<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly report filed pursuant to section 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 2, 1997 Commission file number 1-8897
CONSOLIDATED STORES CORPORATION
A Delaware Corporation
IRS No. 06-1119097
1105 North Market Street, Suite 1300
P. O. Box 8985
Wilmington, Delaware 19899
(302) 478-4896
Indicate 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, and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
The number of shares of Common Stock $.01 par value per share, outstanding as of
September 5, 1997, was 84,319,557 and there were no shares of Nonvoting Common
Stock, $.01 par value per share outstanding at that date.
FORM 10Q Page 1
<PAGE> 2
CONSOLIDATED STORES CORPORATION
QUARTERLY REPORT ON FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II - OTHER INFORMATION
Items 1 - 6 14
Signature 15
</TABLE>
FORM 10Q Page 2
<PAGE> 3
<TABLE>
<CAPTION>
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
AUGUST 2, FEBRUARY 1,
1997 1997*
- ------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Current Assets:
Cash $ 25,447 $ 30,044
Accounts receivable 9,431 9,342
Inventories 1,041,044 792,665
Prepaid expenses and deferred income taxes 117,992 94,467
- ------------------------------------------------------------------------------------------------------
Total current assets 1,193,914 926,518
- ------------------------------------------------------------------------------------------------------
Property and equipment - net 415,141 380,095
Other assets 27,459 23,890
- ------------------------------------------------------------------------------------------------------
$ 1,636,514 $ 1,330,503
======================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 299,907 $ 295,701
Accrued liabilities and income taxes 51,741 133,635
Notes payable and current maturities of long-term obligations 87,206 27,892
- ------------------------------------------------------------------------------------------------------
Total current liabilities 438,854 457,228
- ------------------------------------------------------------------------------------------------------
Long-term obligations 463,135 151,292
Deferred income taxes and other noncurrent liabilities 47,150 39,898
Stockholders' equity:
Preferred stock - authorized 2,000,000 shares, $.01 par value; none
issued -- --
Common stock - authorized 1997 - 290,000,000 shares, 1996 -
90,000,000 shares $.01 par value; issued 84,289,903 and
66,958,488** shares respectively 843 670
Nonvoting common stock - authorized 8,000,000 shares, $.01 par
value; none issued -- --
Additional paid-in-capital 324,292 312,879
Retained earnings 362,488 369,022
Other adjustments (248) (486)
- ------------------------------------------------------------------------------------------------------
Total stockholders' equity 687,375 682,085
- ------------------------------------------------------------------------------------------------------
$ 1,636,514 $ 1,330,503
======================================================================================================
<FN>
* Condensed from audited financial statements
** Unadjusted for 5 for 4 stock split to shareholders of record on June 10, 1997.
The accompanying notes are an integral part of these condensed financial statements.
</TABLE>
FORM 10Q Page 3
<PAGE> 4
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
------------------------------------------------------
August 2, August 3, August 2, August 3,
1997 1996 1997 1996
- -------------------------------------------------------------- -------------- -------------- -----------
<S> <C> <C> <C> <C>
Net sales $624,326 $532,547 $1,219,200 $854,516
Cost and expenses:
Cost of sales 364,108 315,798 720,171 502,659
Selling and administrative expenses 251,135 217,106 497,205 341,808
Interest expense 6,869 5,094 11,546 6,397
Other - net 935 (50) 989 (292)
- -------------------------------------------------------------- -------------- -------------- -----------
623,047 537,948 1,229,911 850,572
- -------------------------------------------------------------- -------------- -------------- -----------
Income (loss) from continuing operations before
income taxes and extraordinary charge 1,279 (5,401) (10,711) 3,944
Income tax expense (benefit) 499 (1,999) (4,177) 1,459
- -------------------------------------------------------------- -------------- -------------- -----------
Income (loss) from continuing operations before
extraordinary charge 780 (3,402) (6,534) 2,485
Discontinued operations -- (3,317) -- (5,598)
Extraordinary charge -- (1,856) -- (1,856)
- -------------------------------------------------------------- -------------- -------------- -----------
Net income (loss) $ 780 $(8,575) $(6,534) $(4,969)
============================================================== ============== ============== ===========
Income (loss) per common and common equiva-
lent share:
Continuing operations $ 0.01 $ (0.04) $ (0.08) $ 0.03
Discontinued operations -- (0.04) -- (0.07)
Extraordinary charge -- (0.02) -- (0.02)
- -------------------------------------------------------------- -------------- -------------- -----------
Net income (loss) $ 0.01 $ (0.10) $ (0.08) $ (0.06)
============================================================== ============== ============== ===========
Weighted average common and common equiva-
lent shares outstanding 88,182 84,444 84,131 81,172
============================================================== ============== ============== ==========
The accompanying notes are an integral part of these condensed financial statements.
</TABLE>
FORM 10Q Page 4
<PAGE> 5
<TABLE>
<CAPTION>
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
TWENTY-SIX WEEKS ENDED
----------------------------------
August 2, August 3,
1997 1996
- ------------------------------------------------------------------------------------------------ ----------------
<S> <C> <C>
Operating Activities
Net loss $ (6,534) $ (4,969)
Adjustments to net income (loss) to arrive at cash used by
operations:
Extraordinary item, net -- 1,856
Depreciation and amortization 30,839 21,615
Deferred income taxes 8,570 (2,930)
Other 7,868 5,488
Change in assets and liabilities net of effect from acquired business (357,859) (122,575)
- ------------------------------------------------------------------------------------------------ ----------------
Net cash used for operating activities (317,116) (101,515)
- ------------------------------------------------------------------------------------------------ ----------------
Investment Activities:
Payment for acquired business -- (214,513)
Capital expenditures (67,307) (46,229)
Other 2,176 1,912
- ------------------------------------------------------------------------------------------------ ----------------
Net cash used for investment activities (65,131) (258,830)
- ------------------------------------------------------------------------------------------------ ----------------
Financing Activities:
Proceeds from issuance of common stock -- 190,647
Proceeds from credit agreements, net 371,309 222,600
Payment of senior notes and other debt (157) (35,000)
Debt issue payments -- (10,307)
Extinguishment of debt -- (2,946)
Proceeds from exercise of stock options 3,813 2,658
Increase in deferred credits 2,685 2,835
- ------------------------------------------------------------------------------------------------ ----------------
Net cash provided by financing activities 377,650 370,487
- ------------------------------------------------------------------------------------------------ ----------------
Increase (decrease) in cash $ (4,597) $ 10,142
================================================================================================ ================
Supplemental Disclosure of Cash Flow Information:
Income taxes paid $ 61,767 $ 14,350
Interest paid 11,841 5,245
Supplemental Disclosure of Non Cash Transactions:
Issuance of subordinated notes - Note 2
The accompanying notes are an integral part of these condensed financial statements.
</TABLE>
FORM 10Q Page 5
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The condensed consolidated balance sheet at August 2, 1997, and the condensed
consolidated statements of income and statements of cash flows for the thirteen
and twenty-six week periods ended August 2, 1997, have been prepared by the
Company without audit. In the opinion of management, all adjustments necessary
to present fairly the financial position, results of operations, and cash flows
at August 2, 1997, and for the thirteen and twenty-six week periods presented
have been made. Such adjustments consisted only of normal recurring items.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principals
have been omitted or condensed. It is suggested that the condensed consolidated
financial statements be read in conjunction with the financial statements and
notes thereto included in the Company's Annual Report for the year ended
February 1, 1997. The results of operations for the period ended August 2, 1997,
may not necessarily be indicative of the operating results for the full year.
Certain reclassifications have been made to the prior year's income statement to
conform to current presentation.
NOTE 2 - ACQUISITION
- --------------------
Effective May 5, 1996, the Company acquired Kay-Bee Center, Inc. (KAY-BEE) from
Melville Corporation for a initial purchase price of approximately $315 million
(subject to post-closing adjustments), consisting of $215 million in cash and
$100 million of subordinated notes, issued to Melville Corporation. Post-closing
adjustments recorded in the third quarter 1996, reduced the cash component of
the purchase price by $29.7 million to $185.3 million. This acquisition was
accounted for as a purchase with the results of KAY-BEE included from the
acquisition date. At May 5, 1996, KAY-BEE operated 1,042 toy stores located in
all 50 states and Puerto Rico primarily under the names Kay-Bee Toys and Toy
Works.
The following summary, prepared on a pro forma basis, combines the
results of operations as if KAY-BEE had been acquired at the beginning of the
fiscal year presented. Included in the pro forma presentation is the impact of
certain purchase adjustments directly attributable to the acquisition which are
expected to have a continuing impact.
<TABLE>
<CAPTION>
Twenty-six
weeks ended
(In thousands, except per share data) August 3, 1996
=======================================================================
Unaudited
<S> <C>
Net sales $1,030,906
-----------------------------------------------------------------------
Loss from:
Continuing operations before extraordinary charge $ (15,201)
Discontinued operations (5,598)
Extraordinary charge (1,856)
-----------------------------------------------------------------------
Net loss $ (22,655)
=======================================================================
Loss per common and common equivalent share of stock:
Continuing operations before extraordinary charge $ (0.18)
Discontinued operations (0.06)
Extraordinary charge (0.02)
-----------------------------------------------------------------------
Net loss $ (0.26)
=======================================================================
</TABLE>
FORM 10Q Page 6
<PAGE> 7
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The pro forma financial information is presented for informational purposes only
and is not necessarily indicative of the operating results that would have
occurred had the KAY-BEE acquisition been consummated as of the beginning of the
fiscal year presented. Additionally, the pro forma financial information is not
intended to be a prediction of future results and it does not reflect any
synergies that may be achieved from the combined operations.
NOTE 3 - DISCONTINUED OPERATIONS
In the fourth quarter of 1996 the Company adopted a plan to close its single
price point and small specialty stores operating under the names of All For One
and iTZADEAL!. Accordingly, the operating results for this business are reported
as a discontinued operation and prior years operating results have been
restated. During the second quarter 1997 and corresponding year to date period
$3.4 million and $6.9 million, respectively, were charged, net of tax, against
the reserve established in 1996 for discontinued operations.
NOTE 4 - INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Income (loss) per common and common equivalent share are based on the weighted
average number of shares outstanding during each period which includes the
additional number of shares, as applicable, which would have been issued upon
exercise of stock options assuming that the Company used the proceeds received
to purchase additional shares at market value.
The Board of Directors authorized 5 for 4 stock splits payable to stockholders
of record on December 10, 1996, and June 10, 1997. These stock splits resulted
in the issuance of 13,388,264 (unadjusted for June 10, 1997 split) and
16,852,771 new shares of common stock, respectively. All references in the
financial statements to average number of shares outstanding and income (loss)
per share amounts have been restated to reflect the splits unless otherwise
noted.
NOTE 5 - STOCK OFFERING
As of June 10, 1996, the Company completed an offering of 5,125,000 (8,007,812
as adjusted for subsequent stock splits) shares of common stock. Net proceeds to
the Company were approximately $190.6 million.
NOTE 6 - EXTRAORDINARY ITEM
During the second quarter of 1996 the Company recorded an extraordinary item in
connection with the early extinguishment for $35 million of 10.5% senior notes.
The charge before income taxes was $2.9 million.
NOTE 7 - NEW ACCOUNTING STANDARD
The Company calculates earnings (loss) per share using methods prescribed by
Accounting Principles Board Opinion (APB) No. 15, "Earnings per Share". In
February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share" which
replaces APB No. 15 and requires adoption for periods ending after December 15,
1997. The Statement will require dual presentation of basic and fully diluted
income (loss) per share on the face of the statement of income. For the periods
ended August 2, 1997, and August 3, 1996, the basic and diluted income (loss)
per share calculated pursuant to SFAS No. 128 are not materially different from
primary income (loss) per share calculated under APB No. 15.
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," was issued. SFAS No. 131 establishes standards for the way
that public companies report selected information about operating segments in
annual financial statements and requires that those companies report selected
information about segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosures about products and
services,
FORM 10Q Page 7
<PAGE> 8
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
geographic areas, and major customers. SFAS No. 131, which supersedes SFAS No.
14, "Financial Reporting for Segments of a Business Enterprise," but retains the
requirement to report information about major customers, requires that a public
company report financial and descriptive information about its reportable
operating segments. Operating segments are components of an enterprise about
which separate financial information is available that is evaluated regularly by
the chief operating decision maker in deciding how to allocate resources and in
assessing performance. Generally, financial information is required to be
reported on the basis that it is used internally for evaluating segment
performance and deciding how to allocate resources to segments. SFAS No. 131
requires that a public company report a measure of segment profit or loss,
certain specific revenue and expense items, and segment assets. However, SFAS
No. 131 does not require the reporting of information that is not prepared for
internal use if reporting it would be impracticable. SFAS No. 131 also requires
that a public company report descriptive information about the way that the
operating segments were determined, the products and services provided by the
operating segments, differences between the measurements used in reporting
segment information and those used in the enterprise's general-purpose financial
statements, and changes in the measurement of segment amounts from period to
period. SFAS No. 131 is effective for financial statements for periods beginning
after December 15, 1997. The Company has not determined the effects, if any,
that SFAS No. 131 will have on the disclosures in its consolidated financial
statements.
FORM 10Q Page 8
<PAGE> 9
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW. The Company is the nation's largest closeout retailer and the nation's
largest mall-based toy retailer with 1,869 stores located in all 50 states and
Puerto Rico. The Company operates 649 retail closeout stores under the names ODD
LOTS and BIG LOTS (Closeout Stores) in the midwestern, southern and mid-Atlantic
regions of the United States, and 1,220 retail toy and closeout toy stores
throughout the United States and Puerto Rico, primarily under the names K-B
TOYS, K-B TOY WORKS, and K-B TOY OUTLET (Toy Stores). 1,042 of the Toy Stores
were acquired as of May 5, 1996 in the acquisition of KAY-BEE. As a value
retailer specializing in toys and closeout merchandise, the Company seeks to
provide the budget-conscious consumer with a broad range of quality, name-brand
products at exceptional values. Wholesale operations are conducted under the
names CONSOLIDATED INTERNATIONAL and WISCONSIN TOY.
The Closeout Stores typically offer merchandise at prices 15% to 35% below those
offered by other discount retailers and up to 70% below those offered by
traditional retailers. The Closeout Stores offer a wide variety of name-brand
consumer products, including food items, health and beauty aids, electronics,
housewares, tools, paint, lawn and garden, hardware, sporting goods, toys and
softlines. In addition, these stores supplement their broad offering of items in
core product categories with a changing mix of new merchandise and seasonal
goods such as back-to-school and holiday merchandise.
The Toy Stores offer a broad variety of closeout toys, as well as currently
promoted retail toys (known as "in-line toys") and traditional toy merchandise.
The Company has been in the toy retailing business since its inception and has
operated stand-alone toy stores since 1994.
TRENDS. The Company has historically experienced seasonal fluctuations with a
significant percentage of its net sales and income being realized in the fourth
fiscal quarter. The Company's quarterly results can also be affected by the
timing of store openings and closings, the amount of net sales contributed by
new and existing stores and the timing of certain holidays. Due to the increase
in the Company's retail toy operations as a result of the KAY-BEE acquisition on
May 5, 1996, it is anticipated that a substantial amount of net sales, operating
profit and net income will be realized in the fourth fiscal quarter. Quarterly
fluctuations in inventory balances are normal reflecting the opportunistic
purchases available at any given time and the expansion of the Company's store
base. Historically, on a per store basis, inventory levels are lower at the end
of the Company's fiscal year and build through the remaining three quarters of
the year to a peak level in the third quarter. Accounts payable generally follow
a trend similar to inventories.
FORM 10Q Page 9
<PAGE> 10
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following table compares components of the statement of income as a percent
of net sales and reflects the number of stores in operation at the end of each
period.
<TABLE>
<CAPTION>
Thirteen weeks ended Twenty-six weeks ended
August 2, August 3, August 2, August 3,
1997 1996 1997 1996
---------- ---------- ---------- ----------
(Percent to total net sales)
Net sales:
<S> <C> <C> <C> <C>
Closeout 58.5 % 59.3 % 57.2 % 71.9 %
Toys 40.2 39.1 41.1 25.9
Other 1.3 1.6 1.7 2.2
---------- ---------- ---------- ----------
100.0 100.0 100.0 100.0
Cost of sales 58.3 59.3 59.1 58.8
---------- ---------- ---------- ----------
Gross profit 41.7 40.7 40.9 41.2
Selling and administrative expenses 40.2 40.8 40.8 40.0
---------- ---------- ---------- ----------
Operating profit (loss) 1.5 (0.1) 0.1 1.2
Interest expense 1.1 1.0 0.9 0.7
Other - net 0.1 -- 0.1 --
---------- ---------- ---------- ----------
Income (loss) from continuing operations before income
taxes and extraordinary charge 0.3 (1.1) (0.9) 0.5
Income tax expense (benefit) 0.1 (0.4) (0.3) 0.2
---------- ---------- ---------- ----------
Income (loss) from continuing operations before
extraordinary charge 0.2 (0.7) (0.6) 0.3
Discontinued operations -- (0.6) -- (0.7)
Extraordinary charge -- (0.3) -- (0.2)
---------- ---------- ---------- ----------
Net income (loss) 0.2 % (1.6)% (0.6)% (0.6)%
========== ========== ========== ==========
August 2, August 3,
1997 1996
---------- ----------
Retail stores in operation at end of period:
Closeout 649 571
Toys 1,220 1,165
---------- ----------
1,869 1,736
========== ==========
</TABLE>
In the fourth quarter of 1996 the Company adopted a plan to close its single
price point and small specialty stores operating under the names of All For One
and iTZADEAL!. The 1996 operations of these stores are reported as discontinued
operations. During the second quarter 1997 and corresponding year to date period
$3.4 million and $6.9 million, respectively, were charged, net of tax, against
the reserve established in 1996 for discontinued operations.
SALES. Net sales for the thirteen and twenty-six week periods ended August 2,
1997, increased 17.2% and 42.7%, respectively. Comparable store sales for stores
open two years at the beginning of the fiscal year increased 10.0% for the
quarter and 9.8% for the year to date period. The sales improvement reflects
comparable store sales increases in each operating segment, the greater number
of closeout stores in operation during the period, and the sales performance of
K-B TOYS acquired at the start of the second quarter of fiscal 1996.
FORM 10Q Page 10
<PAGE> 11
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Net sales and comparable store sales by operating unit were as follows:
<TABLE>
<CAPTION>
Thirteen weeks ended
---------------------------
August 2, August 3, Percentage
Operating Segment 1997 1996 Change
- ---------------------------- ---------- ---------- ---------
(In thousands)
<S> <C> <C> <C>
Closeout $ 364,948 $ 316,052 15.5%
Toys 251,023 208,196 20.6
Other 8,355 8,299 0.7
---------- ---------- ----------
$ 624,326 $ 532,547 17.2%
========== ========== ==========
Comparable store sales:
- ----------------------------
Closeout 5.4% 2.1%
Toys 16.3% 6.5%*
Twenty-six weeks ended
---------------------------
August 2, August 3, Percentage
1997 1996 Change
---------- ---------- ---------
(In thousands)
<S> <C> <C> <C>
Closeout $ 697,609 $ 614,768 13.5%
Toys 501,606 221,737 126.2
Other 19,985 18,011 11.0
---------- ---------- ----------
$1,219,200 $ 854,516 42.7%
========== ========== ==========
Comparable store sales:
- ----------------------------
Closeout 3.5% 3.9%
Toys 18.2% 7.0%*
* Includes KAY-BEE comparable store sales from date of acquisition.
</TABLE>
GROSS PROFIT. Gross profit as a percent of net sales was 41.7% for the second
quarter of fiscal 1997 compared to 40.7% in the same 1996 period. This
improvement is primarily attributable to improved initial markups in the
Closeout segment offset to some extent by a slight decline in the Toy Stores
resulting from increased video games sales which traditionally have a smaller
gross profit percentage. In the Toy Stores the Company has gradually increased
the availability of closeout toys, which traditionally have a higher gross
profit percentage, over the past year from approximately 20% to approximately
30%. Gross profit was 40.9% and 41.2% for the first six months of fiscal 1997
and 1996, respectively. Components of gross profit as a percent to each
operating segments sales were as follows:
<TABLE>
<CAPTION>
Thirteen weeks ended Twenty-six weeks ended
------------------------------ ------------------------------
August 2, August 3, August 2, August 3,
Operating Segment 1997 1996 1997 1996
- ------------------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Closeout 42.3% 40.6% 41.7% 41.4%
Toys 41.2 41.5 40.5 42.0
Other 27.2 22.6 25.7 22.9
---------- ---------- ---------- ----------
41.7% 40.7% 40.9% 41.2%
========== ========== ========== ==========
</TABLE>
FORM 10Q Page 11
<PAGE> 12
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SELLING AND ADMINISTRATIVE EXPENSES. As a percent to net sales, selling and
administrative expenses were 40.2% and 40.8% in the second quarter of fiscal
1997 and 1996, respectively and 40.8% and 40.0% in each of the year to date
periods. Historically the Toy Stores cost structure has resulted in a higher
percentage ratio of selling and administrative expenses to net sales in the
first three quarters of the year. Accordingly, the comparative year to date
increment in selling and administrative expenses as a percent to net sales
reflects the full period impact in 1997 of KAY-BEE Toys.
INTEREST EXPENSE. Interest expense increased $1.8 million in the second quarter
of 1997 and rose $5.1 million for the year to date period. The increase was
attributable to higher weighted average debt levels utilized principally to
support operating requirements for the increased number of Toy Stores, increased
inventory levels, and capital expenditures.
INCOME TAXES. The estimated annual effective income tax rate for the Company has
increased from 37.0% in 1996 to 39.0%. The increase in rate results primarily
from the surrender of the Company's corporate-owned life insurance program in
1996.
CAPITAL RESOURCES AND LIQUIDITY
Working capital at August 3, 1997, was $755.1 million, a 60.8% increase compared
to $469.3 million at February 1, 1997. The primary sources of liquidity for the
Company has been, and continues to be, cash flow from operations and borrowings
under available credit facilities. Net cash used by operations in each of the
twenty-six week periods ended August 2, 1997, and August 3, 1996, as detailed in
the condensed consolidated statements of cash flows, was $317.2 million and
$101.5 million, respectively. The utilization by operations in 1997 is
principally attributable to increased inventory levels reflecting the greater
number of stores in operation, the strong opportunistic availability of closeout
merchandise, and the impact of seasonality in the toy business. Future
comparisons of funds used and provided by operations are anticipated to continue
to fluctuate as a result of these factors. Additionally, the Company had capital
expenditures of $67.3 million and $46.2 million in each respective year to date
period. Capital expenditures in 1997 are expected to be approximately $110
million to $120 million principally for the anticipated opening of 85 to 95 net
Closeout Stores and estimated 100 net Toy Stores plus capital requirements for
warehouse expansion and systems needs.
As necessary, the Company supplements its capital and operating cash
requirements with borrowings under available credit facilities. At August 2,
1997, approximately $70.9 million was available for direct borrowings under the
Company's $600 million Revolving Credit Facility (Revolver) and an additional
$43.1 million of uncommitted credit facilities were available, subject to the
terms of the Revolver.
The Company continues to believe that it will have adequate resources to fund
ongoing operating requirements and future capital expenditures related to the
expansion of existing businesses and development of new projects. Additionally,
management is not aware of any current trends, events, demands, commitments, or
uncertainties which reasonably can be expected to have a material impact on the
liquidity, capital resources, financial position or results of operations of the
Company.
FORM 10Q Page 12
<PAGE> 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. Not applicable.
Item 2. Changes in Securities. Not applicable.
Item 3. Defaults Upon Senior Securities. Not applicable.
Item 4. Submission of Matters to Vote of Security Holders.
(a) The Company's Annual Meeting was held on May 20, 1997.
(b) The number of shares of voting Common Stock, $.01 par value per share,
outstanding as of April 3, 1997, the record date was 67,339,903(1).
(c) The number of shares of Common Stock of the Company represented in person
or by proxy and eligible to vote was 62,735,329(1).
(d) Proxies were solicited by management pursuant to Regulation 14 under the
Securities Exchange Act of 1934. There was no solicitation in opposition
to management's nominees as listed in the proxy statement. All of the
nominee's were elected pursuant to a vote of the stockholders.
(e) A proposal to approve the Amendment to the Fourth Article of Incorporation
of the Company increasing the authorized number of shares of Common Stock,
$.01 par value per share, of the Company from 90,000,000 to 290,000,000
was approved by a majority vote of the stockholders.
The vote on this proposal was:
41,397,621(1) 21,287,814(1) 49,894(1)
------------- -------------- -------------
(For) (Against) (Abstain)
(1) Unadjusted for 5 for 4 stock split to shareholders of record on June 10,
1997.
Item 5. Other Information.
The Private Securities Litigation Reform Act of 1995 ("the Act") provides a safe
harbor for forward-looking statements made by or on behalf of the Company.
Certain statements contained in Management's Discussion and Analysis and in
other Company filings are forward-looking statements. These statements discuss
among other things, expected growth, future revenues, future cash flows and
future performance. The forward looking statements are subject to risks and
uncertainties including but not limited to competitive pressures, inflation,
consumer debt levels, currency exchange fluctuations, trade restrictions,
changes in tariff and freight rates, capital market conditions, and other risks
indicated in the Company's filings with the Securities and Exchange Commission.
Actual results may materially differ from anticipated results described in these
statements.
FORM 10Q Page 13
<PAGE> 14
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
<TABLE>
<CAPTION>
(a) Exhibits.
Exhibit No. Document
-------------- --------------------------------------------------------
<S> <C> <C>
10(a) Transfer Agreement, dated as of May 9, 1997, among
Consolidated Stores Corporation, an Ohio
corporation, Nashua Hollis CVS, Inc., a New
Hampshire corporation, The Bank of New York, a New
York banking corporation, as Trustee, and each of
the purchasers (as defined)
10(b) Consolidated Stores Corporation, Note Agreement
dated May 9, 1997, for $100,000,000 7% Senior
Subordinated Notes Due May 4, 2000
27 Financial Data Schedule
(b) Reports on Form 8-K.
During the quarter covered by this report the Company filed the following
Current Report.
Form/Date Topic
-------------- --------------------------------------------------------
Form 8-K Announcement of 5 for 4 stock split to shareholders of
May 21, 1997 record June 10, 1997 to be distributed June 24, 1997
</TABLE>
FORM 10Q Page 14
<PAGE> 15
SIGNATURE
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.
CONSOLIDATED STORES CORPORATION
-------------------------------
(Registrant)
<TABLE>
<S> <C>
Dated: September 10, 1997 By: /s/ Michael J. Potter
------ ------------------ -------------------------
Michael J. Potter, Sr. Vice President,
Chief Financial Officer, and Principal
Accounting Officer
</TABLE>
FORM 10Q Page 15
<PAGE> 1
EXHIBIT 10(a)
CONSOLIDATED STORES CORPORATION,
The Company
NASHUA HOLLIS CVS, INC.,
The Seller
THE BANK OF NEW YORK,
The Trustee
THE PURCHASERS LISTED ON SCHEDULE A,
The Purchasers
TRANSFER AGREEMENT
DATED AS OF MAY 9, 1997
$100,000,000
7% SENIOR SUBORDINATED NOTES DUE MAY 4, 2000
<PAGE> 2
TABLE OF CONTENTS EXHIBIT 10(a)
PAGE
----
1. DEFINITIONS ...................................................... 1
2. SALE AND PURCHASE OF THE NOTES ................................... 7
3. AMENDMENT AND RESTATEMENT OF INDENTURE AND ORIGINAL NOTES;
TERMINATION OF TRUST AND REMOVAL OF TRUSTEE........................ 7
3.1 Amendment and Restatement of Indenture and Original
Notes..................................................... 7
3.2 Termination of Trust and Removal of Trustee............... 7
4. CLOSING ........................................................... 8
5. CONDITIONS TO CLOSING ............................................. 8
5.1 Representations and Warranties ........................... 8
5.2 Performance; No Default .................................. 9
5.3 Compliance Certificates .................................. 9
5.4 Opinions of Counsel ...................................... 9
5.5 Execution and Delivery of Documents and Agreements........ 9
5.6 Purchase Permitted by Applicable Law .....................10
5.7 Payment of Special Counsel Fees ..........................10
5.8 Private Placement Number .................................10
5.9 Changes in Corporate Structure ...........................10
5.10 Consent of Required Banks ................................10
5.11 Proceedings and Documents ................................10
6. REPRESENTATIONS, COVENANTS AND WARRANTIES OF THE COMPANY
6.1 Organization; Power and Authority ........................11
6.2 Authorization; Obligations are Enforceable; Waiver of
Defenses .................................................11
6.3 Disclosure ...............................................11
6.4 Organization and Ownership of Shares of Subsidiaries .....12
6.5 Financial Statements .....................................12
6.6 Compliance with Laws, Other Instruments, etc..............12
6.7 Governmental Authorizations, etc. 13
6.8 Litigation; Observance of Statutes and Orders ............13
6.9 Taxes ....................................................13
6.10 Title to Property; Leases ................................13
6.11 Licenses, Permits, etc....................................13
6.12 Compliance with ERISA ....................................14
6.13 Private Offering by the Company ..........................15
6.14 Use of Original Proceeds by the Company ..................15
6.15 Existing Indebtedness ....................................15
6.16 Foreign Assets Control Regulations, etc...................15
6.17 Status under Certain Statutes ............................15
7. REPRESENTATIONS AND WARRANTIES OF THE SELLER.......................15
7.1 Organization; Power and Authority.........................15
CONSOLIDATED STORES CORPORATION TRANSFER AGREEMENT
<PAGE> 3
TABLE OF CONTENTS (cont.) EXHIBIT 10(a)
PAGE
----
7.2 Obligation is Enforceable. ................................16
7.3 Compliance with Laws, Other Instruments, etc. .............16
7.4 Governmental Authorizations, etc. .........................16
7.5 Private Offering by the Seller 16
7.6 Material Documentation ....................................16
7.7 Good Title ................................................16
7.8 Payment Status ............................................17
7.9 No Impairment .............................................17
7.10 No Obligations ............................................17
7.11 No Defaults ...............................................17
7.12 Warranties under New York Uniform Commercial Code .........17
7.13 No Control Status .........................................18
7.14 No Transfer Taxes .........................................18
7.15 ERISA .....................................................18
7.16 Assets of Seller ..........................................18
8. REPRESENTATIONS OF THE PURCHASER ...................................18
8.1 Purchase for Investment ...................................18
8.2 Source of Funds ...........................................19
9. EXPENSES, ETC. .....................................................20
9.1 Expenses ..................................................20
9.2 Survival ..................................................20
10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. ......20
11. NOTICES. ...........................................................21
12. REPRODUCTION OF DOCUMENTS. .........................................21
13. SUBSTITUTION OF PURCHASER. .........................................22
14. MISCELLANEOUS. .....................................................22
14.1 Successors and Assigns. ...................................22
14.2 Severability. .............................................22
14.3 Construction. .............................................22
14.4 Section Headings, Table of Contents, Etc. .................22
14.5 Counterparts. .............................................23
14.6 Governing Law. ............................................23
Schedule A -- Information Relating to Purchasers
Schedule 5.9 -- Changes in Corporate Structure
Schedule 6.3 -- Disclosure
Schedule 6.4 -- Organization and Ownership of Subsidiaries
<PAGE> 4
TABLE OF CONTENTS (cont.) EXHIBIT 10(a)
PAGE
----
Schedule 6.5 -- Financial Statements
Schedule 6.8 -- Litigation
Schedule 6.11 -- Licenses, Permits, etc.
Schedule 6.12 -- ERISA
Schedule 6.15 -- Existing Indebtedness
Schedule 7.6 -- Material Documentation
Exhibit A -- Form of Restated Note Agreement
Exhibit B1 -- Form of Opinion of Counsel for the Company
Exhibit B2 -- Form of Opinion of Special Counsel for the Seller
Exhibit B3 -- Form of Opinion of Local New Hampshire Counsel for the Seller
Exhibit B4 -- Form of Opinion of General Counsel for CVS Corporation
Exhibit B5 -- Form of Opinion of Special Counsel for the Purchasers
<PAGE> 5
EXHIBIT 10(a)
TRANSFER AGREEMENT
TRANSFER AGREEMENT (as amended from time to time, this "AGREEMENT"),
dated as of May 9, 1997, among CONSOLIDATED STORES CORPORATION, an Ohio
corporation (together with its successors and assigns, the "COMPANY"), NASHUA
HOLLIS CVS, INC., a New Hampshire corporation (together with its successors and
assigns, the "SELLER"), THE BANK OF NEW YORK, a New York banking corporation, as
Trustee (together with its successors and assigns, the "TRUSTEE"), and each of
the purchasers listed on Schedule A (collectively, together with their
respective successors and assigns, the "PURCHASERS").
RECITALS:
A. The Company has issued $100,000,000 aggregate principal amount of
its 7% Senior Subordinated Notes due May 4, 2000 (as in effect immediately prior
to the Closing, the "ORIGINAL NOTES", and as amended and restated by the Company
and the Purchasers at the Closing, in the form set out in Exhibit 1 to the
Restated Note Agreement, the "RESTATED NOTES"), under an Indenture dated as of
May 5, 1996 (as in effect immediately prior to the Closing, the "INDENTURE", and
as amended and restated by the Company and each of the Purchasers at the
Closing, in the form set out in Exhibit A, collectively, the "RESTATED NOTE
AGREEMENT"), between the Company and The Bank of New York.
B. The Company sold the entire aggregate principal amount of the
Original Notes to Melville Corporation on May 5, 1996. Melville Corporation
caused all of the Original Notes, through one or more Persons controlled by it,
to be assigned and transferred to the Seller.
C. The Company and the Seller have taken all corporate action required
to authorize the sale by the Seller to the Purchasers of $100,000,000 aggregate
principal amount of the Original Notes pursuant to the terms and conditions of
this Agreement.
D. The Company, the Trustee and the Purchasers have agreed, subject to
the satisfaction of the conditions precedent set forth in Section 4 hereof, (i)
to amend and restate in full the Indenture by the execution and delivery of the
Restated Note Agreement, (ii) to amend and restate in full the Original Notes in
the form set out in Exhibit 1 to the Restated Note Agreement, and (iii) to
remove the Trustee and terminate and discharge the Indenture; and the Company
and the Purchasers have taken all corporate action, and the Trustee has taken
all trust action, required to authorize such amendment and restatement of the
Indenture and the Original Notes, and such removal of the Trustee and such
termination and discharge of the Indenture.
NOW THEREFORE, in consideration of the foregoing, and of the mutual
promises herein contained, the Company, the Seller, the Trustee and each of the
Purchasers hereby agree as follows:
1. DEFINITIONS.
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
AFFILIATE -- means, at any time,and with respect to any
Person, any other Person that at such time directly or indirectly
through one or more intermediaries Controls, or is Controlled by, or is
under common Control with, such first Person. As used in this
defi-
CONSOLIDATED STORES CORPORATION 1 TRANSFER AGREEMENT
<PAGE> 6
EXHIBIT 10(a)
nition, "Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies
of a Person, whether through the ownership of voting securities, by
contract or otherwise. Unless the context otherwise clearly requires,
any reference to an "Affiliate" is a reference to an Affiliate of the
Company.
AGREEMENT, THIS -- is defined in the introductory sentence
hereof.
BUSINESS DAY -- means any day other than a Saturday, a Sunday
or a day on which commercial banks in New York are required or
authorized to be closed.
CAPITAL LEASE -- means, at any time, a lease with respect to
which the lessee is required concurrently to recognize the acquisition
of an asset and the incurrence of a liability in accordance with GAAP.
CLOSING -- is defined in Section.
CODE -- means the Internal Revenue Code of 1986, as amended
from time to time, and the rules and regulations promulgated thereunder
from time to time.
COMPANY -- is defined in the introductory sentence of this
Agreement.
DEFAULT -- means an event or condition the occurrence or
existence of which would, with the lapse of time or the giving of
notice or both, become an Event of Default.
ENVIRONMENTAL LAWS -- means any and all Federal, state, local,
and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees, permits, concessions, grants, franchises, licenses,
agreements or governmental restrictions relating to pollution and the
protection of the environment or the release of any materials into the
environment, including but not limited to those related to hazardous
substances or wastes, air emissions and discharges to waste or public
systems.
ERISA -- means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the rules and regulations
promulgated thereunder from time to time in effect.
ERISA AFFILIATE -- means any trade or business (whether or not
incorporated) that is treated as a single employer together with the
Company under section 414 of the Code.
EVENT OF DEFAULT -- means and includes (i) each Event of
Default defined as such in the Indenture and (ii) each Event of Default
defined as such in the Restated Note Agreement.
GAAP -- means generally accepted accounting principles as in
effect from time to time in the United States of America.
CONSOLIDATED STORES CORPORATION 2 TRANSFER AGREEMENT
<PAGE> 7
EXHIBIT 10(a)
GOVERNMENTAL AUTHORITY -- means
(a) the government of
(i) the United States of America or
any State or other political subdivision thereof, or
(ii) any jurisdiction in which the Seller,
the Trustee, the Company or any Subsidiary conducts all or any
part of its business, or which asserts jurisdiction over any
properties or business activities of any such Persons, or
(b) any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or pertaining
to, any such government.
GUARANTY -- means, with respect to any Person, any obligation
(except the endorsement in the ordinary course of business of
negotiable instruments for deposit or collection) of such Person
guaranteeing or in effect guaranteeing any indebtedness, dividend or
other obligation of any other Person in any manner, whether directly or
indirectly, including (without limitation) obligations incurred through
an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any
property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment
of such indebtedness or obligation, or (ii) to maintain any working
capital or other balance sheet condition or any income statement
condition of any other Person or otherwise to advance or make available
funds for the purchase or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness
or obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
HOLDER -- means, with respect to any Note, the Person in whose
name such Note is registered in the register maintained by the Company
pursuant Article 2 of the Indenture.
INDEBTEDNESS -- with respect to any Person means, at any time,
without duplication,
(a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock;
CONSOLIDATED STORES CORPORATION 3 TRANSFER AGREEMENT
<PAGE> 8
EXHIBIT 10(a)
(b) its liabilities for the deferred purchase price of
property acquired by such Person (excluding accounts payable arising in
the ordinary course of business but including all liabilities created
or arising under any conditional sale or other title retention
agreement with respect to any such property);
(c) all liabilities appearing on its balance sheet in
accordance with GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any Lien
with respect to any property owned by such Person (whether or not it
has assumed or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its
account by banks and other financial institutions (whether or not
representing obligations for borrowed money);
(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities
of a type describe in any of clauses (a) through (f) hereof.
INDENTURE -- is defined in Recital A hereof.
INSTITUTIONAL INVESTOR -- means (a) any original purchaser of
a Note, (b) any holder of a Note holding more than 5% of the aggregate
principal amount of the Notes then outstanding, and (c) any bank, trust
company, savings and loan association or other financial institution,
any pension plan, any investment company, any insurance company, any
broker or dealer, or any other similar financial institution or entity,
regardless of legal form.
LIEN -- means, with respect to any Person, any mortgage, lien,
pledge, charge, security interest or other encumbrance, or any interest
or title of any vendor, lessor, lender or other secured party to or of
such Person under any conditional sale or other title retention
agreement or Capital Lease, upon or with respect to any property or
asset of such Person (including in the case of stock, stockholder
agreements, voting trust agreements and all similar arrangements).
MATERIAL -- means material in relation to the business,
operations, affairs, financial condition, assets, or properties of the
Company and its Subsidiaries taken as a whole.
MATERIAL ADVERSE EFFECT -- means a material adverse effect on
(a) the business, operations, affairs, financial condition, assets or
properties of the Company and its Subsidiaries taken as a whole, or (b)
the ability of the Company to perform its obligations under this
Agreement, the Restated Note Agreement and the Notes, or (c) the
validity or enforceability of this Agreement or the Notes.
MEMORANDUM -- is defined in Section 6.3.
CONSOLIDATED STORES CORPORATION 4 TRANSFER AGREEMENT
<PAGE> 9
EXHIBIT 10(a)
MULTIEMPLOYER PLAN -- means any Plan that is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).
NOTES -- shall, when reference is made to a date prior to the
date of Closing, mean the Original Notes, and when reference is made to
a date on or after the date of Closing, mean the Restated Notes.
OFFICER'S CERTIFICATE -- means, with respect to any Person, a
certificate of a Senior Financial Officer or of any other officer of
such Person whose responsibilities extend to the subject matter of such
certificate.
ORIGINAL NOTES -- is defined in Recital A hereof.
PERSON -- means an individual, partnership, corporation,
limited liability company, association, trust, unincorporated
organization, or a government or agency or political subdivision
thereof.
PLAN -- means an "employee benefit plan" (as defined in
section 3(3) of ERISA) that is or, within the preceding five years, has
been established or maintained, or to which contributions are or,
within the preceding five years, have been made or required to be made,
by the Company or any ERISA Affiliate or with respect to which the
Company or any ERISA Affiliate may have any liability.
PREFERRED STOCK -- means any class of capital stock of a
corporation that is preferred over any other class of capital stock of
such corporation as to the payment of dividends or the payment of any
amount upon liquidation or dissolution of such corporation.
PROPERTY or PROPERTIES -- means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible,
choate or inchoate.
PURCHASERS -- is defined in the introductory sentence of this
Agreement.
QPAM EXEMPTION -- means Prohibited Transaction Class Exemption
84-14 issued by the United States Department of Labor.
REQUIRED BANKS -- shall have the meaning ascribed to such term
in the Revolving Credit Facility.
RESTATED NOTE AGREEMENT -- is defined in Recital A hereof.
RESTATED NOTES -- is defined in Recital A hereof.
REVOLVING CREDIT FACILITY -- means the Amended and Restated
Credit Agreement, dated as of May 3, 1996, among the Company, the banks
party thereto from time to time and their respective successors and
assigns, The Bank of New York as syndication agent and managing agent,
National City Bank of Columbus as administrative agent and managing
agent, PNC Bank, Ohio, National Association as arranger, documentation
agent
CONSOLIDATED STORES CORPORATION 5 TRANSFER AGREEMENT
<PAGE> 10
EXHIBIT 10(a)
and managing agent, Bank One, Columbus, N.A. as managing agent, and
National City Bank as managing agent, as such agreement is amended by
(i) Amendment Number One to Amended and Restated Credit Agreement,
dated as of March 21, 1997, and (ii) Waiver and Amendment Number Two to
Amended and Restated Credit Agreement, dated as of May 16, 1997.
SECURITIES ACT -- means the Securities Act of 1933, as amended
from time to time.
SELLER -- is defined in the introductory sentence of this
Agreement.
SENIOR FINANCIAL OFFICER -- means, with respect to any Person,
the chief financial officer, principal accounting officer, treasurer or
comptroller of such Person.
SIDE LETTER -- means and includes, as the case may be, those
certain letter agreements, dated January 22, 1997 and May 16, 1997,
respectively, in each case between the Company and CVS Corporation,
pursuant to which CVS Corporation has agreed to indemnify the Company
against payment of any "Make-Whole Amount" in excess of the "Call
Premium" (as defined therein) in connection with an optional redemption
of the Notes prior to May 4, 2000.
SOURCE -- is defined in Section.
SUBSIDIARY -- means, as to any Person, any corporation,
association or other business entity in which such Person or one or
more of its Subsidiaries or such Person and one or more of its
Subsidiaries owns sufficient equity or voting interests to enable it or
them (as a group) ordinarily, in the absence of contingencies, to elect
a majority of the director (or Persons performing similar functions) of
such entity, and any partnership or joint venture if more than a 50%
interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership an and does ordinarily take major
business actions without the prior approval of such Person or one or
more of its Subsidiaries). Unless the context otherwise clearly
requires, any reference to a "Subsidiary" is a reference to a
Subsidiary of the Company.
SWAPS -- means, with respect to any Person, payment
obligations with respect to interest rate swaps, currency swaps and
similar obligations obligating such Person to make payments, whether
periodically or upon the happening of a contingency. For the purposes
of this Agreement, the amount of the obligations under any Swap shall
be the amount determined in respect thereof as of the end of the then
most recently ended fiscal quarter of such Person, based on the
assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to
such Swap provides for the netting of amounts payable by and to such
Person thereunder ror if any such agreement provides for the
simultaneous payment of amounts by and to such Person, then in each
such case, the amount of such obligation shall be the net amount so
determined.
TRUSTEE -- is defined in the introductory sentence of this
Agreement.
CONSOLIDATED STORES CORPORATION 6 TRANSFER AGREEMENT
<PAGE> 11
EXHIBIT 10(a)
2. SALE AND PURCHASE OF THE NOTES.
Subject to the terms and conditions of this Agreement, the Seller shall
sell, assign and transfer to each Purchaser, and each Purchaser shall purchase
and assume from the Seller, at the Closing provided for in Section 4, Original
Notes, together with all of the rights, privileges and benefits of the Seller
under the Indenture resulting from the Seller's ownership of the Original Notes,
in the principal amount specified below such Purchaser's name in Schedule A, at
the purchase price of 98.60975% of the principal amount thereof, plus accrued
and unpaid interest thereon from and including April 15, 1997 to but not
including the date of the Closing. The net money for the Original Notes to be
paid at Closing is $99,212,527.98. This amount is arrived at by applying the
price of 98.60975% to a par amount of $100,000,000 and then adding the accrued
interest of $602,777.98 which is calculated from the last payment date of April
15, 1997 to the settlement date of May 16, 1997.
Execution and delivery of a counterpart of this Agreement by each of
the Company, the Trustee and the Seller shall, notwithstanding Section 2.06 of
the Indenture or any other provision thereof or of the Original Notes,
constitute and evidence the satisfaction of all conditions to the transfer of
all of the Original Notes to the Purchasers under the provisions of the
Indenture and the Original Notes.
Legal and equitable title to the Notes and to all of the rights,
privileges and benefits of the Seller under the Indenture resulting from the
Seller's ownership of the Notes shall, subject to the satisfaction of the terms
and conditions set forth herein, pass to the Purchasers on the date of the
Closing. Each Purchaser's obligations hereunder are several and not joint
obligations and no Purchaser shall have any liability to any Person for the
performance or non-performance by any other Purchaser hereunder.
3. AMENDMENT AND RESTATEMENT OF INDENTURE AND ORIGINAL NOTES; TERMINATION
OF TRUST AND REMOVAL OF TRUSTEE.
3.1 AMENDMENT AND RESTATEMENT OF INDENTURE AND ORIGINAL NOTES. Each of
the Company, the Trustee and the Purchasers hereby agree that, contemporaneously
with the purchase and sale of the Original Notes in accordance with Section 2
hereof, the Company and each of the Purchasers (a) shall amend and restate in
full the Indenture by the execution and delivery of the Restated Note Agreement,
and (b) shall amend and restate in full the Original Notes by execution and
delivery to the Purchasers of Restated Notes in the form set out in Exhibit 1 to
the Restated Note Agreement. The execution and delivery of a counterpart of this
Agreement by each of the Purchasers, the Company and the Seller shall constitute
direction by each of the Purchasers, the Company and the Seller to the Trustee,
pursuant to the Indenture, to enter into this Agreement by executing and
delivering a counterpart hereof to the other parties hereto.
3.2 TERMINATION OF TRUST AND REMOVAL OF TRUSTEE. Contemporaneously with
the execution and delivery of the Restated Note Agreement and the Restated
Notes, each of the Company, the Trustee and the Purchasers hereby agree that,
without any further action on the part of such parties or any other Person, (a)
the Trustee shall be, and hereby is, removed as "Trustee" under the Indenture,
and (b) the Indenture shall be, and hereby is, terminated and discharged.
CONSOLIDATED STORES CORPORATION 7 TRANSFER AGREEMENT
<PAGE> 12
EXHIBIT 10(a)
4. CLOSING.
The sale and purchase of the Original Notes shall occur at the offices
of Hebb & Gitlin, One State Street, Hartford, Connecticut 06103 at 10:00 a.m.
local time, at a closing (the "CLOSING") on May 16, 1997 or on such other
Business Day thereafter on or prior to May 23, 1997 as may be agreed upon by the
Company, the Seller and the Purchasers. At the Closing, the Seller will deliver
the aggregate principal amount of Original Notes to be purchased by the
Purchasers (together with any necessary instruments of transfer or assignment
duly executed by the Seller) against delivery by the Purchasers to the Seller or
its order of immediately available funds in the amount of the aggregate purchase
price therefor (separately paid by each of the Purchasers in the respective
amounts specified below such Purchaser's name on Schedule A) by wire transfer of
immediately available funds for the account of the Seller to account number
1702-2513-9741 at First Bank, 601 2nd Avenue, Minneapolis, MN 55402-1749, ABA
#091000022, Attention: Judy Beauregard, Cash Manager, Telephone No. (401)
765-1500, ext. 3515., whereupon: (a) the Company and the Purchasers shall
contemporaneously execute and deliver the Restated Note Agreement; and (b) the
Company shall contemporaneously execute and deliver Restated Notes to each of
the Purchasers, in the form of a single Note (or such greater number of Notes in
denominations of at least $100,000 as such Purchaser may request) dated the date
of the Closing and registered in the name of such Purchaser (or in the name of
its nominee), as specified on Schedule A to the Restated Note Agreement. Such
delivery of the Restated Notes by the Company shall be made contemporaneously
with delivery by the Purchasers of an equal aggregate principal amount of
Original Notes, which Original Notes shall be marked "cancelled"
contemporaneously with the delivery thereof to the Company.
The Company hereby agrees to promptly, and in any event within two
Business Days after receipt thereof, deliver such "cancelled" Original Notes to
the Trustee for formal cancellation thereof in accordance with the Indenture.
The execution and delivery of this Agreement by the Company shall constitute
direction by the Company to the Trustee to effectuate such cancellation and to
thereafter promptly return such cancelled Original Notes to the Company and
deliver photocopies thereof to Hebb & Gitlin, the Purchasers' special counsel,
at its address set forth above.
If at the Closing the Seller shall fail to tender Original Notes or the
Company shall fail to tender Restated Notes to any Purchaser, as provided above
in this Section 4, or any of the conditions specified in Section 5 shall not
have been fulfilled to any Purchaser's satisfaction, such Purchaser shall, at
its election, be relieved of all further obligations under this Agreement and
the Restated Note Agreement, without thereby waiving any rights it may have by
reason of such failure or such nonfulfillment.
5. CONDITIONS TO CLOSING.
The obligation of each Purchaser to purchase and pay for the Original
Notes to be sold to it at the Closing is subject to the fulfillment to such
Purchaser's satisfaction, prior to or at the Closing, of the following
conditions, as such conditions relate to such Purchaser.
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of each of the Company and the Seller in this Agreement, and of the Company in
the Restated Note Agreement, shall be correct in all material respects when made
and at the time of the Closing.
CONSOLIDATED STORES CORPORATION 8 TRANSFER AGREEMENT
<PAGE> 13
EXHIBIT 10(a)
5.2 PERFORMANCE; NO DEFAULT. Each of the Company, the Seller and the
Trustee shall have performed and complied with all agreements and conditions
contained in this Agreement required to be performed or complied with by it
prior to or at the Closing, and such performance and compliance shall remain in
effect on the date of the Closing. Immediately before, and after giving effect
to, the sale of the Notes as contemplated hereby, no Default or Event of Default
shall have occurred and be continuing.
5.3 COMPLIANCE CERTIFICATES.
(a) Each of the Company and the Seller shall have delivered to
the Purchasers an Officers' Certificate, dated the date of the Closing,
certifying that the conditions specified in Sections 5.1, 5.2 and 5.9,
in the case of the Company, and Sections 5.1 and 5.2, in the case of
the Seller, have been fulfilled.
(b) Each of the Company and the Seller shall have delivered to
the Purchaser a certificate of its Secretary or one of its Assistant
Secretaries, dated the date of the Closing, certifying as to the
resolutions attached thereto and other corporate proceedings relating
to the authorization of the execution and delivery of this Agreement
and the transactions contemplated hereby, as applicable, and in the
case of the Company, the authorization, execution and delivery of the
Restated Notes and the Restated Note Agreement and the transactions
contemplated thereby.
5.4 OPINIONS OF COUNSEL. The Purchasers shall have received opinions in
form and substance satisfactory to the Purchasers, dated the date of the
Closing:
(a) from Albert J. Bell, Esq., General Counsel for the
Company, substantially in the form set out in Exhibit B1 (and the
Company hereby instructs its counsel to deliver such opinion
to the Purchaser);
(b) from each of (i) Davis Polk & Wardwell, special counsel
for the Seller, (ii) Sheehan Phinney Bass + Green PA, local New
Hampshire counsel for the Seller, and (iii) Zenon Lankowsky, General
Counsel for CVS Corporation, each substantially in the forms set out in
Exhibits B2, B3 and Exhibit B4, respectively (and the Seller hereby
instructs each such counsel to deliver such opinions to the
Purchasers); and
(c) from Hebb & Gitlin, special counsel for the Purchasers in
connection with the transactions contemplated hereby, substantially in
the form set out in Exhibit B5.
5.5 EXECUTION AND DELIVERY OF DOCUMENTS AND AGREEMENTS.
(A) THIS AGREEMENT. Each of the Company, the Seller, the
Trustee and each Purchaser shall have executed and delivered a
counterpart of this Agreement to each other party hereto.
(B) RESTATED NOTE AGREEMENT. Contemporaneously with the
execution and delivery of this Agreement by the parties hereto, the
Company and each Purchaser shall have executed and delivered a
counterpart of its Restated Note Agreement to each other.
CONSOLIDATED STORES CORPORATION 9 TRANSFER AGREEMENT
<PAGE> 14
EXHIBIT 10(a)
(C) RESTATED NOTES. Contemporaneously with the execution and
delivery of this Agreement by the parties hereto, the Company shall
have executed and delivered to each Purchaser one or more Restated
Notes, in the principal amount and bearing the registration number
specified below such Purchaser's name in Schedule A to the Restated
Note Agreement, in replacement of the Original Notes contemporaneously
acquired by such Purchaser from the Seller pursuant to this Agreement.
5.6 PURCHASE PERMITTED BY APPLICABLE LAW. On the date of the Closing,
the purchase of Notes shall (i) be permitted by the laws and regulations of each
jurisdiction to which the relevant Purchaser is subject, without recourse to
provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting
limited investments by insurance companies without restriction as to the
character of the particular investment, (ii) not violate any applicable law or
regulation (including, without limitation, Regulation G, T or X of the Board of
Governors of the Federal Reserve System) and (iii) not subject the relevant
Purchaser to any tax, penalty or liability under or pursuant to any applicable
law or regulation, which law or regulation was not in effect on the date hereof.
If requested by any Purchaser, such Purchaser shall have received an Officer's
Certificate from the Company or the Seller certifying as to such matters of fact
as such Purchaser may reasonably specify to enable it to determine whether such
purchase is so permitted.
5.7 PAYMENT OF SPECIAL COUNSEL FEES. Without limiting the provisions of
Section 9, the Seller shall have paid on or before the Closing the fees, charges
and disbursements of the Purchasers' special counsel referred to in Section
5.4(c) to the extent reflected in a statement of such counsel rendered to the
Seller at least one Business Day prior to the Closing.
5.8 PRIVATE PLACEMENT NUMBER. A Private Placement Number issued by
Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities
Valuation Office of the National Association of Insurance Commissioners) shall
have been obtained for the Notes.
5.9 CHANGES IN CORPORATE STRUCTURE. Except as specified in Schedule
5.9, the Company shall not have changed its jurisdiction of incorporation or
been a party to any merger or consolidation and shall not have succeeded to all
or any substantial part of the liabilities of any other entity, at any time
following the date of the most recent financial statements referred to in
Schedule 6.5.
5.10 CONSENT OF REQUIRED BANKS. The Company shall have obtained from
the Required Banks, and the Purchasers shall have received a copy of, the
Required Banks' acknowledgement of and consent to the amendment and restatement
of the Indenture and the Original Notes by the execution and delivery of the
Restated Note Agreement and the Restated Notes, respectively, which
acknowledgement and consent shall be in form and substance satisfactory to the
Purchasers and shall be in full force and effect on the date of Closing.
5.11 PROCEEDINGS AND DOCUMENTS. All corporate and other proceeding in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be satisfactory to
the special counsel to the Purchasers and the special counsel to the Purchasers
shall have received all such counterpart originals or certified or other copies
of such documents as such special counsel may reasonably request.
CONSOLIDATED STORES CORPORATION 10 TRANSFER AGREEMENT
<PAGE> 15
EXHIBIT 10(a)
6. REPRESENTATIONS, COVENANTS AND WARRANTIES OF THE COMPANY.
The Company represents, covenants and warrants to each of the
Purchasers, as of the date of the Closing, that:
6.1 ORGANIZATION; POWER AND AUTHORITY. The Company is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and is duly qualified as a foreign corporation
and is in good standing in each jurisdiction in which such qualification is
required by law, other than those jurisdictions as to which the failure to be so
qualified or in good standing would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. The Company has the
corporate power and authority to own or hold under lease the properties it
purports to own or hold under lease, to transact the business it transacts and
proposes to transact, to execute and deliver this Agreement, the Restated Note
Agreement and the Restated Notes and to perform the provisions hereof and
thereof.
6.2 AUTHORIZATION; OBLIGATIONS ARE ENFORCEABLE; WAIVER OF DEFENSES This
Agreement, the Restated Note Agreement and the Restated Notes have been duly
authorized by all necessary corporate action on the part of the Company, and
each of this Agreement and the Restated Note Agreement constitutes, and upon
execution and delivery thereof each Restated Note will constitute, a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by (a)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and (b) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). The Company agrees that it is not currently
aware of any grounds for disputing the validity or enforceability of the
Indenture, the Restated Note Agreement, the Notes or any of its respective
obligations thereunder in any judicial, administrative or other proceeding,
either prior to or following the consummation of the Closing. To the extent
there currently exists any defenses, offsets, rights of recoupment,
counterclaims or claims of any nature in respect of the Notes, or any other
grounds for disputing the validity or enforceability of the Restated Note
Agreement or the Restated Notes, the Company hereby expressly waives, releases
and discharges the same.
6.3 DISCLOSURE. The Company, through its agent, J.P. Morgan Securities,
Inc., has delivered to each Purchaser a copy of a Private Placement Memorandum,
dated April 9, 1997 (the "MEMORANDUM"), relating to the transactions
contemplated hereby. Except as disclosed in Schedule 6.3, this Agreement, the
Memorandum, the documents, certificates or other writings identified in Schedule
6.3 and the financial statements listed in Schedule 6.5, taken as a whole, do
not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading in light
of the circumstances under which they were made. Except as disclosed in the
Memorandum or as expressly described in Schedule 6.3, or in one of the
documents, certificates or other writings identified therein, or in the
financial statements listed in Schedule 6.5, since February 3, 1996 there has
been no change in the financial condition, operations, business, or properties
of the Company or any Subsidiary except changes that individually or in the
aggregate would not reasonably be expected to have a Material Adverse Effect.
CONSOLIDATED STORES CORPORATION 11 TRANSFER AGREEMENT
<PAGE> 16
EXHIBIT 10(a)
6.4 ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES.
(a) Schedule 6.4 is (except as noted therein) a complete and
correct list of the Company's Subsidiaries, showing, as to each
Subsidiary, the correct name thereof, the jurisdiction of its
organization, and the percentage of shares of each class of its capital
stock or similar equity interests outstanding owned by the Company and
each other Subsidiary.
(b) All of the outstanding shares of capital stock or similar
equity interests of each Subsidiary shown in Schedule 6.4 as being
owned by the Company and its Subsidiaries have been validly issued, are
fully paid and nonassessable and are owned by the Company or another
Subsidiary free and clear of any Lien (except as otherwise disclosed in
Schedule 6.4).
(c) Each Subsidiary identified in Schedule 6.4 is a
corporation or other legal entity duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization,
and is duly qualified as a foreign corporation or other legal entity
and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to
which the failure to be so qualified or in good standing would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Each such Subsidiary has the corporate or
other power and authority to own or hold under lease the properties it
purports to own or hold under lease and to transact the business it
transacts and proposes to transact.
6.5 FINANCIAL STATEMENTS. The Company has delivered to each Purchaser
copies of the financial statements of Consolidated Stores Corporation, a
Delaware corporation, and its Subsidiaries listed in Schedule 6.5. All of said
financial statements (including in each case the related schedules and notes)
fairly present in all material respects the consolidated financial position of
the Company and its Subsidiaries as of the respective dates specified in such
Schedule and the consolidated results of their operations and cash flows for the
respective periods so specified and have been prepared in accordance with GAAP
consistently applied throughout the periods involved except as set forth in the
notes thereto (subject, in the case of any interim financial statements, to
normal year-end adjustments).
6.6 COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. The execution,
delivery and performance by the Company of this Agreement, the Restated Note
Agreement and the Restated Notes will not
(a) contravene, result in any breach of, or constitute a
default under, or result in the creation of any Lien in respect of any
property of the Company or any Subsidiary under, any indenture,
mortgage, deed of trust, loan, purchase or credit agreement, lease,
corporate charter or by-laws, or any other agreement or instrument to
which the Company or any Subsidiary is bound or by which the Company or
any Subsidiary or any of their respective properties may be bound or
affected,
(b) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of
any court, arbitrator or Governmental Authority applicable to the
Company or any Subsidiary, or
CONSOLIDATED STORES CORPORATION 12 TRANSFER AGREEMENT
<PAGE> 17
EXHIBIT 10(a)
(c) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to the Company or
any Subsidiary.
6.7 GOVERNMENTAL AUTHORIZATIONS, ETC. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by the Company of this Agreement, the Restated Note Agreement or the Notes.
6.8 LITIGATION; OBSERVANCE OF STATUTES AND ORDERS.
(a) Except as disclosed in Schedule 6.8, there are no actions,
suits or proceedings pending or, to the knowledge of the Company,
threatened against or affecting the Company or any Subsidiary or any
property of the Company or any Subsidiary in any court or before any
arbitrator of any kind or before or by any Governmental Authority that,
individually or in the aggregate, would reasonably be expected to have
a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under
any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law,
ordinance, rule or regulation (including, without limitation,
Environmental Laws) of any Governmental Authority, which default or
violation, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect.
6.9 TAXES. The Company and its Subsidiaries have filed all income tax
returns that are required to have been filed in any jurisdiction, and have paid
all taxes shown to be due and payable on such returns and all other taxes and
assessments payable by them to the extent such taxes and assessments have become
due and payable and before they have become delinquent, except for any taxes and
assessments (a) the amount of which is not individually or in the aggregate
Material or (b) the amount, applicability or validity of which is currently
being contested in good faith by appropriate proceedings and with respect to
which the Company or a Subsidiary, as the case may be, has established adequate
reserves in accordance with GAAP. The Federal income tax liabilities of the
Company and its Subsidiaries have been determined by the Internal Revenue
Service and paid for all fiscal years up to and including the fiscal year ended
February 3, 1991.
6.10 TITLE TO PROPERTY; LEASES. The Company and its Subsidiaries have
good and sufficient title to their respective Material properties including all
such properties reflected in the most recent audited balance sheet referred to
in Section 6.5 or purported to have been acquired by the Company or any
Subsidiary after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens prohibited by
this Agreement except for those defects in title and Liens that individually or
in the aggregate would not have a Material Adverse Effect. All Material leases
are valid and subsisting and are in full force and effect in all material
respects.
6.11 LICENSES, PERMITS, ETC. Except as disclosed in Schedule 6.11, the
Company and its Subsidiaries own or possess all licenses, permits, franchises,
authorizations, patents, copyrights, service marks, trademarks and trade names,
or rights thereto, that are Material, without known conflict with the rights of
others, except for those conflicts that, individually or in the aggregate, would
not have a Material Adverse Effect.
CONSOLIDATED STORES CORPORATION 13 TRANSFER AGREEMENT
<PAGE> 18
EXHIBIT 10(a)
6.12 COMPLIANCE WITH ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except
for such instances of noncompliance as have not resulted in and could
not reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any ERISA Affiliate has incurred any liability
pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans (as defined
in section 3 of ERISA), and no event, transaction or condition has
occurred or exists that would reasonably be expected to result in the
incurrence of any such liability by the Company or any ERISA Affiliate,
or in the imposition of any Lien on any of the rights, properties or
assets of the Company or any ERISA Affiliate, in either case pursuant
to Title I or IV of ERISA or to such penalty or excise tax provisions
or to section 401(a)(29) or 412 of the Code, other than such
liabilities or Liens as would not be individually or in the aggregate
Material.
(b) The present value of the aggregate benefit liabilities
under each of the Plans (other than Multiemployer Plans), determined as
of the end of such Plan's most recently ended plan year on the basis of
the actuarial assumptions specified for funding purposes in such Plan's
most recent actuarial valuation report, did not exceed the aggregate
current value of the assets of such Plan allocable to such benefit
liabilities by more than $10,000,000 in the aggregate for all such
Plans. The term "BENEFIT LIABILITIES" has the meaning specified in
section 4001 of ERISA and the terms "CURRENT VALUE" and "PRESENT VALUE"
have the meaning specified in section 3 of ERISA.
(c) The Company and the ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of
Multiemployer Plans that individually or in the aggregate are Material.
(d) The expected postretirement benefit obligation (determined
as of the last day of the Company's most recently ended fiscal year in
accordance with Financial Accounting Standards Board Statement No. 106,
without regard to liabilities attributable to continuation coverage
mandated by section 4980B of the Code) of the Company and its
Subsidiaries is not Material.
(e) The execution and delivery of this Agreement and the
issuance and sale of the Notes hereunder will not involve any
transaction that is subject to the prohibitions of section 406 of ERISA
or in connection with which a tax could be imposed pursuant to section
4975(c)(1)(A)-(D) of the Code. The representation by the Company in the
first sentence of this Section 6.12(e) is made in reliance upon and
subject to the accuracy of the Purchasers' representation in Section 8
of this Agreement as to the sources of the funds used to pay the
purchase price of the Notes to be purchased by the Purchaser.
(f) Schedule 6.12 sets forth all ERISA Affiliates and all
"employee benefit plans" maintained by the Company (or any "affiliate"
thereof) or in respect of which the Notes could constitute an "employer
security" ("EMPLOYEE BENEFIT PLAN" has the meaning specified in section
3 of ERISA, "AFFILIATE" has the meaning specified in section 407(d) of
ERISA and section V of the Department of Labor Prohibited Transaction
Exemption 95-60 (60 FR 35925, July 12, 1995) and "EMPLOYER SECURITY"
has the meaning specified in section 407(d) of ERISA).
CONSOLIDATED STORES CORPORATION 14 TRANSFER AGREEMENT
<PAGE> 19
EXHIBIT 10(a)
6.13 PRIVATE OFFERING BY THE COMPANY. Neither the Company nor anyone
acting on its behalf has offered the Notes or any similar securities for sale
to, or solicited any offer to buy any of the same from, or otherwise approached
or negotiated in respect thereof with, any Person other than the Purchasers and
not more than two other Institutional Investors, each of which has been offered
the Notes at a private sale for investment. Neither the Company nor anyone
acting on its behalf has taken, or will take, any action that would subject the
issuance or sale of the Notes to the registration requirements of section 5 of
the Securities Act.
6.14 USE OF ORIGINAL PROCEEDS BY THE COMPANY. Neither the Company nor
any agent acting on its behalf has taken or will take any action which might
cause this Agreement, the Restated Note Agreement or the Restated Notes to
violate Regulation G, Regulation T or any other regulation of the Board of
Governors of the Federal Reserve System or to violate the Exchange Act, in each
case as in effect now or as the same may hereafter be in effect.
6.15 EXISTING INDEBTEDNESS. Except as described therein, Schedule 6.15
sets forth a complete and correct list of all outstanding Indebtedness of the
Company and its Subsidiaries as of May 3, 1997, since which date there has been
no Material change in the amounts, interest rates, sinking funds, instalment
payments or maturities of the Indebtedness of the Company or its Subsidiaries.
Neither the Company nor any Subsidiary is in default and no waiver of default is
currently in effect, in the payment of any principal or interest on any
Indebtedness of the Company or such Subsidiary and no event or condition exists
with respect to any Indebtedness of the Company or any Subsidiary the
outstanding principal amount of which exceeds $10,000,000 that would permit (or
that with notice or the lapse of time, or both, would permit) one or more
Persons to cause such Indebtedness to become due and payable before its stated
maturity or before its regularly scheduled dates of payment.
6.16 FOREIGN ASSETS CONTROL REGULATIONS, ETC. Neither the sale of the
Notes by the Company nor its use of the proceeds thereof has violated or will
violate the Trading with the Enemy Act, as amended, or any of the foreign assets
control regulations of the United States Treasury Department (31 CFR, Subtitle
B, Chapter V, as amended) or any enabling legislation or executive order
relating thereto.
6.17 STATUS UNDER CERTAIN STATUTES. Neither the Company nor any
Subsidiary is subject to regulation under the Investment Company Act of 1940, as
amended, the Public Utility Holding Company Act of 1935, as amended, the
Transportation Acts (49 U.S.C.), as amended, or the Federal Power Act, as
amended.
7. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller represents and warrants to each of the Purchasers, and
acknowledges that each of the Purchasers are relying upon such representations
and warranties in purchasing the Original Notes, as follows:
7.1 ORGANIZATION; POWER AND AUTHORITY. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Seller has full power and authority, and has
taken all action necessary, to execute and deliver this Agreement, to sell,
transfer and assign the Original Notes, to fulfill its obligations hereunder and
to consummate the transactions contemplated hereby.
CONSOLIDATED STORES CORPORATION 6 TRANSFER AGREEMENT
<PAGE> 20
EXHIBIT 10(a)
7.2 OBLIGATION IS ENFORCEABLE. This Agreement constitutes a legal,
valid and binding obligation of the Seller enforceable against the Seller in
accordance with its terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
7.3 COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. The execution,
delivery and performance by the Seller of this Agreement will not (i)
contravene, result in any breach of, or constitute a default under, any
indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease,
corporate charter or by-laws, or any other Material agreement or instrument to
which the Seller is bound or by which the Seller or any of its properties may be
bound or affected, (ii) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to the Seller or (iii) violate
any provision of any statute or other rule or regulation of any Governmental
Authority applicable to the Seller.
7.4 GOVERNMENTAL AUTHORIZATIONS, ETC. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by the Seller of this Agreement.
7.5 PRIVATE OFFERING BY THE SELLER. Neither the Seller nor anyone
acting on its behalf has offered the Original Notes or any similar securities
for sale to, or solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof with, any person other than the
Purchasers and not more than two other Institutional Investors, each of which
has been offered the Original Notes at a private sale for investment. Neither
the Seller nor anyone acting on its behalf has taken, or will take, any action
that would subject the offering or sale of the Original Notes to the
registration requirement of Section 5 of the Securities Act or to the provisions
of any securities or "Blue Sky" law of New York, Ohio, Connecticut, Illinois or
Iowa. Based on the Purchasers' representations set forth in Section 8 hereof,
the sale of the Original Notes to the Purchasers in accordance herewith will not
require registration under the Securities Act nor qualification of an indenture
with respect thereto under the Trust Indenture Act of 1939, as amended.
7.6 MATERIAL DOCUMENTATION. The documents, instruments and/or
agreements listed in Schedule 7.6 are all of the material documents, instruments
and agreements governing the Seller's rights and obligations in respect of its
investment in the Original Notes. The Seller has delivered to the Purchasers
true, accurate and complete copies (and in the case of the Original Notes,
original securities) of each and every document, instrument and agreement listed
in Schedule 7.6. The Seller has fully paid the entire purchase price for the
Original Notes held by it and performed all obligations to be performed in
respect of all such documents, instruments and agreements. The Seller has not
given its consent to change, modify or amend, nor has it waived, any term or
provision of the Indenture or the Original Notes.
7.7 GOOD TITLE. The Seller is the sole beneficial owner and the record
holder of the Original Notes, and has good title and interest in and to the
Original Notes, free and clear of any Liens or other adverse claims against the
Seller. The Seller has made no prior conveyance or assignment of any of the
Original Notes or any interest therein, and has made no agreement to do so with
any Person. The Seller's transfer, assignment and sale of the Original Notes to
the Purchasers hereunder will pass to the Purchasers, in the aggregate, good and
valid title to all of
CONSOLIDATED STORES CORPORATION 16 TRANSFER AGREEMENT
<PAGE> 21
EXHIBIT 10(a)
the Original Notes, free and clear of any Liens or other adverse claims. In
making the representation set forth in the immediately preceding sentence, the
Seller has assumed that each of the Purchasers is acquiring the Original Notes
in good faith without notice of any adverse claim thereto.
7.8 PAYMENT STATUS. There are no amounts currently due and payable in
respect of the Original Notes.
7.9 NO IMPAIRMENT. The interest of the Seller in and to the Original
Notes is not subject to being voided, avoided, reduced, expunged, subordinated
(except as expressly provided in the Indenture and in the Original Notes) or
disallowed, and is not subject to any defense, claim, counterclaim, set-off or
recoupment or other impairment of any kind, in each case, as a result of actions
taken or omitted to be taken by the Seller. The Seller has no actual knowledge
of any facts or circumstances that could cause the interest of the Seller in and
to the Original Notes to be voided, avoided, reduced, expunged, subordinated
(except as expressly provided in the Indenture and in the Original Notes) or
disallowed, or that could subject such interest to any defense, claim,
counterclaim, set-off or recoupment or other impairment of any kind, in each
case, as a result of actions taken or omitted to be taken by any Person other
than the Seller.
7.10 NO OBLIGATIONS. There is no liability or obligation of any kind
(whether fixed, contingent, conditional or otherwise):
(a) in respect of the Original Notes being transferred to any
Purchaser by the Seller, that such Purchaser is or shall be required to
pay or otherwise perform, or
(b) in respect of the Notes being issued to any Purchaser by
the Company that, except as set forth in the Side Letter, the Seller or
any of its Affiliates is or shall be required to pay or otherwise
perform.
The failure of the Seller or any such Affiliate to pay or perform its
obligations or liabilities set forth in the Side Letter will not result in any
(i) liability or obligation of any kind (whether fixed, contingent, conditional
or otherwise) to any Purchaser or (ii) right of offset in favor of the Company
in respect of its obligations at any time owed to the holders of the Notes.
7.11 NO DEFAULTS. To the best of the Seller's knowledge, there are no
defaults, or events which with the passage of time or the giving of notice or
both would become defaults, under the Indenture or the Original Notes.
7.12 WARRANTIES UNDER NEW YORK UNIFORM COMMERCIAL CODE. The Seller
hereby makes to each Purchaser each of the warranties and representations set
forth in: (a) section 3-417(2) of the Uniform Commercial Code of the State of
New York (regardless of whether the Notes qualify as an instrument or negotiable
instrument within the meaning of such code); and (b) section 8-306(2) of the
Uniform Commercial Code of the State of New York.
CONSOLIDATED STORES CORPORATION 6 TRANSFER AGREEMENT
<PAGE> 22
EXHIBIT 10(a)
7.13 NO CONTROL STATUS. The Seller is not a Person (either alone or
together with others) directly or indirectly controlling or controlled by the
Company within the meaning of the Securities Act.
7.14 NO TRANSFER TAXES. No stamp or transfer tax or governmental charge
will be imposed in connection with the sale and transfer of the Original Notes
to the Purchasers.
7.15 ERISA. The Original Notes are not being sold by (i) a bank single
entity trust fund, insurance company segregated separate account or employee
pension benefit plan or (ii) a bank collective investment fund or insurance
company pooled separate account in which any employee pension benefit plan
participates to the extent of 10% or more.
7.16 ASSETS OF SELLER. The Original Notes do not constitute
substantially all of the assets of the Seller.
8. REPRESENTATIONS OF THE PURCHASER.
8.1 PURCHASE FOR INVESTMENT. Each Purchaser represents that
(a) it is purchasing the Notes listed on Schedule A below its
name for investment for its own account, for a separate account (as
such term is used in Rule 144A, 17 C.F.R. ss.230.144A), for the account
of another for which it has sole investment discretion, or for a trust
of which it is the trustee,
(b) it is an "accredited investor" as defined in section 2(15)
of the Securities Act,
(c) it understands that the Notes have not been registered
under the Securities Act and may be resold only if registered in
accordance with the provisions of the Securities Act or if any
exemption from such registration is available for such sale,
(d) it has had an opportunity to review the Memorandum and
obtain information relevant to the Company, and
(e) it is not purchasing the Notes with a view to or for sale
in connection with any distribution thereof within the meaning of the
Securities Act;
provided, that this representation shall not be deemed to prejudice any
Purchaser's right to
(A) sell or otherwise dispose of all or any part of the Notes
in compliance with the Securities Act or the rules and regulations
thereunder; and
(B) have control over the disposition of all of its assets to
the fullest extent permitted or required by any applicable law;
provided, further, that nothing in clause (d) above shall in any way limit the
representations and warranties of the Company and the Seller set forth herein or
the ability of any Purchaser to rely thereon.
CONSOLIDATED STORES CORPORATION 18 TRANSFER AGREEMENT
<PAGE> 23
EXHIBIT 10(a)
8.2 SOURCE OF FUNDS. Each Purchaser represents that at least one of the
following statements is an accurate representation as to each source of funds (a
"SOURCE") to be used by it to pay the purchase price of the Notes to be
purchased by it hereunder:
(a) the Source is an "insurance company general account" as
defined in Department of Labor Prohibited Transaction Exemption 95-60
(60 FR 35925, July 12, 1995) and in respect thereof such Purchaser
represents that there is no "employee benefit plan" (as defined in
section 3(3) of ERISA and section 4975(e)(1) of the IRC, treating as a
single plan all plans maintained by the same employer or employee
organization or affiliate thereof) with respect to which the amount of
the general account reserves and liabilities of all contracts held by
or on behalf of such plan exceed ten percent (10%) of the total
reserves and liabilities of such general account (exclusive of separate
account liabilities) plus surplus, as set forth in the NAIC Annual
Statement filed with such Purchaser's state of domicile; or
(b) if such Purchaser is an insurance company, the Source does
not include assets allocated to any separate account maintained by such
Purchaser in which any employee benefit plan (or its related trust) has
any interest, other than a separate account that is maintained solely
in connection with such Purchaser's fixed contractual obligations under
which the amounts payable, or credited, to such plan and to any
participant or beneficiary of such plan (including any annuitant) are
not affected in any manner by the investment performance of the
separate account; or
(c) the Source is either (i) an insurance company pooled
separate account, within the meaning of Prohibited Transaction
Exemption ("PTE") 90-1 (issued January 29, 1990), or (ii) a bank
collective investment fund, within the meaning of the PTE 91-38 (issued
July 12, 1991) and, except as such Purchaser has disclosed to the
Company in writing pursuant to this paragraph (c), no employee benefit
plan or group of plans maintained by the same employer or employee
organization beneficially owns more than 10% of all assets allocated to
such pooled separate account or collective investment fund; or
(d) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning of
Part V of the QPAM Exemption), no employee benefit plan's assets that
are included in such investment fund, when combined with the assets of
all other employee benefit plans established or maintained by the same
employer or by an affiliate (within the meaning of Section V(c)(1) of
the QPAM Exemption) of such employer or by the same employee
organization and managed by such QPAM, exceed 20% of the total client
assets managed by such QPAM, the conditions of Part I(c) and (g) of the
QPAM Exemption are satisfied, neither the QPAM nor a person controlling
or controlled by the QPAM (applying the definition of "control" in
Section V(e) of the QPAM Exemption) owns a 5% or more interest in the
Company and
(i) the identity of such QPAM and
(ii) the names of all employee benefit plans
whose assets are included in such investment fund have been
disclosed to the Company in writing pursuant to this paragraph
(d); or
CONSOLIDATED STORES CORPORATION 19 TRANSFER AGREEMENT
<PAGE> 24
EXHIBIT 10(a)
(e) the Source is a governmental plan; or
(f) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to the Company in
writing pursuant to this paragraph (f); or
(g) the Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA.
As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL
PLAN", "PARTY IN INTEREST" and "SEPARATE ACCOUNT" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
9. EXPENSES, ETC.
9.1 EXPENSES. Whether or not the purchase of the Notes contemplated
hereby is consummated, the Seller will pay all costs and expenses (including
reasonable attorneys' fees of a special counsel and, if reasonably required,
local or other counsel) incurred by the Purchasers in connection with such
transaction, including, without limitation, the costs and expenses (including,
without limitation, any such expenses in connection with a bankruptcy proceeding
in respect of the Seller) incurred in enforcing or defending (or determining
whether or how to enforce or defend) any rights against the Seller under this
Agreement or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with such rights against the Seller
under this Agreement. The Seller will pay, and will save the Purchasers harmless
from, all claims in respect of any fees, costs or expenses if any, of brokers
and finders (other than those retained by the Purchasers).
9.2 SURVIVAL. The obligations of the Seller under this Section will
survive the payment or transfer of any Note, the enforcement, amendment or
waiver of any provision of this Agreement or the Notes, and the termination of
this Agreement.
10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by each Purchaser of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of any
Purchaser or any other holder of a Note. All statements contained in any
certificate or other instrument delivered by or on behalf of the Company or the
Seller, as the case may be, pursuant to this Agreement shall be deemed
representations and warranties of the Company or the Seller, as the case may be,
under this Agreement. Subject to the preceding sentence, this Agreement, the
Restated Note Agreement and the Restated Notes, as the case may be, embody the
entire agreement and understanding
(a) between each Purchaser and the Company, and supersede all
prior agreements and understandings relating to the subject matter
hereof and thereof,
(b) between each Purchaser and the Seller, and supersede all
prior agreements and understandings relating to the subject matter
hereof and thereof, and
CONSOLIDATED STORES CORPORATION 20 TRANSFER AGREEMENT
<PAGE> 25
EXHIBIT 10(a)
(c) between the Seller and the Company and supersede all prior
agreements and understandings relating to the subject matter hereof and
thereof, except as otherwise specified in the Side Letter.
11. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(i) if to a Purchaser or its nominee, to such Purchaser or its
nominee at the address specified for such communications in Schedule A,
or at such other address such Purchaser or its nominee shall have
specified to the other parties in writing;
(ii) if to the Company, to Consolidated Stores Corporation,
300 Phillipi Road, P.O. Box 28512, Columbus, Ohio 43228-0512,
Attention: General Counsel; Telecopier: (614) 278-6763; or at such
other address as the Company shall have specified to the other parties
in writing;
(iii) if to the Seller, to C.V.S. Corporation, One CVS Drive,
Woonsocket, Rhode Island 02895, Attention Mr. Philip C. Galbo;
Telecopier: (401) 769-2211; or at such other address as the Seller
shall have specified to the other parties in writing; and
(iv) if to the Trustee, to The Bank of New York, 101 Barclay
Street, Floor 21 West, New York, New York 10286, Attention: Corporate
Trust Trustee Administration; Telecopier: (212) 815-5915; or at such
other address as the Seller shall have specified to the other parties
in writing.
Notices under this Section 11 will be deemed given only when actually received.
12. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by the Purchaser at the Closing (except the
Notes themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to each Purchaser, may be
reproduced by such Purchaser by any photographic, photostatic, microfilm,
microcard, miniature photographic or other similar process and such Purchaser
may destroy any original document so reproduced. Each of the Company, the
Trustee and the Seller, as the case may be, agree and stipulate that, to the
extent permitted by applicable law, any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by a Purchaser in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Section 12 shall not prohibit the
Company, the Seller, the Trustee or any holder of Notes from contesting any such
reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
CONSOLIDATED STORES CORPORATION 21 TRANSFER AGREEMENT
<PAGE> 26
EXHIBIT 10(a)
13. SUBSTITUTION OF PURCHASER.
Each Purchaser shall have the right to substitute any one of its
Affiliates as the purchaser of the Notes that it has agreed to purchaser
hereunder, by written notice to the Company and the Seller, which notice shall
be signed by both the Purchaser and such Affiliate, shall contain such
Affiliate's agreement to be bound by this Agreement and shall contain a
confirmation by such Affiliate of the accuracy with respect to it of the
representations set forth in Section 8. Upon receipt of such notice, wherever
the word "Purchaser" is used in this Agreement (other than in this Section 13),
such word shall be deemed to refer to such Affiliate in lieu of such Purchaser.
In the event that such Affiliate is so substituted as a purchaser hereunder and
such Affiliate thereafter transfers to the Purchaser all of the Notes then held
by such Affiliate, upon receipt by the Company and the Seller of notice of such
transfer, wherever the word "Purchaser" is used in this Agreement (other than in
this Section 13), such word shall no longer be deemed to refer to such
Affiliate, but shall refer to such Purchaser, and such Purchaser shall have all
the rights of an original holder of the Notes under this Agreement.
14. MISCELLANEOUS.
14.1 SUCCESSORS AND ASSIGNS. All covenants and other agreements
contained in this Agreement by or on behalf of any of the parties hereto bind
and inure to the benefit of their respective successors and assigns (including
without limitation, any subsequent holder of a Note) whether so expressed or
not.
14.2 SEVERABILITY. Any provisions of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.
14.3 CONSTRUCTION. Each covenant contained herein shall be construed
(absent express provision to the contrary) as being independent of each other
covenant contained herein, so that compliance with any one covenant shall not
(absent such an express contrary provision) be deemed to excuse compliance with
any other covenant. Where any provision herein refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly by such
Person.
14.4 SECTION HEADINGS, TABLE OF CONTENTS, ETC. The titles of the
Sections and the Table of Contents appear as a matter of convenience only, do
not constitute a part hereof and shall not affect the construction hereof. The
words "herein," "hereof," "hereunder" and "hereto" refer to this Agreement as a
whole and not to any particular Section or other subdivision. References to a
"Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an
Exhibit attached to this Agreement. References to a "Section" are, unless
otherwise specified, references to a Section of this Agreement.
CONSOLIDATED STORES CORPORATION 22 TRANSFER AGREEMENT
<PAGE> 27
EXHIBIT 10(a)
14.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument. Each counterpart may consists of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto.
14.6 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
the State of New York, excluding choice-of-law principles of the law of such
State that would require the application of the laws of a jurisdiction other
than such State.
[Remainder of page intentionally blank. Next page is signature page.]
CONSOLIDATED STORES CORPORATION 23 TRANSFER AGREEMENT
<PAGE> 28
EXHIBIT 10(a)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
CONSOLIDATED
STORES CORPORATION
By /s/ Michael J. Potter
-------------------------------
Name: Michael J. Potter
Title: Senior Vice President
Chief Financial Officer
NASHUA HOLLIS CVS, INC.
By /s/ Nancy Christal
-------------------------------
Name: Nancy Christal
Title: President and Treasurer
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
BY: CIGNA INVESTMENTS, INC.
By /s/ Stephen A. Osborn
-------------------------------
Name: Stephen A. Osborn
Title: Managing Director
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY ON BEHALF OF ONE OR MORE
SEPARATE ACCOUNTS
BY: CIGNA INVESTMENTS, INC.
By /s/ Stephen A. Osborn
-------------------------------
Name: Stephen A. Osborn
Title: Managing Director
CONSOLIDATED STORES CORPORATION 24 TRANSFER AGREEMENT
<PAGE> 29
EXHIBIT 10(a)
LIFE INSURANCE COMPANY OF NORTH AMERICA
By: CIGNA Investments, Inc.
By /s/ Stephen A. Osborn
----------------------------------------
Name: Stephen A. Osborn
Title: Managing Director
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By /s/ Jon C. Heiny
----------------------------------------
Name: Jon C. Heiny
Title: Counsel
By /s/ Christopher J. Henderson
----------------------------------------
Name: Christopher J. Henderson
Title: Counsel
NIPPON LIFE INSURANCE COMPANY OF AMERICA, BY
ITS ATTORNEY IN FACT PRINCIPAL MUTUAL LIFE
INSURANCE COMPANY
By /s/ Jon C. Heiny
----------------------------------------
Name: Jon C. Heiny
Title: Counsel
By /s/ Christopher J. Henderson
----------------------------------------
Name: Christopher J. Henderson
Title: Counsel
CONSOLIDATED STORES CORPORATION 25 TRANSFER AGREEMENT
<PAGE> 30
EXHIBIT 10(a)
ALLSTATE LIFE INSURANCE COMPANY
By /s/ Patricia W. Wilson
---------------------------------
Name: Patricia W. Wilson
By /s/ Steven M. Laude
---------------------------------
Name: Steven M. Laude
Authorized Signatories
ALLSTATE INSURANCE COMPANY
By /s/ Patricia W. Wilson
---------------------------------
Name: Patricia W. Wilson
By /s/ Steven M. Laude
---------------------------------
Name: Steven M. Laude
Authorized Signatories
THE BANK OF NEW YORK, AS TRUSTEE
By /s/ Mary Jane Morrissey
---------------------------------
Name: Mary Jane Morrissey
Title: Vice President
CONSOLIDATED STORES CORPORATION 26 TRANSFER AGREEMENT
<PAGE> 1
EXHIBIT 10(b)
CONSOLIDATED STORES CORPORATION
NOTE AGREEMENT
Dated as of May 9, 1997
$100,000,000
7% Senior Subordinated Notes Due May 4, 2000
<PAGE> 2
TABLE OF CONTENTS EXHIBIT 10(b)
PAGE
----
1. PRELIMINARY STATEMENT; DESCRIPTION OF NOTES .......................... 1
1.1 Preliminary Statement ........................................... 1
1.2 Description of Original Notes ................................... 1
1.3 Description of Restated Notes ................................... 2
1.4 Defined Terms; Rules of Construction ............................ 2
2. EXECUTION AND DELIVERY OF NOTES ...................................... 2
3. CLOSING .............................................................. 3
4. CONDITIONS TO CLOSING ................................................ 3
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ........................ 3
6. REPRESENTATIONS OF EACH PURCHASER .................................... 3
7. INFORMATION AS TO COMPANY ............................................ 4
7.1 Financial and Business Information .............................. 4
7.2 Officer's Certificate ........................................... 6
7.3 Inspection ...................................................... 6
8. PAYMENT OF THE NOTES ................................................. 7
8.1 Payment at Maturity ............................................. 7
8.2 Optional Prepayments with Make-Whole Amount ..................... 7
8.3 Change in Control ............................................... 7
8.4 Offer to Pay out of Excess Proceeds ............................. 9
8.5 Allocation of Partial Prepayments ...............................10
8.6 Maturity; Surrender, etc. .......................................10
8.7 Purchase of Notes ...............................................10
8.8 Make-Whole Amount ...............................................10
8.9 Side Letter .....................................................12
9. AFFIRMATIVE COVENANTS ................................................12
9.1 Payment of Notes ................................................12
9.2 Maintenance of Office or Agency .................................12
9.3 Payment of Taxes and Other Claims. ..............................12
9.4 Corporate Existence. ............................................13
9.5 Maintenance of Properties and Insurance. ........................13
9.6 Investment Company Act. .........................................14
9.7 Covenant to Comply with Securities Laws Upon Purchase of Notes...14
9.8 Compliance with Law .............................................14
10. NEGATIVE COVENANTS ...................................................14
10.1 Limitation on Restricted Payments ...............................14
10.2 Limitation on Additional Indebtedness ...........................15
CONSOLIDATED STORES CORPORATION NOTE AGREEMENT
<PAGE> 3
TABLE OF CONTENTS (cont.) EXHIBIT 10(b)
PAGE
----
10.3 Dividend and Payment Restrictions Affecting Subsidiaries ........16
10.4 Limitation on Transactions with Affiliates ......................16
10.5 Limitation on Asset Sales. ......................................17
10.6 When the Company May Merge or Transfer Assets ...................18
11. EVENTS OF DEFAULT ....................................................19
12. REMEDIES ON DEFAULT, ETC. ............................................21
12.1 Acceleration ....................................................21
12.2 Other Remedies ..................................................22
12.3 Rescission ......................................................22
12.4 No Waivers or Election of Remedies, Expenses, etc. ..............23
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES ........................23
13.1 Registration of Notes ...........................................23
13.2 Transfer and Exchange of Notes ..................................23
13.3 Replacement of Notes ............................................24
14. PAYMENTS ON NOTES ....................................................24
14.1 Place of Payment ................................................24
14.2 Home Office Payment .............................................24
15. EXPENSES, ETC. .......................................................25
15.1 Transaction Expenses ............................................25
15.2 Survival ........................................................25
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT .........25
17. AMENDMENT AND WAIVER .................................................26
17.1 Requirements ....................................................26
17.2 Solicitation of Holders of Notes ................................26
17.3 Binding Effect, etc. ............................................27
17.4 Notes held by Company, etc. .....................................27
18. NOTICES ..............................................................27
19. REPRODUCTION OF DOCUMENTS ............................................28
20. CONFIDENTIAL INFORMATION .............................................28
21. SUBSTITUTION OF PURCHASER ............................................30
22. SUBORDINATION ........................................................30
22.1 Notes Subordinate to Senior Indebtedness.........................30
CONSOLIDATED STORES CORPORATION NOTE AGREEMENT
<PAGE> 4
TABLE OF CONTENTS (cont.) EXHIBIT 10(b)
PAGE
----
22.2 Payment Over of Proceeds Upon Dissolution, Etc..................30
22.3 No Payment When Senior Indebtedness in Default..................32
22.4 Payment Permitted If No Default ................................33
22.5 Subrogation to Rights of Holders of Senior Indebtedness ........33
22.6 Provisions Solely to Define Relative Rights ....................33
22.7 Further Actions ................................................34
22.8 No Waiver of Subordination Provisions ..........................34
22.9 Notice to Holders of the Notes .................................35
22.10 [Intentionally Omitted] ........................................35
22.11 [Intentionally Omitted] ........................................35
22.12 Waiver .........................................................35
22.13 No Waiver; Remedies ............................................35
23. MISCELLANEOUS ........................................................35
23.1 Successors and Assigns .........................................35
23.2 Payments Due on Non-Business Days; When Payments Deemed
Received .......................................................36
23.3 Certificate and Opinion as to Conditions Precedent .............36
23.4 Statements Required in Certificate or Opinion ..................36
23.5 No Recourse Against Others .....................................37
23.6 Severability ...................................................37
23.7 Construction ...................................................37
23.8 Counterparts ...................................................37
23.9 Governing Law ..................................................37
SCHEDULE A -- Information Relating to Purchasers
SCHEDULE B -- Defined Terms
EXHIBIT 1 -- Form of 7% Senior Subordinated Note due May 4, 2000
CONSOLIDATED STORES CORPORATION NOTE AGREEMENT
<PAGE> 5
EXHIBIT 10(b)
CONSOLIDATED STORES CORPORATION
300 Phillipi Road
Columbus, Ohio 43228-0512
7% SENIOR SUBORDINATED NOTES DUE MAY 4, 2000
Dated as of May 9, 1997
[SEPARATELY ADDRESSED TO EACH OF THE
PURCHASERS NAMED IN SCHEDULE A HERETO]
Ladies and Gentlemen:
CONSOLIDATED STORES CORPORATION, an Ohio corporation (together with its
successors and assigns, the "COMPANY"), agrees with you as follows:
1. PRELIMINARY STATEMENT; DESCRIPTION OF NOTES.
1.1 PRELIMINARY STATEMENT.
On the Issue Date, the Company entered into that certain Indenture (as
in effect immediately prior to the Closing, the "ORIGINAL NOTE INDENTURE"),
dated as of the Issue Date, with The Bank of New York (the "INDENTURE TRUSTEE"),
a New York banking corporation, as Trustee thereunder, pursuant to which on the
Issue Date the Company issued and sold the Original Notes to Melville
Corporation. Melville Corporation caused all of the Original Notes, through one
or more Persons controlled by it, to be assigned and transferred to Nashua
Hollis CVS, Inc. (Nashua Hollis CVS, Inc. is hereinafter referred to as the
"ORIGINAL PURCHASER"), a New Hampshire corporation. Contemporaneously with the
execution and delivery hereof, the Company, the Trustee, the Original Purchaser
and the purchasers named in Schedule A (collectively, the "PURCHASERS") have
entered into that certain Transfer Agreement (the "TRANSFER AGREEMENT"), dated
as of May 9, 1997, pursuant to which (a) the Original Purchaser has sold to the
Purchasers, and Purchasers have purchased, all of the Original Notes at the
purchase price of 98.60975% of the principal amount thereof plus accrued and
unpaid interest thereon, and (b) the Company and the Purchasers, as transferees
of 100% in aggregate principal amount of the Original Notes, have agreed,
subject to the satisfaction of the conditions precedent set forth in Section 4,
to (i) the amendment and restatement in full of the Original Note Indenture by
this Agreement and the Other Agreements, (ii) the amendment and restatement in
full of the Original Notes in the form set out in Exhibit 1, and (iii) the
removal of the Indenture Trustee and the termination and discharge of the
Original Note Indenture.
1.2 DESCRIPTION OF ORIGINAL NOTES.
On May 1, 1996, the Company authorized the issue and sale of, and on
the Issue Date the Company issued and sold, $100,000,000 aggregate principal
amount of its 7% Senior Subordinated Notes due May 4, 2000 (the "ORIGINAL
NOTES"), dated the date of issue, bearing interest (computed on the basis of a
360-day year of twelve 30-day months) from such date at the
CONSOLIDATED STORES CORPORATION 1 NOTE AGREEMENT
<PAGE> 6
EXHIBIT 10(b)
rate of 7% per annum, payable semiannually on April 15 and October 15 in each
year (commencing October 15, 1996) and at maturity, and having such other terms
as therein and in the Original Note Indenture provided.
1.3 DESCRIPTION OF RESTATED NOTES.
Pursuant to the Transfer Agreement, the Company and the Purchasers have
agreed to amend and restate in full the Original Notes in the form set out in
Exhibit 1 (the "NOTES", such term to include each Note delivered pursuant to
this Agreement and the Other Agreements, and any such notes issued in
substitution therefor pursuant to Section 13 of this Agreement and the Other
Agreements), with such changes therefrom, if any, as may be approved by you and
the Company. All amounts owing under, and evidenced by, the Original Notes as of
the date of the Closing shall continue to be outstanding under, and shall on and
after the date of the Closing be evidenced by, the Notes, and shall be repayable
in accordance with this Agreement. The term "Notes" shall be deemed, when
reference is made to a date prior to the date of Closing, to be a reference to
the Original Notes, and when reference is made to a date on or after the date of
Closing, to be a reference to the Notes.
In furtherance of the foregoing, the Company agrees with you and each
Other Purchaser that all Original Notes outstanding on the date of Closing are
hereby, without any further action being required on the part of the holders
thereof or on the part of any other Person, deemed to be conformed to the form
of Note attached to this Agreement and the Other Agreements as Exhibit 1. The
outstanding Notes shall be and are entitled to all of the rights and benefits
provided therefor in this Agreement and the Other Agreements.
1.4 DEFINED TERMS; RULES OF CONSTRUCTION.
Certain terms used in this Agreement are defined in Schedule B.
References to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a
Schedule or an Exhibit attached to this Agreement. References to a "Section"
are, unless otherwise specified, references to a Section of this Agreement. The
words "herein," "hereof," "hereunder" and "hereto" refer to this Agreement as a
whole and not to any particular Section or other subdivision.
Unless the context otherwise requires: (a) a term has the meaning
assigned to it; (b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP; (c) "or" is not exclusive; (d)
"including" means including, without limitation; (e) words in the singular
include the plural, and words in the plural include the singular; and (f) any
gender used in this Agreement shall be deemed to include the neuter, masculine
and feminine gender.
2. EXECUTION AND DELIVERY OF NOTES.
Subject to the terms and conditions of this Agreement and the Transfer
Agreement, the Company will execute and deliver to you, at the Closing provided
for in Section 3, one or more Notes in the principal amount specified below your
name in Schedule A in replacement of the Original Notes contemporaneously
acquired from the Original Purchaser under the Transfer Agreement and held by
you. Contemporaneously with entering into this Agreement, the Company is
entering into separate Note Agreements (as may be amended or supplemented from
time to time, the "OTHER AGREEMENTS") identical (except for the identity and
signature of the purchaser) with this Agreement with each of the other
purchasers named in Schedule A (the "OTHER PURCHASERS"), providing for the
amendment and restatement of the Original Notes held
CONSOLIDATED STORES CORPORATION 2 NOTE AGREEMENT
<PAGE> 7
EXHIBIT 10(b)
by each Other Purchaser, and the substitution therefor of Notes in the principal
amount specified below its name in Schedule A. Your obligation hereunder and the
obligations of the Other Purchasers under the Other Agreements are several and
not joint obligations and you shall have no obligation under any Other Agreement
and no liability to any Person for the performance or non-performance by any
Other Purchaser thereunder.
3. CLOSING.
The sale, purchase and replacement of the Notes to be acquired by you
and the Other Purchasers shall occur at the offices of Hebb & Gitlin, One State
Street, Hartford, Connecticut 06103, at 10:00 a.m., local time, at a closing
(the "Closing") on May 16, 1997. At the Closing the Company will deliver to you
the Notes to be acquired by you (in replacement of the Original Notes
contemporaneously purchased by you) in the form of a single Note (or such
greater number of Notes in denominations of at least $100,000 as you may
request), dated the date of the Closing and registered in your name (or in the
name of your nominee), against delivery by you to the Company of an equal
aggregate principal amount of Original Notes. If at the Closing the Company
shall fail to tender such Notes to you as provided above in this Section 3, or
any of the conditions specified in Section 4 shall not have been fulfilled to
your satisfaction, you shall, at your election, be relieved of all further
obligations under this Agreement, without thereby waiving any rights you may
have by reason of such failure or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligations under this Agreement, including, without limitation,
the obligation to purchase and pay for the Notes to be delivered to you at the
Closing, are subject to the conditions precedent set forth Section 5 of the
Transfer Agreement, which conditions precedent are incorporated herein by
reference with the same force and effect as though set forth herein in full, and
the failure by the Company or any other party to the Transfer Agreement, as the
case may be, to satisfy all such conditions shall relieve you, at your election,
of all such obligations.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
To induce you to enter into this Agreement and to purchase and pay for
the Notes to be delivered to you at the Closing, the Company makes the
warranties and representations set forth in Section 6 of the Transfer Agreement,
effective as of the date of the execution of this Agreement by the Company,
which warranties and representations are incorporated herein by reference with
the same force and effect as though set forth herein in full.
6. REPRESENTATIONS OF EACH PURCHASER.
Each Purchaser makes the representations set forth in Section 8 of the
Transfer Agreement, effective as of the date of the execution of this Agreement
by such Purchaser, which representations are incorporated herein by reference
with the same force and effect as though set forth herein in full.
CONSOLIDATED STORES CORPORATION 3 NOTE AGREEMENT
<PAGE> 8
EXHIBIT 10(b)
7. INFORMATION AS TO COMPANY.
7.1 Financial and Business Information.
The Company shall deliver to each holder of Notes that is an
Institutional Investor:
(a) QUARTERLY STATEMENTS -- within 60 days after the end of
each quarterly fiscal period in each fiscal year of the Company (other
than the last quarterly fiscal period of each such fiscal year),
duplicate copies of,
(i) a consolidated balance sheet of the Company and
its Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries, for such quarter and (in the case of the second
and third quarters) for the portion of the fiscal year ending
with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a Senior Financial
Officer as fairly presenting, in all material respects, consolidated
the financial position of the companies being reported on and their
consolidated results of operations and cash flows, subject to changes
resulting from year-end adjustments, provided that delivery within the
time period specified above of copies of the Company's Quarterly Report
on Form 10-Q prepared in compliance with the requirements therefor and
filed with the Securities and Exchange Commission shall be deemed to
satisfy the requirements of this Section 7.1(a);
(b) ANNUAL STATEMENTS -- within 120 days after the end of each
fiscal year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and
its Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied by an opinion thereon of independent
certified public accountants of recognized national standing, which
opinion shall state that such financial statements present fairly, in
all material respects, the consolidated financial position of the
companies being reported upon and their consolidated results of
operations and cash flows and have been prepared in conformity with
GAAP, and that the examination of such accountants in connection with
such financial statements has been made in accordance with generally
accepted auditing standards, and that such audit provides a reasonable
basis for such opinion in the circumstances, provided that the delivery
within the time period specified above of the Company's Annual Report
on Form 10-K for such fiscal year prepared in accordance
CONSOLIDATED STORES CORPORATION 4 NOTE AGREEMENT
<PAGE> 9
EXHIBIT 10(b)
with the requirements therefor and filed with the Securities and
Exchange Commission, shall be deemed to satisfy the requirements of
this Section (b);
(c) SEC AND OTHER REPORTS -- promptly upon their becoming
available, one copy of each financial statement, report (including,
without limitation, the Company's annual report to shareholders, if
any, prepared pursuant to Rule 14a-3 under the Exchange Act), notice or
proxy statement sent by the Company or any Subsidiary to public
securities holders generally, and each regular or periodic report, each
registration statement that shall have become effective (without
exhibits except as expressly requested by such holder), and each final
prospectus and all amendments thereto filed by the Company or any
Subsidiary with the Securities and Exchange Commission;
(d) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- promptly, and in
any event within five days after a Responsible Officer becoming aware
of the existence of any Default or Event of Default, a written notice
specifying the nature and period of existence thereof and what action
the Company is taking or proposes to take with respect thereto;
(e) ERISA MATTERS -- promptly, and in any event within five
days after a Responsible Officer becoming aware of any of the
following, a written notice setting forth the nature thereof and the
action, if any, that the Company or an ERISA Affiliate proposes to take
with respect thereto:
(i) with respect to any Plan, any reportable event,
as defined in section 4043(b) of ERISA and the regulations
thereunder, for which notice thereof has not been waived
pursuant to such regulations as in effect on the date of the
Closing; or
(ii) the taking by the PBGC of steps to institute, or
the threatening by the PBGC of the institution of, proceedings
under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the
receipt by the Company or any ERISA Affiliate of a notice from
a Multiemployer Plan that such action has been taken by the
PBGC with respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that could
result in the incurrence of any liability by the Company or
any ERISA Affiliate pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to
employee benefit plans, or in the imposition of any Lien on
any of the rights, properties or assets of the Company or any
ERISA Affiliate pursuant to Title I or IV of ERISA or such
penalty or excise tax provisions, if such liability or Lien,
taken together with any other such liabilities or Liens then
existing, would reasonably be expected to have a Material
Adverse Effect; and
(f) REQUESTED INFORMATION -- with reasonable promptness, such
other data and information relating to the business, operations,
affairs, financial condition, assets or properties of the Company or
any of its Subsidiaries or relating to the ability of the Company to
perform its obligations hereunder and under the Notes as from time to
time may be reasonably requested by any such holder of Notes, or such
information regarding the Company required to satisfy the requirements
of 17 C.F.R. section 230.144A, as amended from time to time, in
connection with any contemplated transfer of the Notes.
CONSOLIDATED STORES CORPORATION 5 NOTE AGREEMENT
<PAGE> 10
EXHIBIT 10(b)
7.2 OFFICER'S CERTIFICATE.
Each set of financial statements delivered to a holder of Notes
pursuant to Section (a) or Section (b) hereof shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
(a) COVENANT COMPLIANCE -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 10.1 through Section 10.6,
inclusive, during the quarterly or annual period covered by the
statements then being furnished (including with respect to each such
Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage, as the case may be, permissible under the
terms of such Sections, and the calculation of the amount, ratio or
percentage then in existence); and
(b) EVENT OF DEFAULT -- a statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and
conditions of the Company and its Subsidiaries from the beginning of
the quarterly or annual period covered by the statements then being
furnished to the date of the certificate and that such review has not
disclosed the existence during such period of any condition or event
that constitutes a Default or an Event of Default or, if any such
condition or event existed or exists (including, without limitation,
any such event or condition resulting from the failure of the Company
or any Subsidiary to comply with any Environmental Law), specifying the
nature and period of existence thereof and what action the Company
shall have taken or proposes to take with respect thereto.
7.3 INSPECTION.
The Company shall permit the representatives of each holder of Notes
that is an Institutional Investor:
(a) NO DEFAULT -- if no Default or Event of Default then
exists, at the expense of such holder and upon reasonable prior notice
to the Company, to visit the principal executive office of the Company,
to discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the Company's officers, and, with the consent of the
Company, which consent will not be unreasonably withheld) to visit the
other offices and properties of the Company and each Subsidiary, all at
such reasonable times and as often as may be reasonably requested in
writing; and
(b) DEFAULT -- if a Default or Event of Default then exists,
at the expense of the Company, to visit and inspect any of the offices
or properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective officers and independent
public accountants (and by this provision the Company authorizes said
accountants to discuss the affairs, finances and accounts of the
Company and its Subsidiaries), all at such times and as often as may be
requested.
CONSOLIDATED STORES CORPORATION 6 NOTE AGREEMENT
<PAGE> 11
EXHIBIT 10(b)
8. PAYMENT OF THE NOTES.
8.1 PAYMENT AT MATURITY.
The entire principal amount of the Notes remaining outstanding on May
4, 2000, together with interest accrued thereon, shall become due and payable on
May 4, 2000.
8.2 OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT.
The Company may, at its option, upon notice as provided below, prepay
at any time on and after May 5, 1998, all, or from time to time thereafter any
part of, the Notes in an amount not less than 5% of the aggregate principal
amount of the Notes then outstanding in the case of a partial prepayment, at
100% of the principal amount so prepaid, together with interest accrued thereon,
plus the Make-Whole Amount determined for the prepayment date with respect to
such principal amount. The Company will give each holder of Notes written notice
of each optional prepayment under this Section 8.2 not less than 30 days and not
more than 60 days prior to the date fixed for such prepayment. Each such notice
shall specify such prepayment date, the aggregate principal amount of the Notes
to be prepaid on such date, the principal amount of each Note held by such
holder to be prepaid (determined in accordance with Section 8.3), and the
interest to be paid on the prepayment date with respect to such principal amount
being prepaid, and shall be accompanied by a certificate of a Senior Financial
Officer as to the estimated Make-Whole Amount due in connection with such
prepayment (calculated as if the date of such notice were the date of the
prepayment), setting forth the details of such computation. Two Business Days
prior to such prepayment, the Company shall deliver to each holder of Notes a
certificate of a Senior Financial Officer specifying the calculation of such
Make-Whole Amount as of the specified prepayment date.
8.3 CHANGE IN CONTROL.
(a) NOTICE OF CHANGE IN CONTROL OR CONTROL EVENT. The Company
will, within 30 days after any Responsible Officer has knowledge of the
occurrence of any Change in Control or Control Event, give written
notice of such Change in Control or Control Event to each holder of
Notes. If a Change in Control has occurred, such notice shall contain
and constitute an irrevocable offer to prepay Notes as described in
Section and shall be accompanied by the certificate described in
Section .
(b) OFFER TO PREPAY NOTES. The offer to prepay Notes
contemplated by Section shall be an offer to prepay, in accordance with
and subject to this Section , all, but not less than all, the Notes
held by each holder (in this case only, "holder" in respect of any Note
registered in the name of a nominee for a disclosed beneficial owner
shall mean such beneficial owner) on a date specified in such offer
(the "PROPOSED PREPAYMENT DATE"), that is not less than 30 days and not
more than 45 days after the date of such offer (if the Proposed
Prepayment Date shall not be specified in such offer, the Proposed
Prepayment Date shall be the 45th day after the date of such offer).
CONSOLIDATED STORES CORPORATION 7 NOTE AGREEMENT
<PAGE> 12
EXHIBIT 10(b)
(c) ACCEPTANCE; REJECTION. A holder of Notes may accept the
offer to prepay made pursuant to this Section by causing a notice of
such acceptance to be delivered to the Company at least 5 days prior to
the Proposed Prepayment Date. A failure by a holder of Notes to respond
to an offer to prepay made pursuant to this Section shall be deemed to
constitute a rejection of such offer by such holder.
(d) PREPAYMENT. Prepayment of the Notes to be prepaid pursuant
to this Section shall be at 101% of the principal amount of such Notes,
together with interest on such Notes accrued to the date of prepayment.
The prepayment shall be made on the Proposed Prepayment Date.
(e) OFFICER'S CERTIFICATE. Each offer to prepay the Notes
pursuant to this Section shall be accompanied by a certificate,
executed by a Senior Financial Officer of the Company and dated the
date of such offer, specifying:
(i) that such offer is made pursuant to this Section;
(ii) the Proposed Prepayment Date;
(iii) the last date upon which the offer can be
accepted, and setting forth the consequences of failing to
provide an acceptance, as provided in Section ;
(iv) the principal amount of each Note offered to be
prepaid;
(v) the amount of the premium due in connection with
such prepayment;
(vi) the interest that would be due on each Note
offered to be prepaid, accrued to the Proposed Prepayment
Date;
(vii) that the conditions of this Section have been
fulfilled; and
(viii) in reasonable detail, the nature and date or
proposed date of the Change in Control.
(f) EFFECT OF SENIOR INDEBTEDNESS UPON PREPAYMENTS.
Notwithstanding any other provision of this Section , if at the time of
the occurrence of a Change in Control, the terms of any Senior
Indebtedness restrict or prohibit the repurchase of the Notes pursuant
to this Section , then prior to the mailing of the notice to holders of
Notes provided for in this Section but in any event within 30 days
following any such Change in Control, the Company shall eliminate such
restriction or prohibition by (i) repaying in full all such Senior
Indebtedness or offering to repay in full all such Senior Indebtedness
and repaying the Indebtedness of each lender who accepts such offer or
(ii) obtaining any required consent or waiver under all such Senior
Indebtedness to permit the prepayment of the Notes as provided for in
this Section.
CONSOLIDATED STORES CORPORATION NOTE AGREEMENT
8
<PAGE> 13
EXHIBIT 10(b)
8.4 OFFER TO PAY OUT OF EXCESS PROCEEDS.
(a) OFFER. If and when the aggregate amount of Excess Proceeds
received by the Company and its Subsidiaries in connection with Asset
Sales made in accordance with Section exceeds $5,000,000, the Company
shall make an irrevocable offer to the holders of the Notes to pay the
principal of the Notes (together with any interest accrued and unpaid
thereon) in an amount equal to such aggregate amount of Excess
Proceeds. Such offer shall satisfy the requirements of Section
applicable thereto.
Such offer will be in writing and will
(i) refer to this Section ,
(ii) briefly describe the nature of the Asset Sale
and the Net Cash Proceeds received in connection therewith,
(iii) specify the prepayment date (the "PREPAYMENT
DATE"), which shall not be less than 30 days after, nor more
than 45 days after, the date of such offer,
(iv) specify the last date upon which the offer can
be accepted, and state the consequences of failing to provide
an acceptance, as provided in Section ,
(v) specify the amount of such offer (the
"DISPOSITION PAYMENT AMOUNT"), the minimum ratable share of
such Disposition Payment Amount payable in respect of each
Note (such minimum ratable share to be determined on the basis
of the aggregate principal amount of all Notes outstanding
immediately prior to the making of such offer) and the
principal amount of each Note offered to be prepaid on such
Prepayment Date,
(vi) specify the amount of interest that would be due
on each Note offered to be prepaid, accrued to such Prepayment
Date, and
(vii) be executed by a Senior Financial Officer of
the Company.
(b) ACCEPTANCE, REJECTION. To accept or reject such offered
payment, a holder of Notes shall cause a notice of such acceptance or
rejection to be delivered to the Company at least 5 days prior to the
Prepayment Date. A failure to respond to any such offer of payment as
provided in this Section shall be deemed to constitute a rejection of
such offer.
(c) PAYMENT. The Company shall pay to each holder which shall
have accepted such offer a principal amount equal to such holder's
ratable share of the Disposition Payment Amount (such ratable share to
be determined on the basis only of the aggregate principal amount of
the Notes outstanding immediately prior to the making of such offer
which shall have accepted such offer) at 100% of such principal amount,
together with interest thereon accrued to such Prepayment Date, which
amount shall become due and payable on such Prepayment Date. The
Company shall, promptly after making such payment, notify in writing
all holders of Notes of the payment amount, and the name of each
holder, of any Notes prepaid under this Section 8.4.
CONSOLIDATED STORES CORPORATION 9 NOTE AGREEMENT
<PAGE> 14
EXHIBIT 10(b)
8.5 ALLOCATION OF PARTIAL PREPAYMENTS.
In the case of each partial prepayment of the Notes pursuant to Section
8.2, the principal amount of the Notes to be prepaid shall be allocated among
all of the Notes at the time outstanding in proportion, as nearly as
practicable, to the respective unpaid principal amounts thereof not theretofore
called for prepayment.
8.6 MATURITY; SURRENDER, ETC.
In the case of each prepayment of Notes pursuant to this Section 8, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable premium or Make-Whole
Amount, if any. From and after such date, unless the Company shall fail to pay
such principal amount when so due and payable, together with the interest and
premium or Make-Whole Amount, if any, as aforesaid, interest on such principal
amount shall cease to accrue. Any Note paid or prepaid in full shall be
surrendered to the Company and cancelled and shall not be reissued, and no Note
shall be issued in lieu of any prepaid principal amount of any Note.
8.7 PURCHASE OF NOTES.
The Company will not and will not permit any Affiliate to purchase,
redeem or otherwise acquire, directly or indirectly, any of the outstanding
Notes except (a) upon the payment or redemption of the Notes in accordance with
the terms of this Agreement and the Notes or (b) pursuant to an offer to
purchase made by the Company or an Affiliate pro rata to the holders of all
Notes at the time outstanding upon the same terms and conditions. Any such offer
shall provide each holder with sufficient information to enable it to make an
informed decision with respect to such offer, and shall remain open for at least
15 Business Days. If the holders of more than 50% of the principal amount of the
Notes then outstanding accept such offer, the Company shall promptly notify the
remaining holders of such fact (the "Second Notice") and the expiration date for
the acceptance by holders of Notes of such offer shall be extended by the number
of days necessary to give each such remaining holder at least 15 Business Days
from its receipt of such Second Notice to accept such offer. The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to any
payment, prepayment or purchase of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such
Notes.
8.8 MAKE-WHOLE AMOUNT.
The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Remaining Scheduled
Payments with respect to the Called Principal of such Note over the amount of
such Called Principal, provided that the Make-Whole Amount may in no event be
less than zero. For the purposes of determining the Make-Whole Amount, the
following terms have the following meanings:
"CALLED PRINCIPAL" means, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to the terms
hereof or that has become or is declared to be immediately due and
payable pursuant to Section 12.1, as the context requires.
CONSOLIDATED STORES CORPORATION 10 NOTE AGREEMENT
<PAGE> 15
EXHIBIT 10(b)
"DISCOUNTED VALUE" means, with respect to the Called Principal
of any Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on which
interest on the Notes is payable) equal to the Reinvestment Yield with
respect to such Called Principal.
"REINVESTMENT YIELD" means, with respect to the Called
Principal of any Note, 0.50% over the yield to maturity implied by
(a) the yields reported, as of 10:00 A.M. (New York
City time) on the second Business Day preceding the Settlement
Date with respect to such Called Principal, on the display
designated as "Page USD" on the Bloomberg Financial Markets
System (or such other display as may replace Page USD on the
Bloomberg Financial Markets System) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining
Average Life of such Called Principal as of such Settlement
Date, or
(b) if such yields are not reported as of such time
or the yields reported as of such time are not ascertainable,
the Treasury Constant Maturity Series Yields reported, for the
latest day for which such yields have been so reported as of
the second Business Day preceding the Settlement Date with
respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury securities
having a constant maturity equal to the Remaining Average Life
of such Called Principal as of such Settlement Date.
Such implied yield will be determined, if necessary, by (i) converting
U.S. Treasury bill quotations to bond-equivalent yields in accordance
with accepted financial practice and (ii) interpolating linearly
between (1) the actively traded U.S. Treasury security with the
duration closest to and greater than the Remaining Average Life and (2)
the actively traded U.S. Treasury security with the duration closest to
and less than the Remaining Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (a) such Called Principal into (b) the sum
of the products obtained by multiplying (i) the principal component of
each Remaining Scheduled Payment with respect to such Called Principal
by (ii) the number of years (calculated to the nearest one-twelfth
year) that will elapse between the Settlement Date with respect to such
Called Principal and the scheduled due date of such Remaining Scheduled
Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the
Called Principal of any Note, all payments of such Called Principal and
interest thereon that would be due after the Settlement Date with
respect to such Called Principal if no payment of such Called Principal
were made prior to its scheduled due date, provided that if such
Settlement Date is not a date on which interest payments are due to be
made under the terms of the Notes, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of
interest accrued to such Settlement Date and required to be paid on
such Settlement Date.
CONSOLIDATED STORES CORPORATION 11 NOTE AGREEMENT
<PAGE> 16
EXHIBIT 10(b)
"SETTLEMENT DATE" means, with respect to the Called Principal
of any Note, the date on which such Called Principal is to be prepaid
pursuant to the terms hereof or has become or is declared to be
immediately due and payable pursuant to Section 12.1, as the context
requires.
8.9 SIDE LETTER.
Notwithstanding any agreements or understandings between the Company
and the Original Purchaser or any of its Affiliates in respect of the Original
Notes or the Notes, or any breach of or default under any such agreements or
understandings, all payments to be made by the Company to the holders of the
Notes shall be made without any offset, right of recoupment, defense,
counterclaim or claim of any nature arising out of any such agreement or
understanding, including, without limitation, the Side Letter.
9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
9.1 PAYMENT OF NOTES.
The Company shall pay the principal of, premium or Make-Whole Amount,
if any, and interest (including interest accruing on or after the filing of a
petition in bankruptcy or reorganization relating to the Company, whether or not
a claim for post-filing interest is allowed in such proceeding) on the Notes on
(or prior to) the dates and in the manner provided in the Notes or pursuant to
this Agreement. The Company shall pay interest on overdue principal and premium
or Make-Whole Amount, if any, and interest on overdue installments of interest
(including interest accruing on or after the filing of a petition in bankruptcy
or reorganization relating to the Company, whether or not a claim for
post-filing interest is allowed in such proceeding), to the extent lawful, at
the rate per annum borne by the Notes, which interest on overdue interest shall
accrue from the date such amounts became overdue. The provisions of this Section
shall not be deemed to excuse any Event of Default set forth in Section 11.
9.2 MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain an office at the address of the Company as
provided in Section 18 where notices, presentations and demands to or upon the
Company in respect of the Notes and this Agreement may be made or served. The
Company shall give prompt written notice to the holders of the Notes of any
change of location of such office, which will in any event be located within the
United States of America.
9.3 PAYMENT OF TAXES AND OTHER CLAIMS.
The Company shall pay or discharge or cause to be paid or discharged,
before any penalty accrues thereon:
(a) all taxes, assessments and governmental charges levied or
imposed upon the Company or any Subsidiary upon the income, profits or
property of the Company or any Subsidiary; and
CONSOLIDATED STORES CORPORATION 12 NOTE AGREEMENT
<PAGE> 17
EXHIBIT 10(b)
(b) all lawful claims for labor, materials and supplies which,
if unpaid, would by law become a lien upon the property of the Company
or any Subsidiary;
provided, however, that neither the Company nor any Subsidiary shall be required
to pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim the amount, applicability or validity of which is being
contested in good faith by appropriate proceedings and, if required by GAAP, for
which adequate provision has been made.
9.4 CORPORATE EXISTENCE.
Subject to Section , the Company will do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence
and the corporate, partnership or other existence of any Subsidiary in
accordance with the respective organizational documents of such Subsidiary and
the rights (charter and statutory), licenses and franchises of the Company and
its Subsidiaries, provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any Subsidiary, if the Board of Directors of the Company
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and its Subsidiaries, taken as a whole,
and that the loss thereof is not reasonably likely to have a Material Adverse
Effect.
9.5 MAINTENANCE OF PROPERTIES AND INSURANCE.
The Company shall cause all material properties owned by or leased to
it or any Subsidiary and necessary in the conduct of its business or the
business of such Subsidiary to be maintained and kept in normal condition,
repair and working order and supplied with all necessary equipment and shall
cause to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that nothing in this
Section shall prevent the Company or any Subsidiary from discontinuing the
operation or maintenance of any such properties or disposing of any of them, if
such discontinuance or disposal is determined by the Board of Directors of the
Company or the Board of Directors of the applicable Subsidiary to be desirable
in the conduct of the business of the Company or the business of such
Subsidiary.
The Company shall provide or cause to be provided, for itself and any
Subsidiaries, insurance (including appropriate self-insurance, if adequate
reserves are maintained with respect thereto) against loss or damage of the
kinds customarily insured against by corporations similarly situated and owning
like properties, including, but not limited to, public liability insurance, with
reputable insurers in such amounts, with such deductibles and by such methods as
shall be customary for corporations similarly situated in the industry.
CONSOLIDATED STORES CORPORATION 13 NOTE AGREEMENT
<PAGE> 18
EXHIBIT 10(b)
9.6 INVESTMENT COMPANY ACT.
The Company shall not become an investment company subject to
registration under the Investment Company Act of 1940, as amended.
9.7 COVENANT TO COMPLY WITH SECURITIES LAWS UPON PURCHASE OF NOTES.
In connection with any offer to purchase or purchase of Notes under
Section or Section , the Company shall: (a) comply with all tender offer rules
under the Exchange Act which may then be applicable, including Rule 14e-1
thereunder; and (b) otherwise comply with all federal and state securities laws
so as to permit the rights and obligations under Section and Section to be
exercised in the time and in the manner specified in Section and Section , as
the case may be.
9.8 COMPLIANCE WITH LAW.
The Company shall and shall cause each of its Subsidiaries to comply
with all laws, ordinances or governmental rules or regulations to which each of
them is subject, including, without limitation, Environmental Laws, and shall
obtain and maintain in effect all licenses, certificates, permits, franchises
and other governmental authorizations necessary to the ownership of their
respective properties or to the conduct of their respective businesses, in each
case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect.
10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
10.1 LIMITATION ON RESTRICTED PAYMENTS.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly:
(a) declare or pay any dividend on, or make any distribution
in respect of its Capital Stock;
(b) purchase, redeem or otherwise acquire or retire for value
any of its Capital Stock;
(c) make any Investment in any Person (other than Permitted
Investments); or
(d) purchase, redeem or otherwise acquire or retire for value,
prior to a scheduled mandatory sinking fund payment date or maturity
date,
(1) any Indebtedness of the Company which ranks
subordinate in right of payment to the Notes, or
(2) any Indebtedness of any Subsidiary
CONSOLIDATED STORES CORPORATION 14 NOTE AGREEMENT
<PAGE> 19
EXHIBIT 10(b)
(each such declaration, payment, distribution, purchase,
redemption, acquisition, retirement or Investment being
referred to as a "RESTRICTED PAYMENT") if, at the time of any
such action, or after giving effect to such Restricted
Payment:
(i) an Event of Default or a Default shall have occurred and
be continuing;
(ii) the aggregate amount of all Restricted Payments declared
or made beginning on the Issue Date shall exceed the sum of
(X) 50% of the Company's Consolidated Net
Income accrued on a cumulative basis from February 4,
1996 through the last fiscal quarter ending prior to
the date of such proposed Restricted Payment (or if
the Company's cumulative Consolidated Net Income
during such period shall be a deficit, minus 100% of
such deficit), plus
(Y) the aggregate net proceeds received by
the Company (other than from a Subsidiary) after the
Issue Date as a capital contribution to the Company
or from the issuance and sale of either Capital Stock
(other than Disqualified Capital Stock) or
Indebtedness that by its terms was convertible into
such Capital Stock to the extent such Indebtedness
shall have been converted into Capital Stock; or
(iii) the Company could not incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to Section .
Notwithstanding any of the foregoing provisions of this Section , such
provisions will not prevent: (1) the payment of any dividend within 60 days
after the date of declaration, if at the date of declaration, such payment would
comply with such provisions; (2) any dividend or other distribution on shares of
Capital Stock payable solely in shares of Capital Stock (other than Disqualified
Capital Stock); (3) any dividend or other distribution payable from a Subsidiary
to the Company or any Wholly-owned Subsidiary of the Company; and (4) payment by
a Subsidiary of any amounts due in accordance with the provisions of any Senior
Indebtedness.
10.2 LIMITATION ON ADDITIONAL INDEBTEDNESS.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume, guarantee or otherwise become
directly or indirectly liable for the payment of any Indebtedness (including
Acquired Indebtedness), except that the Company or its Subsidiaries may Incur
Permitted Indebtedness and may create, incur, assume, guarantee or otherwise
become directly or indirectly liable for the payment of Indebtedness (in
addition to Permitted Indebtedness) if, after giving pro forma effect to the
incurrence of such Indebtedness, the Consolidated Fixed Charge Coverage Ratio
for the four full fiscal quarters immediately preceding the incurrence of such
Indebtedness, taken as one period and calculated on the assumption that such
Indebtedness had been incurred (and the proceeds thereof were used to repay
Indebtedness, if applicable) on the first day of such four full fiscal quarter
period and, in the case of Acquired Indebtedness, on the assumption that the
related acquisition (whether by means of purchase, merger, amalgamation or
otherwise) also had occurred on such date with the appropriate adjustments
(including the inclusion of the Consolidated Net Income of the acquired Person)
with respect to such acquisition being included in such pro forma calculation,
would have been greater than or equal to 1.1 to 1.0.
CONSOLIDATED STORES CORPORATION 15 NOTE AGREEMENT
<PAGE> 20
EXHIBIT 10(b)
10.3 DIVIDEND AND PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company will not, and will not permit any Subsidiary to, directly
or indirectly, create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or restriction of any kind on the ability of any
Subsidiary to:
(a) pay dividends or make any other distribution in respect of
its Capital Stock;
(b) pay any Indebtedness owed to the Company or any
Subsidiary;
(c) make loans or advances to the Company or any Subsidiary;
or
(d) transfer any of its property or assets to the Company or
any Subsidiary;
except for such encumbrances or restrictions
(i) existing as of the Issue Date or arising pursuant to the
Revolving Credit Facility,
(ii) pursuant to an agreement relating to any Indebtedness by
such Subsidiary prior to the date on which such Subsidiary was
acquired,
(iii) pursuant to an agreement which has been entered into for
the pending sale or disposition of all or substantially all of the
Capital Stock or assets of such Subsidiary (provided that such
restriction terminate upon consummation of such disposition),
(iv) pursuant to customary non-assignment provisions and
leases entered into in the ordinary course of business, or
(v) pursuant to an agreement effecting a renewal, extension,
refinancing or refunding of Indebtedness incurred pursuant to an
agreement or arrangement referred to in clause (i) or clause (ii)
above; provided, however, that provisions related to such encumbrance
or restriction contained in any such renewal, extension, refinancing or
refunding are no more restrictive in any material respect than the
provisions contained in the agreement it replaces.
10.4 LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into or suffer to exist any transaction or series
of related transactions (including, without limitation, any sale, purchase,
exchange or lease of assets, property or services or any loan or any other
direct or indirect payment, transfer or other disposition) with any Affiliate of
the Company or of any of its Subsidiaries unless:
(a) such Affiliate is (both before and after such transaction)
(i) a Wholly-Owned Subsidiary or (ii) a Subsidiary, none of whose
minority interests are held by another Affiliate of the Company or of
any of its Subsidiaries; or
CONSOLIDATED STORES CORPORATION 16 NOTE AGREEMENT
<PAGE> 21
EXHIBIT 10(b)
(b) each such transaction and any series of related
transactions is on terms that are no less favorable to the Company or
such Subsidiary, as the case may be, than would be available in a
comparable transaction with an unrelated third party;
provided, however, that with respect to a transaction or series of related
transactions for which the total consideration (based on fair market value) is
equal to or in excess of $5,000,000, a committee of the Board of Directors of
the Company composed entirely of all of the disinterested Directors of the
Company shall approve by unanimous resolution certifying that such transaction
or series or transactions comply with clause (b) above; and provided, further,
that the foregoing restriction shall not apply to
(i) any transaction pursuant to agreements in place as of the
Issue Date, and
(ii) any transaction with an officer or director of the
Company or of any Subsidiary in their capacity as officer or director
entered into in the ordinary course of business (including compensation
and employee benefit arrangements with any officer or director of the
Company or of any Subsidiary).
Notwithstanding the foregoing, nothing in this Section shall prohibit the
Company from engaging in transactions expressly permitted by Section .
10.5 LIMITATION ON ASSET SALES.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, make any Asset Sale unless:
(a) the Company or such Subsidiary, as the case may be,
received consideration at the time of such Asset Sale at least equal to
the fair market value for the stock or assets sold or otherwise
disposed of (such value to be determined in good faith by the Board of
Directors of the Company, whose determination shall be conclusive and
evidenced by a board resolution delivered to the holders of the Notes);
and
(b) at least 75% of such consideration consists of cash.
Within 180 days of the receipt of Net Cash Proceeds from any Asset Sale, the
Company, at its option, may apply the Net Cash Proceeds from such Asset Sale to
(i) the permanent reduction of Senior Indebtedness in accordance with its terms,
(ii) the purchase of replacement assets for the assets subject to such Asset
Sale, or (iii) any combination of clauses (i) and (ii) above.
For purposes of the foregoing, "NET CASH PROCEEDS" means the aggregate
amount of cash (including any other consideration that is immediately converted
into cash) received by the Company or any of its Subsidiaries in respect of such
an Asset Sale, less the sum of: (a) all out-of-pocket fees, commissions and
other expenses incurred in connection with such Asset Sale, including the amount
of income taxes required to be paid by the Company or any of its Subsidiaries in
connection therewith; and (b) the aggregate amount of cash so received which is
used to retire any existing Indebtedness of the Company or any of its
Subsidiaries which is required to be repaid in connection therewith. If at any
time any funds are received by or for the account of the Company or any of its
Subsidiaries upon the sale, conversion, collection or other liquidation of any
non-cash consideration received in respect of an Asset Sale, such funds shall,
CONSOLIDATED STORES CORPORATION 17 NOTE AGREEMENT
<PAGE> 22
EXHIBIT 10(b)
when received, constitute Net Cash Proceeds and shall, within 180 days after the
receipt of such funds, be applied as provided in the preceding paragraph or as
provided in the succeeding paragraph. Notwithstanding the foregoing, $35,000,000
of what otherwise would be deemed Net Cash Proceeds received in any fiscal year
will be excluded from Net Cash Proceeds and will not be subject to the
restrictions contained in this Section.
Any Net Cash Proceeds that are not applied or invested as provided
above shall constitute "EXCESS PROCEEDS". When the aggregate amount of Excess
Proceeds exceeds $5,000,000, the Company will offer to purchase all of Notes
from the holders thereof in accordance with the procedures described in Section
. To the extent that the aggregate principal amount, plus accrued and unpaid
interest thereon, of the Notes tendered pursuant to such offer is less than the
Excess Proceeds, the Company may use such unused Excess Proceeds, or a portion
thereof, for general corporate purposes. Upon completion of such offer to
purchase, the amount of Excess Proceeds will be reset at zero.
10.6 WHEN THE COMPANY MAY MERGE OR TRANSFER ASSETS.
The Company (i) may not consolidate with or merge into any other
Person; (ii) may not, directly or indirectly, in one or a series of
transactions, transfer, convey, sell, lease or otherwise dispose of all or
substantially all of the properties and assets of the Company and its
Subsidiaries on a consolidated basis; (iii) may not, and may not permit any
Subsidiary to, acquire capital stock of or other ownership interests in any
other Person such that such Person becomes a Subsidiary; and (iv) may not, and
may not permit any Subsidiary to, (x) purchase, lease or otherwise acquire all
or substantially all of the properties and assets of any Person or any existing
business (whether existing as a separate entity, subsidiary, division, unit or
otherwise) of any Person or (y) make any Investment in a Person that, as a
consequence of such Investment, becomes a Subsidiary of the Company, unless:
(a) the Company shall be the continuing Person, or the Person,
if other than the Company, formed by such consolidation or into which
the Company is merged or to which the properties and assets of the
Company, substantially as an entirety, are transferred shall be a
corporation organized and existing under the laws of the United States
or any State thereof or the District of Columbia and shall expressly
assume, by an amendment hereto duly executed and delivered to the
holders of the Notes, in form satisfactory to the Required Holders, all
the obligations of the Company under the Notes and this Agreement, and
this Agreement remains in full force and effect;
(b) immediately before and immediately after giving effect to
such transaction, no Event of Default and no Default shall have
occurred and be continuing;
(c) immediately before and immediately after giving effect to
such transaction, the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to Section ;
and
(d) immediately after giving effect to such transaction on a
pro forma basis, the Consolidated Net Worth of the surviving entity
shall be equal to or greater than the Consolidated Net Worth of the
Company immediately before such transaction.
CONSOLIDATED STORES CORPORATION 18 NOTE AGREEMENT
<PAGE> 23
EXHIBIT 10(b)
Notwithstanding the foregoing, any Subsidiary of the Company may
consolidate with, merge into or transfer all or part of its properties and
assets to the Company or any other Subsidiary or Subsidiaries of the Company.
This Section shall not apply to any transaction or series of
transactions involving the Company if a Change in Control shall result therefrom
and the Company is required to comply with the provisions of Section , in which
case Section shall apply.
In connection with any consolidation, merger or transfer contemplated
hereby, the Company shall deliver, or cause to be delivered, to the holders of
the Notes, in form and substance reasonably satisfactory to the Required
Holders, a Specified Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger or transfer and the amendment to this
Agreement in respect thereto comply with this Section , and that all conditions
precedent herein provided for relating to such transactions have been complied
with.
Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Company in accordance with the foregoing,
the successor corporation formed by such consolidation or into which the Company
is merged or to which the transfer is made, shall succeed to, and be substituted
for, any may exercise every right and power of the Company under this Agreement
with the same effect as if such successor corporation had been named as the
Company herein; and thereafter, the Company shall be discharged and released
from all obligation and covenants under this Agreement and the Notes.
11. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) PRINCIPAL, PREMIUM OR MAKE-WHOLE AMOUNT PAYMENT -- the
Company defaults in the payment of any principal, premium or Make-Whole
Amount, if any, on any Note when the same becomes due and payable,
whether at maturity or at a date fixed for prepayment or by declaration
or otherwise; or
(b) INTEREST PAYMENT -- the Company defaults in the payment of
any interest on any Note for more than five Business Days after the
same becomes due and payable; or
(c) SPECIFIED COVENANTS -- the Company defaults in the
performance of or compliance with any term contained in Section 10.6;
or
(d) OTHER COVENANTS -- the Company defaults in the performance
of or compliance with any term contained herein (other than those
referred to in paragraphs (a), (b) and (c) of this Section 11) and such
default is not remedied within 30 days after the earlier of (i) any
Executive Officer obtaining actual knowledge of such default and (ii)
the Company receiving written notice of such default from any holder of
a Note; or
(e) WARRANTIES AND REPRESENTATIONS -- any representation or
warranty made in writing by or on behalf of the Company or by any
officer of the Company in this Agreement, the Transfer Agreement or in
any writing furnished in connection with the
CONSOLIDATED STORES CORPORATION 19 NOTE AGREEMENT
<PAGE> 24
EXHIBIT 10(b)
transactions contemplated hereby proves to have been false or incorrect
in any material respect on the date as of which made; or
(f) CROSS-ACCELERATION -- the Company or any Material
Subsidiary is in default (as principal or as guarantor or other surety)
in the payment of any principal of or premium or make-whole amount or
interest on any Indebtedness that is outstanding in an aggregate
principal amount of at least $10,000,000 (without giving effect to any
period of grace provided with respect thereto), and as a consequence of
such default such Indebtedness has become, or has been declared due and
payable before its stated maturity or before its regularly scheduled
dates of payment; or
(g) INSOLVENCY -- the Company or any Material Subsidiary
(i) is generally not paying, or admits in writing its
inability to pay, its debts as they become due,
(ii) files, or consents by answer or otherwise to the
filing against it of, a petition for relief or reorganization
or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy,
insolvency, reorganization, moratorium or other similar law of
any jurisdiction,
(iii) makes an assignment for the benefit of its
creditors,
(iv) consents to the appointment of a custodian,
receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its
property,
(v) is adjudicated as insolvent or to be liquidated,
or
(vi) takes corporate action for the purpose of any of
the foregoing; or
(h) APPOINTMENT OF A RECEIVER -- a court or governmental
authority of competent jurisdiction enters an order appointing, without
consent by the Company or any of its Material Subsidiaries, a
custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property,
or constituting an order for relief or approving a petition for relief
or reorganization or any other petition in bankruptcy or for
liquidation or to take advantage of any bankruptcy or insolvency law of
any jurisdiction, or ordering the dissolution, winding-up or
liquidation of the Company or any of its Material Subsidiaries, or any
such petition shall be filed against the Company or any of its Material
Subsidiaries and such petition shall not be dismissed within 60 days;
or
(i) FINAL JUDGMENT -- a final judgment or judgments for the
payment of money aggregating in excess of $10,000,000 are rendered
against one or more of the Company and its Subsidiaries and which
judgments are not, within 60 days after entry thereof, bonded,
discharged or stayed pending appeal, or are not discharged within 60
days after the expiration of such stay; or
(j) ERISA -- if
CONSOLIDATED STORES CORPORATION 20 NOTE AGREEMENT
<PAGE> 25
EXHIBIT 10(b)
(i) any Plan shall fail to satisfy the minimum
funding standards of ERISA or the Code for any plan year or
part thereof or a waiver of such standards or extension of any
amortization period is sought or granted under section 412 of
the Code,
(ii) a notice of intent to terminate any Plan shall
have been or is reasonably expected to be filed with the PBGC
or the PBGC shall have instituted proceedings under ERISA
section 4042 to terminate or appoint a trustee to administer
any Plan or the PBGC shall have notified the Company or any
ERISA Affiliate that a Plan may become a subject of any such
proceedings,
(iii) the aggregate "amount of unfunded benefit
liabilities" (within the meaning of section 4001(a)(18) of
ERISA) under all Plans, determined in accordance with Title IV
of ERISA, shall exceed $10,000,000,
(iv) the Company or any ERISA Affiliate shall have
incurred or is reasonably expected to incur any liability
pursuant to Title I or IV of ERISA or the penalty or excise
tax provisions of the Code relating to employee benefit plans,
(v) the Company or any ERISA Affiliate withdraws from
any Multiemployer Plan, or
(vi) the Company or any Subsidiary establishes or
amends any employee welfare benefit plan that provides
post-employment welfare benefits in a manner that would
increase the liability of the Company or any Subsidiary
thereunder;
and any such event or events described in clause (i) through clause
(vi) above, either individually or together with any other such event
or events, could reasonably be expected to have a Material Adverse
Effect (the terms "EMPLOYEE BENEFIT PLAN" and "EMPLOYEE WELFARE BENEFIT
PLAN" shall have the respective meanings assigned to such terms in
section 3 of ERISA).
12. REMEDIES ON DEFAULT, ETC.
12.1 ACCELERATION.
(a) If an Event of Default with respect to the Company
described in paragraph (g) or paragraph (h) of Section 11 (other than
an Event of Default described in clause (i) of paragraph (g) or
described in clause (vi) of paragraph (g) by virtue of the fact that
such clause encompasses clause (i) of paragraph (g)) has occurred, all
the Notes then outstanding shall automatically become immediately due
and payable.
(b) If any other Event of Default has occurred and is
continuing, any holder or holders of more than 51% in principal amount
of the Notes at the time outstanding may at any time at its or their
option, by notice or notices to the Company, declare all the Notes then
outstanding to be immediately due and payable.
(c) If any Event of Default described in paragraph (a) or (b)
of Section 11 has occurred and is continuing, any holder or holders of
Notes at the time outstanding af-
CONSOLIDATED STORES CORPORATION 21 NOTE AGREEMENT
<PAGE> 26
EXHIBIT 10(b)
fected by such Event of Default may at any time, at its or their
option, by notice or notices to the Company, declare all the Notes held
by it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus (x) all accrued and
unpaid interest thereon and (y) the Make-Whole Amount determined in respect of
such principal amount, or in respect of a Change in Control, the premium in
respect of such principal amount (to the full extent permitted by applicable
law), shall all be immediately due and payable, in each and every case without
presentment, demand, protest or further notice, all of which are hereby waived.
The Company acknowledges, and the parties hereto agree, that each holder of a
Note has the right to maintain its investment in the Notes free from repayment
by the Company (except as herein specifically provided for) and that the
provision for payment of a premium or Make-Whole Amount, as the case may be, by
the Company in the event that the Notes are prepaid or are accelerated as a
result of an Event of Default or a Change in Control, is intended to provide
compensation for the deprivation of such right under such circumstances.
12.2 OTHER REMEDIES.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.
12.3 RESCISSION.
At any time after any Notes have been declared due and payable pursuant
to clause (b) or clause (c) of Section 12.1, the holders of not less than 65% in
principal amount of the Notes then outstanding, by written notice to the
Company, may rescind and annul any such declaration and its consequences if (a)
the Company has paid all overdue interest on the Notes, all principal of and
premium or Make-Whole Amount, if any, due and payable on any Notes other than by
reason of such declaration, and all interest on such overdue principal and
premium or Make-Whole Amount, if any, and (to the extent permitted by applicable
law) any overdue interest in respect of the Notes, (b) all Events of Default and
Defaults, other than non-payment of amounts that have become due solely by
reason of such declaration, have been cured or have been waived pursuant to
Section 17, and (c) no judgment or decree has been entered for the payment of
any monies due pursuant hereto or to the Notes. No rescission and annulment
under this Section 12.3 will extend to or affect any subsequent Event of Default
or Default or impair any right consequent thereon.
CONSOLIDATED STORES CORPORATION 22 NOTE AGREEMENT
<PAGE> 27
EXHIBIT 10(b)
12.4 NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of any Note
in exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by this Agreement or by any Note upon any holder thereof shall
be exclusive of any other right, power or remedy referred to herein or therein
or now or hereafter available at law, in equity, by statute or otherwise.
Without limiting the obligations of the Company under Section 15, the Company
will pay to the holder of each Note on demand such further amount as shall be
sufficient to cover all costs and expenses of such holder incurred in any
enforcement or collection under this Section 12, including, without limitation,
reasonable attorneys' fees, expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1 REGISTRATION OF NOTES.
The Company shall keep at its principal executive office a register for
the registration and registration of transfers of Notes. The name and address of
each holder of one or more Notes, each transfer thereof and the name and address
of each transferee of one or more Notes shall be registered in such register.
Prior to due presentment for registration of transfer, the Person in whose name
any Note shall be registered shall be deemed and treated as the owner and holder
thereof for all purposes hereof, and the Company shall not be affected by any
notice or knowledge to the contrary. The Company shall give to any holder of a
Note that is an Institutional Investor promptly upon request therefor, a
complete and correct copy of the names and addresses of all registered holders
of Notes.
13.2 TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
his attorney duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, at the Company's expense (except as provided below), one or
more new Notes (as requested by the holder thereof) in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form of Exhibit 1. Each
such new Note shall be dated and bear interest from the date to which interest
shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $100,000, provided that if necessary
to enable the registration of transfer by a holder of its entire holding of
Notes, one Note may be in a denomination of less than $100,000. Any transferee,
by its acceptance of a Note registered in its name (or the name of its nominee),
shall be deemed to have made the representation set forth in Section 8.2 of the
Transfer Agreement.
CONSOLIDATED STORES CORPORATION 23 NOTE AGREEMENT
<PAGE> 28
EXHIBIT 10(b)
13.3 REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note
is, or is a nominee for, an original purchaser or a Qualified
Institutional Buyer, such Person's own unsecured agreement of indemnity
shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
14. PAYMENTS ON NOTES.
14.1 PLACE OF PAYMENT.
Subject to Section 14.2, payments of principal, premium or Make-Whole
Amount, if any, and interest becoming due and payable on the Notes shall be made
in New York City, New York at the office of the Company or the Company's bank in
such jurisdiction. The Company may at any time, by notice to each holder of a
Note, change the place of payment of the Notes so long as such place of payment
shall be either the principal office of the Company in such jurisdiction or the
principal office of a bank or trust company in such jurisdiction.
14.2 HOME OFFICE PAYMENT.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
premium or Make-Whole Amount, if any, and interest by the method and at the
address specified for such purpose below your name in Schedule A, or by such
other method or at such other address as you shall have from time to time
specified to the Company in writing for such purpose, without the presentation
or surrender of such Note or the making of any notation thereon, except that
upon written request of the Company made concurrently with or reasonably
promptly after payment or prepayment in full of any Note, you shall surrender
such Note for cancellation, reasonably promptly after any such request, to the
Company at its principal executive office or at the place of payment most
recently designated by the Company pursuant to Section 14.1. Prior to any sale
or other disposition of any Note held by you or your nominee you will, at your
election, either endorse thereon the amount of principal paid thereon and the
last date to which interest has been paid thereon or surrender such Note to the
Company in exchange for a new Note or Notes pursuant to Section 13.2. The
Company will afford the benefits of this Section 14.2 to any Institutional
Investor that is the direct or indirect transferee of any Note purchased by you
under this Agreement and that has made the same agreement relating to such Note
as you have made in this Section 14.2.
CONSOLIDATED STORES CORPORATION 24 NOTE AGREEMENT
<PAGE> 29
EXHIBIT 10(b)
15. EXPENSES, ETC.
15.1 TRANSACTION EXPENSES.
The Company will pay all costs and expenses (including reasonable
attorneys' fees of a special counsel and, if reasonably required, local or other
counsel) incurred by you and each Other Purchaser or holder of a Note in
connection herewith and in connection with any amendments, waivers or consents
under or in respect of this Agreement or the Notes (whether or not such
amendment, waiver or consent becomes effective), including, without limitation:
(a) the costs and expenses incurred in enforcing or defending (or determining
whether or how to enforce or defend) any rights under this Agreement or the
Notes or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the Notes, or
by reason of being a holder of any Note, and (b) the costs and expenses,
including financial advisors' fees, incurred in connection with the insolvency
or bankruptcy of the Company or any Subsidiary or in connection with any
work-out or restructuring of the transactions contemplated hereby and by the
Notes. The Company will pay, and will save you and each other holder of a Note
harmless from, all claims in respect of any fees, costs or expenses if any, of
brokers and finders (other than those retained by you).
15.2 SURVIVAL.
The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by you of any Note or portion thereof or interest therein and the payment of any
Note, and may be relied upon by any subsequent holder of a Note, regardless of
any investigation made at any time by or on behalf of you or any other holder of
a Note. All statements contained in any certificate or other instrument
delivered by or on behalf of the Company pursuant to this Agreement shall be
deemed representations and warranties of the Company under this Agreement.
Subject to the preceding sentence, this Agreement and the Notes embody the
entire agreement and understanding between you and the Company and supersede all
prior agreements and understandings relating to the subject matter hereof.
Without limiting the foregoing, all warranties, representations and
certifications made by the Company in or pursuant to the Original Note Indenture
or in any certificate or other instrument delivered by it or on its behalf
thereunder or pursuant thereto, prior to the date of the Closing, shall be
considered to have been relied upon by you, shall survive the delivery to you of
the Notes in exchange for the Original Notes and shall be incorporated herein by
this reference, regardless of any investigation made by you or on your behalf.
All payment obligations of the Company under the Original Note Indenture
(including, without limitation, reimbursement obligations in respect of costs,
expenses and fees of or incurred by the Original Purchaser or the Trustee),
other than the obligation to pay the principal of and interest and premium on
the Original Notes (which obligations, after the date of the Closing, shall be
evidenced by the Notes) shall survive the amendment and restatement of the
Original Notes and the cancellation thereof.
CONSOLIDATED STORES CORPORATION 25 NOTE AGREEMENT
<PAGE> 30
EXHIBIT 10(b)
17. AMENDMENT AND WAIVER.
17.1 REQUIREMENTS.
This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
provisions of any of Sections 1, 2, 3, 4, 5, 6 and 21, or any defined term (as
it is used therein), will be effective as to you unless consented to by you in
writing, and (b) no such amendment or waiver may, without the written consent of
the holder of each Note at the time outstanding affected thereby, (i) subject to
the provisions of Section 12 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest or of the
premium or Make-Whole Amount on, the Notes, (ii) change the percentage of the
principal amount of the Notes the holders of which are required to consent to
any such amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b),
12, 17 and 20.
17.2 SOLICITATION OF HOLDERS OF NOTES.
(a) SOLICITATION. The Company will provide each holder of the
Notes (irrespective of the amount of Notes then owned by it) with
sufficient information, sufficiently far in advance of the date a
decision is required, to enable such holder to make an informed and
considered decision with respect to any proposed amendment, waiver or
consent in respect of any of the provisions hereof or of the Notes. The
Company will deliver executed or true and correct copies of each
amendment, waiver or consent effected pursuant to the provisions of
this Section 17 to each holder of outstanding Notes promptly following
the date on which it is executed and delivered by, or receives the
consent or approval of, the requisite holders of Notes.
(b) PAYMENT. The Company will not directly or indirectly pay
or cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any security, to any
holder of Notes as consideration for or as an inducement to the
entering into by any holder of Notes of any waiver or amendment of any
of the terms and provisions hereof unless such remuneration is
concurrently paid, or security is concurrently granted, on the same
terms, ratably to each holder of Notes then outstanding even if such
holder did not consent to such waiver or amendment.
(c) CONSENT IN CONTEMPLATION OF TRANSFER. Any consent made
pursuant to this Section 17 by a holder of Notes that has transferred
or has agreed to transfer its Notes to the Company, any Subsidiary or
any Affiliate of the Company and has provided or has agreed to provide
such written consent as a condition to such transfer shall be void and
of no force or effect except solely as to such holder, and any
amendments effected or waivers granted or to be effected or granted
that would not have been or would not be so effected or granted but for
such consent (and the consents of all other holders of Notes that were
acquired under the same or similar conditions) shall be void and of no
force or effect except solely as to such holder.
CONSOLIDATED STORES CORPORATION 26 NOTE AGREEMENT
<PAGE> 31
EXHIBIT 10(b)
17.3 BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note nor
any delay in exercising any rights hereunder or under any Note shall operate as
a waiver of any rights of any holder of such Note. As used herein, the term
"THIS AGREEMENT" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
17.4 NOTES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent
(a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery
service (charges prepaid), or
(b) by registered or certified mail with return receipt
requested (postage prepaid), or
(c) by a recognized overnight delivery service (with charges
prepaid).
Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address
specified for such communications in Schedule A, or at such other
address as you or it shall have specified to the Company in writing;
(ii) if to any other holder of any Note, to such holder at
such address as such other holder shall have specified to the Company
in writing; or
(iii) if to the Company, to Consolidated Stores Corporation,
300 Phillipi Road, P.O. Box 28512, Columbus, Ohio 43228-0512,
Attention: General Counsel; Telecopier: (614) 278-6763, or at such
other address as the Company shall have specified to the holder of each
Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
CONSOLIDATED STORES CORPORATION 27 NOTE AGREEMENT
<PAGE> 32
EXHIBIT 10(b)
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "CONFIDENTIAL INFORMATION" means
information delivered to you by or on behalf of the Original Purchaser, the
Company or any Subsidiary in connection with the transactions contemplated by or
otherwise pursuant to this Agreement that is proprietary in nature and that was
clearly marked or labeled or otherwise adequately identified when received by
you as being confidential information of the Original Purchaser, the Company or
such Subsidiary, provided that such term does not include information that
(a) was publicly known or otherwise known to you prior to the
time of such disclosure,
(b) subsequently becomes publicly known through no act or
omission by you or any person acting on your behalf,
(c) otherwise becomes known to you other than through
disclosure by the Original Purchaser, the Company or any Subsidiary, or
(d) constitutes financial statements delivered to you under
Section 7.1 that are otherwise publicly available.
You will maintain the confidentiality of such Confidential Information in
accordance with procedures adopted by you in good faith to protect confidential
information of third parties delivered to you, provided that you may deliver or
disclose Confidential Information to:
(i) your directors, officers, trustees, employees, agents,
attorneys and affiliates (to the extent such disclosure reasonably
relates to the administration of the investment represented by your
Notes),
(ii) your financial advisors and other professional advisors
who agree to hold confidential the Confidential Information
substantially in accordance with the terms of this Section 20,
CONSOLIDATED STORES CORPORATION 28 NOTE AGREEMENT
<PAGE> 33
EXHIBIT 10(b)
(iii) any other holder of any Note,
(iv) any Institutional Investor to which you sell or offer to
sell such Note or any part thereof or any participation therein (if
such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this Section
20),
(v) any Person from which you offer to purchase any security
of the Company (if such Person has agreed in writing prior to its
receipt of such Confidential Information to be bound by the provisions
of this Section 20),
(vi) any federal or state regulatory authority having
jurisdiction over you,
(vii) the National Association of Insurance Commissioners or
any similar organization, or any nationally recognized rating agency
that requires access to information about your investment portfolio or
(viii) any other Person to which such delivery or disclosure
may be necessary or appropriate
(A) to effect compliance with any law, rule,
regulation or order applicable to you,
(B) in response to any subpoena or other legal
process,
(C) in connection with any litigation to which you
are a party, or
(D) if an Event of Default has occurred and is
continuing, to the extent you may reasonably determine such
delivery and disclosure to be necessary or appropriate in the
enforcement or for the protection of the rights and remedies
under your Notes and this Agreement.
Each holder of a Note, by its acceptance of a Note, will be deemed to have
agreed to be bound by and to be entitled to the benefits of this Section 20 as
though it were a party to this Agreement. On reasonable request by the Company
or the Original Purchaser, as the case may be, in connection with the delivery
to any holder of a Note of information required to be delivered to such holder
under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into an
agreement with the Company or the Original Purchaser, as the case may be,
embodying the provisions of this Section 20.
CONSOLIDATED STORES CORPORATION 29 NOTE AGREEMENT
<PAGE> 34
EXHIBIT 10(b)
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement (other than in this Section
21), such word shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original holder of the
Notes under this Agreement.
22. SUBORDINATION
22.1 NOTES SUBORDINATE TO SENIOR INDEBTEDNESS.
Anything in this Agreement or the Notes to the contrary
notwithstanding, the Company covenants and agrees, and each holder of a Note, by
its acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Section , the Indebtedness
represented by the Notes and the payment of the principal of (and premium, if
any) and interest on (including any payments required under any provisions of
this Agreement and the Notes, including Section and Section ) each and all of
the Notes and other amounts owed by the Company under this Agreement and the
Notes are hereby expressly made subordinate and subject in right of payment to
the prior payment in full in cash of all Senior Indebtedness (including any
interest accruing after the occurrence of an Event of Default under Section
11(g) or Section 11(h), whether or not such interest is an allowed claim
enforceable against the debtor in a case brought under the Bankruptcy Code).
As used in this Agreement and the Notes, "PAYING THE NOTES", "PAYMENT
OF THE NOTES" and similar phrases mean any direct or indirect payment or
distribution by or on behalf of the Company on account of principal of (or
premium, if any) or interest on the Notes or other amounts owed by the Company
under this Agreement and the Notes or to acquire or repurchase pursuant to the
provisions of this Agreement or redeem, retire or defease all or any portion of
the Notes or to make any deposit, payment or transfer in furtherance of any of
the foregoing.
This Section shall constitute a continuing offer to all Persons who
become holders of, or continue to hold, Senior Indebtedness, and such provisions
are made for the benefit of the holders of Senior Indebtedness and such holders
are made obligees hereunder and any one or more of them may enforce such
provisions. Holders of Senior Indebtedness need not prove reliance on the
subordination provisions hereof.
22.2 PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
In the event of (i) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its creditors,
as such, or to its assets, or (ii) any liquidation, dissolution or
CONSOLIDATED STORES CORPORATION 30 NOTE AGREEMENT
<PAGE> 35
EXHIBIT 10(b)
other winding up of the Company, whether voluntary or involuntary and whether or
not involving insolvency or bankruptcy, or (iii) any assignment for the benefit
of creditors or any other marshalling of assets and liabilities of the Company,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, then and in any such event:
(a) the holders of Senior Indebtedness shall be entitled to
receive payment in full in cash of all amounts due or to become due on
or in respect of all Senior Indebtedness, or provision shall be made
for such payment in accordance with the instruments governing such
Senior Indebtedness, before the holders of the Notes are entitled to
receive any payment on account of principal of (or premium, if any) or
interest on the Notes or other amounts owed by the Company under this
Agreement and the Notes; and
(b) any payment or distribution of assets or securities of the
Company of any kind or character, whether in cash, property or
securities, to which the holders of Notes would be entitled but for the
provisions of this Section , including any such payment or distribution
which may be payable or deliverable by reason of the payment of any
other Indebtedness of the Company being subordinated to the payment of
the Notes (except for any such payment or distribution (i) authorized
by an order or decree giving effect, and stating in such order or
decree that effect is given, to the subordination of the Notes to the
Senior Indebtedness, and made by a court of competent jurisdiction in a
reorganization proceeding under any applicable bankruptcy law, or (ii)
of securities that are subordinated, to at least the same extent as the
Notes, to the payment in cash of all Senior Indebtedness then
outstanding), shall be paid by the liquidating trustee or agent or
other Person making such payment or distribution, whether a trustee in
bankruptcy, a receiver or liquidating trustee or otherwise, directly to
the holders of Senior Indebtedness or their representative or
representatives, ratably according to the aggregate amounts remaining
unpaid on the Senior Indebtedness, for application to the payment of
all Senior Indebtedness remaining unpaid, to the extent necessary to
pay all Senior Indebtedness in full in cash, after giving effect to any
concurrent payment or distribution to the holders of such Senior
Indebtedness; and
(c) in the event that, notwithstanding the foregoing
provisions of this Section , the holder of any Note shall have received
any such payment or distribution of assets or securities of the Company
of any kind or character, whether in cash, property or securities
(other than payments or distributions authorized by an order or decree
giving effect to the subordination of payments or distributions of
securities that are subordinated to the payment in cash of all Senior
Indebtedness, all as described in paragraph (b) above), including any
such payment or distribution which may be payable or deliverable by
reason of the payment of any other Indebtedness of the Company being
subordinated to the payment of the Notes, before all Senior
Indebtedness is paid in full in cash or payment thereof provided for,
then and in such event such payment or distribution shall be received
and held in trust for the benefit of, and shall be paid over or
delivered to, the holders of Senior Indebtedness or their
representative or representatives, ratably according to the aggregate
amount remaining unpaid on the Senior Indebtedness, for application to
the payment of all Senior Indebtedness remaining unpaid, to the extent
necessary to pay all Senior Indebtedness in full in cash, after giving
effect to any concurrent payment or distribution to or for the holders
of Senior Indebtedness.
CONSOLIDATED STORES CORPORATION 31 NOTE AGREEMENT
<PAGE> 36
EXHIBIT 10(b)
The consolidation of the Company with, or the merger of the Company
into, another corporation or the liquidation or dissolution of the Company
following the conveyance, transfer or lease of its properties and assets
substantially as an entirety to another corporation upon the terms and
conditions set forth in Section shall not be deemed a dissolution, winding up,
liquidation, reorganization, assignment for the benefit of creditors or
marshalling of assets and liabilities of the Company for the purposes of this
Section if the corporation formed by such consolidation or into which the
Company is merged or the corporation which acquires substantially as an
entirety, as the case may be, shall, as a part of such consolidation, merger,
conveyance, transfer or lease, comply with the conditions set forth in the last
sentence of Section.
22.3 NO PAYMENT WHEN SENIOR INDEBTEDNESS IN DEFAULT.
(a) In the event of and during the continuation of any default
in the payment of any Senior Indebtedness whether at maturity, upon
acceleration or otherwise beyond any applicable grace period with
respect thereto ("PAYMENT DEFAULT"), and written notice (the "PAYMENT
NOTICE") thereof shall have been given to each of the Company and the
holders of Notes by (i) in the case of the Revolving Credit Facility,
the bank agent under the Revolving Credit Facility, or (ii) in the case
of any other issue of Senior Indebtedness, the representative for, or
the holders of at least a majority of the principal amount of, the
Senior Indebtedness, then no payment shall be made by or on behalf of
the Company on the Notes until the date, if any, on which such default
or event of default is waived by the holders of such Senior
Indebtedness or otherwise cured or has ceased to exist or the Senior
Indebtedness to which such default or event of default relates is
discharged by payment in full in cash.
(b) In the event that any other event of default with respect
to any Senior Indebtedness shall have occurred and be continuing that
permits the holders of such Senior Indebtedness (or a trustee on behalf
of such holders) to declare such Senior Indebtedness due and payable
prior to the date on which it would otherwise have become due and
payable, and written notice thereof shall have been given to each of
the Company and the holders of Notes by (i) in the case of the
Revolving Credit Facility, the bank agent under the Revolving Credit
Facility, or (ii) in the case of any other issue of Senior
Indebtedness, the representative for, or the holders of at least a
majority of the principal amount of Senior Indebtedness ("COVENANT
DEFAULT NOTICE") then no payment shall be made by or on behalf of the
Company on any Notes until the earlier of
(i) 179 days after the date on which a Covenant
Default Notice shall have been given, and
(ii) the date, if any, on which such default or event
of default is waived by the holders of such Senior
Indebtedness or otherwise cured or has ceased to exist or the
Senior Indebtedness to which such default or event of default
relates is discharged by payment in full in cash
(provided, however, that further written notice relating to the same or
any other event of default with respect to any Senior Indebtedness
received by the Company or the Trustee within 360 days after such prior
receipt of a Covenant Default Notice shall not be effective to further
prohibit such payments, provided, further, that notwithstanding
anything in this Section 22.3(b) to the contrary, there must be at
least 181 consecutive days in any 360 day period in which no limitation
on payment pursuant to this Section is in ef-
CONSOLIDATED STORES CORPORATION 32 NOTE AGREEMENT
<PAGE> 37
EXHIBIT 10(b)
fect, and provided, further, that further written notice relating to
the same default or event of default or any other default or event of
default specified above existing or continuing on the date of receipt
of the Covenant Default Notice, whether or not received by the Company
or the holders of Notes within 360 days after prior receipt of a
Covenant Default Notice, shall not be effective to further prohibit
such payments unless all defaults and events of default shall have been
cured or waived after such date for a period of not less than 90
consecutive days).
In the event that, notwithstanding the foregoing, any payment
or distribution shall be made by or on behalf of the Company to the
holder of any Note prohibited by the foregoing provisions of this
Section , then and in such event such payment or distribution shall be
received and held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Senior Indebtedness or their
representative or representatives, ratably according to the aggregate
amounts remaining unpaid on account of the Senior Indebtedness, for
application to the payment of all Senior Indebtedness remaining unpaid,
to the extent necessary to pay all Senior Indebtedness in full in cash,
after giving effect to any concurrent payment or distribution to or for
the holders of Senior Indebtedness.
The provisions of this Section shall not apply to any payment
with respect to which Section would be applicable.
22.4 PAYMENT PERMITTED IF NO DEFAULT.
Nothing contained in this Section or elsewhere in this Agreement or in
any of the Notes shall prevent the Company, at any time except under the
circumstances described in Section or under the conditions described in Section
, from making payments at any time of principal of (and premium or Make-Whole
Amount, if any) or interest on the Notes or other amounts owed by the Company
under this Agreement and the Notes.
22.5 SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS.
No payment or distributions to the holders of Senior Indebtedness or
their representatives pursuant to the provisions of this Section shall entitle
any holders of the Notes to exercise any right of subrogation in respect thereof
until the Senior Indebtedness shall have been paid in full.
22.6 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.
The provisions of this Section are and are intended solely for the
purpose of defining the relative rights of the holders of the Notes on the one
hand and the holders of Senior Indebtedness on the other hand. Nothing contained
in this Section or elsewhere in this Agreement or in the Notes is intended to or
shall:
(a) impair, as among the Company, its creditors other than
holders of Senior Indebtedness and the holders of the Notes, the
obligation of the Company, which is absolute and unconditional, to pay
to the holders of the Notes the principal of (and premium or Make-Whole
Amount, if any) and interest on the Notes as and when the same shall
become due and payable in accordance with their terms; or
CONSOLIDATED STORES CORPORATION 33 NOTE AGREEMENT
<PAGE> 38
EXHIBIT 10(b)
(b) affect the relative rights against the Company of the
holders of the Notes and creditors of the Company other than the
holders of Senior Indebtedness; or
(c) prevent the holder of any Note from exercising all
remedies otherwise permitted by applicable law upon default under this
Agreement, subject to the express limitations set forth in Section and
to the rights, if any, under this Section of the holders of Senior
Indebtedness.
22.7 FURTHER ACTIONS.
If any proceeding referred to in clauses (i), (ii) or (iii) of the
first sentence of Section above is commenced by or against the Company, the
holders of the Notes shall duly and promptly take such action as the holders of
Senior Indebtedness may reasonably request to collect on the Notes and to file
appropriate claims or proofs of claim in respect of the Notes and to collect and
receive any and all payments which may be payable upon or with respect to the
Notes.
Holders of Senior Indebtedness or their representatives are hereby
authorized to demand specific performance of the provisions of this Section ,
whether or not the Company shall have complied with any of the provisions hereof
applicable to it, at any time when any holder of Notes shall have failed to
comply with any of the provisions of this Section applicable to it. The holders
of the Notes hereby irrevocably waive any defense based on the adequacy of a
remedy at law, which might be asserted as a bar to such remedy of specific
performance.
The holders of the Notes and the Company each will, at the Company's
expense and at any time and from time to time, promptly execute and deliver all
further instruments and documents, and take all further action, that may
reasonably be necessary, or that the holders of Senior Indebtedness or their
representatives may reasonably request, in order to protect any right or
interest granted by this Section or to enable the holders of Senior Indebtedness
or any of their representatives to exercise and enforce its rights and remedies
under this Section .
22.8 NO WAIVER OF SUBORDINATION PROVISIONS.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Agreement, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the holders of the Notes, without incurring
responsibility to the holders of the Notes and without impairing or releasing
the subordination provided in this Section or the obligations hereunder of the
holders of the Notes to the holders of Senior Indebtedness, do any one or more
of the following:
(a) change the manner, place or terms of payment or extend the
time of payment of or renew, refinance or refund Senior Indebtedness or
any instrument evidencing the same or any agreement under which Senior
Indebtedness is outstanding;
CONSOLIDATED STORES CORPORATION 34 NOTE AGREEMENT
<PAGE> 39
EXHIBIT 10(b)
(b) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Senior Indebtedness;
(c) release any Person liable in any manner for the collection
of Senior Indebtedness; and
(d) exercise or refrain from exercising any rights against the
Company and any other Person.
22.9 NOTICE TO HOLDERS OF THE NOTES.
The Company shall give prompt written notice to the holders of the
Notes of any fact known to the Company which would prohibit the making of any
payment to the holders of the Notes in respect of the Notes.
22.10 [INTENTIONALLY OMITTED].
22.11 [INTENTIONALLY OMITTED].
22.12 WAIVER.
The holders of the Notes and the Company each hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Senior Indebtedness and this Section and any requirement that the holders of
Senior Indebtedness or any of their representatives protect, secure, perfect or
insure any security interest or lien or any property subject thereto or exhaust
any right to take any action against the Company or any other person or entity
or any collateral.
22.13 NO WAIVER; REMEDIES.
No failure on the part of the holders of Senior Indebtedness or any of
their representatives to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right under this Section preclude any other or further exercise
thereof or the exercise of any other right. The remedies in this Section
provided are cumulative and not exclusive of any remedies provided by law.
23. MISCELLANEOUS.
23.1 SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by or on
behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.
CONSOLIDATED STORES CORPORATION 35 NOTE AGREEMENT
<PAGE> 40
EXHIBIT 10(b)
23.2 PAYMENTS DUE ON NON-BUSINESS DAYS; WHEN PAYMENTS DEEMED RECEIVED.
(a) PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of
principal of or premium or Make-Whole Amount or interest on any Note
that is due on a date other than a Business Day shall be made on the
next succeeding Business Day without including the additional days
elapsed in the computation of the interest payable on such next
succeeding Business Day.
(b) PAYMENTS, WHEN RECEIVED. Any payment to be made to the
holders of Notes hereunder or under the Notes shall be deemed to have
been made on the Business Day such payment actually becomes available
to such holder at such holder's bank prior to 12:00 noon (local time of
such bank).
23.3 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the holders of the
Notes or the Required Holders to take any action under this Agreement, the
Company shall furnish to such holders:
(a) a Specified Officers' Certificate stating that, in the
opinion of the signers, all conditions precedent, if any, provided for
in this Agreement relating to the proposed action have been complied
with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
23.4 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each Specified Officers' Certificate and Opinion of Counsel with
respect to compliance with a covenant or condition provided for in this
Agreement shall include:
(a) a statement that each Person making such Specified
Officers' Certificate or Opinion of Counsel has read such covenant or
condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such Specified Officers' Certificate or Opinion of Counsel
are based;
(c) a statement that, in the opinion of each such Person, he
has made such examination or investigation as is necessary to enable
such Person to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement that, in the opinion of such Person, such
covenant or condition has been complied with; provided, however, that
with respect to matters of fact, an Opinion of Counsel may rely on a
Specified Officers' Certificate or certificates of public officials.
CONSOLIDATED STORES CORPORATION 36 NOTE AGREEMENT
<PAGE> 41
EXHIBIT 10(b)
23.5 NO RECOURSE AGAINST OTHERS.
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the Notes
or this Agreement or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Note, each holder thereof shall
waive and release the directors, officers, employees or stockholders, as such,
of the Company from all such liability for obligations of the Company under the
Notes or this Agreement. The waiver and release shall be part of the
consideration for the issue of the Notes.
23.6 SEVERABILITY.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
23.7 CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
23.8 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
23.9 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND
THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW
YORK, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD
REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
[Remainder of page intentionally blank. Next page is signature page.]
CONSOLIDATED STORES CORPORATION 37 NOTE AGREEMENT
<PAGE> 42
EXHIBIT 10(b)
If you are in agreement with the foregoing, please sign the
form of agreement on the accompanying counterpart of this Agreement and return
it to the Company, whereupon the foregoing shall become a binding agreement
between you and the Company.
Very truly yours,
CONSOLIDATED STORES CORPORATION
By /s/ Michael J. Potter
--------------------------------
Name: Michael J. Potter
Title: Senior Vice President
Chief Financial Officer
The foregoing is hereby
agreed to as of the
date thereof.
[SEPARATELY EXECUTED BY EACH
OF THE FOLLOWING PURCHASERS]
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
BY CIGNA INVESTMENTS, INC.
By /s/ Stephen A. Osborn
-------------------------------------
Name: Stephen A. Osborn
Title: Managing Director
CONNECTICUT GENERAL LIFE INSURANCE COMPANY,
ON BEHALF OF ONE OR MORE SEPARATE ACCOUNTS
BY CIGNA INVESTMENTS, INC.
By /s/ Stephen A. Osborn
-------------------------------------
Name: Stephen A. Osborn
Title: Managing Director
CONSOLIDATED STORES CORPORATION 38 NOTE AGREEMENT
<PAGE> 43
EXHIBIT 10(b)
LIFE INSURANCE COMPANY OF NORTH AMERICA
BY: CIGNA INVESTMENTS, INC.
By /s/ Stephen A. Osborn
----------------------------------
Name: Stephen A. Osborn
Title: Managing Director
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By /s/ Jon C. Heiny
-----------------------------------
Name: Jon C. Heiny
Title: Counsel
By /s/ Christopher J. Henderson
-----------------------------------
Name: Christopher J. Henderson
Title: Counsel
NIPPON LIFE INSURANCE COMPANY OF AMERICA, BY ITS ATTORNEY IN FACT
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By /s/ Jon C. Heiny
-----------------------------------
Name: Jon C. Heiny
Title: Counsel
By /s/ Christopher J. Henderson
-----------------------------------
Name: Christopher J. Henderson
Title: Counsel
CONSOLIDATED STORES CORPORATION 39 NOTE AGREEMENT
<PAGE> 44
EXHIBIT 10(b)
ALLSTATE LIFE INSURANCE COMPANY
By /s/ Patricia W. Wilson
-----------------------------------
Name: Patricia W. Wilson
By /s/ Steven M. Laude
-----------------------------------
Name: Steven M. Laude
Authorized Signatories
ALLSTATE INSURANCE COMPANY
By /s/ Patricia W. Wilson
-----------------------------------
Name: Patricia W. Wilson
By /s/ Steven M. Laude
-----------------------------------
Name: Steven M. Laude
Authorized Signatories
CONSOLIDATED STORES CORPORATION 40 NOTE AGREEMENT
<PAGE> 45
EXHIBIT 10(b)
SCHEDULE B
DEFINED TERMS
-------------
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"ACQUIRED INDEBTEDNESS" means, with respect to any specified Person,
Indebtedness of any other Person: (a) existing at the time such other Person
merged with or into or became a Subsidiary of such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of such specified Person;
or (b) assumed by such specified Person in connection with its acquisition of
assets owned by such other Person.
"AFFILIATE" as to any Person shall mean any other Person (i) which
directly or indirectly controls, is controlled by, or is under common control
with such Person, (ii) which beneficially owns or holds 15% or more of any class
of the voting or other equity interests of such Person, or (iii) 15% or more of
any class of voting or other equity interests of which is beneficially owned or
held, directly or indirectly, by such Person. As used in this definition,
"Control" shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise, including
the power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise, including the power to elect a majority of the directors or trustees
of a corporation or trust, as the case may be. Unless the context otherwise
clearly requires, any reference to an "Affiliate" is a reference to an Affiliate
of the Company.
"AGREEMENT, THIS" is defined in Section 17.3.
"ASSET SALE" by any Person means any sale, transfer or lease (or series
of related sales, transfers or leases) by such Person or any of its Subsidiaries
of any property or assets, including shares of Capital Stock (other than
directors' qualifying shares) or other ownership interests of a Subsidiary of
such Person; provided, however, that Asset Sale will not include: (i)
transactions involving the sale of inventory in the ordinary course of business;
(ii) any sale, transfer or lease of assets in the ordinary course of business
which are no longer necessary or required in the conduct of the Company's or any
of its Subsidiary's business; (iii) any sale, transfer or lease of assets by any
Wholly-Owned Subsidiary to the Company or another Wholly-Owned Subsidiary; (iv)
and any sale, transfer or lease of assets in the ordinary course of business;
(v) any sale, transfer or lease or other disposition that is governed by and in
compliance with Section ; (vi) the issuance by such Person of shares of its
Capital Stock; (vii) any payment of purchase price to Melville Corporation in
connection with that certain Stock Purchase Agreement dated as of March 26, 1996
between Melville Corporation and Consolidated Stores Corporation; or (viii) any
sale, transfer or lease of assets, other than those specifically excepted
pursuant to clauses (i) through (iv) above, provided that the aggregate
after-tax proceeds of all such sales, transfers or leases on and after the date
thereof (as reasonably estimated by the Company) does not exceed $25,000,000.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy", as amended from time to time and all rules and regulations
promulgated thereunder.
CONSOLIDATED STORES CORPORATION Schedule B-1 NOTE AGREEMENT
<PAGE> 46
EXHIBIT 10(b)
"BOARD OF DIRECTORS" of any corporation means the Board of Directors of
such corporation, or any duly authorized committee of such Board of Directors.
"BUSINESS DAY" means (a) for the purposes of Section only, any day
other than a Saturday, a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed, and (b) for the purposes of any
other provision of this Agreement, any day other than a Saturday, a Sunday or a
day on which commercial banks in New York City, New York, or Columbus, Ohio, are
required or authorized to be closed.
"CAPITAL LEASE OBLIGATION" of any Person means the amount of the
liability in respect of a lease of (or other Indebtedness arrangements conveying
the right to use) real or personal property of such Person which is required to
be classified and accounted for as a capital lease or liability on the face of a
balance sheet of such Person in accordance with GAAP.
"CAPITAL STOCK" means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock (including
each class of common stock and preferred stock) or partnership interests and any
warrants, options or other rights to acquire such stock or interests, but
excluding any debt securities convertible into such stock.
"CHANGE IN CONTROL" has occurred if at any time:
(i) any person (as such term is used in section 13(d) and
section 14(d)(2) of the Exchange Act as in effect on the Issue Date) or
related persons constituting a group (as such term is used in Rule
13d-5 under the Exchange Act) become the "beneficial owners" (as such
term is used in Rule 13d-3 under the Exchange Act as in effect on the
Closing Date), directly or indirectly, of more than 33.33% of the total
voting power of all classes then outstanding of the Company's voting
stock; or
(ii) within a period of twelve (12) consecutive calendar
months, individuals who were directors on the board of directors of the
Company on the first day of such period together with any directors
whose election by such board of directors or whose nomination by the
shareholders was approved by a vote of the majority of the directors
then in office shall cease to constitute a majority of the board of
directors of the Company.
"CLOSING" is defined in Section 3.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
"COMPANY" is defined in the introductory sentence of this Agreement.
"CONFIDENTIAL INFORMATION" is defined in Section 20.
"CONSOLIDATED EBIT" means, with respect to a Person for any period, (a)
Consolidated Net Income (loss), plus (b) Consolidated Income Tax Expense, plus
(c) Consolidated Interest Expense of such Person for such period, determined on
a consolidated basis in accordance with GAAP.
CONSOLIDATED STORES CORPORATION Schedule B-2 NOTE AGREEMENT
<PAGE> 47
EXHIBIT 10(b)
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means on any date of
determination the ratio of (a) the Company's Consolidated EBIT for the most
recent four fiscal quarters immediately preceding the date of determination,
plus the Company's Consolidated Rent Expense, to (b) the Company's Consolidated
Interest Expense for the most recent four fiscal quarters immediately preceding
the date of determination, plus an amount equal to such Consolidated Rent
Expense.
"CONSOLIDATED INCOME TAX EXPENSE" means, with respect to a Person for
any period, the provision for taxes for such period for such Person and its
Subsidiaries based on income or profits to the extent such income or profits
were included in computing Consolidated Net Income for such period, determined
on a consolidated basis in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to a Person for any
period, the interest expense of such Person and its Subsidiaries in respect of
Indebtedness to the extent deducted in determining Consolidated Net Income for
such period, determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to a Person for any
period, the Net Income of such Person and its Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, excluding all
extraordinary income and gains to net income to the extent included in net
income for such period.
"CONSOLIDATED NET WORTH" means, with respect to any Person, the
stockholders' equity of such Person and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED RENT EXPENSE" means, with respect to a Person, the
aggregate rental amounts payable by such Person and its Subsidiaries for the
most recent four consecutive fiscal quarters immediately preceding the date of
determination under any lease of real property having an original term
(including any required renewals or any renewals at the option of the lessor or
lessee) of one year or more (but excluding any Capital Lease Obligation),
determined on a consolidated basis in accordance with GAAP.
"CONTROL EVENT" means:
(a) the execution by the Company or any of its Subsidiaries or
Affiliates of any agreement or letter of intent with respect to any
proposed transaction or event or series of transactions or events
which, individually or in the aggregate, may reasonably be expected to
result in a Change in Control;
(b) the execution of any written agreement which, when fully
performed by the parties thereto, would result in a Change in Control;
or
(c) the making of any written offer by any person (as such
term is used in section 13(d) and section 14(d)(2) of the Exchange Act
as in effect on the Issue Date) or related persons constituting a group
(as such term is used in Rule 13d-5 under the Exchange Act as in effect
on the Issue Date) to the holders of the common stock of the Company,
which offer, if accepted by the requisite number of holders, would
result in a Change in Control.
CONSOLIDATED STORES CORPORATION Schedule B-3 NOTE AGREEMENT
<PAGE> 48
EXHIBIT 10(b)
"COVENANT DEFAULT NOTICE" is defined in Section.
"DEFAULT" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
"DISPOSITION PAYMENT AMOUNT" is defined in Section 8.4(a)(v).
"DISQUALIFIED CAPITAL STOCK" means, with respect to any Person, any
Capital Stock of such Person that, by its terms (or by the terms of any security
into which it is convertible or for which it is exercisable, redeemable or
exchangeable), matures, or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or apart, on or prior to the maturity of the Notes.
"ENVIRONMENTAL LAWS" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
"EVENT OF DEFAULT" is defined in Section 11.
"EXCESS PROCEEDS" is defined in Section 10.5.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time.
"EXECUTIVE OFFICER" means and includes the chief financial officer of
the Company and any natural Person who constitutes an executive officer of the
Company for purposes of item 401(b) of Regulation S-K promulgated under the
Securities Act.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession
in the United States, consistently applied by the Person in respect of which
such accounting principles are being applied, that are in effect from time to
time.
"HOLDER" means, with respect to any Note, the Person in whose name such
Note is registered in the register maintained by the Company pursuant to Section
13.1.
CONSOLIDATED STORES CORPORATION Schedule B-4 NOTE AGREEMENT
<PAGE> 49
EXHIBIT 10(b)
"INCUR" means, with respect to any Indebtedness, to create, issue,
assume, guarantee, incur or otherwise become liable, directly or indirectly, in
respect of such Indebtedness. The term "INCURRENCE" when used as a noun shall
have a correlative meaning.
"INDEBTEDNESS" means as to any Person at any time, any and all
indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such Person for or in respect of:
(i) borrowed money;
(ii) amounts raised under or liabilities in respect of any
note purchase or acceptance credit facility;
(iii) reimbursement obligations (contingent or otherwise)
under any letter of credit, currency swap agreement, interest rate
swap, cap, collar or floor agreement or other interest rate management
device;
(iv) any other transaction (including forward sale or purchase
agreements, capitalized leases (but not operating leases) and
conditional sales agreements) having the commercial effect of a
borrowing of money entered into by such Person to finance its
operations or capital requirements (but not including trade payables,
trade credits and accrued expenses incurred in the ordinary course of
business which are not represented by a promissory note or other
evidence of indebtedness and which are not more than thirty (30) days
past due); or
(v) any guaranty of Indebtedness for borrowed money.
"INDENTURE TRUSTEE" is defined in Section 1.1.
"INSTITUTIONAL INVESTOR" means (a) any original purchaser of a Note,
(b) any holder of a Note holding more than 5% of the aggregate principal amount
of the Notes then outstanding, and (c) any bank, trust company, savings and loan
association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.
"INVESTMENTS" of any Person means all investments in other Persons in
the form of loans, advances or other extensions of credit or capital
contributions (excluding travel and similar advances to officers and employees
made in the ordinary course of business and excluding all indebtedness and
receivables from another Person which are current assets or arose from sales or
leases of goods or services on terms consistent with such Person's past
practices or such Person's industry's common practices), purchases (or other
acquisitions for consideration) of Indebtedness, Capital Stock or other
securities and all other items that are or would be classified as investments
(including, without limitation, purchases of assets outside the ordinary course
of business) on a balance sheet prepared in accordance with GAAP.
"ISSUE DATE" means May 5, 1996, the date of original issue of the
Original Notes.
"LIEN" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or
CONSOLIDATED STORES CORPORATION Schedule B-5 NOTE AGREEMENT
<PAGE> 50
EXHIBIT 10(b)
Capital Lease, upon or with respect to any property or asset of such Person
(including in the case of stock, stockholder agreements, voting trust agreements
and all similar arrangements).
"MAKE-WHOLE AMOUNT" is defined in Section.
"MATERIAL" means material in relation to the business, operations,
affairs, financial condition, assets, or properties of the Company and its
Subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Subsidiaries taken as a whole, or (b) the ability of the Company
to perform its obligations under this Agreement and the Notes, or (c) the
validity or enforceability of this Agreement or the Notes.
"MATERIAL SUBSIDIARY" mean any of C S Ross Company, an Ohio
corporation, KB Toy of California, Inc., a Delaware corporation, K.B.
Consolidated, Inc., an Ohio corporation, KayBee Center, Inc., a California
corporation, and any Subsidiary of the Company having at least 10% of the total
consolidated assets of the Company and its Subsidiaries or at least 10% of the
total consolidated revenues of the Company and its Subsidiaries for the 12-month
period ending on the last day of the most recent fiscal quarter of the Company.
Notwithstanding the foregoing, each of KB Toy of Wisconsin, Inc., TRO, Inc. and
Kay-Bee Toy & Hobby Shops, Inc. (each a "Deemed NM Subsidiary") shall not be
considered to be a Material Subsidiary so long as the operating assets (as
opposed to assets consisting of capital stock) of such Deemed NM Subsidiary
shall not exceed 10% of the total consolidated operating assets of the Company
and its Subsidiaries and the revenues of such Deemed NM Subsidiary (excluding
revenues of Subsidiaries of such Deemed NM Subsidiary which may be consolidated
with the revenues of such Deemed NM Subsidiary under GAAP) shall not exceed 10%
of the total consolidated revenues of the Company and its Subsidiaries for the
12-month period ending on the last day of the most recent fiscal quarter of the
Company.
"MEMORANDUM" is defined in Section 5.3.
"MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
"NET CASH PROCEEDS" is defined in Section.
"NOTES" is defined in Section.
"OFFICER'S CERTIFICATE" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.
"OPINION OF COUNSEL" means a written opinion (containing as applicable
the information specified in Section 23.3 and Section 23.4) rendered by legal
counsel who is acceptable to the Required Holders, which may be counsel to the
Company.
"ORIGINAL NOTE INDENTURE" is defined in Section.
"ORIGINAL NOTES" is defined in Section 1.2.
CONSOLIDATED STORES CORPORATION Schedule B-6 NOTE AGREEMENT
<PAGE> 51
EXHIBIT 10(b)
"ORIGINAL PURCHASER" is defined in Section 1.1.
"OTHER AGREEMENTS" is defined in Section 2.
"OTHER PURCHASERS" is defined in Section 2.
"PAYMENT DEFAULT" is defined in Section.
"PAYMENT NOTICE" is defined in Section.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"PERMITTED INDEBTEDNESS" will include:
(i) Indebtedness incurred by the Company or any Subsidiary of
the Company under the Revolving Credit Facility up to a maximum
permitted amount of $750,000,000;
(ii) Indebtedness owed by Company to any Wholly-Owned
Subsidiary of the Company or Indebtedness owed by any Subsidiary to the
Company or to a Wholly Owned Subsidiary of the Company;
(iii) Indebtedness of the Company and its Subsidiaries
outstanding on the Issue Date;
(iv) Indebtedness secured by purchase money security
interests;
(v) Indebtedness in connection with interest rate agreements
permitted by the Revolving Credit Facility;
(vi) any other Indebtedness not referred to above which does
not exceed in the aggregate $25,000,000; and
(vii) renewals, extensions, refinancings or refundings of any
Indebtedness (such new Indebtedness being "Refinancing Indebtedness");
provided that such Refinancing Indebtedness (a) does not exceed the
maximum permitted principal or accreted amount of, (b) ranks no more
favorably in order of payment to the Notes as, and (c) if such
Indebtedness so renewed, extended, refinanced or refunded is not Senior
Indebtedness, does not have a Weighted Average Life to Stated Maturity
shorter than that of, the Indebtedness being renewed, extended,
refinanced or refunded; and
(viii) Indebtedness not otherwise permitted to be incurred in
an aggregate principal amount not to exceed $50,000,000 at any one time
outstanding.
CONSOLIDATED STORES CORPORATION Schedule B-7 NOTE AGREEMENT
<PAGE> 52
EXHIBIT 10(b)
"PERMITTED INVESTMENTS" means an Investment which consists of:
(a) marketable obligations of or obligations guaranteed by the
United States of America or issued by any agency thereof and backed by
the full faith and credit of the United States of America, in each case
with final maturities of one year or less;
(b) commercial paper having a rating of at least P-1 or A-1
(other their respective equivalents) by Moody's Investor Service, Inc.
or Standard & Poor's Rating Services, a division of The McGraw Hill
Companies, Inc., respectively;
(c) certificates of deposit with final maturities of one year
or less issued by United States commercial banks of recognized standing
with capital and surplus aggregating in excess of $100,000,000;
(d) shares of money market funds that have assets in excess of
$100,000,000 and that invest solely in Permitted Investments of the
kind described in clauses (a) through (c) above;
(e) Investments other than set forth above not to exceed
$10,000,000;
(f) an Investment in or to any of the Wholly-Owned
Subsidiaries of the Company;
(g) loans to employees outstanding on the date of the Closing;
and
(h) investments related to Company-owned life insurance
contracts.
"PERSON" means an individual, partnership, corporation, limited
liability company, joint venture, association, trust, unincorporated
organization, or a government or agency or political subdivision thereof or any
other entity.
"PLAN" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"PREFERRED STOCK" means any class of Capital Stock of a Person that is
preferred over any other class of Capital Stock of such Person as to the payment
of dividends or other equity distributions or the payment of any amount upon
liquidation or dissolution of such Person.
"PREPAYMENT DATE" is defined in Section 8.4(a)(iii).
"PROPERTY OR PROPERTIES" means, unless otherwise specifically limited,
real or personal property of any kind, tangible or intangible, choate or
inchoate.
"PROPOSED PREPAYMENT DATE" is defined in Section 8.3(b).
"PURCHASERS" is defined in Section 1.1.
CONSOLIDATED STORES CORPORATION Schedule B-8 NOTE AGREEMENT
<PAGE> 53
EXHIBIT 10(b)
"QUALIFIED INSTITUTIONAL BUYER" means any Person who is a "qualified
institutional buyer" within the meaning of such term as set forth in Rule
144A(a)(1) under the Securities Act.
"REQUIRED HOLDERS" means, at any time, the holder or holders of at
least 51% in principal amount of the Notes at the time outstanding (exclusive of
Notes then owned by the Company or any of its Affiliates).
"RESPONSIBLE OFFICER" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.
RESTRICTED PAYMENT" is defined in Section.
"REVOLVING CREDIT FACILITY" means the Amended and Restated Credit
Agreement, dated as of May 3, 1996, among the Company, the banks party thereto
from time to time and their respective successors and assigns, The Bank of New
York as syndication agent and managing agent, National City Bank of Columbus as
administrative agent and managing agent, PNC Bank, Ohio, National Association as
arranger, documentation agent and managing agent, Bank One, Columbus, N.A. as
managing agent, and National City Bank as managing agent, as such agreement is
amended by (i) Amendment Number One to Amended and Restated Credit Agreement,
dated as of March 21, 1997, and (ii) Waiver and Amendment Number Two to Amended
and Restated Credit Agreement, dated as of May 16, 1997, and any guarantees by
Subsidiaries of the Company and any other agreements executed in connection
therewith, in each case, as such agreements or guarantees may be further
amended, modified, refinanced or refunded from time to time.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time.
"SENIOR FINANCIAL OFFICER" means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.
SENIOR INDEBTEDNESS -- means:
(a) all obligations owned by the Company or any Subsidiary of
the Company under or in connection with the Revolving Credit Facility,
whether outstanding on the date hereof or thereafter created, assumed
or incurred and any refinancing, refunding or replacement thereof;
provided, however, that any Indebtedness under any refinancing,
refunding or replacement of the Revolving Credit Facility shall not
constitute Senior Indebtedness to the extent that Indebtedness
thereunder is by its terms expressly subordinated in right of payment
to any other Indebtedness of the Company; and
(b) the principal of, premium, if any, and accrued and unpaid
interest on Indebtedness of the Company, contingent or otherwise, in
respect of borrowed money, whether outstanding on the date hereof or
hereafter created, incurred or assumed, unless in the case of any
particular Indebtedness, the instrument creating or evidencing the same
or pursuant to which the same is outstanding expressly provides that
such Indebtedness shall not be senior in right of payment to the Notes.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i)
Indebtedness evidenced by the Notes, (ii) Indebtedness that is expressly
subordinated or junior in rights of payment to any Indebtedness of the Company,
(iii) any liability for federal, state, provincial, local or
CONSOLIDATED STORES CORPORATION Schedule B-9 NOTE AGREEMENT
<PAGE> 54
EXHIBIT 10(b)
other taxes owed or owing by the Company, (iv) Indebtedness of or amounts owed
by the Company for compensation to employees and for services, (v) Indebtedness
of the Company to a Subsidiary of the Company or any other Affiliate of the
Company, (vi) amounts owing under leases (other than Capital Lease Obligations)
and (vii) any Indebtedness Incurred which is not permitted by the terms of this
Agreement. All interest which would accrue after the filing of a petition by or
against the Company under any federal, state or foreign bankruptcy or similar
law, whether or not such interest is allowed as a claim after such filing under
such bankruptcy or similar law, shall constitute Senior Indebtedness.
"SIDE LETTER" means and includes, as the case may be, those certain
letter agreements, dated January 22, 1997 and May 16, 1997, respectively, in
each case between the Company and CVS Corporation, pursuant to which CVS
Corporation has agreed to indemnify the Company against payment of any
Make-Whole Amount in excess of the "Call Premium" (as defined therein) in
connection with an optional redemption of the Original Notes or the Notes, as
the case may be, prior to May 4, 2000.
"SOURCE" is defined in Section.
"SPECIFIED OFFICERS' CERTIFICATE" means a written certificate
containing the information specified in Section 23.3 and Section 23.4, signed by
the President or a Vice President of the Company and a Senior Financial Officer
and delivered to the holders of the Notes.
"SUBSIDIARY" of any Person means (i) a corporation more than 50% of the
Voting Power of which is owned, directly or indirectly, by such Person or by one
or more other Subsidiaries of such Person or by such Person and one or more
Subsidiaries of such Person, (ii) a partnership of which such Person, one or
more other Subsidiaries of such Person or such Person and one or more
Subsidiaries of such Person, directly or indirectly, is the general partners and
has the power to direct the policies, management and affairs or (iii) any other
Person (other than a corporation) in which such Person, one or more other
Subsidiaries of such Person or such Person and one or more Subsidiaries of such
Person, directly or indirectly, has at least a majority ownership interest or
the power to direct the policies, management and affairs thereof. Unless the
context otherwise clearly requires, any reference to a "Subsidiary" is a
reference to a Subsidiary of the Company.
"TRANSFER AGREEMENT" is defined in Section 1.1.
"VOTING POWER" of any Person means the aggregate number of votes of all
classes of Capital Stock of such Person which ordinarily has voting power for
the election of a number of the Board of Directors or their equivalents of such
Person.
"WEIGHTED AVERAGE LIFE TO STATED MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding principal amount of such Indebtedness into (b) the total of the
products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest twelfth) which will elapse between
such date and the making of such payment.
CONSOLIDATED STORES CORPORATION Schedule B-10 NOTE AGREEMENT
<PAGE> 55
EXHIBIT 10(b)
"WHOLLY-OWNED SUBSIDIARY" means, at any time, any Subsidiary 100% of
all of the equity interests (except directors' qualifying shares) and voting
interests of which are owned by any one or more of the Company and the
Company's other Wholly-Owned Subsidiaries at such time.
CONSOLIDATED STORES CORPORATION Schedule B-11 NOTE AGREEMENT
<PAGE> 56
EXHIBIT 10(b)
EXHIBIT 1
[FORM OF NOTE]
CONSOLIDATED STORES CORPORATION
7% SENIOR SUBORDINATED NOTE DUE MAY 4, 2000
No. R-___ [Date]
$_______ PPN: 210149 A@ 9
FOR VALUE RECEIVED, the undersigned, CONSOLIDATED STORES CORPORATION
(herein called the "COMPANY"), a corporation organized and existing under the
laws of the State of Ohio, hereby promises to pay to ___________ , or registered
assigns, the principal sum of ______________ DOLLARS ($_________) on May 4,
2000, with interest (computed on the basis of a 360-day year of twelve 30-day
months) (a) on the unpaid balance thereof at the rate of seven percent (7%) per
annum from the date hereof, payable semiannually on the fifteenth (15th) day of
April and October in each year, commencing with the April 15 or October 15 next
succeeding the date hereof, until the principal hereof shall have become due and
payable, and (b) to the extent permitted by law on any overdue payment
(including any overdue prepayment) of principal, any overdue payment of interest
(including interest accruing on or after the filing of a petition in bankruptcy
or reorganization relating to the Company, whether or not a claim for
post-filing interest is allowed in such proceeding) and any overdue payment of
any premium or Make-Whole Amount (as defined in the Note Agreements referred to
below), payable semiannually as aforesaid (or, at the option of the registered
holder hereof, on demand), at the rate per annum borne by this Note, which
interest on overdue amounts shall accrue from the date such amounts became
overdue.
Payments of principal of, interest on and any premium or Make-Whole
Amount with respect to this Note are to be made in lawful money of the United
States of America at the address shown in the register maintained by the Company
for such purpose or at such other place as the Company shall have designated by
written notice to the holder of this Note as provided in the Note Agreements
referred to below.
This Note is one of a series of Senior Subordinated Notes (herein
called the "NOTES") issued pursuant to separate Note Agreements, dated as of May
9, 1997 (as from time to time amended, the "NOTE AGREEMENTS"), between the
Company and the respective purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
Section 20 of the Note Agreements and (ii) to have made the representation set
forth in Section 8.2 of the Transfer Agreement (as defined in the Note
Agreements).
This Note is a registered Note and, as provided in the Note Agreements,
upon surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of transfer, the
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company will not be affected by any notice to the contrary.
Exhibit 1-1
<PAGE> 57
EXHIBIT 10(b)
This Note is subject to optional prepayment, in whole or from time to
time in part, on and after May 5, 1998, on the terms specified in the Note
Agreements, but not otherwise.
If an Event of Default, as defined in the Note Agreements, occurs and
is continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner, at the price (including any applicable Make-Whole
Amount) and with the effect provided in the Note Agreements.
The obligations evidenced by this Note are subordinated to the Senior
Indebtedness (as defined in the Note Agreements) on the terms provided in the
Note Agreements.
THIS NOTE AND THE NOTE AGREEMENTS ARE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK,
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE
THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
CONSOLIDATED STORES CORPORATION
By
------------------------------------
Name:
Title:
Exhibit 1-2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM CONSOLIDATED STORES
CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FILED IN FORM
10-Q AS OF AUGUST 2, 1997, AND THE THIRTEEN AND TWENTY-SIX WEEK PERIODS THEN
ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-02-1997
<PERIOD-END> AUG-02-1997
<CASH> 25,447
<SECURITIES> 0
<RECEIVABLES> 9,431
<ALLOWANCES> 0
<INVENTORY> 1,041,044
<CURRENT-ASSETS> 1,193,914
<PP&E> 624,636
<DEPRECIATION> 209,495
<TOTAL-ASSETS> 1,636,514
<CURRENT-LIABILITIES> 438,854
<BONDS> 463,135
0
0
<COMMON> 843
<OTHER-SE> 686,532
<TOTAL-LIABILITY-AND-EQUITY> 1,636,514
<SALES> 1,219,200
<TOTAL-REVENUES> 1,219,200
<CGS> 720,717
<TOTAL-COSTS> 1,217,376
<OTHER-EXPENSES> 989
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,546
<INCOME-PRETAX> (10,711)
<INCOME-TAX> (4,177)
<INCOME-CONTINUING> (6,534)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,534)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
