subsection 4.10 and changes in the rate of tax on the overall net
income of such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against
assets held by, deposits or other liabilities in or for the account
of, advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate or the
Swing Line Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting
into, continuing or maintaining Eurodollar Loans, Swing Line Loans or LIBO
Rate CAF Advances or issuing or participating in Letters of Credit or to
reduce any amount receivable hereunder in respect thereof, then, in any such
case, within 15 days after demand therefor (accompanied by the certificate
contemplated by subsection 4.9(c) with respect thereto) the Borrower shall pay
such Lender such additional amount or amounts as will compensate such Lender
for such increased cost or reduced amount receivable.
(b) If any Lender shall have determined that the adoption of
or any change in any Requirement of Law regarding capital adequacy or in
the interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any
Governmental Authority made subsequent to the date hereof shall have the
effect of reducing the rate of return on such Lender's or such corporation's
capital as a consequence of its obligations hereunder or under or in
respect of any Letter of Credit to a level below that which such Lender or
such corporation could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's or such corporation's
policies with respect to capital adequacy) by an amount deemed by such Lender
to be material, then from time to time, within 15 days after demand
therefor (accompanied by the certificate contemplated by subsection 4.9(c)
with respect thereto), the Borrower shall pay to such Lender such additional
amount or amounts as will compensate such Lender for such reduction.
(c) If any Lender becomes entitled to claim any additional
amounts pursuant to this subsection 4.9, it shall promptly notify the
Borrower (with a copy to the Administrative Agent) of the event by reason of
which it has become so entitled. A certificate as to any additional amounts
payable pursuant to this subsection 4.9 submitted by such Lender to the
Borrower (with a copy to the Administrative Agent) setting forth in
reasonable detail the calculation of such amounts and the basis therefor
shall be conclusive in the absence of manifest error. The agreements in
this subsection shall survive the termination of this Agreement and the
payment of the Loans and all other amounts payable hereunder.
4.10 Indemnification for Taxes. (a) All payments made by the
Borrower under this Agreement and any Notes shall be made free and clear of,
and without deduction or withholding for or
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on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise and excise
taxes (imposed in lieu of net income taxes) imposed on the Administrative
Agent or any Lender as a result of a present or former connection between the
Administrative Agent or such Lender and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing
authority thereof or therein (other than any such connection arising solely
from the Administrative Agent or such Lender having executed, delivered or
performed its obligations or received a payment under, or enforced,
this Agreement or any Note). If any such non-excluded taxes, levies, imposts,
duties, charges, fees deductions or withholdings ("Non-Excluded Taxes")
are required to be withheld from any amounts payable to the
Administrative Agent or any Lender hereunder or under any Note, the
amounts so payable to the Administrative Agent or such Lender shall be
increased to the extent necessary to yield to the Administrative Agent or
such Lender (after payment of all Non-Excluded Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts specified
in this Agreement, provided, however, that the Borrower shall not be
required to increase any such amounts payable to any Lender that is not
organized under the laws of the United States of America or a state thereof if
such Lender fails to comply with the requirements of paragraph (b) of
this subsection 4.10. Whenever any Non-Excluded Taxes are payable by the
Borrower, as promptly as possible thereafter the Borrower shall send to the
Administrative Agent for its own account or for the account of such Lender, as
the case may be, a certified copy of an original official receipt received by
the Borrower showing payment thereof. If the Borrower fails to pay any
Non-Excluded Taxes when due to the appropriate taxing authority or fails to
remit to the Administrative Agent the required receipts or other required
documentary evidence, the Borrower shall indemnify the Administrative Agent
and the Lenders for any incremental taxes, interest or penalties that
may become payable by the Administrative Agent or any Lender as a
result of any such failure. The agreements in this subsection shall
survive the termination of this Agreement and the payment of the Loans and
all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the
United States of America or a state thereof shall:
(i) in the case of a Lender or a Transferee that is a "bank"
under Section 881(c)(3)(A) of the Code:
(A) on or before the date it becomes a party to this
Agreement (or, in the case of a Participant, on or before the
date such Participant becomes a Participant hereunder), deliver
to the Borrower and the Administrative Agent (I) two duly completed
copies of United States Internal Revenue Service Form 1001 or
4224, or successor applicable form, as the case may be, and (II) an
Internal Revenue Service Form W-8 or W-9, or successor applicable
form, as the case may be;
(B) deliver to the Borrower and the
Administrative Agent two further copies of any such form or
certification on or before the date that any such form or
certification expires or becomes obsolete and after the occurrence
of any event requiring a change in the most recent form
previously delivered by it to the Borrower; and
(C) obtain such extensions of time for filing and
complete such forms or certifications as may reasonably be
requested by the Borrower or the Administrative Agent; and
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(ii) in the case of a Lender or a Transferee that is not a "bank"
under Section 881(c)(3)(A) of the Code:
(A) on or before the date it becomes a party to this
Agreement (or, in the case of a Participant, on or before the date
such Participant becomes a Participant hereunder), deliver to
the Borrower and the Administrative Agent (I) a statement under
penalties of perjury that such Lender or Transferee (x) is not a
"bank" under Section 881(c)(3)(A) of the Code, is not subject to
regulatory or other legal requirements as a bank in any
jurisdiction, and has not been treated as a bank for purposes of any
tax, securities law or other filing or submission made to
any Governmental Authority, any application made to a rating
agency or qualification for any exemption from tax, securities law
or other legal requirements, (y) is not a 10-percent
shareholder within the meaning of Section 881(c)(3)(B) of the Code
and (z) is not a controlled foreign corporation receiving interest
from a related person within the meaning of Section 881(c)(3)(C)
of the Code and (II) a properly completed and duly executed
Internal Revenue Service Form W-8 or applicable successor
form;
(B) deliver to the Borrower and the Administrative Agent
two further properly completed and duly executed copies of such Form
W-8, or any successor applicable form, on or before the date that
any such Form W-8 expires or becomes obsolete or after the occurrence
of any event requiring a change in the most recent form previously
delivered by it to the Borrower or upon the request of the Borrower;
and
(C) obtain such extensions of time for filing and completing
such forms or certifications as may be reasonably requested by the
Borrower or the Administrative Agent;
unless in any such case an event (including, without limitation, any change
in treaty, law or regulation) has occurred prior to the date on which any
such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advises the
Borrower and the Administrative Agent. Each Lender that is not incorporated
under the laws of the United States of America or a state thereof shall certify
(i) in the case of a Form 1001 or 4224, that it is entitled to receive
payments under this Agreement without deduction or withholding of any
United States federal income taxes and (ii) in the case of a Form W-8 or W-9
provided pursuant to subsection 4.10(b)(i)(A)(II), that it is entitled to
an exemption from United States backup withholding tax. Each Person that
shall become a Lender or a Participant pursuant to subsection 11.6
shall, upon the effectiveness of the related transfer, be required to
provide all of the forms and statements required pursuant to this subsection,
provided that in the case of a Participant such Participant shall furnish all
such required forms and statements to the Lender from which the related
participation shall have been purchased.
4.11 Indemnity. The Borrower agrees to indemnify each Lender and
to hold each Lender harmless from any loss or reasonable expense which
such Lender may sustain or incur as a consequence of (a) default by the
Borrower in making a borrowing of, conversion into or continuation of
Eurodollar Loans, Swing Line Loans, Bilateral Option Loans or CAF Advances
after the Borrower has given a notice requesting the same in accordance
with the provisions of this Agreement, (b) default by the Borrower in
making any prepayment of a Eurodollar Loan, Swing Line Loan, Bilateral
Option Loan or CAF Advance after the Borrower has given a notice
thereof in accordance with the provisions of this Agreement or (c) the
making of a prepayment or conversion of Eurodollar Loans, Swing Line
Loans, Bilateral Option Loans or CAF Advances on a day which is not the last
day of an
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Interest Period, the date such Swing Line Loans or Bilateral Option Loans
are due (which, in the case of any Swing Line Loan, shall be the fifth
Business Day following the Borrowing Date with respect thereto) or the
applicable CAF Advance Maturity Date, as the case may be, with respect
thereto, which loss shall be equal to, in the case of Eurodollar Loans or CAF
Advances, the excess, if any, of (i) the amount of interest which would have
accrued on the amount so prepaid or converted, or not so borrowed, converted or
continued, for the period from the date of such prepayment or conversion or of
such failure to borrow, convert or continue to the last day of such
Interest Period (or proposed Interest Period) or, in the case of CAF
Advances, the CAF Advance Maturity Date (or proposed CAF Advance Maturity
Date), respectively, in each case at the applicable rate of interest for such
Eurodollar Loans or CAF Advances provided for herein (excluding, however,
the Applicable Margin or any positive margin applicable to CAF Advances
included therein, if any) over (ii) the amount of interest (as
reasonably determined by such Lender) which would have accrued to such Lender
on such amount by placing such amount on deposit for a comparable period
with leading banks in the interbank eurodollar market. A certificate as
to any amounts payable pursuant to this subsection 4.11 submitted by any
Lender to the Borrower (with a copy to the Administrative Agent) shall be
conclusive in the absence of manifest error. This covenant shall survive
the termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder.
4.12 Change of Lending Office. Each Lender agrees that if it
makes any demand for payment under subsection 4.9 or 4.10(a), or if any
adoption or change of the type described in subsection 4.8 shall occur
with respect to it, it will use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions and so long as such
efforts would not be disadvantageous to it, as determined in its sole
discretion) to designate a different lending office if the making of such a
designation would reduce or obviate the need for the Borrower to make payments
under subsection 4.9 or 4.10(a), or would eliminate or reduce the effect of
any adoption or change described in subsection 4.8.
4.13 Evidence of Debt. (a) Each Lender shall maintain in
accordance with its usual practice an account or accounts evidencing
indebtedness of the Borrower to such Lender resulting from the Loans of such
Lender, including the amounts of principal and interest payable and paid to
such Lender from time to time under this Agreement.
(b) The Administrative Agent shall maintain the Register
pursuant to subsection 11.6(d), and a subaccount therein for each Lender, in
which shall be recorded (i) in the case of Committed Loans and/or Bilateral
Option Loans, the amount of each Committed Loan or Bilateral Option Loan made
hereunder, the Type thereof and each Interest Period (if any) applicable
thereto, (ii) in the case of CAF Advances, the amount of each CAF Advance
made hereunder, the CAF Advance Maturity Date thereof, the interest rate
applicable thereto and each CAF Advance Interest Payment Date applicable
thereto, (iii) the amount of any principal or interest due and payable or
to become due and payable from the Borrower to each Lender hereunder and (iv)
both the amount of any sum received by the Administrative Agent hereunder
from the Borrower and each Lender's share thereof.
(c) The entries made in the Register and the accounts of each
Lender maintained pursuant to subsection 4.13(a) shall, to the extent
permitted by applicable law, be prima facie evidence of the existence
and amounts of the obligations of the Borrower therein recorded; provided,
however, that the failure of any Lender or the Administrative Agent to
maintain the Register or any such account, or any error therein, shall not
in any manner affect the obligation of the Borrower to repay (with
applicable interest) the Loans in accordance with the terms of this
Agreement.
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(d) The Borrower agrees that, upon the request to the
Administrative Agent by any Lender, the Borrower will execute and deliver to
such Lender a promissory note of the Borrower evidencing the
Revolving Credit Loans of such Lender, substantially in the form of
Exhibit G (a "Revolving Credit Note"), payable to the order of such Lender
and in a principal amount equal to the Revolving Credit Commitment of such
Lender on the date of issuance of such Revolving Credit Note. Each Lender is
hereby authorized to record the date, Type and amount of each Revolving Credit
Loan of such Lender, the date and amount of each payment or prepayment of
principal thereof, each continuation of all or a portion thereof as the same
Type, each conversion of all or a portion thereof to another Type and, in
the case of Eurodollar Loans, the length of each Interest Period and
Eurodollar Rate with respect thereto, on the schedule (or any continuation
of the schedule) annexed to and constituting a part of its Revolving Credit
Note, as the case may be, and any such recordation shall, to the extent
permitted by applicable law, constitute prima facie evidence of the
accuracy of the information so recorded, provided that the failure to
make any such recordation (or any error therein) shall not affect the
obligation of the Borrower to repay (with applicable interest) the Revolving
Credit Loans in accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the
Administrative Agent by the Swing Line Lender, the Borrower will execute and
deliver to the Swing Line Lender a promissory note of the Borrower evidencing
the Swing Line Loans of the Swing Line Lender, in a form
reasonably satisfactory to the Borrower and the Swing Line Lender (a "Swing
Line Note"), payable to the order of the Swing Line Lender and in a
principal amount equal to the Swing Line Commitment. The Swing Line Lender
is hereby authorized to record the date and amount of each Swing Line Loan and
the date and amount of each payment or prepayment of principal thereof on
the schedule (or any continuation of the schedule) annexed to and
constituting a part of its Swing Line Note, as the case may be, and any
such recordation shall, to the extent permitted by applicable law,
constitute prima facie evidence of the accuracy of the information so
recorded, provided that the failure to make any such recordation (or any
error therein) shall not affect the obligation of the Borrower to repay
(with applicable interest) the Swing Line Loans in accordance with the
terms of this Agreement.
(f) The Borrower agrees that, upon the request to the
Administrative Agent by any Lender, the Borrower will execute and deliver to
such Lender a promissory note of the Borrower evidencing the CAF
Advances of such Lender, substantially in the form of Exhibit I (a "CAF
Advance Note"), payable to the order of such Lender and representing the
obligation of the Borrower to pay the lesser of (a) the aggregate amount
of the Revolving Credit Commitments and (b) the unpaid principal amount of all
CAF Advances made by such Lender, with interest on the unpaid principal
amount from time to time outstanding of each CAF Advance evidenced
thereby as prescribed in subsection 3.16(b). Each Lender is hereby
authorized to record the date and amount of each CAF Advance made by such
Lender, the CAF Advance Maturity Date thereof, the date and amount of each
payment of principal thereof and the interest rate with respect thereto
on the schedule (or any continuation of the schedule) annexed to and
constituting a part of its CAF Advance Note and any such recordation
shall, to the extent permitted by applicable law, constitute prima facie
evidence of the accuracy of the information so recorded, provided that
the failure to make any such recordation (or any error therein) shall not
affect the obligation of the Borrower to repay (with applicable interest)
the CAF Advances in accordance with the terms of this Agreement. Each CAF
Advance Note shall be dated the Initial Closing Date, and each CAF Advance
evidenced thereby shall bear interest for the period from and including
the Borrowing Date of such CAF Advance on the unpaid principal amount
thereof from time to time outstanding at the applicable rate per annum
determined as provided in, and such interest shall be payable as specified
in, subsection 3.16(b).
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SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into
this Agreement and to make the Extensions of Credit, the Borrower hereby
represents and warrants to the Administrative Agent and each Lender that:
5.1 Financial Condition. The consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as at January 29, 1997 and the
related consolidated statements of income and of cash flows for the Fiscal
Year ended on such date, reported on by Price Waterhouse LLP, copies of
which have heretofore been furnished to each Lender, are complete and
correct in all material respects and present fairly the consolidated
financial condition of the Borrower and its Consolidated Subsidiaries
as at such date, and the consolidated results of their operations and their
consolidated cash flows for the Fiscal Year then ended. All such
financial statements, including the related schedules and notes thereto,
have been prepared in accordance with GAAP applied consistently throughout
the periods involved (except as approved by such accountants or Responsible
Officer, as the case may be, and as disclosed therein). Except as set
forth on Schedule 5.1 or as permitted by the Existing Credit Agreement,
neither the Borrower nor any of its Consolidated Subsidiaries had, at the
date of the most recent balance sheet referred to above, any material
Guarantee Obligation, material contingent liability or liability for taxes, or
any material long-term lease or unusual forward or long-term commitment,
including, without limitation, any interest rate or foreign currency swap
or exchange transaction, which is not reflected in the foregoing
statements or in the notes thereto. Except as set forth on Schedule 5.1
or as permitted by the Existing Credit Agreement, during the period from
January 29, 1997 to and including the date hereof there has been no sale,
transfer or other disposition by the Borrower or any of its Consolidated
Subsidiaries of any material part of its business or property and no purchase
or other acquisition of any business or property (including any capital
stock of any other Person) material in relation to the consolidated
financial condition of the Borrower and its Consolidated Subsidiaries at
January 29, 1997.
5.2 No Change. Since January 29, 1997, there has been no
development or event which has had or could reasonably be expected to have
a Material Adverse Effect.
5.3 Corporate Existence; Compliance with Law. Each of the Borrower
and its Restricted Subsidiaries (a) is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization,
(b) has the corporate power and authority, and the legal right, to own and
operate its property, to lease the property it operates as lessee and to
conduct the business in which it is currently engaged, (c) is duly
qualified as a foreign corporation and in good standing under the laws of
each jurisdiction where its ownership, lease or operation of property or the
conduct of its business requires such qualification and (d) is in compliance
with all Requirements of Law except, in each case, where the failure
to be so organized, existing, in good standing or qualified, or the
failure to have such power or authority or to so comply, could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
5.4 Corporate Power; Authorization; Enforceable Obligations.
Each of the Borrower and its Restricted Subsidiaries has the corporate
power and authority, and the legal right, to make, deliver and perform the
Loan Documents to which it is a party and (in the case of the Borrower) to
borrow and obtain the other Extensions of Credit hereunder and has taken all
necessary corporate action to authorize the Extensions of Credit on the terms
and conditions of this Agreement and any Notes and to authorize the
execution, delivery and performance of the Loan Documents to which it is a
party. No consent or authorization of, filing with, notice to, or other act
by or in respect of, any Governmental Authority or any other Person is
required in connection with the Extensions of Credit
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hereunder or with the execution, delivery, performance, validity or
enforceability of the Loan Documents to which the Borrower or any of its
Restricted Subsidiaries is a party except as may be necessary to perfect the
Liens created pursuant to the Security Documents and the Trust Agreement and
except those described on Schedule 5.4, all of which have been obtained,
made or waived. This Agreement has been, and each other Loan Document will
be, duly executed and delivered on behalf of the Borrower and each of its
Restricted Subsidiaries that is a party thereto. This Agreement
constitutes, and each other Loan Document when executed and delivered will
constitute, a legal, valid and binding obligation of the Borrower
and each of its Restricted Subsidiaries that is a party thereto
enforceable against the Borrower and each such Restricted Subsidiary in
accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally,
general equitable principles (whether considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing.
5.5 No Legal Bar. The execution, delivery and performance
of the Loan Documents to which the Borrower or any of its Restricted
Subsidiaries is a party, the Extensions of Credit hereunder and the use of
the proceeds thereof will not violate any Requirement of Law or Contractual
Obligation of the Borrower or of any of its Restricted Subsidiaries and will
not result in, or require, the creation or imposition of any Lien on any of
its or their respective properties or revenues pursuant to any such
Requirement of Law or Contractual Obligation (other than pursuant to the Loan
Documents), except to the extent that any such violations (individually
or in the aggregate) could not reasonably be expected to have a Material
Adverse Effect.
5.6 No Material Litigation. No litigation, investigation
or proceeding of or before any arbitrator or Governmental Authority is
pending or, to the knowledge of the Borrower, threatened by or against the
Borrower or any of its Restricted Subsidiaries or against any of its or their
respective properties or revenues (a) with respect to any of the Loan
Documents or any of the transactions contemplated hereby or thereby or
(b) which could reasonably be expected to have a Material Adverse Effect.
5.7 No Default. Neither the Borrower nor any of its Restricted
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect which could reasonably be expected to have a
Material Adverse Effect. After giving effect to the initial Extensions of
Credit and the application of the proceeds thereof, no Default or Event
of Default has occurred and is continuing.
5.8 No Burdensome Restrictions. No Requirement of Law or
Contractual Obligation of the Borrower or any of its Restricted Subsidiaries
could reasonably be expected to have a Material Adverse Effect.
5.9 Taxes. Each of the Borrower and its Restricted Subsidiaries
has filed or caused to be filed all tax returns which, to the knowledge of
the Borrower, are required to be filed and has paid all taxes shown to be
due and payable on said returns or on any assessments made against it or
any of its property (including, without limitation, any Material Real
Property) and all other taxes, fees or other charges imposed on it or any of
its property by any Governmental Authority (other than any such taxes, fees
or other charges (i) the amount or validity of which are then being
contested in good faith by appropriate proceedings and with respect to
which reserves in conformity with GAAP have been provided on the books
of the Borrower or its Subsidiaries, as the case may be, or (ii) which, if
not paid, could reasonably be expected to have a Material Adverse Effect);
no tax Lien has been filed, and, to the knowledge of the Borrower,
no claim is being asserted, with respect to any such tax, fee or
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other charge (other than with respect to any such tax, fee or other charge
the amount or validity of which is then being contested in good faith
by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of the Borrower or its
Subsidiaries, as the case may be) which could reasonably be expected to
have a Material Adverse Effect.
5.10 Federal Regulations. No part of the proceeds of any
Extension of Credit will be used for "purchasing" or "carrying" any
"margin stock" within the respective meanings of each of the quoted terms
under Regulation G or Regulation U of the Board of Governors as now and from
time to time hereafter in effect. If requested by any Lender or the
Administrative Agent, the Borrower will furnish to the Administrative Agent
and each Lender a statement to the foregoing effect in conformity with the
requirements of FR Form G-1 or FR Form U-1 referred to in said Regulation G
or Regulation U, as the case may be.
5.11 ERISA. Neither a Reportable Event nor an "accumulated
funding deficiency" (within the meaning of Section 412 of the Code or Section
302 of ERISA) which could reasonably be expected to have a Material Adverse
Effect has occurred during the five-year period prior to the date on
which this representation is made or deemed made with respect to any Plan.
Each Plan has complied in all material respects with the applicable
provisions of ERISA and the Code, except where the failure to so comply
could not reasonably be expected to have a Material Adverse Effect. No
termination of a Single Employer Plan has occurred, except where such a
termination could not reasonably be expected to have a Material Adverse
Effect, and no Lien in favor of the PBGC or a Plan has arisen, during
such five-year period. The present value of all accrued benefits under
each Single Employer Plan (based on those assumptions used to fund such Plan)
did not, as of the last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets of such
Plan allocable to such accrued benefits, except to the extent any such
excess (individually or in the aggregate) could not reasonably be
expected to have a Material Adverse Effect. Neither the Borrower nor any
Commonly Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan, except where such withdrawal could not reasonably be
expected to have a Material Adverse Effect, and neither the Borrower
nor any Commonly Controlled Entity would become subject to any liability
under ERISA if the Borrower or any such Commonly Controlled Entity were to
withdraw completely from all Multiemployer Plans as of the valuation date
most closely preceding the date on which this representation is made or
deemed made, except where such liability could not reasonably be expected
to have a Material Adverse Effect. No such Multiemployer Plan is in
Reorganization or Insolvency.
5.12 Investment Company Act; Other Regulations. The Borrower is
not an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as
amended. To the best knowledge of the Borrower, the Borrower is not subject
to regulation under any federal or state statute or regulation (other than
Regulation X of the Board of Governors) which limits its ability to incur
Indebtedness.
5.13 Subsidiaries. Schedule 5.13 sets forth all the Subsidiaries
of the Borrower at the date hereof.
5.14 Environmental Matters. To the best knowledge of the Borrower:
(a) The Mortgaged Properties do not contain, and have not
previously contained, any Materials of Environmental Concern in
amounts or concentrations or under such conditions which (i)
constitute or constituted a violation of, or (ii) could reasonably be
expected to give
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rise to liability under, any Environmental Law, except in either case
insofar as such violation or liability, or any aggregation thereof,
could not reasonably be expected to have a Material Adverse Effect.
(b) The Mortgaged Properties and all operations at the Mortgaged
Properties are in compliance, and have within the periods covered by
the applicable statute of limitations been in compliance, in all
material respects with all applicable Environmental Laws, and there is
no contamination at, under or about the Mortgaged Properties or violation
of any Environmental Law with respect to the Mortgaged Properties
or the business operated by the Borrower or any of its Restricted
Subsidiaries (the "Business") which could reasonably be expected to have
a Material Adverse Effect.
(c) Neither the Borrower nor any of its Subsidiaries has received
any notice of violation, alleged violation, non-compliance, liability
or potential liability regarding environmental matters or compliance
with Environmental Laws with regard to any of the Mortgaged
Properties or the Business, nor does the Borrower have knowledge or
reason to believe that any such notice will be received or is being
threatened, except insofar as such notice or threatened notice, or
any aggregation thereof, does not involve a matter or matters that
could reasonably be expected to have a Material Adverse Effect.
(d) Materials of Environmental Concern have not been transported
or disposed of from the Mortgaged Properties in violation of, or in a
manner or to a location which could reasonably be expected to give rise
to liability under, any Environmental Law, nor have any Materials of
Environmental Concern been generated, treated, stored or disposed of at,
on or under any of the Mortgaged Properties in violation of, or in a
manner that could reasonably be expected to give rise to liability
under, any applicable Environmental Law except insofar as any such
violation or liability referred to in this paragraph, or any aggregation
thereof, could not reasonably be expected to have a Material Adverse
Effect.
(e) No judicial proceeding or governmental or administrative action
is pending or threatened under any Environmental Law to which the
Borrower or any Restricted Subsidiary is or will be named as a party with
respect to the Mortgaged Properties or the Business, nor are there any
consent decrees or other decrees, consent orders, administrative orders
or other orders, or other administrative or judicial requirements
outstanding under any Environmental Law with respect to the Mortgaged
Properties or the Business except insofar as such proceeding, action,
decree, order or other requirement, or any aggregation thereof, could
not reasonably be expected to have a Material Adverse Effect.
(f) There has been no release or threat of release of Materials of
Environmental Concern at or from the Mortgaged Properties, or arising
from or related to the operations of the Borrower or any Restricted
Subsidiary in connection with the Mortgaged Properties or otherwise in
connection with the Business, in violation of or in amounts or in a
manner that could reasonably give rise to liability under Environmental
Laws except insofar as any such violation or liability referred to
in this paragraph, or any aggregation thereof, could not reasonably be
expected to have a Material Adverse Effect.
(g) Each of the representations and warranties set forth in
subsections 5.14(a) through (f) is true and correct with respect to each
parcel of real property owned or operated by the Borrower or any of its
Restricted Subsidiaries (other than the Mortgaged Properties) except to
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the extent that the facts and circumstances giving rise to any such
failure to be so true and correct could not reasonably be expected
to have a Material Adverse Effect.
5.15 The Security Documents. (a) The provisions of the Security
Agreement are effective to create in favor of the Trustee a legal and valid
security interest in all right, title and interest of the Borrower or any
Subsidiary Guarantor party thereto in the collateral described therein
(subject to Section 10 thereof), and when the financing statements referred
to on Schedule 5.15 and subsection 7.11(a)(ii) have been filed as
specified in Schedule 5.15 and subsection 7.11(a)(ii), the Trustee has a
fully perfected security interest in all right, title and interest of the
Borrower or such Subsidiary Guarantor, as the case may be, in all
"accounts", "chattel paper", "inventory" or "general intangibles" (other
than "uncertificated securities") (each as defined in the applicable
uniform commercial code) described in such financing statements, all other
UCC Filing Collateral (other than UCC Local Filing Collateral)
described in such financing statements and, to the best knowledge of the
Borrower, all UCC Local Filing Collateral described in such financing
statements, in each case superior (to the extent that priority can be
obtained by filing uniform commercial code financing statements) in right
to any Liens of any third person against such collateral or interests
therein, subject only to Liens permitted under subsection 8.4 (other than
subsection 8.4(k));
(b) The provisions of the Pledge Agreement, together with
possession by the Trustee (or any agent acting on its behalf) of the
Pledged Securities described therein (or, in the case of Pledged Securities
constituting "securities" (as defined in the applicable uniform commercial
code), together with the "transfer" to the Trustee (or any agent acting on its
behalf) of such Pledged Securities in accordance with the applicable uniform
commercial code), are effective to create in favor of the Trustee a legal and
valid security interest in all right, title and interest of the Borrower
or any Subsidiary Guarantor party thereto, as the case may be, in the
Pledged Securities (subject to Section 14 of the Pledge Agreement). The
Trustee has a fully perfected security interest in the Pledged Stock and
all other Pledged Securities described in the Pledge Agreement which are
then in the possession of the Trustee (or any agent acting on its behalf) (or,
in the case of Pledged Securities constituting "securities" (as defined
in the applicable uniform commercial code), which have been "transferred" to
the Trustee (or any agent acting on its behalf) in accordance with the
applicable uniform commercial code), which security interest is (i) in the
case of Pledged Stock, superior in right to any Liens of any third person
against such collateral or interests therein, subject to Section 14 of the
Pledge Agreement and to Liens permitted under subsection 8.4(a) and
(ii) in the case of all other Pledged Securities, superior (to the extent
that priority can be obtained by possession or "transfer" of such other
Pledged Securities) in right to any Liens of any third person against such
collateral or interests therein, subject to Section 14 of the Pledge
Agreement and to Liens permitted by subsection 8.4(a);
(c) Each Mortgage is effective to create in favor of the Trustee,
a legal, valid and enforceable Lien on all right, title and interest of the
Borrower or any Subsidiary Guarantor party thereto, as the case may be,
in the Mortgaged Property thereunder. When each Mortgage and the related
fixture filings are duly recorded in the appropriate office or offices and
the mortgage recording fees and taxes in respect thereof are paid and
compliance is otherwise had with the formal requirements of state law
applicable to the recording of real estate mortgages generally, such
Mortgage shall constitute a fully perfected Lien on and security interest in
such Mortgaged Property (prior to all mortgages on the Mortgaged Property
other than those which have been assigned to the Trustee), subject only to
the encumbrances and exceptions to title expressly set forth or referred to
in such Mortgage, and to Liens permitted by subsection 8.4 (other than
subsection 8.4(k));
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subject, in the case of clauses (a) through (c) above, to bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and to principles of equity whether
considered in a proceeding in equity or at law.
5.16 Ownership of Property; Liens. Each of the Borrower and
each Restricted Subsidiary has good title in fee simple to, or valid
ground leasehold interests in, their respective Material Real Properties
and has good title in fee simple to their other owned real property that is
material to the operation of their respective businesses, subject to defects
in title and leasehold and other interests which are not material to the
business, operations and financial condition of the Borrower and its
Restricted Subsidiaries taken as a whole and other than those items referred
to in the applicable Mortgages or in the schedules to the applicable
Mortgages, and none of such property is subject to any Lien other than
Liens permitted under subsection 8.4.
5.17 Intellectual Property. The Borrower and each of its
Restricted Subsidiaries owns, or is licensed to use, all trademarks,
tradenames, copyrights, technology, know-how and processes necessary for
the conduct of its business as currently conducted except for those the
failure to own or license which could not reasonably be expected to have a
Material Adverse Effect (the "Intellectual Property"). Except as set
forth on Schedule 5.17, no claim has been asserted and is pending by any
Person challenging or questioning the use of any such Intellectual
Property or the validity or effectiveness of any such Intellectual Property,
which could reasonably be expected to have a Material Adverse Effect, nor
does the Borrower know of any valid basis for any such claim. Except as
set forth on Schedule 5.17, the use of such Intellectual Property by the
Borrower and its Restricted Subsidiaries does not infringe on the rights of any
Person, except for such claims and infringements that, in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
5.18 Pledged Stock. On the Effective Date, the shares of Capital
Stock listed on Schedule A to the Pledge Agreement will constitute all the
issued and outstanding shares of Capital Stock of the issuers thereof listed on
said Schedule owned by the Borrower or the Subsidiary Guarantors party to
the Pledge Agreement; all such shares have been duly and validly issued and
are fully paid and nonassessable; the relevant Pledgor of said shares is the
record and beneficial owner of said shares; and said shares are free of
any Liens or options in favor of, or claims of, any other Person, except
the Lien of the Pledge Agreement (subject to Section 14 thereof) and
Liens permitted under subsection 8.4(a).
5.19 Real Estate Matters. (a) The real property described on
Schedule 5.19(a) constitutes all of the Material Real Property of the Borrower
or any Subsidiary Guarantor on the date hereof. The Borrower shall have the
right to supplement Schedule 5.19(a) at any time prior to the Effective Date
to add additional parcels of real property by written notice thereof to the
Administrative Agent on or prior to the Effective Date.
(b) Schedule 5.19(b) sets forth a true and complete list as of
the date hereof of all mortgages and deeds of trust (collectively, as
amended, supplemented, substituted, replaced or otherwise modified from time
to time, the "Put Bond Mortgages") pursuant to which a Lien has been
granted on real property to secure the Repurchased Put Bonds.
(c) Schedule 5.19(c) sets forth a true and complete list of all
real property owned by the Big Beaver Joint Ventures as of the date hereof.
5.20 Continuing Letters of Credit. Schedule 5.20 is a true and
complete list, by reference to the aggregate face amounts of letters of
credit issued by the Persons listed thereon that are
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also Lenders (but which are not designated as Issuing Banks pursuant to
clause (a) or the last sentence of the definition of Issuing Bank) of
letters of credit issued by such Persons outstanding as of the dates set
forth in such Schedule.
5.21 Solvency. As of the Effective Date and each date on which an
Extension of Credit is made hereunder, after giving effect to the
transactions contemplated to occur on the Effective Date or on such other date,
the Borrower is Solvent.
5.22 Purpose of Loans. The proceeds of the Revolving Credit Loans,
Swing Line Loans, Bilateral Option Loans and CAF Advances, if any, shall be
used for general corporate purposes.
5.23 Accuracy of Information. All statements and other
information (other than statements and information constituting
projections) contained in any written documents or other materials provided
to the Administrative Agent and the Lenders by the Borrower, including all
such statements and other information contained in the Preliminary
Confidential Information Memorandum dated April 1997 (as supplemented
through the date hereof, the "Information Memorandum"), are, when taken
as a whole, correct in all material respects and do not contain any untrue
statements of a material fact or omit to state a material fact necessary in
order to make the statements contained therein not materially misleading in
light of the circumstances under which such statements were made. All
statements and other information constituting projections which are
contained in any written documents or other materials provided to
the Administrative Agent and the Lenders by the Borrower, including the
Information Memorandum, were prepared based on good faith estimates and
assumptions of the Borrower believed to be reasonable at the time such
projections were prepared.
SECTION 6. CONDITIONS
6.1 Conditions to Effectiveness. This agreement shall become
effective upon the satisfaction or waiver of the following conditions (except
that subsections 11.22(c) and (d) shall become effective upon satisfaction of
the condition set forth in Section 6.1(i)):
(a) Execution of Loan Documents and Addenda. The Administrative
Agent shall have received (i) this Agreement, executed and delivered by a
duly authorized officer of the Borrower, with a counterpart for the
Administrative Agent and each Lender, (ii) an executed Addendum (or a
copy thereof by facsimile transmission) from each Person listed on
Schedule 1.1(a), provided, that, notwithstanding the foregoing, in the
event that an Addendum has not been duly executed and delivered by each
Person listed on Schedule 1.1(a) on the date (which shall be no earlier
than the date hereof) on which this Agreement shall have been executed and
delivered by each of the Borrower and the Administrative Agent, the
condition set forth in this subsection 6.1(a)(ii) shall, subject to
satisfaction of the other conditions precedent set forth in this
subsection 6.1, nevertheless be satisfied on such date with respect to
those Persons which have executed and delivered an Addendum on or
before such date if on such date the Borrower and the Administrative
Agent shall have designated one or more banks, financial institutions
or other entities ("Designated Lenders") to assume, in the aggregate,
all of the Commitments which would have been held by the Persons listed on
Schedule 1.1(a) (the "Non-Executing Persons") which have not so
executed an Addendum (subject to each such Designated Lender's prior
written consent in its sole discretion and its execution of an Addendum)
(Schedule 1.1(a) shall automatically be deemed to be amended to reflect
the respective Commitments of the Designated Lenders and the omission of
the Non-Executing
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Persons as Lenders hereunder) and (iii) a Consent, executed and
delivered by a duly authorized officer of each Subsidiary
Guarantor, consenting to the amendment of the Existing Credit
Agreement pursuant to this Agreement and otherwise in form and
substance reasonably satisfactory to the Administrative Agent.
(b) Closing Certificate. The Administrative Agent shall have
received, with a copy for each Lender, a certificate of the
Borrower, dated the Effective Date, substantially in the form of
Exhibit I, with appropriate insertions and attachments, satisfactory
in form and substance to the Administrative Agent, executed by the
President or any Vice President and the Secretary or any Assistant
Secretary of the Borrower.
(c) Borrower Incumbency Certificate. The Administrative Agent
shall have received, with a copy for each Lender, a certificate of
the Borrower, dated the Effective Date, as to the incumbency and
signature of the officers of the Borrower executing any Loan Document
satisfactory in form and substance to the Administrative Agent, executed
by the President or any Vice President and the Secretary or any Assistant
Secretary of the Borrower.
(d) Subsidiary Incumbency Certificates. The Administrative
Agent shall have received, with a copy for each Lender, a certificate
of each Restricted Subsidiary of the Borrower which is a party to a Loan
Document, dated the Effective Date, as to the incumbency and signature
of the officers of such Subsidiary acknowledging and consenting to the
execution and delivery of this Agreement by the Borrower, satisfactory
in form and substance to the Administrative Agent, executed by the
President or any Vice President and the Secretary or any Assistant
Secretary of such Subsidiary.
(e) Legal Opinions. The Administrative Agent shall have received,
with a copy for each Lender, the following executed legal opinions:
(i) the executed legal opinion of Skadden, Arps, Slate,
Meagher & Flom LLP, counsel to the Borrower and the other Loan
Parties, substantially in the form of Exhibit J-1;
(ii) the executed legal opinion of Anthony N. Palizzi,
general counsel of the Borrower, substantially in the form of
Exhibit J-2; and
(iii) the executed legal opinion of Simpson Thacher &
Bartlett, counsel to the Administrative Agent and the Lenders,
substantially in the form of Exhibit J-3.
Each such legal opinion shall cover such matters incident to the
transactions contemplated by this Agreement as the Administrative
Agent may reasonably require.
(f) UCC Lien Searches. The Administrative Agent shall have
received the results of a recent lien search in such jurisdictions as
shall be satisfactory to the Administrative Agent which shall reflect
the filings made in such jurisdictions to perfect the Liens granted
pursuant to the Security Documents and shall otherwise be in form
and substance reasonably satisfactory to the Administrative Agent.
(g) Borrowing Base Certificate. The Administrative Agent shall
have received the most recent Borrowing Base Certificate required to be
delivered pursuant to subsection 7.2(c)
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of the Existing Credit Agreement, executed and delivered by a duly
authorized officer of the Borrower.
(h) Exiting Revolving Credit Lenders. The Administrative Agent
shall have received evidence satisfactory to it that (i) all Revolving
Credit Loans (as defined in the Existing Credit Agreement) of the
Revolving Credit Lenders (as defined in the Existing Credit Agreement)
which will not execute and deliver an Addendum (and will not have a
Revolving Credit Commitment hereunder) with respect to this Agreement
("Exiting Revolving Credit Lenders") shall have been or shall
concurrently be repaid in full, together with any accrued interest
thereon and any accrued fees payable to such Exiting Revolving Credit
Lenders under the Existing Credit Agreement to but excluding the Effective
Date, and (ii) the Revolving Credit Commitments (as defined in the
Existing Credit Agreement) of such Exiting Revolving Credit Lenders
shall have been or shall concurrently be terminated.
(i) Majority Lenders under Existing Credit Agreement. The
Administrative Agent shall have received Addenda from Revolving Credit
Lenders (as defined in the Existing Credit Agreement) which constitute
Majority Lenders and Majority Revolving Credit Lenders (as such terms
are defined in the Existing Credit Agreement).
(j) Additional Matters. All corporate and other proceedings,
and all documents, instruments and other legal matters in connection with
the transactions contemplated by this Agreement and the other Loan
Documents shall be reasonably satisfactory in form and substance
to the Administrative Agent, and the Administrative Agent shall have
received such other documents and legal opinions in respect of any
aspect or consequence of the transactions contemplated hereby or
thereby as it shall reasonably request.
6.2 Conditions to Each Extension of Credit. The agreement of
each Lender to make any Extension of Credit requested to be made by
it on any date (including, without limitation, its initial Extension of
Credit) is subject to the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by the Loan Parties in or pursuant
to the Loan Documents (excluding those set forth on Schedule 1.1(b)
and excluding, on and after the Collateral Release Date, the
representations and warranties contained in subsections 5.15, 5.18 and
5.19) shall be true and correct in all material respects on and as of
such date as if made on and as of such date.
(b) No Default. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the Extension of
Credit requested to be made on such date.
(c) Borrowing Base. After giving effect to the Extensions
of Credit requested to be made on any such date prior to the Collateral
Release Date and the use of proceeds thereof, the Aggregate Revolving
Credit Outstandings at such time shall not exceed the Borrowing Base at
such time.
Each Extension of Credit to the Borrower hereunder shall constitute a
representation and warranty by the Borrower as of the date thereof that the
conditions contained in this subsection have been satisfied.
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SECTION 7. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments
remain in effect or any Letter of Credit remains outstanding or any
amount is owing to any Lender or the Administrative Agent hereunder or
under any other Loan Document, the Borrower shall and (except in the case
of delivery of financial information, reports and notices) shall cause each
of its Restricted Subsidiaries to:
7.1 Financial Statements. Furnish to the Administrative Agent
with a copy for each Lender:
(a) as soon as available, but in any event within 95 days after
the end of each Fiscal Year of the Borrower, a copy of the consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as at
the end of such year and the related consolidated statements of income
and retained earnings and of cash flows for such year, setting forth in
each case in comparative form the figures as of the end of and for the
previous Fiscal Year, reported on without a qualification arising out
of the scope of the audit, by Price Waterhouse LLP or other
independent certified public accountants of nationally recognized
standing, together with a copy of the Borrower's Form 10-K filed with
the SEC for such Fiscal Year; and
(b) as soon as available, but in any event not later than 50 days
after the end of each of the first three quarterly periods of each
Fiscal Year of the Borrower, the unaudited consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries as at the end of such
quarter and the related unaudited consolidated statements of income and
retained earnings and of cash flows of the Borrower and its Consolidated
Subsidiaries for such quarter and the portion of the Fiscal Year
through the end of such quarter, setting forth in each case in
comparative form the figures for the previous Fiscal Year as set forth
in the Borrower's Form 10-Q filed with the SEC for such quarterly
period, certified by a Responsible Officer as being fairly stated in
all material respects (subject to normal year-end audit
adjustments).
All such financial statements shall be complete and correct in all material
respects (subject to, in the case of the financial statements referred to in
paragraph (b) above, normal year-end adjustments) and shall be prepared in
reasonable detail and in accordance with GAAP applied consistently throughout
the periods reflected therein and with prior periods (except as approved by
such accountants or officer, as the case may be, and disclosed therein).
7.2 Certificates; Other Information. Furnish to the
Administrative Agent with a copy for each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 7.1(a), a certificate of the independent
certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor no
knowledge was obtained of any Default or Event of Default, except as
specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 7.1(a) and (b), a certificate of a
Responsible Officer (i) stating that such Responsible Officer has
obtained no knowledge of any Default or Event of Default with respect to
the period covered by such financial statements except as specified in
such certificate and (ii) setting forth, in reasonable detail, a
calculation of the financial covenants set forth in subsection 8.1 for
the period corresponding to such financial statements;
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(c) on or prior to the twentieth day (or if such day is not a
Business Day, the next succeeding Business Day) following the end of
each fiscal month (other than any fiscal month ending after the
Collateral Release Date), an officer's certificate substantially in the
form of Exhibit K (a "Borrowing Base Certificate"), certified by a
Responsible Officer as true and correct;
(d) concurrently with the delivery of the financial statements
referred to in subsections 7.1(a) and (b), unless the Collateral Release
Date has occurred, a certificate of a Responsible Officer setting forth a
list of all stores and distribution centers owned or leased and
classified as owned by the Borrower or any of its Restricted
Subsidiaries for which a certificate of occupancy or a temporary
certificate of occupancy has been issued during the period covered by
such financial statements;
(e) not later than 90 days after the beginning of each Fiscal Year
of the Borrower, a copy of the projections by the Borrower of the
operating budget and cash flow budget of the Borrower and its Subsidiaries
for such Fiscal Year, such projections to be accompanied by a
certificate of a Responsible Officer to the effect that such projections
have been prepared on the basis of assumptions believed to have been
reasonable when made;
(f) promptly after the same are sent, copies of all financial
statements and reports which the Borrower sends to its stockholders, and
promptly after the same are filed, copies of all reports on Form 8-K
which the Borrower may make to, or file with, the SEC; and
(g) promptly, such additional financial and other information
as the Administrative Agent (on behalf of itself or any Lender) may from
time to time reasonably request.
7.3 Payment of Obligations. Pay, discharge or otherwise satisfy
at or before maturity or before they become delinquent, as the case may be,
all its obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have
been provided on the books of the Borrower or its Subsidiaries, as the case may
be, and except where the failure to so pay, discharge or otherwise satisfy
such obligation could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
7.4 Conduct of Business and Maintenance of Existence. Continue to
engage in business of the same general type as now conducted by the
Borrower and its Restricted Subsidiaries and preserve, renew and keep in
full force and effect its corporate existence and take all reasonable action
to maintain all rights, privileges and franchises necessary or desirable in
the normal conduct of its business except as otherwise permitted pursuant to
subsection 8.5 and except where the failure to maintain such rights,
privileges and franchises could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect; comply with all
Contractual Obligations and Requirements of Law except to the extent that
failure to comply therewith could not, individually or in the aggregate,
be reasonably expected to have a Material Adverse Effect.
7.5 Maintenance of Property; Insurance. Keep its property
necessary in its business in good working order and condition, ordinary
wear and tear excepted, if the failure to do so could reasonably be expected
to have a Material Adverse Effect; maintain with financially sound and
reputable insurance companies insurance on all its property in at least such
amounts and against at least such risks as are usually insured against in the
same general area by similar companies of comparable size engaged in the
same or a similar business and owning or operating similar properties
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in localities where the Borrower and its Restricted Subsidiaries operate and
furnish upon the written request of the Administrative Agent
information as to the insurance carried.
7.6 Inspection of Property; Books and Records; Discussions.
Keep proper books of records and account in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall be
made of all dealings and transactions in relation to its business and
activities; and permit representatives of the Administrative Agent, at
the request of any Lender, to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any
reasonable time and as often as may reasonably be desired and to discuss the
business, operations, properties and financial and other condition of the
Borrower and its Restricted Subsidiaries with officers and employees of
the Borrower and its Restricted Subsidiaries and in the presence of a
Responsible Officer with its independent certified public accountants.
7.7 Notices. Promptly give notice to the Administrative Agent
(which shall promptly give notice thereof to each Lender) of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Restricted Subsidiaries
which could reasonably be expected to have a Material Adverse Effect
or (ii) litigation, investigation or proceeding which may exist at
any time between the Borrower or any of its Subsidiaries and any
Governmental Authority, which (A) in the case of any such litigation,
investigation or proceeding in the ordinary course of business, could
reasonably be expected to have a Material Adverse Effect and (B) in the
case of any other litigation, investigation or proceeding, if
adversely determined, could reasonably be expected to have a Material
Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or
any of its Subsidiaries in which the amount involved is $50,000,000 or
more to the extent not covered by insurance or in which injunctive or
similar relief is sought which (A) in the case of any such litigation, or
proceeding in the ordinary course of business, could reasonably be
expected to have a Material Adverse Effect and (B) in the case of any
other litigation or proceeding, if adversely determined, could
reasonably be expected to have a Material Adverse Effect; and
(d) the following events, as soon as possible and in any event
within 30 days after the Borrower knows or has reason to know
thereof: (i) the occurrence or expected occurrence of any Reportable
Event with respect to any Plan, a failure to make any required
contribution to a Plan, the creation of any Lien in favor of the PBGC
or a Plan or any withdrawal from, or the termination, Reorganization or
Insolvency of, any Multiemployer Plan which, in any case, could
reasonably be expected to have a Material Adverse Effect or (ii) the
institution of proceedings or the taking of any other action by the
PBGC or the Borrower or any Commonly Controlled Entity or any
Multiemployer Plan with respect to the withdrawal from, or the
termination, Reorganization or Insolvency of, any Plan which, in any
case, could reasonably be expected to have a Material Adverse
Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of
a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Borrower proposes to take with respect
thereto.
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7.8 Environmental Laws. (a) Comply with all applicable Environmental
Laws and obtain and comply in all material respects with and maintain any and
all licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws except in any such case to the extent that
failure to do so could not be reasonably expected to have a Material Adverse
Effect.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws, except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect, and promptly comply in all material
respects with all lawful orders and directives of all Governmental Authorities
regarding Environmental Laws except to the extent that the same are being
contested in good faith by appropriate proceedings and the pendency of such
proceedings could not be reasonably expected to have a Material Adverse Effect.
7.9 Further Assurances. Upon the request of the Administrative Agent at
any time prior to the Collateral Release Date, promptly perform or cause to be
performed any and all acts and execute or cause to be executed any and all
documents (including, without limitation, financing statements and continuation
statements) for filing under the provisions of the Uniform Commercial Code or
any other Requirement of Law which are necessary or, in the reasonable opinion
of the Administrative Agent, advisable to maintain in favor of the Trustee
Liens on the Collateral that are duly perfected (to the extent that the same
are contemplated to be so perfected under the terms of the Loan Documents) in
accordance with all applicable Requirements of Law.
7.10 Mortgages; Etc. Unless the Collateral Release Date shall have
occurred:
(a) (i) With respect to any parcel of property that qualifies as a
parcel of Material Real Property during any fiscal quarter (other than any
parcel of Material Real Property of the Borrower located in the State of
California, Alaska, Nevada or Washington), on or before the last day of the
succeeding fiscal quarter, execute and deliver to the Administrative Agent a
Mortgage with respect to such parcel of Material Real Property unless (A) a
Lien is granted in favor of third parties on such parcel of Material Real
Property pursuant to subsection 8.4(g), (i), (j) or (k) or (B) the recordation
of such Mortgage would result in the payment of a material mortgage recording
tax and (ii) with respect to any parcel of property that qualifies as a parcel
of Material Real Property of the Borrower during any fiscal quarter which is
located in the State of California, Alaska, Nevada or Washington, on or before
the last day of the succeeding fiscal quarter, execute and deliver a Subsidiary
Mortgage to a Subsidiary Guarantor securing all California Mortgage Notes
issued by the Borrower to such Subsidiary Guarantor then outstanding, together
with an additional California Mortgage Note in an aggregate principal amount,
or an increase in the aggregate principle amount of such outstanding California
Mortgage Notes in an amount, at least equal to the fair market value, as
determined by the Borrower, of such parcel of Material Real Property unless (A)
a Lien is granted in favor of third parties on such parcel of Material Real
Property pursuant to subsection 8.4(g), (i), (j) or (k) or (B) the recordation
of such Subsidiary Mortgage would result in the payment of a material mortgage
recording tax, provided that, upon the occurrence of a Collateral Release
Event, the Borrower and its Restricted Subsidiaries shall not thereafter be
required to (but may) execute any Mortgages or Subsidiary Mortgages pursuant to
this paragraph.
(b) Cause to be delivered to the Corporate Trustee all Repurchased Put
Bonds acquired after the Initial Closing Date to be held by the Corporate
Trustee (or its agent or custodian) as Pledged Securities, subject to the terms
of the Pledge Agreement, as collateral security for the Secured Obligations.
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(c) Cause to be delivered to the Corporate Trustee all California
Mortgage Notes issued on or after the Initial Closing Date to be held by the
Corporate Trustee (or its agent or custodian) as Pledged Securities, subject to
the terms of the Pledge Agreement, as collateral security for the Secured
Obligations, provided that, upon the occurrence of a Collateral Release Event,
the Borrower and its Restricted Subsidiaries shall not thereafter be required
to (but may) deliver any California Mortgage Notes pursuant to this paragraph.
(d) Cause to be delivered to the Corporate Trustee a certificate or
certificates evidencing 65% of the Capital Stock of Kmart Taiwan Limited owned
by Kmart Overseas Corporation promptly upon the receipt thereof by the Borrower
or Kmart Overseas Corporation.
7.11 Additional Collateral. Unless the Collateral Release Date shall
have occurred:
(a) With respect to any assets acquired after the Initial Closing Date
by the Borrower or any Subsidiary Guarantor that are intended to be subject to
the Lien created by any of the Security Documents but which are not so subject
(other than any assets described in subsection 7.10 or paragraph (b), (c) or
(d) of this subsection), promptly (and in any event within 30 days after the
acquisition thereof): (i) execute and deliver to the Administrative Agent such
amendments to the relevant Security Documents or such other documents as the
Administrative Agent shall deem necessary or advisable to grant to the Trustee
a Lien on such assets, (ii) take all actions reasonably deemed necessary or
advisable by the Administrative Agent to cause such Lien to be duly perfected
(to the extent contemplated therein and in the other Loan Documents) in
accordance with all applicable Requirements of Law, including, without
limitation, the filing of financing statements in such jurisdictions as may be
requested by the Administrative Agent (it being agreed that no action shall be
required pursuant to this clause (ii) to perfect a Lien (1) in assets that
would not constitute UCC Filing Collateral or (2) in assets constituting UCC
Filing Collateral if such perfection relates to assets with an aggregate book
value of less than $1,000,000), and (iii) with respect to assets constituting
UCC Filing Collateral with a book value in excess of $1,000,000 that are
perfected under the laws of any jurisdiction, if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described in clauses (i) and (ii) immediately
preceding, which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Administrative Agent.
(b) With respect to any Person that, subsequent to the Initial Closing
Date, becomes a Domestic Subsidiary, promptly upon the request of the
Administrative Agent: (i) execute and deliver to the Trustee a new pledge
agreement or such amendments to the relevant Pledge Agreement as the
Administrative Agent shall deem necessary or advisable to grant to the Trustee
a Lien on the Capital Stock of such Domestic Subsidiary which is owned by the
Borrower or any of its Subsidiaries, (ii) deliver to the Trustee the
certificates representing such Capital Stock, together with undated stock
powers executed and delivered in blank by a duly authorized officer of the
Borrower or such Domestic Subsidiary, as the case may be, (iii) cause such new
Domestic Subsidiary (A) to become a party to the Subsidiaries Guarantee and the
Subsidiaries Security Agreement, in each case pursuant to documentation which
is in form and substance satisfactory to the Administrative Agent, and (B) to
take all actions reasonably deemed necessary or advisable by the Administrative
Agent to cause the Lien created by the Subsidiaries Security Agreement to be
duly perfected (to the extent contemplated therein and in the other Loan
Documents) in accordance with all applicable Requirements of Law, including,
without limitation, the filing of financing statements in such jurisdictions as
may be requested by the Administrative Agent (it being agreed that no action
shall be required pursuant to this clause (iii) to perfect a Lien in assets
that would not constitute UCC Filing Collateral or in assets constituting UCC
Filing Collateral if such perfection relates to assets with an aggregate book
value of less than $1,000,000) and (iv) with respect to assets of any such
Domestic Subsidiary with a book
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value in excess of $1,000,000 that are perfected under the laws of any
jurisdiction, if requested by the Administrative Agent, deliver to the
Administrative Agent legal opinions relating to the matters described in
clauses (i), (ii) and (iii) immediately preceding, which opinions shall be in
form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent.
(c) With respect to any Person that, subsequent to the Initial Closing
Date, becomes a Foreign Subsidiary with a net worth in excess of $10,000,000,
promptly upon the request of the Administrative Agent: (i) execute and deliver
to the Trustee a new pledge agreement or such amendments to the relevant Pledge
Agreement as the Administrative Agent shall deem necessary or advisable to
grant to the Trustee a Lien on the Capital Stock of such Subsidiary which is
owned by the Borrower or any of its Subsidiaries (provided that in no event
shall more than 65% of the Capital Stock of any such Subsidiary be required to
be so pledged) and (ii) deliver to the Trustee any certificates representing
such Capital Stock, together with undated stock powers executed and delivered
in blank by a duly authorized officer of the Borrower or such Subsidiary, as
the case may be, and take or cause to be taken all such other actions under the
law of the jurisdiction of organization of such Foreign Subsidiary as may be
necessary or advisable to perfect such Lien on such Capital Stock.
(d) If the Borrower or any Subsidiary Guarantor shall acquire any
Investment Securities (other than Investment Securities of any issuer
aggregating less than $10,000,000) prior to the Collateral Release Date, such
Loan Party shall deliver certificates representing such Investment Securities
to the Corporate Trustee or its agent or custodian (or otherwise "transfer"
such Investment Security (within the meaning of the applicable uniform
commercial code) to the Corporate Trustee or its agent or custodian), together
with, when necessary or appropriate, undated powers as provided in Section 2(b)
of the Pledge Agreement, to be held by the Corporate Trustee (or its agent or
custodian) as Pledged Securities, subject to the terms of the Pledge Agreement,
as collateral security for the Secured Obligations.
7.12 Cash Equivalents. Except as otherwise permitted by clause (c),
(d), (f), (i) (to the extent applicable), (j) or (k) of subsection 8.4, the
Borrower and each Subsidiary Guarantor will, at all times prior to the
Collateral Release Date, maintain all its Cash Equivalents in accounts
established with a custodian which shall have agreed to hold such property in
the name of the Trustee subject to the provisions of the Pledge Agreement,
provided that the Borrower and the Subsidiary Guarantors shall not be required
to maintain Temporary Cash Equivalent Investments in such accounts to the
extent such investments in such Temporary Cash Equivalent Investments are
reasonably necessary for the operation of the business of the Borrower and the
Subsidiary Guarantors consistent with past practices.
SECTION 8. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect or any Letter of Credit remains outstanding or any amount is owing to
any Lender or the Administrative Agent hereunder or under any other Loan
Document, the Borrower shall not, and (except in the case of subsection 8.1)
shall not permit any of its Restricted Subsidiaries to, directly or indirectly:
8.1 Financial Condition Covenants.
(a) Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio
as of the last day of any fiscal quarter to be less than 1.25 to 1.00.
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(b) Leverage Ratio. Permit at any time the Leverage Ratio to exceed
0.50 to 1.00.
8.2 Limitation on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness of the Borrower (i) under this Agreement and (ii)
under the Convertible Debentures;
(b) (i) Indebtedness of the Borrower to any Subsidiary and of any
Subsidiary Guarantor to the Borrower or any other Subsidiary and (ii)
Indebtedness of the Borrower in respect of cash advances from Meldisco in
anticipation of dividends, income distributions and royalties due from
Meldisco to the Borrower;
(c) Indebtedness of the Borrower and any of its Restricted Subsidiaries
incurred after the Initial Closing Date to finance the acquisition,
construction or completion of fixed or capital assets (whether pursuant to
a loan, a Financing Lease or otherwise), provided that the principal amount
of such Indebtedness shall at no time exceed 100% of the original
acquisition, construction or completion cost, as the case may be, of such
assets;
(d) Indebtedness of Significant Foreign Subsidiaries incurred for
working capital or other operating purposes;
(e) Indebtedness outstanding on the Effective Date;
(f) Indebtedness of a corporation which becomes a Restricted Subsidiary
after the Effective Date, provided that (i) such Indebtedness existed at
the time such corporation became a Restricted Subsidiary and was not
created in anticipation thereof and (ii) immediately after giving effect to
the acquisition of such corporation by the Borrower or any other Restricted
Subsidiary no Default or Event of Default shall have occurred and be
continuing;
(g) Indebtedness in respect of interest rate and currency hedging
transactions entered into in the ordinary course of business and not for
speculative purposes;
(h) subject to subsection 8.9(g), Indebtedness of any Foreign
Subsidiary to the Borrower or any Subsidiary;
(i) Indebtedness not otherwise permitted by this subsection 8.2 not
exceeding (as to the Borrower and all its Restricted Subsidiaries),
together with any then outstanding Qualified Big Beaver Indebtedness,
$500,000,000 in aggregate principal amount at any one time outstanding; and
(j) any refinancings, refundings, renewals or extensions of
Indebtedness permitted hereunder, provided that if the principal amount of
such Indebtedness is increased, such increased amount is permitted to be
incurred under subsection 8.2(i);
provided that, notwithstanding the foregoing, no Indebtedness of any Person
shall be designated as "Permitted Pari Passu Senior Debt" and no Indebtedness
created, incurred, assumed or suffered to exist pursuant to this subsection 8.2
shall constitute "Permitted Pari Passu Senior Debt" for purposes of the Trust
Agreement.
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8.3 Limitation on Guarantee Obligations. Create, incur, assume or
suffer to exist any Guarantee Obligation except:
(a) the Subsidiaries Guarantee and any Guarantee Obligations arising
under any of the other Loan Documents;
(b) Guarantee Obligations in existence on the Effective Date;
(c) Guarantee Obligations of the Borrower or any Restricted Subsidiary
of obligations of any Restricted Subsidiary or the Borrower which
obligations are otherwise permitted under this Agreement;
(d) Guarantee Obligations of the Borrower under its guaranty of the
obligations of the Convertible Trust under, or as contemplated by, the
Convertible Preferred Securities Documents as in effect on the Initial
Closing Date;
(e) Guarantee Obligations entered into in connection with surety,
appeal, payment and performance bonds (and other obligations of a like
nature) incurred in the ordinary course of business;
(f) Guarantee Obligations of the Borrower or any Restricted Subsidiary
of Indebtedness or other obligations of Securitization Entities incurred in
connection with Securitization Transactions;
(g) subject to subsection 8.9(g), Guarantee Obligations of the Borrower
or any Restricted Subsidiary of Indebtedness or other obligations incurred
in the ordinary course of business of Foreign Subsidiaries;
(h) Guarantee Obligations in respect of obligations of vendors to the
Borrower and its Restricted Subsidiaries created in the ordinary course of
business; and
(i) Guarantee Obligations (not otherwise permitted pursuant to this
subsection 8.3) incurred after the Effective Date in an aggregate amount
for the Borrower and its Restricted Subsidiaries not to exceed $200,000,000
at any one time outstanding.
8.4 Limitation on Liens. Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, provided that adequate reserves with
respect thereto are maintained on the books of the Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP (or, in the case
of Significant Foreign Subsidiaries, generally accepted accounting
principles in effect from time to time in their respective jurisdictions of
incorporation);
(b) carriers', warehousemen's, mechanics', landlord's, materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
securing amounts which are not overdue for a period of more than 60 days or
which are being contested in good faith by appropriate proceedings;
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(c) (i) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements and (ii) Liens granted to banks in the ordinary course of
business in connection with deposit, disbursement or concentration accounts
(other than in connection with borrowed money) maintained with such banks
on funds and other items in such accounts;
(d) Liens granted and deposits made to secure the performance of bids,
trade contracts and real estate related contracts entered into in the
ordinary course of business (in each case, other than for borrowed money),
utilities, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(e) easements, rights-of-way, restrictions, subdivisions,
parcelizations and other similar encumbrances incurred in the ordinary
course of business which do not in any case materially detract from the
value of the property subject thereto or materially interfere with the
ordinary conduct of the business of the Borrower or such Restricted
Subsidiary;
(f) Liens in existence on the date hereof (or arising at any time
during the period from the date hereof through the Effective Date) and (i)
listed on Schedule 8.4(f) securing Indebtedness or other obligations
described on such Schedule or (ii) otherwise securing Indebtedness or other
obligations not exceeding $10,000,000 in the aggregate;
(g) Liens securing Indebtedness of the Borrower and its Restricted
Subsidiaries permitted by subsection 8.2(c), provided that (i) such Liens
do not at any time encumber any property other than the property financed
by such Indebtedness and (ii) the amount of Indebtedness secured thereby is
not increased;
(h) Liens on assets of any Significant Foreign Subsidiary securing
Indebtedness of such Significant Foreign Subsidiary permitted by subsection
8.2(d) and other obligations incurred in the ordinary course of business;
(i) Liens on the property or assets of a corporation which becomes a
Restricted Subsidiary after the Effective Date and Liens existing on assets
acquired by the Borrower or a Restricted Subsidiary after the Effective
Date, in either case securing Indebtedness permitted by subsection 8.2(c)
or 8.2(f), provided that (i) such Liens existed at the time such
corporation became a Restricted Subsidiary or such asset was acquired and
were not created in anticipation thereof, (ii) any such Lien is not spread
to cover any property or assets of such corporation after the time such
corporation becomes a Restricted Subsidiary or such asset is acquired, and
(iii) the amount of Indebtedness secured thereby is not increased;
(j) Liens securing Indebtedness permitted under subsection 8.2(j) to
the extent such Indebtedness was originally permitted to be secured
pursuant to this subsection; provided that the principal amount of such
Indebtedness is not increased (other than by an amount equal to any costs
and expenses incurred in connection with such refunding or refinancing) and
that no such Lien is spread to cover additional property;
(k) Liens (not otherwise permitted hereunder) which secure obligations
not exceeding (as to the Borrower and all its Restricted Subsidiaries)
$100,000,000 in aggregate principal or face amount at any time outstanding;
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(l) Liens granted in accordance with the terms of the Put Bond
Mortgages or the Repurchased Put Bonds as in effect on the Initial Closing
Date on property or assets in substitution for or replacement of property
or assets subject to the Liens granted pursuant to the Put Bond Mortgages
to the extent such substitution or replacement is required thereunder in
accordance with the provisions thereof;
(m) Liens created pursuant to the Security Documents to secure, among
other things, the Kmart Credit Agreement Obligations and Liens created
pursuant to any Subsidiary Mortgages; and
(n) Liens created in favor of any Person who delivers goods under a
consignment to the Borrower or a Restricted Subsidiary, provided that the
Borrower or such Restricted Subsidiary treats and designates on its books
and records such goods as "goods on consignment" for all purposes and such
goods are not included as Inventory of the Borrower or such Restricted
Subsidiary, as the case may be, on the books of the Borrower or such
Restricted Subsidiary, as the case may be;
provided that, notwithstanding the foregoing, no Lien created, incurred,
assumed or suffered to exist pursuant to this subsection 8.4 (other than
subsections 8.4(a), (b), (m) or (n) shall be a Lien on Inventory of the
Borrower or any of its Restricted Subsidiaries.
8.5 Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign,
transfer or otherwise dispose of, all or substantially all of its property,
business or assets except:
(a) any Restricted Subsidiary of the Borrower may be merged or
consolidated with or into the Borrower (provided that the Borrower shall be
the continuing or surviving corporation) or with or into any one or more
wholly owned Restricted Subsidiaries of the Borrower (provided that the
wholly owned Restricted Subsidiary or Restricted Subsidiaries shall be the
continuing or surviving corporation and provided that if one of the parties
to such transaction is a Subsidiary Guarantor then the continuing or
surviving corporation shall be a Subsidiary Guarantor);
(b) any Restricted Subsidiary may convey, sell, lease, transfer, assign
or otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to the Borrower or any other wholly owned
Restricted Subsidiary of the Borrower (provided that if such selling
Restricted Subsidiary is a Subsidiary Guarantor then the acquiring
Restricted Subsidiary shall be a Subsidiary Guarantor); and
(c) any Restricted Subsidiary may be merged or consolidated with or
into, or convey, sell, lease, transfer, assign or otherwise dispose of any
or all of its assets to, any Person to the extent that the sale or other
disposition of the assets of such Restricted Subsidiary would be permitted
under subsection 8.6.
8.6 Limitation on Sale of Assets. Convey, sell, lease, assign, transfer
or otherwise dispose of any of its property, business or assets (including,
without limitation, receivables and leasehold interests), whether now owned or
hereafter acquired, or, in the case of any Restricted Subsidiary, issue or sell
any shares of such Restricted Subsidiary's Capital Stock to any Person (other
than the Borrower or any wholly owned Subsidiary Guarantor or, if such
Restricted Subsidiary is not a
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wholly-owned Restricted Subsidiary, pro-rata to the owners of the equity
securities of such Restricted Subsidiary), except:
(a) the sale or other disposition of obsolete, surplus or worn out
property in the ordinary course of business or in connection with real
estate development activities;
(b) the sale of inventory in the ordinary course of business (including
sales of inventory in connection with closed stores and sales of
discontinued inventory) and transfers of inventory and equipment among the
Borrower and the Subsidiary Guarantors pursuant to reasonable business
requirements;
(c) (i) the sale or discount of accounts receivable arising in the
ordinary course of business in connection with the compromise or collection
thereof or pursuant to the Existing Receivables Transactions and (ii) sales
or other dispositions of Cash Equivalents or Temporary Cash Equivalent
Investments in the ordinary course of business;
(d) as permitted by subsection 8.5(b);
(e) sales and dispositions of real property and related assets in
connection with (i) Permitted Sale-Leasebacks or (ii) Securitization
Transactions; provided that, in the opinion of a Responsible Officer, the
purchase price with respect to each such sale or disposition represents the
fair value of the assets so sold;
(f) the transactions described on Schedule 8.6(f) or any sale or other
disposition of any asset received in exchange for any asset described on
such Schedule in connection with any transaction described on such Schedule
(the "Scheduled Asset Sales"), provided that, in the opinion of a
Responsible Officer the purchase price with respect to each such sale
represents the fair value of the assets so sold;
(g) the sale by the Borrower or any Restricted Subsidiary of all or a
portion of (or any interest in) the Purchased Credit Facilities and the
Repurchased Put Bonds;
(h) the sale or other disposition of any property (other than any sale
or other disposition which is otherwise permitted under this subsection
8.6), provided that (i) at the time of and after giving effect to such sale
or disposition, the aggregate book value of all assets so sold or disposed
of in any Fiscal Year shall not exceed an amount equal to 10% of
Shareholders' Equity at the beginning of such Fiscal Year and (ii) in the
opinion of a Responsible Officer the purchase price with respect to such
sale or other disposition (except with respect to sales or other
dispositions the aggregate purchase price with respect to which does not
exceed $10,000,000) represents the fair value of the assets so sold or
disposed of;
(i) subject to the other terms and provisions hereof, leases or
subleases (or assignment of leases) of real property in the ordinary course
of business; and
(j) the sale or other disposition of the Investments described as items
1 and 2 in Schedule 8.9(i)(A) under the heading "Kmart Corporation Other
Investments".
8.7 Limitation on Dividends. Declare or pay any dividend (other than
dividends payable solely in common stock of the Borrower) on, or make any
payment on account of, or set apart assets for a sinking or other analogous
fund for, the purchase, redemption, defeasance, retirement or
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other acquisition of, any shares of any class of Capital Stock of the Borrower
or any warrants or options to purchase any such Stock, whether now or
hereafter outstanding, or make any other distribution in respect thereof,
either directly or indirectly, whether in cash or property or in obligations
of the Borrower or any Restricted Subsidiary (such declarations, payments,
setting apart, purchases, redemptions, defeasances, retirements,
acquisitions and distributions being herein called "Restricted Payments"),
except that:
(a) the Borrower may purchase or exchange then-existing employee stock
options for consideration consisting solely of new employee stock options
and may purchase Capital Stock or options to acquire the same from
directors, officers and employees of the Borrower and its Restricted
Subsidiaries in connection with employment and severance arrangements; and
(b) so long as after giving effect thereto no Default or Event of
Default has occurred and is continuing, the Borrower may make Restricted
Payments with respect to its Common Stock commencing in the 1997 Fiscal
Year, provided that no Restricted Payment may be made pursuant to this
paragraph if, after giving effect thereto, the aggregate amount of all
Restricted Payments made pursuant to this paragraph would exceed 50% of the
Consolidated Net Income of the Borrower for the period (taken as one
accounting period) from the beginning of the 1997 Fiscal Year through the
last day of the most recent fiscal quarter ended prior to the date such
Restricted Payment is made.
8.8 Limitation on Capital Expenditures and "Property held for Resale".
Make (by way of the acquisition of securities of a Person or otherwise) any
expenditure in respect of the purchase or other acquisition of fixed or capital
assets (excluding any such asset acquired in connection with normal replacement
and maintenance programs properly charged to current operations but including
expenditures in respect of the construction or development of "property held
for resale") except for expenditures not exceeding, in the aggregate for the
Borrower and its Restricted Subsidiaries during any Fiscal Year of the
Borrower, $1,000,000,000; provided that, (a) with respect to any Fiscal Year
(other than the 1996 Fiscal Year), the Borrower and its Restricted Subsidiaries
shall be permitted to make additional capital expenditures in an amount not to
exceed the Additional Permitted Capital Expenditure Amount for such Fiscal
Year, (b) the amount for the 2000 Fiscal Year shall be pro rated for the period
from the beginning of such Fiscal Year to the Revolving Credit Termination Date
and (c) up to 100% of any amount permitted to be expended in any Fiscal Year
(without giving effect to this clause (c)) if not so expended in the Fiscal
Year for which it is permitted above, may be carried over for expenditure in
the next following Fiscal Year.
8.9 Limitation on Investments, Loans and Advances. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit of any Person (an "Investment"), except for:
(a) extensions of trade credit and prepaid expenses made in the
ordinary course of business;
(b) Investments in Cash Equivalents and Temporary Cash Equivalent
Investments;
(c) (i) Investments resulting from the acquisition by the Borrower or a
Restricted Subsidiary of the Indebtedness under the Purchased Credit
Facilities and the Repurchased Put Bonds and (ii) subject to subsection
8.8, loans made by the Borrower or a Restricted Subsidiary to the Big
Beaver Joint Ventures to finance construction of the related projects prior
and subsequent to the date hereof;
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(d) loans to officers of the Borrower or any Subsidiary;
(e) loans and advances to employees of the Borrower or its Subsidiaries
for travel, entertainment and relocation expenses in the ordinary course of
business;
(f) Investments by the Borrower in Subsidiary Guarantors and
Investments by Restricted Subsidiaries in the Borrower and in Subsidiary
Guarantors;
(g) Investments by the Borrower and Restricted Subsidiaries in Foreign
Subsidiaries, provided that, after giving effect to such Investment, the
aggregate then outstanding amount of all such Investments (including
Investments in the nature of sales and transfers of assets (including,
pursuant to a transaction permitted under subsection 8.5) for less than
fair market value and Guarantee Obligations pursuant to subsection 8.3(g))
made subsequent to the Effective Date in Foreign Subsidiaries shall not
exceed $150,000,000, provided, further, that the conversion of any
Indebtedness owed to the Borrower or any Restricted Subsidiary by any
Foreign Subsidiary into equity of such Foreign Subsidiary shall not
constitute an additional Investment in such Foreign Subsidiary by the
Borrower or such Restricted Subsidiary for purposes of the limitation
contained in the immediately preceding proviso;
(h) loans by the Borrower to its employees (other than to officers of
the Borrower or any Subsidiary) in connection with management incentive
plans in an aggregate amount not to exceed $20,000,000 at any one time
outstanding;
(i) Investments (A) existing on the Effective Date and listed on
Schedule 8.9(i)(A), (B) in the Convertible Trust contemplated by the
Declaration of Trust for the Convertible Trust or the Convertible Debenture
Indenture as in effect on the Initial Closing Date and (C) in
Securitization Entities formed or established in connection with
Securitization Transactions;
(j) Investments received in connection with the collection of accounts
receivable in the ordinary course of business;
(k) Investments received in connection with any Asset Sale or other
disposition permitted hereunder;
(l) loans and advances to suppliers in the ordinary course of business
consistent with past practice; and
(m) Acquisitions and other Investments made by the Borrower or any of
its Restricted Subsidiaries, provided that, after giving effect to any such
Acquisition or Investment, the aggregate then outstanding amount of all
such Acquisitions and such other Investments (including assumed
Indebtedness) made at any time after the Effective Date shall not exceed an
amount equal to 10% of Shareholders' Equity as of the end of the most
recent fiscal quarter for which financial statements have been delivered
pursuant to subsection 7.1.
8.10 Limitation on Optional Payments and Modifications of Debt
Instruments. (a) Make any optional payment or prepayment on or optionally
redeem or purchase any Indebtedness (other than the Loans and the Convertible
Debentures) of the Borrower or any Subsidiary, (b) make any payment or
prepayment on account of the principal of or interest on, or redeem or
purchase, any Convertible Debentures, provided that (i) so long as after giving
effect thereto no Event of Default shall have then occurred and be continuing,
the Borrower may pay interest on the Convertible
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Debentures pursuant to the terms of the Convertible Debenture Indenture and
(ii) the conversion of the Convertible Debentures into common stock of the
Borrower (and any related cash payments made in lieu of fractional shares)
shall not be deemed to be a payment or prepayment on account of or a redemption
or purchase of the Convertible Debentures or (c) amend, modify or change, or
consent or agree to any amendment, modification or change to any of the terms
relating to the payment or prepayment of principal of or interest on, any such
Indebtedness or the Convertible Debenture or the Convertible Debenture
Indenture (other than any such amendment, modification or change which would
extend the maturity or reduce the amount of any payment of principal thereof or
which would reduce the rate or extend the date for payment of interest
thereon); provided, that the Borrower and its Restricted Subsidiaries may
prepay Indebtedness (other than the Convertible Debenture) (i) from the
proceeds of new Indebtedness incurred to refinance such Indebtedness pursuant
to subsection 8.2(j), (ii) under Financing Leases for stores and other property
no longer occupied or used by the Borrower or such Restricted Subsidiary in
connection with the settlement, termination or assignment of such Financing
Lease, (iii) secured by assets in connection with any sale or other disposition
of such assets permitted under subsection 8.6, (iv) under the Refinanced Credit
Facilities (as defined in the Existing Credit Agreement) on the Initial Closing
Date, (v) incurred after the Initial Closing Date pursuant to subsection
8.2(i), and (vi) in an aggregate amount, in addition to payments otherwise
permitted under this subsection 8.10, not to exceed $300,000,000.
8.11 Limitation on Transactions with Affiliates. Except as set forth on
Schedule 8.11, enter into any transaction, including, without limitation, any
purchase, sale, lease or exchange of property or the rendering of any service,
with any Affiliate unless such transaction is (a) otherwise permitted under
this Agreement and (b) upon fair and reasonable terms no less favorable to the
Borrower or such Restricted Subsidiary, as the case may be, than it would
obtain in a comparable arm's length transaction with a Person which is not an
Affiliate.
8.12 Limitation on Sales and Leasebacks. Enter into any arrangement
with any Person providing for the leasing by the Borrower or any Restricted
Subsidiary of real or personal property which has been or is to be sold or
transferred by the Borrower or such Restricted Subsidiary to such Person or to
any other Person to whom funds have been or are to be advanced by such Person
on the security of such property or rental obligations of the Borrower or such
Restricted Subsidiary (such arrangement, a "Sale-Leaseback") except for
Sale-Leasebacks in the ordinary course of the Borrower's or such Restricted
Subsidiary's business, consistent with past practice and at market rates and
subject to compliance with subsection 8.6(e) ("Permitted Sale-Leasebacks"). For
the avoidance of doubt, Sale-Leasebacks that result in a Financing Lease shall
be treated as Indebtedness for all purposes of this Agreement.
8.13 Joint Ventures. Consent to or approve the incurrence or assumption
of any Indebtedness (other than (a) Indebtedness under the Purchased Credit
Facilities and any amounts advanced by the Borrower or any Subsidiary Guarantor
to complete construction of the related projects and (b) Indebtedness not
exceeding, together with Indebtedness permitted under subsection 8.2(i),
$500,000,000 in aggregate principal amount at any one time outstanding (any
such Indebtedness described in this clause (b) being referred to herein as
"Qualified Big Beaver Indebtedness")) by any of the Big Beaver Joint Ventures
or consent to or approve the creation, assumption or incurrence of any Lien
(other than any Lien in favor of the Borrower or any Subsidiary Guarantor) by
any of the Big Beaver Joint Ventures, except in a transaction which results in
the repayment in full of the related Indebtedness of such Big Beaver Joint
Venture under the Purchased Credit Facilities or any amounts advanced by the
Borrower or any Subsidiary Guarantor to such Big Beaver Joint Venture to
complete construction of the related projects.
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SECTION 9. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan when due
in accordance with the terms hereof; or the Borrower shall fail to pay any
Reimbursement Obligation within two Business Days after such Reimbursement
Obligation becomes due in accordance with the terms hereof; or the Borrower
shall fail to pay any interest on any Loan, or any other amount payable
hereunder, within five days after any such interest or other amount becomes
due in accordance with the terms hereof; or
(b) Any representation or warranty made or deemed made by the Borrower
or any other Loan Party herein or in any other Loan Document or which is
contained in any certificate, document or financial or other statement
furnished by it at any time under or in connection with this Agreement or
any such other Loan Document shall prove to have been incorrect in any
material respect on or as of the date made or deemed made; or
(c) The Borrower shall default in the observance or performance of any
agreement contained in Section 8 or the Borrower shall fail to deliver a
Borrowing Base Certificate pursuant to subsection 7.2(c) within 10 days
after such Borrowing Base Certificate was due pursuant to such subsection;
or
(d) The Borrower or any other Loan Party shall default in the
observance or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as provided in paragraphs
(a) through (c) of this Section), and such default shall continue
unremedied for a period of 30 days after the earlier of (i) the date upon
which written notice thereof is given to the Borrower by the Administrative
Agent or the Majority Lenders or (ii) the date upon which a Responsible
Officer becomes aware of such default; or
(e) The Borrower or any of its Restricted Subsidiaries shall
(i) default in any payment of principal of or interest on any Indebtedness
(other than the Loans) or in the payment of any Guarantee Obligation,
beyond the period of grace, if any, provided in the instrument or agreement
under which such Indebtedness or Guarantee Obligation was created; or (ii)
default in the observance or performance of any other agreement or
condition relating to any such Indebtedness or Guarantee Obligation or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of
which default or other event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of
such Guarantee Obligation (or a trustee or agent on behalf of such holder
or holders or beneficiary or beneficiaries) to cause, with the giving of
notice if required (but after the expiration of all grace periods
applicable thereto), such Indebtedness to become due prior to its stated
maturity or such Guarantee Obligation to become payable; provided, however,
that no Default or Event of Default shall exist under this paragraph unless
the aggregate amount of Indebtedness and/or Guarantee Obligations in
respect of which any default or other event or condition referred to in
this paragraph shall have occurred shall be equal to at least $100,000,000;
or
(f) (i) The Borrower or any of its Restricted Subsidiaries shall
commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent,
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or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any substantial
part of its assets, or the Borrower or any of its Restricted Subsidiaries
shall make a general assignment for the benefit of its creditors; or (ii)
there shall be commenced against the Borrower or any of its Restricted
Subsidiaries any case, proceeding or other action of a nature referred to
in clause (i) above which (A) results in the entry of an order for relief
or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of 60 days; or (iii) there shall be
commenced against the Borrower or any of its Restricted Subsidiaries any
case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order for
any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof; or (iv) the
Borrower or any of its Restricted Subsidiaries shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence
in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v)
the Borrower or any of its Restricted Subsidiaries shall generally not, or
shall be unable to, or shall admit in writing its inability to, pay its
debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate,
any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of
the Majority Lenders, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) the Borrower or any
Commonly Controlled Entity shall, or in the reasonable opinion of the
Majority Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan or (vi) any other event or condition shall occur or exist with respect
to a Plan; and in each case in clauses (i) through (vi) above, such event
or condition, together with all other such events or conditions, if any,
could reasonably be expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against the
Borrower or any of its Restricted Subsidiaries involving in the aggregate a
liability (to the extent not paid or covered by insurance) of $100,000,000
or more, and such judgments or decrees shall not have been vacated,
discharged, stayed or bonded pending appeal within 60 days from the entry
thereof; or
(i) (i) For any reason (other than any act on the part of the
Administrative Agent, the Trustee or any Lender) the Trust Agreement, the
Subsidiaries Guarantee or any Security Document ceases to be or is not in
full force and effect (except in accordance with its terms or pursuant to
subsection 11.13) in any material respect and such default shall continue
unremedied for 30 days after the earlier of receipt by the Borrower of
notice of such default from the Administrative Agent or actual knowledge of
such default by a Responsible Officer, (ii) the Borrower or any of its
Restricted Subsidiaries shall assert in writing that the Trust Agreement,
the Subsidiaries Guarantee or any Security Document has ceased to be or is
not in
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full force and effect (except in accordance with its terms or pursuant
to subsection 11.13) or (iii) the Lien created by any of the Security
Documents shall cease to be enforceable and of the same effect and priority
purported to be created thereby except to the extent contemplated hereunder
and under the other Loan Documents; or
(j) (i) Any Person or "group" (within the meaning of Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended) (A) shall have
acquired beneficial ownership of 33% or more of any outstanding class of
Capital Stock having ordinary voting power in the election of directors of
the Borrower or (B) shall obtain the power (whether or not exercised) to
elect a majority of the Borrower's directors or (ii) the Board of Directors
of the Borrower shall not consist of a majority of Continuing Directors;
"Continuing Directors" shall mean the directors of the Borrower on the
Initial Closing Date and each other director, if such other director's
nomination for election to the Board of Directors of the Borrower is
recommended by a majority of the then Continuing Directors;
then, and in any such event, (A) if such event is an Event of Default
specified in clause (i) or (ii) of paragraph (f) of this Section with
respect to the Borrower, automatically the Commitments shall immediately
terminate and the Loans hereunder (with accrued interest thereon) and all
other amounts owing under this Agreement (including, without limitation, all
amounts of L/C Obligations, whether or not the beneficiaries of the
then outstanding Letters of Credit shall have presented the documents required
thereunder) shall immediately become due and payable, and (B) if such event
is any other Event of Default, either or both of the following actions may be
taken: (i) with the consent of the Majority Lenders, the Administrative
Agent may, or upon the request of the Majority Lenders, the Administrative
Agent shall, by notice to the Borrower declare the Commitments to be
terminated forthwith, whereupon the Commitments shall immediately terminate;
and (ii) with the consent of the Majority Lenders, the Administrative Agent
may, or upon the request of the Majority Lenders, the Administrative
Agent shall, by notice to the Borrower, declare the Loans hereunder
(with accrued interest thereon) and all other amounts owing under this
Agreement (including, without limitation, all amounts of L/C Obligations,
whether or not the beneficiaries of the then outstanding Letters of Credit
shall have presented the documents required thereunder) to be due and
payable forthwith, whereupon the same shall immediately become due and
payable. Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
With respect to all Letters of Credit with respect to which presentment
for honor shall not have occurred at the time of an acceleration pursuant to
the preceding paragraph, the Borrower shall at such time deposit in a cash
collateral account opened by the Administrative Agent an amount equal to the
aggregate then undrawn and unexpired amount of such Letters of Credit. The
Borrower hereby grants to the Administrative Agent, for the benefit of each
Issuing Bank and the L/C Participants, a security interest in such cash
collateral to secure all obligations of the Borrower under this Agreement and
the other Loan Documents. Amounts held in such cash collateral account shall be
applied by the Administrative Agent to the payment of drafts drawn under such
Letters of Credit, and the unused portion thereof after all such Letters of
Credit shall have expired or been fully drawn upon, if any, shall be applied to
repay other obligations of the Borrower hereunder and under the Notes. After
all such Letters of Credit shall have expired or been fully drawn upon, all
Reimbursement Obligations shall have been satisfied and all other obligations
of the Borrower hereunder and under the Notes shall have been paid in full, the
balance, if any, in such cash collateral account shall be returned to the
Borrower. The Borrower shall execute and deliver to the Administrative Agent,
for the account of each Issuing Bank and the L/C Participants, such further
documents and instruments as the Administrative Agent may reasonably request to
evidence the creation and perfection of the security interest in such cash
collateral account.
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Whenever the Loans hereunder (with accrued interest thereon) and all
other amounts owing under this Agreement and any Notes shall have become
immediately due and payable in accordance with clause (A) or clause (B) of
the second preceding paragraph, the Administrative Agent shall forthwith
deliver a Notice of Acceleration to the Corporate Trustee, provided that,
by written notice to the Borrower and the Administrative Agent, the
Majority Lenders may, for such periods and/or subject to such conditions as
may be specified in such notice, withdraw any declaration of acceleration
effected in accordance with clause (B) above. If a declaration of
acceleration in accordance with clause (B) immediately preceding shall have
been withdrawn in accordance with the proviso to the immediately preceding
sentence, the Administrative Agent shall forthwith deliver to the Corporate
Trustee a notice of cancellation of the respective Notice of Acceleration
theretofore delivered to the Corporate Trustee. In addition, if the
Administrative Agent shall have previously delivered a Notice of Default to
the Corporate Trustee relating to a particular Event of Default which
Notice of Default is then in effect, the Administrative Agent shall deliver
a cancellation of such Notice of Default upon the waiver or cure of such
Event of Default, provided that no other Event of Default shall have
occurred and be continuing at such time.
SECTION 10. THE ADMINISTRATIVE AGENT
10.1 Appointment. Each Lender hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each Lender irrevocably
authorizes the Administrative Agent, in such capacity, to take such action
on its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as are
expressly delegated to the Administrative Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as
are reasonably incidental thereto, including, without limitation, all
powers, rights and remedies provided in the Trust Agreement.
Notwithstanding any provision to the contrary elsewhere in this Agreement,
the Administrative Agent shall not have any duties or responsibilities,
except those expressly set forth herein, or any fiduciary relationship with
any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other
Loan Document or otherwise exist against the Administrative Agent.
10.2 Delegation of Duties. The Administrative Agent may execute any of
its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys in-fact selected by it with reasonable care.
10.3 Exculpatory Provisions. Neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully taken or omitted to
be taken by it or such Person under or in connection with this Agreement or
any other Loan Document (except for its or such Person's own gross
negligence or willful misconduct) or (ii) responsible in any manner to any
of the Lenders for any recitals, statements, representations or warranties
made by the Borrower or any officer thereof contained in this Agreement or
any other Loan Document or in any certificate, report, statement or other
document referred to or provided for in, or received by the Administrative
Agent under or in connection with, this Agreement or any other Loan
Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document
or for any failure of the Borrower to perform its obligations hereunder or
thereunder. The Administrative Agent shall not be under any obligation to
any Lender to ascertain or to inquire as to the observance or performance
of any of the agreements contained in, or
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88
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Borrower.
10.4 Reliance by Administrative Agent. The Administrative Agent shall
be entitled to rely, and shall be fully protected in relying, upon any
Note, writing, resolution, notice, consent, certificate, affidavit, letter,
facsimile, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Borrower), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent may deem and treat the payee
of any Note as the owner thereof for all purposes unless a written notice
of assignment, negotiation or transfer thereof shall have been filed with
the Administrative Agent. The Administrative Agent shall be fully justified
in failing or refusing to take any action under this Agreement or any other
Loan Document unless it shall first receive such advice or concurrence of
Lenders entitled to so act in accordance with the terms of this Agreement
as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such
action. The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and the other
Loan Documents in accordance with a request of Lenders entitled to so act
in accordance with the terms of this Agreement, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all
the Lenders and all future holders of the Loans.
10.5 Notice of Default. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice from
a Lender or the Borrower referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that the Administrative Agent receives such a
notice, the Administrative Agent shall promptly give notice thereof to the
Lenders. The Administrative Agent shall take such action with respect to
such Default or Event of Default as shall be reasonably directed by Lenders
entitled to so act in accordance with the terms of this Agreement; provided
that unless and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.
10.6 Non-Reliance on Administrative Agent and Other Lenders. Each
Lender expressly acknowledges that neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates has made any representations or warranties to it and that no act
by the Administrative Agent hereafter taken, including any review of the
affairs of the Borrower, shall be deemed to constitute any representation
or warranty by the Administrative Agent to any Lender. Each Lender
represents to the Administrative Agent that it has, independently and
without reliance upon the Administrative Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, operations,
property, financial and other condition and creditworthiness of the
Borrower and made its own decision to make its Loans hereunder and enter
into this Agreement. Each Lender also represents that it will,
independently and without reliance upon the Administrative Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this
Agreement and the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations,
property, financial and other condition and creditworthiness of the
Borrower. Except for notices, reports and other documents expressly
required
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to be furnished to the Lenders by the Administrative Agent hereunder, the
Administrative Agent shall not have any duty or responsibility to provide
any Lender with any credit or other information concerning the business,
operations, property, condition (financial or otherwise), prospects or
creditworthiness of the Borrower which may come into the possession of the
Administrative Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
10.7 Indemnification. The Lenders agree to indemnify the Administrative
Agent in its capacity as such (to the extent not reimbursed by the Borrower
and without limiting the obligation of the Borrower to do so), ratably
according to their respective Voting Percentages in effect on the date on
which indemnification is sought, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the
Loans) be imposed on, incurred by or asserted against the Administrative
Agent in any way relating to or arising out of, the Commitments, this
Agreement, any of the other Loan Documents or any documents contemplated by
or referred to herein or therein or the transactions contemplated hereby or
thereby or any action taken or omitted by the Administrative Agent under or
in connection with any of the foregoing; provided that no Lender shall be
liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from the Administrative Agent's gross
negligence or willful misconduct. The agreements in this subsection shall
survive the payment of the Loans and all other amounts payable hereunder.
10.8 Administrative Agent in Its Individual Capacity. The
Administrative Agent and its Affiliates may make loans to, accept deposits
from and generally engage in any kind of business with the Borrower as
though the Administrative Agent were not the Administrative Agent hereunder
and under the other Loan Documents. With respect to the Loans made by it or
any Letter of Credit issued or participated in by it, the Administrative
Agent shall have the same rights and powers under this Agreement and the
other Loan Documents as any Lender and may exercise the same as though it
were not the Administrative Agent, and the terms "Lender" and "Lenders"
shall include the Administrative Agent in its individual capacity.
10.9 Successor Administrative Agent. The Administrative Agent may
resign as Administrative Agent upon 10 days' notice to the Borrower and the
Lenders. If the Administrative Agent shall resign as Administrative Agent
under this Agreement and the other Loan Documents, then the Majority
Lenders shall appoint from among the Lenders a successor agent for the
Lenders, which successor agent (provided that it shall have been approved
by the Borrower), shall succeed to the rights, powers and duties of the
Administrative Agent hereunder. Effective upon such appointment and
approval, the term "Administrative Agent" shall mean such successor agent,
and the former Administrative Agent's rights, powers and duties as
Administrative Agent shall be terminated, without any other or further act
or deed on the part of such former Administrative Agent or any of the
parties to this Agreement or any holders of the Loans. After any retiring
Administrative Agent's resignation as Administrative Agent, the provisions
of this Section 10 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Administrative Agent under this
Agreement and the other Loan Documents.
SECTION 11. MISCELLANEOUS
11.1 Amendments and Waivers. Neither this Agreement nor any other Loan
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in
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accordance with the provisions of this subsection. The Majority Lenders may,
or, with the written consent of the Majority Lenders, the Administrative Agent
may, from time to time, (a) enter into with the applicable Loan Party or
Parties written amendments, supplements or modifications hereto and to the
other Loan Documents for the purpose of adding, deleting or revising any
provisions to this Agreement or the other Loan Documents or changing in any
manner the rights of the Lenders or of the Borrower hereunder or thereunder or
(b) waive, on such terms and conditions as the Majority Lenders or the
Administrative Agent, as the case may be, may specify in such instrument, any
of the requirements of this Agreement or the other Loan Documents or any
Default or Event of Default and its consequences; provided, however, that no
such waiver and no such amendment, supplement or modification shall (i) reduce
the amount or extend the scheduled date of maturity of any Loan or of any
installment thereof, or reduce the stated rate of any interest or fee payable
hereunder or extend the scheduled date of any payment thereof or increase the
amount or extend the expiration date of any Lender's Commitments, in each case
without the consent of each Lender adversely affected thereby, (ii) (A) amend,
modify or waive any provision of this subsection or of subsection 11.13, or
consent to the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement and the other Loan Documents or, except as
provided in subsection 11.13, release or subordinate the interest of the
Trustee in all or substantially all of the Collateral, in each case without the
written consent of all the Lenders, or (B) reduce the percentage specified in
the definition of Majority Lenders or Required Lenders without the written
consent of all the Lenders, (iii) increase any percentage set forth in the
definition of Borrowing Base or Eligible Inventory Borrowing Base Amount
without the consent of the Required Lenders, (iv) amend, modify or waive any
provision of subsections 3.6 through 3.13 without the consent of each Issuing
Bank adversely affected in any material respect thereby, (v) amend, modify or
waive any provision of subsections 3.21 or 3.22 without the consent of the
Swing Line Lender or (vi) amend, modify or waive any provision of Section 10
without the written consent of the then Administrative Agent. Any such waiver
and any such amendment, supplement or modification shall apply equally to each
of the Lenders and shall be binding upon the Borrower, the Lenders, the
Administrative Agent and all future holders of the Loans. In the case of any
waiver, the Borrower, the Lenders, and the Administrative Agent shall be
restored to their former positions and rights hereunder and under the other
Loan Documents, and any Default or Event of Default waived shall be deemed to
be cured and not continuing; no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereon.
11.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made (a) in the case of delivery
by hand (including by overnight courier), when delivered, (b) in the case
of delivery by mail, three days after being deposited in the mails, postage
prepaid, or (c) in the case of delivery by facsimile transmission, when
sent and receipt has been confirmed, addressed as follows in the case of
the Borrower and the Administrative Agent, and as set forth in Schedule
11.2 in the case of the other parties hereto, or to such other address as
may be hereafter notified by the respective parties hereto:
The Borrower: Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
(a) For all notices:
Attention: Treasurer
Fax: (810) 643-5398
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(b) For notices other than pursuant to Sections 3
Attention: Chief Financial Officer
Fax: (810) 643-5787
and
Attention: General Counsel
Fax: (810) 643-1054
The Administrative
Agent: The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention [ ]
With a copy to:
Chase Agent Bank Services
140 East 45th Street, 29th Floor
New York, New York 10017
[ ]
provided that any notice, request or demand to or upon the Administrative
Agent or the Lenders pursuant to subsection 3.2, 3.4, 3.6, 3.15, 3.18, 3.22,
4.1, 4.2 or 4.7 shall not be effective until received. Whenever the
Administrative Agent sends a notice by mail, the Administrative Agent will use
reasonable efforts to also send such notice by one of the other means of notice
permitted hereunder, provided that the failure to do so shall not affect in any
way the validity of any delivery by mail pursuant to this subsection or
otherwise result in any liability to the Administrative Agent or the Lenders.
11.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender,
any right, remedy, power or privilege hereunder or under the other Loan
Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
11.4 Survival of Representations and Warranties. All representations
and warranties made hereunder, in the other Loan Documents and in any
document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this
Agreement and the making of the Loans hereunder.
11.5 Payment of Expenses and Taxes; Indemnity. The Borrower agrees (a)
to pay or reimburse the Administrative Agent for all its reasonable
out-of-pocket costs and expenses incurred in connection with the
development, preparation and execution of, and any amendment, supplement or
modification to, this Agreement and the other Loan Documents and any other
documents prepared in
<PAGE> 98
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connection herewith or therewith, and the consummation and administration of
the transactions contemplated hereby and thereby, including, without
limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent, (b) (i) to pay or reimburse the Administrative Agent for
all its reasonable out-of-pocket costs and expenses incurred in connection with
the enforcement or preservation of any rights under this Agreement, the other
Loan Documents and any such other documents, including, without limitation, the
fees and disbursements of counsel (including the allocated fees and expenses of
in-house counsel) to the Administrative Agent, and (ii) to pay or reimburse
each Lender for all its reasonable out-of-pocket costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, the other Loan Documents and any such other documents following the
occurrence and during the continuation of a Default or an Event of Default,
including, without limitation, the fees and disbursements of counsel (including
the allocated fees and expenses of in-house counsel) to each Lender, (c) to
pay, indemnify, and hold each Lender and the Administrative Agent (and their
respective directors, officers, employees and agents) harmless from, any and
all recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise (other than excise taxes
imposed in lieu of net income taxes) and other similar taxes, if any, which may
be payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement, the other Loan Documents and
any such other documents, and (d) to pay, indemnify, and hold each Lender and
the Administrative Agent (and their respective directors, officers, employees
and agents) harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits and
reasonable out-of-pocket costs, expenses or disbursements of any kind or nature
whatsoever with respect to any claim, litigation, investigation or proceeding
relating to the execution, delivery, enforcement, performance and
administration of this Agreement and the other Loan Documents and any such
other documents or any use of any of the Extensions of Credit, including,
without limitation, any of the foregoing relating to the violation of,
noncompliance with or liability under, any Environmental Law applicable to the
operations of the Borrower, any of its Subsidiaries or any of the Properties
(all the foregoing in this clause (d), collectively, the "Indemnified
Liabilities"), provided that the Borrower shall have no obligation hereunder to
the Administrative Agent or any Lender (or their respective directors,
officers, employees or agents) with respect to Indemnified Liabilities arising
from the gross negligence or willful misconduct of the Administrative Agent or
any such Lender (or their respective directors, officers, employees or agents,
as the case may be). The agreements in this subsection shall survive the
termination of this Agreement and the repayment of the Loans and all other
amounts payable hereunder.
11.6 Successors and Assigns; Participations and Assignments. (a) This
Agreement shall be binding upon and inure to the benefit of the Borrower, the
Lenders, the Administrative Agent and their respective successors and assigns,
except that the Borrower may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of each
Lender.
(b) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one or more
banks or other entities ("Participants") participating interests in any Loan
owing to such Lender, any interest of such Lender in any Letter of Credit, any
Commitment of such Lender or any other interest of such Lender hereunder and
under the other Loan Documents. In the event of any such sale by a Lender of a
participating interest to a Participant, such Lender's obligations under this
Agreement to the other parties to this Agreement shall remain unchanged, such
Lender shall remain solely responsible for the performance thereof, such Lender
shall remain the holder of any such Loan for all purposes under this Agreement
and the other Loan Documents, and the Borrower and the Administrative Agent
shall
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93
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and the other Loan
Documents. No Lender shall be entitled to create in favor of any Participant,
in the participation agreement pursuant to which such Participant's
participating interest shall be created or otherwise, any right to vote on,
consent to or approve any matter relating to this Agreement or any other Loan
Document except for those specified in clauses (i) and (ii) of the proviso to
subsection 11.1. The Borrower agrees that if amounts outstanding under this
Agreement are due or unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall, to the maximum extent permitted by applicable law, be deemed to have the
right of setoff in respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under this Agreement, provided
that, in purchasing such participating interest, such Participant shall be
deemed to have agreed to share with the Lenders the proceeds thereof as
provided in subsection 11.8(a) as fully as if it were a Lender hereunder. The
Borrower also agrees that each Participant shall be entitled to the benefits of
subsections 4.9, 4.10 and 4.11 with respect to its participation in the
Commitments and the Loans outstanding from time to time as if it were a Lender;
provided that, in the case of subsection 4.10, such Participant shall have
complied with the requirements of said subsection and provided, further, that
no Participant shall be entitled to receive any greater amount pursuant to any
such subsection than the transferor Lender would have been entitled to receive
in respect of the amount of the participation transferred by such transferor
Lender to such Participant had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its business of making or
investing in loans and in accordance with applicable law, at any time and from
time to time assign to any Lender or any affiliate thereof or, with the consent
of the Borrower and the Administrative Agent (which in each case shall not be
unreasonably withheld), to an additional bank, financial institution or other
entity that is then engaged in the business of lending money (an "Assignee")
all or any part of its rights and obligations under this Agreement and the
other Loan Documents pursuant to an Assignment and Acceptance, substantially in
the form of Exhibit L, executed by such Assignee and such assigning Lender
(and, in the case of an Assignee that is not then a Lender or an affiliate
thereof, by the Borrower and the Administrative Agent) and delivered to the
Administrative Agent for its acceptance and recording in the Register, with a
copy thereof to the Borrower, provided that (a) in the case of any such
assignment to an additional bank or financial institution, the sum of the
aggregate principal amount of the Committed Loans, the aggregate amount of the
L/C Obligations and the aggregate amount of the unused Commitments being
assigned and, if such assignment is of less than all of the rights and
obligations of the assigning Lender, the sum of the aggregate principal amount
of the Committed Loans, the aggregate amount of the L/C Obligations and the
aggregate amount of the unused Commitments remaining with the assigning Lender
are each not less than $10,000,000 (or such lesser amount as may be agreed to
by the Borrower and the Administrative Agent) and (b) assignments shall not be
required to be made on a ratable basis between the Commitments and/or Committed
Loans held by any Lender. Upon such execution, delivery, acceptance and
recording, from and after the effective date determined pursuant to such
Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto
and, to the extent provided in such Assignment and Acceptance, have the rights
and obligations of a Lender hereunder with a Commitment as set forth therein,
and (y) the assigning Lender thereunder shall, to the extent provided in such
Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations under this
Agreement, such assigning Lender shall cease to be a party hereto).
Notwithstanding any provision of this paragraph (c) and paragraph (e) of this
subsection, the consent of the Borrower shall not be required, and, unless
requested by the Assignee and/or the assigning Lender, new Notes shall not be
required to be executed
<PAGE> 100
94
and delivered by the Borrower, for any assignment which occurs at any time when
any of the events described in Section 9(f) shall have occurred and be
continuing.
(d) The Administrative Agent, on behalf of the Borrower, shall maintain at
the address of the Administrative Agent referred to in subsection 11.2 a copy
of each Assignment and Acceptance delivered to it and a register (the
"Register") for the recordation of the names and addresses of the Lenders and
the Commitments of, and principal amounts of the Loans owing to, each Lender
from time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Administrative Agent and the
Lenders may (and, in the case of any Loan or other obligation hereunder not
evidenced by a Note, shall) treat each Person whose name is recorded in the
Register as the owner of a Loan or other obligation hereunder as the owner
thereof for all purposes of this Agreement and the other Loan Documents,
notwithstanding any notice to the contrary. Any assignment of any Loan or
other obligation hereunder shall be effective only upon appropriate entries
with respect thereto being made in the Register. The Register shall be
available for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an affiliate thereof, by the Borrower and the Administrative
Agent) together with payment to the Administrative Agent of a registration and
processing fee of $3,000, the Administrative Agent shall (i) promptly accept
such Assignment and Acceptance and (ii) on the effective date determined
pursuant thereto record the information contained therein in the Register and
give notice of such acceptance and recordation to the Lenders and the Borrower.
(f) The Borrower authorizes each Lender to disclose to any Participant or
Assignee (each, a "Transferee") and any prospective Transferee, subject to the
provisions of subsection 11.18, any and all financial information in such
Lender's possession concerning the Borrower and its Affiliates which has been
delivered to such Lender by or on behalf of the Borrower pursuant to this
Agreement or which has been delivered to such Lender by or on behalf of the
Borrower in connection with such Lender's credit evaluation of the Borrower and
its Affiliates prior to becoming a party to this Agreement.
(g) For avoidance of doubt, the parties to this Agreement acknowledge that
the provisions of this subsection concerning assignments of Loans and Notes
relate only to absolute assignments and that such provisions do not prohibit
assignments creating security interests, including, without limitation, any
pledge or assignment by a Lender of any Loan or Note to any Federal Reserve
Bank in accordance with applicable law.
11.7 Replacement of Lenders under Certain Circumstances. The Borrower shall
be permitted to replace any Lender which (a) requests reimbursement for amounts
owing pursuant to subsection 4.9 or 4.10 (other than with respect to Bilateral
Option Loans or LIBO Rate CAF Advances) or (b) is affected in the manner
described in subsection 4.8 (other than with respect to Bilateral Option Loans
or LIBO Rate CAF Advances) and as a result thereof any of the actions described
in said subsection are required to be taken; provided that (i) such replacement
does not conflict with any Requirement of Law, (ii) no Event of Default shall
have occurred and be continuing at the time of such replacement, (iii) the
Borrower shall repay (or the replacement bank or institution shall purchase, at
par) all Loans and other amounts owing to such replaced Lender prior to the
date of replacement, (iv) the Borrower shall be liable to such replaced Lender
under subsection 4.11 if any Eurodollar Loan owing to such replaced Lender
shall be prepaid (or purchased) other than on the last
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95
day of the Interest Period relating thereto, any Bilateral Option Loans shall
be paid prior to its maturity or any CAF Advance owing to such replaced Lender
shall be paid other than on the relevant CAF Advance Maturity Date, (v) the
replacement bank or institution, if not already a Lender, and the terms and
conditions of such replacement, shall be reasonably satisfactory to the
Administrative Agent, (vi) the replaced Lender shall be obligated to make such
replacement in accordance with the provisions of subsection 11.6 (provided that
the Borrower shall be obligated to pay the registration and processing fee
referred to therein), (vii) until such time as such replacement shall be
consummated, the Borrower shall pay all additional amounts (if any) required
pursuant to subsection 4.9 or 4.10, as the case may be, and (viii) any such
replacement shall not be deemed to be a waiver of any rights which the
Borrower, the Administrative Agent or any other Lender shall have against the
replaced Lender.
11.8 Adjustments; Set-off. (a) If any Lender (a "benefitted Lender")
shall at any time receive any payment of all or part of its Loans or the
Reimbursement Obligations owing to it, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by
set-off, pursuant to events or proceedings of the nature referred to in Section
9(f), or otherwise), and, after giving effect to any such payment or the
receipt of any such collateral, such benefitted Lender shall have received a
greater proportionate payment (determined in accordance with subsection 4.7) or
interest in collateral than that received by any other Lender, if any, in
respect of such other Lender's Loans or the Reimbursement Obligations owing to
it, or interest thereon, such benefitted Lender shall purchase for cash from
the other Lenders a participating or other similar interest in such portion of
each such other Lender's Loans or the Reimbursement Obligations owing to it, or
shall provide such other Lenders with the benefits of any such collateral, or
the proceeds thereof, as shall be necessary to cause such benefitted Lender to
share the excess payment or benefits of such collateral or proceeds ratably
with each of the Lenders entitled to the same under this subsection; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided by law,
each Lender shall have the right, without prior notice to the Borrower, any
such notice being expressly waived by the Borrower to the extent permitted by
applicable law, upon any amount becoming due and payable by the Borrower
hereunder (whether at the stated maturity, by acceleration or otherwise) which
is not paid when due to set-off and appropriate and apply against such amount
any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Lender or any branch or
agency thereof to or for the credit or the account of the Borrower. Each
Lender agrees promptly to notify the Borrower and the Administrative Agent
after any such set-off and application made by such Lender, provided that the
failure to give such notice shall not affect the validity of such set-off and
application.
(c) The Borrower hereby irrevocably waives and agrees not to assert, for the
benefit of the applicable Secured Parties, all rights of set-off, counterclaim
or defense to payment, whether now existing or hereafter arising, that the
Borrower may have in respect of any Repurchased Put Bonds or California
Mortgage Notes now or hereafter held by any Subsidiary Guarantor.
11.9 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Borrower and the
Administrative Agent.
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96
11.10 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.11 Integration. This Agreement and the other Loan Documents
represent the entire agreement of the Borrower, the Administrative Agent and
the Lenders with respect to the subject matter hereof and thereof, and there
are no promises, undertakings, representations or warranties by the
Administrative Agent or any Lender relative to subject matter hereof or thereof
not expressly set forth or referred to herein or in the other Loan Documents.
11.12 Termination. This Agreement shall terminate when the Commitments have
terminated or expired, no Letter of Credit is outstanding (other than Letters
of Credit which have been cash collateralized in the manner contemplated
pursuant to the penultimate paragraph of Section 9) and the other Kmart Credit
Agreement Obligations have been paid in full.
11.13 Collateral Release. Upon the occurrence of a Collateral Release
Event at any time after the delivery of financial statements pursuant to
subsection 7.1(a) in respect of the 1997 Fiscal Year, the Liens on the
Collateral granted pursuant to the Security Documents or otherwise securing
Secured Obligations shall be released automatically. Within one Business Day
following the satisfaction of the foregoing conditions and the receipt by the
Administrative Agent of a certificate of a Responsible Officer certifying that
such conditions have been satisfied, the Administrative Agent shall deliver to
the Trustee the notice required pursuant to Section 7.10(a) of the Trust
Agreement.
11.14 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
11.15 Submission To Jurisdiction; Waivers. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general jurisdiction
of the Courts of the State of New York, the courts of the
United States of America for the Southern District of New York, and
appellate courts from any thereof;
(b) to the extent permitted by applicable law, consents that
any such action or proceeding may be brought in such courts and waives
any objection that it may now or hereafter have to the venue of any
such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Borrower at its address set forth in subsection 11.2
or at such other address of which the Administrative Agent shall have
been notified pursuant thereto;
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97
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or
proceeding referred to in this subsection any special, exemplary,
punitive or consequential damages.
11.16 Acknowledgements. The Borrower hereby acknowledges
that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or fiduciary duty to the Borrower arising
out of or in connection with this Agreement or any of the other Loan
Documents, and the relationship between the Administrative Agent and
the Lenders, on the one hand, and the Borrower, on the other hand, in
connection herewith or therewith is solely that of debtor and
creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Borrower and the
Lenders or among the Borrower and the Administrative Agent.
11.17 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE
AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
11.18 Confidentiality. Each Lender agrees to keep confidential
all information provided to it by the Borrower or the Administrative Agent
pursuant to or in connection with this Agreement that is designated by the
Borrower in writing as confidential (the "Confidential Information"); provided
that nothing herein shall prevent any Lender from disclosing any such
Confidential Information (i) to the Administrative Agent or any other Lender,
(ii) to any Transferee or prospective Transferee which receives such
Confidential Information having been made aware of the confidential nature
thereof and which has agreed in writing to be bound by the terms of this
subsection 11.18, (iii) to its directors, officers, employees, employees of
affiliates, examiners and professional advisers who have a need to know such
Confidential Information in accordance with customary banking practices and who
receive such Confidential Information having been made aware of the
restrictions of this subsection and, in the case of professional advisers,
having agreed to be bound thereby, (iv) upon the request or demand of any
Governmental Authority having jurisdiction over such Lender, (v) in response to
any order of any court or other Governmental Authority or as may otherwise be
required pursuant to any Requirement of Law, (vi) in connection with the
exercise of any remedy hereunder, (vii) which is now or hereafter becomes
generally available to the public other than as a result of a disclosure by
such Lender or a disclosure known to such Lender to have been made by any
person or entity to which such Lender has delivered such Confidential
Information, (viii) which was available to such Lender prior to its disclosure
to such Lender by the Borrower, or (ix) which becomes available to such Lender
from a source other than the Borrower, provided that such source is not (1)
known to such Lender to be bound by a confidentiality agreement with the
Borrower or (2) known to such Lender to be otherwise prohibited from
transmitting the information to such Lender by a contractual, legal or
fiduciary obligation.
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98
11.19 Judgment Currency. The obligation of the Borrower under
this Agreement to make payments in respect of each Reimbursement Obligation in
the currency in which it is outstanding (the "Agreement Currency") shall not be
discharged or satisfied by any tender or recovery pursuant to any judgment
expressed in or converted into any other currency (the "Judgment Currency")
except to the extent that such tender or recovery of the Judgment Currency
results in the effective receipt by the Lenders or the relevant Issuing Banks,
as the case may be, of the full amount of the Agreement Currency payable under
this Agreement and the Borrower agrees to indemnify the Lenders or the relevant
Issuing Banks, as the case may be (and the Lenders or the relevant Issuing
Banks, as the case may be, shall have an additional legal claim) for any
difference between such full amount and the amount effectively received by such
Lenders or such Issuing Banks, as the case may be, pursuant to any such tender
or recovery. Each Lender's or Issuing Bank's determination of amounts
effectively received by such Lender or Issuing Bank shall be conclusive absent
manifest error. If a judgment in respect of the obligations of the Borrower
hereunder is rendered in a currency other than the Agreement Currency and if,
upon receipt of the full amount of such judgment in such currency and the
conversion into, and receipt of such amount in the Agreement Currency, such
amount of the Agreement Currency exceeds the obligations of the Borrower
hereunder, such excess amount shall be remitted to the Borrower by the Lenders
or the relevant Issuing Banks, as the case may be. The obligations of the
Borrower under this subsection shall survive the termination of this Agreement
and the repayment of the Loans and all other amounts payable hereunder.
11.20 Section Headings. The Section and subsection headings in
this Agreement are for convenience in reference only and shall not deemed to
alter or affect the interpretation of any provisions hereof.
11.21 Exhibits. Exhibits B, C, D, E, F, H, I and M to the
Existing Credit Agreement are not being amended in connection with the
execution and delivery of this Agreement and all such Exhibits are being
attached hereto, for convenience of reference, as Exhibits B, C, D, E, F, G, H
and L, respectively. Without limiting any provisions thereof, (a) the
Borrower, the Administrative Agent and the Lenders hereby confirm that all
references to the "Credit Agreement" in the Loan Documents (as defined in the
Existing Credit Agreement) and in such Exhibits shall refer to this Agreement
and (b) CAF Advance Confirmations, CAF Advance Offers, CAF Advance Requests,
Revolving Credit Notes, CAF Advance Notes and Assignment and Acceptances
executed on or after the Effective Date may be modified to include a specific
reference to this Agreement.
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11.22 Special Provisions. (a) (i) The Borrower and the
Administrative Agent hereby acknowledge that the Term Loans (as defined in the
Existing Credit Agreement) have been repaid in full and (ii) the Borrower, the
Administrative Agent and the Lenders agree that the Term Loan Lenders will not
be parties to this Agreement or have any obligations or liabilities under this
Agreement with respect to the period from and after the Effective Date and that
the Term Loan Lenders shall not have any rights under the Existing Credit
Agreement, this Agreement or any other Loan Document (other than rights under
the Existing Credit Agreement expressly stated to survive the termination of
the Existing Credit Agreement and the repayment of amounts outstanding
thereunder).
(b) From and after the Effective Date, (i) each Exiting
Revolving Credit Lender shall cease to be a party to this Agreement, (ii) no
Exiting Revolving Credit Lender shall have any obligations or liabilities under
this Agreement with respect to the period from and after the Effective Date
and, without limiting the foregoing, no Exiting Revolving Credit Lender shall
have any Revolving Credit Commitment under this Agreement or any participation
on any Letter of Credit outstanding hereunder and (iii) no Exiting Revolving
Credit Lender shall have any rights under the Existing Credit Agreement, this
Agreement or any other Loan Document (other than rights under the Existing
Credit Agreement expressly stated to survive the termination of the Existing
Credit Agreement and the repayment of amounts outstanding thereunder).
(c) The Lenders (which are Revolving Credit Lenders under the
Existing Credit Agreement) hereby waive any requirements for notice of
prepayment, minimum amounts of prepayments of Revolving Credit Loans (as
defined in the Existing Credit Agreement), ratable reductions of Revolving
Credit Commitments (as defined in the Existing Credit Agreement) and ratable
payments on account of the principal or interest of any Revolving Credit Loan
(as defined in the Existing Credit Agreement) under the Existing Credit
Agreement to the extent such prepayment, reductions or payments are required
pursuant to subsection 6.1(h).
(d) The Lenders hereby authorize the Administrative Agent and
the Borrower to request borrowings from the Lenders, to make prepayments of
Revolving Credit Loans (as defined in the Existing Credit Agreement) and to
reduce Revolving Credit Commitments (as defined in the Existing Credit
Agreement) among the Revolving Credit Lenders (as defined in the Existing
Credit Agreement) in order to ensure that, upon the effectiveness of this
Agreement, the Revolving Credit Loans of the Lenders shall be outstanding on a
ratable basis in accordance with their Revolving Credit Commitment Percentages
and that the Revolving Credit Commitments shall be as set forth on Schedule
1.1(a) hereto and no such borrowing, prepayment or reduction shall violate any
provisions of the Existing Credit Agreement or this Agreement. The Lenders
hereby confirm that, from and after the Effective Date, all participations of
the Lenders in respect of Letters of Credit outstanding hereunder pursuant to
subsection 3.9(a) shall be based upon the Revolving Credit Commitment
Percentages of the Lenders (after giving effect to this Agreement).
(e) The Borrower hereby terminates, effective as of the
Effective Date, in full the Revolving Credit Commitments (as defined in the
Existing Credit Agreement) of the Exiting Revolving Credit Lenders.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
KMART CORPORATION
By:/s/ Michael J. Viola
-----------------------------------
Name: Michael J. Viola
Title: Vice President and Treasurer
THE CHASE MANHATTAN BANK, as
Administrative Agent
By:/s/ William P. Rindfuss
-----------------------------------
Name: William P. Rindfuss
Title: Vice President
<PAGE> 107
ANNEX A
PRICING GRID
<TABLE>
<CAPTION>
Margin Level Applicable Margin for Applicable Margin for
Status Eurodollar Loans ABR Loans Commitment Fee Rate
<S> <C> <C> <C>
Margin Level I Status 2.00% 1.00% 0.50%
Margin Level II Status 1.50% 0.50% 0.50%
Margin Level III Status 1.25% 0.25% 0.30%
Margin Level IV Status 1.00% 0% 0.25%
Margin Level V Status 0.875% 0% 0.225%
Margin Level VI Status 0.75% 0% 0.225%
Margin Level VII Status 0.50% 0% 0.20%
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-28-1998
<PERIOD-END> APR-30-1997
<CASH> 265
<SECURITIES> 51
<RECEIVABLES> 483
<ALLOWANCES> 0
<INVENTORY> 7,263
<CURRENT-ASSETS> 8,534
<PP&E> 7,962
<DEPRECIATION> 3,544
<TOTAL-ASSETS> 14,891
<CURRENT-LIABILITIES> 4,497
<BONDS> 1,839
980
0
<COMMON> 488
<OTHER-SE> 4,677
<TOTAL-LIABILITY-AND-EQUITY> 14,891
<SALES> 7,263
<TOTAL-REVENUES> 7,263
<CGS> 5,637
<TOTAL-COSTS> 5,637
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 98
<INCOME-PRETAX> 37
<INCOME-TAX> 11
<INCOME-CONTINUING> 14
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14
<EPS-PRIMARY> .03
<EPS-DILUTED> .05
</TABLE>
