<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
SCHEDULE 13E-4
(Final Amendment)
Issuer Tender Offer Statement
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
Bradlees Stores, Inc.
(Name of Issuer)
Bradlees, Inc.
Bradlees Stores, Inc.
(Name of Person(s) Filing Statement)
9% Convertible Notes
(Title of Class of Securities)
N/A
___________
(CUSIP Number of Class of Securities)
PETER THORNER
Chairman of the Board and Chief Executive Officer
&
DAVID L. SCHMITT
Senior Vice President, General Counsel
Secretary and Clerk
One Bradlees Circle
Braintree, Massachusetts 02184
(781) 380-3000
(Name, Address, including zip code, and telephone number, including area code,
of Person Authorized
to Receive Notices and Communication on Behalf of the Person(s) Filing
Statement)
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
______________________
Copy to:
RAYMOND C. ZEMLIN, P.C.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
(617) 570-1000
______________________
June 23, 1999
(Date Tender Offer First Published, Sent or Given to Security Holders)
<PAGE>
This Final Amendment amends and supplements the issuer Tender Offer
Statement on Schedule 13E-4, dated June 23, 1999, as amended on July 22, 1999
and July 29, 1999. The Issuer Tender Offer Statement is hereby amended to
incorporate the information included in the Items and exhibits referred to
below.
ITEM 1. SECURITY AND ISSUER.
Following the pre-payment of $17,015,000 aggregate principal amount of
Notes on August 5, 1999, $11,976,000 aggregate principal amount of Notes remains
outstanding. The Companies entered into the Supplemental Agreement with the
holders of $8,996,000 aggregate principal amount of Notes (approximately 75% of
the Notes outstanding following the pre-payment) on August 12, 1999.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Item 9 is hereby amended to include the following additional exhibit.
(a) (6) Supplemental Agreement entered into by the Companies and the
holders of $8,996,000 principal amount of Notes.
(a) (7) Collateral Agency Agreement entered into by the Companies and the
holders of $8,996,000 principal amount of Notes.
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
BRADLEES, INC.
By: /s/ Paul R. McKelvey
------------------------------------------
Name: Paul R. McKelvey
Title: Vice President and Treasurer
BRADLEES STORES, INC.
By: /s/ Paul R. McKelvey
------------------------------------------
Name: Paul R. McKelvey
Title: Vice President and Treasurer
Dated:
August 12, 1999
2
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
(a) (6) Supplemental Agreement entered into by the Companies and the holders
of $8,996,000 principal amount of Notes.
(a) (7) Collateral Agency Agreement entered into by the Companies and the
holders of $8,996,000 principal amount of Notes.
<PAGE>
OPTION AGREEMENT
dated as of August 12, 1999
between
BRADLEES, INC.
BRADLEES STORES, INC.
and
CERTAIN HOLDERS OF 9% SECURED CONVERTIBLE
NOTES OF BRADLEES STORES, INC. DUE 2004
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
1. Reference to Indenture; Definitions......................... 2
2. Call Option................................................. 2
2.1 Grant of Call Option................................ 2
2.2 Option Premium...................................... 2
2.3 Call Option Exercise Price.......................... 3
2.4 Expiration of Call Option........................... 4
2.5 Exercise of Call Option............................. 5
2.6 Closing............................................. 5
3. Put Option.................................................. 8
3.1 Grant of Put Option................................. 8
3.2 Put Option Purchase Price........................... 8
3.3 Exercise of Put Option.............................. 8
3.4 Closing............................................. 9
4. Grant of Security; Substitution of Security................. 10
5. Conditions to Effectiveness of Agreement.................... 11
6. Representations and Warranties of Noteholders................ 13
6A. Covenants of Noteholders.................................... 15
7. Representations and Warranties of Bradlees and BSI.......... 16
8. Notices..................................................... 17
9. Miscellaneous............................................... 18
9.1 Assignment.......................................... 18
9.2 Further Assurances.................................. 19
9.3 Choice of Law....................................... 19
9.4 Survival............................................ 19
9.5 Successors and Assigns.............................. 20
9.6 Counterpart Execution............................... 20
9.7 Amendments; Waivers................................. 20
9.8 Integration......................................... 21
9.9 Captions and Headings............................... 21
9.10 Restrictive Legend................................. 21
9.11 Expenses........................................... 21
9.12 Reaffirmation of Indebtedness Under Notes.......... 22
</TABLE>
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Schedules
---------
Schedule A - Noteholders and Principal Amounts of Discount Option Notes
Schedule B - Wire Instructions
Exhibits
--------
<TABLE>
<S> <C>
Exhibit A - Call Option Exercise Notice
Exhibit B - Put Option Exercise Notice
Exhibit C - Mortgage
Exhibit D - Credit Agreement Consent
Exhibit E - Collateral Agency Agreement
Exhibit F - Assignment Notice
</TABLE>
ii
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OPTION AGREEMENT
----------------
THIS OPTION AGREEMENT (this "AGREEMENT") made as of the 12th day of August,
1999 by and between certain holders of 9% Secured Convertible Notes Due 2004
(the "NOTES") of Bradlees Stores, Inc. ("BSI") listed on Schedule A attached
hereto and their successors and assigns (the "NOTEHOLDERS"), BSI and Bradlees,
Inc. ("BRADLEES").
W I T N E S S E T H:
- - - - - - - - - --
WHEREAS, BSI, as issuer, Bradlees, as guarantor, New Horizons of Yonkers,
Inc., as guarantor and IBJ Whitehall Bank & Trust Company, as trustee (the
"TRUSTEE") have entered into an Indenture dated February 2, 1999 pursuant to
which BSI issued the Notes (the "INDENTURE");
WHEREAS, Bradlees and BSI have requested that the Noteholders grant
Bradlees a Call Option (as defined below) for Notes held by the Noteholders on
the terms set forth herein and have agreed (a) that BSI and Bradlees shall grant
the Noteholders a Put Option (as defined below) with respect to such Notes held
by the Noteholders on the terms set forth herein, and (b) that BSI shall grant
additional collateral to secure such Notes and the obligations of Bradlees and
BSI under the Call Option and the Put Option;
WHEREAS, the Noteholders have agreed to grant the Call Option in exchange
for (a) an option premium on the terms set forth herein, (b) the grant of the
Put Option, and (c) the grant of additional collateral to secure the Call
Option, the Put Option and the Discount Option Notes;
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NOW, THEREFORE, in consideration of the premises and of the mutual
agreement herein contained and other good and valuable consideration each to the
other in hand paid, the receipt and legal sufficiency whereof is hereby
acknowledged, the parties hereto covenant and agree as follows:
1. Reference to Indenture; Definitions. Terms used herein and not defined
-----------------------------------
herein are used as defined in the Indenture.
2. Call Option.
-----------
2.1 Grant of Call Option. In consideration of the Option Premium (as
--------------------
defined below), the grant of the Put Option, the grant of additional collateral
to secure the Call Option, the Put Option and the Discount Option Notes, and
other good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, each of the Noteholders does hereby grant, bargain and sell
to Bradlees an option (the "CALL OPTION") to purchase all of the Notes labeled
with a restrictive legend as provided in Section 9.10 hereof held by each of
such Noteholders in a principal amount as set forth on Schedule A attached
hereto with respect to such Noteholder (the "DISCOUNT OPTION NOTES").
2.2 Option Premium. On the Effective Date (as defined below), Bradlees
--------------
shall pay to each Noteholder an option premium equal to one half of one percent
(.5%) of the principal amount of the Discount Option Notes as set forth with
respect to such Noteholder on Schedule A attached hereto, less, in the case of
each Noteholder other than a Majority Noteholder (as defined below), an amount
equal to the Majority Noteholder Expenses (as defined below) paid by Bradlees or
BSI to the Majority Noteholders pursuant Section 9.11 hereof, multiplied by a
fraction the numerator of which is the principal amount of Discount
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Option Notes of such Noteholder as set forth on Schedule A attached hereto and
the denominator of which is the principal amount of Discount Option Notes of all
Noteholders other than the Majority Noteholders as set forth on Schedule A
attached hereto (the "OPTION PREMIUM").
2.3 Call Option Exercise Price. On the Call Option Closing Date (as
--------------------------
defined below) Bradlees shall pay to each Noteholder an amount equal to (a) the
principal amount of Discount Option Notes specified in a Call Option Exercise
Notice (as defined below) multiplied by a percentage (the "DISCOUNT PERCENTAGE")
as set forth below based upon the date on which the Call Option Closing Date
occurs, plus (b) unpaid interest accrued through the date preceding the Call
Option Closing Date on the principal amount specified in the Call Option
Exercise Notice (the "CALL OPTION PURCHASE PRICE"):
<TABLE>
<CAPTION>
If the Call Option Closing Date
occurs during the following periods: Then the Discount Percentage shall be:
- ---------------------------------------- ---------------------------------------
<S> <C>
On or after December 1, 1999 but before
January 1, 2000 86%
On or after January 1, 2000 but before
February 1, 2000 87%
On or after February 1, 2000 but before
March 1, 2000 88%
On or after March 1, 2000 but before
April 1, 2000 89%
On or after April 1, 2000 but before
May 1, 2000 90%
</TABLE>
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On or after May 1, 2000 but before
June 1, 2000 91%
On or after June 1, but before
July 1, 2000 92%
On or after July 1, 2000, but before
August 1, 2000 93%
On or after August 1, 2000 but before
September 1, 2000 94%
On or after September 1, 2000 but
before October 1, 2000 95%
On or after October 1, 2000 but before
November 1, 2000 96%
On or after November 1, 2000 but before
December 1, 2000 97%
On or after December 1, 2000 but before
January 1, 2001 98%
On or after January 1, 2001 but before
February 1, 2001 99%
On or after February 1, 2001 100%
2.4 Expiration of Call Option. The Call Option shall be exercisable in
-------------------------
whole, or from time to time in part as provided in Section 2.5 hereof,
commencing on or after December 1, 1999 and shall expire on the earliest to
occur of the following (the "CALL OPTION EXPIRATION DATE"): (a) February 3,
2004, or (b) the date of any accelerated maturity of the Notes as provided in
Section 8.2 of the Indenture. Nothing herein is intended to limit or modify
BSI's right to redeem Notes pursuant to Section 3.2 of the Indenture.
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2.5 Exercise of Call Option. The Call Option shall be a one-time
-----------------------
option that is exercisable only with respect to all outstanding Discount Option
Notes. From time to time after December 1, 1999 and until the Call Option
Expiration Date, Bradlees may exercise the Call Option by delivering a notice
(the "CALL OPTION EXERCISE NOTICE") to each of the Noteholders at the addresses
and in the manner provided in Section 8 hereof. The Call Option Exercise Notice
shall be substantially in the form of Exhibit A hereto and shall state: (i) that
the Call Option is exercised in respect of all outstanding Discount Option
Notes, (ii) the principal amount of the Discount Option Notes of such Noteholder
for which the Call Option is being exercised, (iii) the Scheduled Call Option
Closing Date (as defined below) and (iv) the Call Option Purchase Price payable
to such Noteholder based on the Scheduled Call Option Closing Date. The Call
Option may not be exercised in connection with any mandatory redemptions of the
Notes pursuant to Section 3.1 of the Indenture and no proceeds of collateral
securing the Notes or the Discount Option Notes may be applied to the payment of
the Call Option Exercise Price.
2.6 Closing. (a) If Bradlees timely delivers the Call Option
-------
Exercise Notice in accordance with the terms hereof and the conditions to the
Noteholders' obligation to close hereunder are satisfied, then the Noteholders
shall be, and remain, obligated to transfer and assign to Bradlees all of such
Noteholders' right, title and interest in, to and under the Discount Option
Notes (the "CALL OPTION ASSIGNMENT") in accordance with the terms of this
Agreement. The closing of the Call Option Assignment (the "CALL OPTION CLOSING")
shall take place on the Business Day specified in the Call Option Exercise
Notice, which shall be no earlier than the fifth Business Day after receipt of
the Call Option Exercise Notice by the
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<PAGE>
Noteholders (the "SCHEDULED CALL OPTION CLOSING DATE"), at the offices of
Goodwin, Procter & Hoar LLP, Exchange Place, Boston, MA 02109. At the Call
Option Closing, each Noteholder shall sell, transfer, assign, grant, set over
and convey to Bradlees, and its successors and assigns, without recourse,
representation or warranty of any kind (except that such Noteholder shall
represent that it is the only legal and beneficial owner of, and has good title
to the Discount Option Notes specified in the Put Option Exercise Notice and
that such Discount Option Notes have not been pledged, encumbered, assigned,
transferred, conveyed, disposed of or terminated, in whole or in part), all of
such Noteholder's right, title and interest in, to and under the Discount Option
Notes that are subject to the Call Option Exercise Notice in accordance with the
terms of this Agreement for and in consideration of the Call Option Purchase
Price.
(b) At the Call Option Closing, and as a condition to each
Noteholder's obligation to close:
(i) Bradlees shall deliver to such Noteholder an amount equal to
the Call Option Purchase Price payable to such Noteholder by wire
transfer in accordance with wire instructions set forth on Schedule B
hereto or such other wire instructions specified in a notice by such
Noteholder to Bradlees received on or before the Scheduled Call Option
Closing Date;
(ii) the Noteholders that are original signatories to this
Agreement shall have received and be entitled to retain the Option
Premium, and
(iii) the Call Option Expiration Date shall not have occurred.
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<PAGE>
(c) At the Call Option Closing, and as a condition to Bradlees=
obligation to close with respect to each Discount Option Note, the Noteholder of
such Discount Option Note shall deliver to Bradlees (i) the original Discount
Option Note, or (ii) if the Noteholder represents that such note cannot be
located after diligent search, a lost note affidavit and indemnification in
customary form.
(d) As used herein the term "CALL OPTION CLOSING DATE" shall refer to
the date not earlier than the Scheduled Call Option Closing Date on which all of
the Noteholders' conditions to close pursuant to Section 2.6(b) hereof have been
satisfied.
(e) In the event any Noteholder fails to deliver to Bradlees at the
Call Option Closing Date any original Discount Option Note or lost note
affidavit and indemnification as required by Section 2.6(c) (the "UNDELIVERED
NOTES"), then Bradlees shall deliver the Call Option Purchase Price payable to
such Noteholder with respect to such Undelivered Notes to a national bank
selected by Bradlees (the "PAYING AGENT"), to be held by the Paying Agent in an
interest bearing account for such Noteholder. Such Noteholder, and any
successor or assign of such Noteholder, shall thereupon cease to have any rights
with respect to the Undelivered Notes (including any rights to convert or
otherwise enforce the Undelivered Notes against Bradlees or BSI or to collect
and receive from BSI any principal, interest or other amount under the
Undelivered Notes), and the sole right of such Noteholder, and any successor or
assign of such Noteholder, with respect thereto shall be the right to receive
from the Paying Agent the Call Option Purchase Price, with any interest accrued
thereon.
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<PAGE>
3. Put Option.
----------
3.1 Grant of Put Option. In consideration of the grant of the Call
-------------------
Option and other good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged, BSI and Bradlees do hereby grant, bargain and sell
to each Noteholder an option (the "PUT OPTION") to sell to BSI or Bradlees a
principal amount of the Discount Option Notes held by such Noteholder.
3.2 Put Option Purchase Price. Upon exercise of the Put Option by a
-------------------------
Noteholder, BSI or Bradlees shall pay to such Noteholder an amount equal to (a)
the principal amount of the Discount Option Notes held by such Noteholder on the
Put Option Closing Date (as defined below), plus (b) unpaid interest on the
Discount Option Notes held by such Noteholder accrued through the date preceding
the Put Option Closing Date (the "PUT OPTION PURCHASE PRICE").
3.3 Exercise of Put Option. The Put Option shall be deemed exercised
----------------------
on earlier of (a) February 3, 2004, or (b) the date of any accelerated maturity
of the Notes as provided in Section 8.2 of the Indenture. In addition, any
Noteholder may exercise the Put Option by delivering notice of the exercise of
the Put Option to BSI and Bradlees on or after February 3, 2003 at the address
and in the manner provided in Section 8 hereof (the "PUT OPTION EXERCISE
NOTICE"). The Put Option Exercise Notice shall be substantially in the form of
Exhibit B hereto and shall state: (i) that the Put Option has been exercised
with respect to all Discount Option Notes held by such Noteholder, (ii) the
principal amount of all Discount Option Notes of such Noteholder, (iii) the
Scheduled Put Option Closing Date (as defined
-8-
<PAGE>
below), and (iv) the Put Option Purchase Price payable based on the Scheduled
Put Option Closing Date.
3.4 Closing. (a) If a Noteholder delivers the Put Option Exercise
-------
Notice in accordance with the terms hereof or if the Put Option is deemed
exercised pursuant to Section 3.3 hereof, BSI and Bradlees may by notice to such
Noteholder elect whether BSI or Bradlees shall receive an assignment of the
Discount Option Notes but shall each be, and remain, jointly and severally
obligated to pay to such Noteholder the Put Option Purchase Price. The closing
of the Put Option (the "PUT OPTION CLOSING") shall take place on (i) the day
that the Put Option is deemed exercised pursuant to the first sentence of this
Section 3.4 or (ii) the Business Day specified in the Put Option Exercise
Notice, which shall be no earlier than the fifth Business Day after receipt of
the Put Option Exercise Notice by BSI and Bradlees (the "SCHEDULED PUT OPTION
CLOSING DATE"), at the offices of Goodwin, Procter & Hoar LLP, Exchange Place,
Boston, MA 02109. At the Put Option Closing, each Noteholder shall sell,
transfer, assign, grant, set over and convey to BSI (or Bradlees if BSI and
Bradlees have by notice to the Noteholders elected Bradlees to receive an
assignment of the Discount Option Notes), and its successors and assigns,
without recourse, representation or warranty of any kind (except that such
Noteholder shall represent that it is the only legal and beneficial owner of,
and has good title to the Discount Option Notes, specified in the Put Option
Exercise Notice and that such Discount Option Notes have not been pledged,
encumbered, assigned, transferred, conveyed, disposed of or terminated, in whole
or in part), all of such Noteholders's right, title and interest in, to and
under the Discount Option Notes held by such Noteholder for and in consideration
of the Put Option Purchase Price.
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<PAGE>
(b) At the Put Option Closing, and as a condition to each
Noteholder's obligation to close, BSI or Bradlees shall deliver to such
Noteholder an amount equal to the Put Option Purchase Price by wire transfer in
accordance with wire instructions set forth on Schedule B hereto or such other
wire instructions specified in a notice by such Noteholder to Bradlees received
on or before the Scheduled Put Option Closing Date;
(c) At the Put Option Closing, and as a condition to BSI's obligation
to close with respect to each Discount Option Note, the Noteholder of such
Discount Option Note shall deliver to BSI (i) the original Discount Option Note,
or (ii) if the Noteholder represents that such Discount Option Note cannot be
located after diligent search, a lost note affidavit and indemnification in
customary form.
(d) As used herein, the term "PUT OPTION CLOSING DATE" shall refer to
the date not earlier than the Scheduled Put Option Closing Date on which all of
the conditions to close set forth in Sections 3.4(a), (b) and (c) hereof have
been satisfied.
4. Grant of Security; Substitution of Security. As security for the punctual
-------------------------------------------
payment and performance of the obligations of Bradlees and BSI under the
Discount Option Notes and this Agreement, including obligations in respect of
the Put Option and the Call Option, BSI will execute and deliver to SND Holding
Corporation, as collateral agent for the benefit of the Noteholders (the
"COLLATERAL AGENT"), a Leasehold Mortgage, Security Agreement, Assignment of
Leases, Rents and Profits and Fixture Financing Statement with respect to BSI's
leasehold interests in property located in Norwalk, Connecticut, Saddlebrook,
New Jersey and Danbury, Connecticut in the form of Exhibit C hereto (the
"MORTGAGE"). At BSI's request and at BSI's sole cost and expense, the Collateral
Agent shall amend the
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<PAGE>
Mortgage to release the lien of the Mortgage with respect to the BSI's
leasehold interest in property located in Danbury, Connecticut (the "DANBURY
LEASEHOLD INTEREST") in connection with the grant to the Collateral Agent of a
first priority mortgage or other security interest on property of a value equal
to the greater of $3.7 million or the value of the Danbury Leasehold Interest
provided that, BSI shall have no right to substitute collateral in connection
with a sale of the Danbury Leasehold Interest. At the request of the Collateral
Agent, BSI shall provide current appraisals, from an appraisal firm reasonably
acceptable to the Collateral Agent, of the value of the Danbury Leasehold
Interest and any proposed substitute collateral.
5. Conditions to Effectiveness of Agreement. This Agreement shall be effective
----------------------------------------
on the date on or before August 31, 1999 on which this Agreement has been
executed and the following conditions are satisfied (the "EFFECTIVE DATE"):
(a) Credit Agreement Consent. BSI, Bradlees and the lenders party to
------------------------
the Revolving Credit and Guaranty Agreement among BSI, Bradlees and certain
lenders party thereto dated February 2, 1999 (the "Credit Agreement") shall have
entered into a consent to the transactions contemplated herein in the form of
Exhibit F attached hereto ("CREDIT AGREEMENT CONSENT").
(b) Collateral Agency Agreement. Each of the Noteholders and the
---------------------------
Collateral Agent shall have executed and delivered a Collateral Agency Agreement
in the form of Exhibit G attached hereto (the "COLLATERAL AGENCY AGREEMENT").
(c) Security Documents. BSI shall have executed and delivered
------------------
Mortgage and the Collateral Agent shall have recorded the Mortgage, UCC
financing statements and other
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<PAGE>
documents sufficient to perfect a security interest in the collateral described
therein in favor of the Collateral Agent, subject only to liens in favor of the
Trustee.
(d) Option Premium and Majority Noteholder Expenses. Each Noteholder
-----------------------------------------------
shall have received the Option Premium applicable to such Noteholder and
Bradlees and BSI shall have paid the Majority Noteholder Expenses to the
Majority Noteholders.
(e) Restrictive Legend. Pursuant to Section 2.4(a) of the Indenture,
------------------
with respect to Notes held in physical form by the Noteholders, each Noteholder
shall have delivered Notes to BSI in principal amount equal to or exceeding the
principal amount set forth with respect to such Noteholder on Schedule A
attached hereto and BSI shall have delivered to such Noteholder (i) a Note in
such principal amount, having a legend as set forth in Section 9.10 hereof, and
(ii) if the principal amount of the Note delivered exceeds the principal amount
set forth with respect to such Noteholder on Schedule A attached hereto, a Note
in a principal amount equal to such excess amount, which shall not bear any
legend. Pursuant to Section 2.4(b) of the Indenture, with respect to Notes of
any Noteholder represented by Global Notes, (i) BSI shall have executed and
delivered to the Trustee an Issuer Order for the exchange of such Global Note,
in whole or part, for a Physical Note payable to such Noteholder in the
principal amount set forth in respect of such Noteholder on Schedule A attached
hereto and (ii) such Noteholder shall have delivered such Physical Note to BSI
and BSI shall have delivered such Note to such Noteholder, having a legend as
set forth in Section 9.10 hereof.
(f) Closing Certificates. Each of BSI and Bradlees shall have
--------------------
delivered to the Collateral Agent a customary closing certificate in form and
substance satisfactory to the Collateral Agent.
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<PAGE>
(g) Legal Opinions of Counsel to Bradlees and BSI. The Collateral
-------------------------
Agent shall have received an opinion or opinions of counsel to Bradlees and BSI
in form and substance acceptable to the Collateral Agent concerning the
authorization, execution and delivery and enforceability of this Agreement and
the Collateral Agency Agreement, the authorization, execution, and delivery of
the Mortgage and the existence of no conflicts with respect to the Credit
Agreement and the Indenture.
(h) Legal Opinions of Counsel to Noteholders. Bradlees and BSI shall
----------------------------------------
have received an opinion or opinions of counsel to each of the Noteholders in
form and substance acceptable to Bradlees and BSI concerning the authorization,
execution, delivery and enforceability of this Agreement and the Collateral
Agency Agreement and the existence of no conflicts with respect to the charter,
By-laws, partnership agreement, limited liability company agreement or other
organizational documents of the Noteholder.
(i) Title Insurance. The Collateral Agent shall have received
---------------
mortgagee's title insurance policies with respect to each of the leasehold
interests subject to the Mortgage and shall be satisfied with the condition of
such title.
6. Representations and Warranties of Noteholders.
-------------------------------------------------
Each Noteholder hereby represents and warrants to Bradlees and BSI that:
(a) Such Noteholder is a duly organized, validly existing and in good
standing in its respective jurisdiction of formation under the laws of such
jurisdiction and has the requisite power and authority to enter into, execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery or performance of this Agreement
will not result in any breach of any provision of, or constitute a
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<PAGE>
default (or an event which with notice or lapse of time or both would constitute
a default) under, any organizational documents or bylaws such Noteholder, or any
material agreement or instrument to which Noteholder is a party or by which it
is bound, or any statute, order, rule or regulation of any court or other
governmental authority applicable to it.
(b) This Agreement has been duly and validly authorized, executed and
delivered by such Noteholder, and constitutes the legal, valid and binding
obligation of such Noteholder enforceable against such Noteholder in accordance
with its terms.
(c) Such Noteholder is the only legal and beneficial owner of, and has
good title to, the Discount Option Notes in a principal amount as set forth on
Schedule A attached hereto. Such Discount Option Notes have not been pledged,
encumbered, assigned, transferred, conveyed, disposed of or terminated in whole
or in part. The principal amount of the Discount Option Notes of such
Noteholder set forth on Schedule A attached hereto is equal to (i) the principal
amount of all Notes held by such Noteholder on the Effective Date, if a sale of
the Yonkers Property for a price of $15 million or more has occurred and such
Noteholder has received its pro rata share of the Net Proceeds of such sale as a
mandatory prepayment of the Notes pursuant to Section 3.1 of the Indenture, or
(ii) 48.27% of the principal amount of the Notes held by such Noteholder on the
Effective Date (rounded down to the nearest $1,000), if a sale of the Yonkers
Property for a price of $15 million or more has not occurred or such Noteholder
has not received its pro rata share of the Net Proceeds of such sale as a
mandatory prepayment of the Notes pursuant to Section 3.1 of the Indenture.
(d) No registration with, or consent or approval of, or any other
action by, any federal, state or governmental agency, authority, administrative
or regulatory body,
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<PAGE>
arbitrator, court or other tribunal, foreign or domestic, is required for the
execution, delivery and performance of this Agreement by such Noteholder or the
sale by such Noteholder of the Discount Option Notes that has not been obtained.
(e) Such Noteholder is an "accredited investor" as defined in Rule 501
of the Securities Act of 1933, as amended. Such Noteholder has such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of this Agreement. Such Noteholder is entering
into this Agreement for its own account, for investment only and not with a view
to, or any present intention of, effecting a distribution of the securities
subject to this Agreement.
6A. Covenants of Noteholders .
------------------------
Each Noteholder covenants and agrees that such Noteholder will not declare
an Event of Default or deliver an Acceleration Notice, nor request or encourage
any other party (including, without limitation, the Trustee) to declare an Event
of Default or deliver an Acceleration Notice under the Indenture due to the
execution, delivery or performance by Bradlees or BSI of this Agreement, any
Mortgage or the Collateral Agency Agreement, or any of the transactions
contemplated hereby or thereby. Each Noteholder further covenants and agrees
that, notwithstanding anything to the contrary in Section 2.4 hereof, should any
party to the Indenture declare an Event of Default or deliver an Acceleration
Notice under the Indenture due solely to the execution, delivery or performance
by Bradlees or BSI of this Agreement, any Mortgage or the Collateral Agency
Agreement, or any of the transactions contemplated hereby or thereby, each
Noteholder will continue to be bound by the terms of this Agreement, including,
without limitation, the terms of the Call Option, and that the principal due in
respect
-15-
<PAGE>
of any Notes held by a Noteholder which is accelerated and immediately due and
payable under the Indenture as a result of the Event of Default shall be equal
to the principal amount then due in respect of such Notes multiplied by the then
applicable Discount Percentage (provided that during the period between the date
hereof and December 1, 1999, the applicable Discount Percentage shall be deemed
to be 86%).
7. Representations and Warranties of Bradlees and BSI.
--------------------------------------------------
Bradlees and BSI hereby represent and warrant to each Noteholder that:
(a) Each of Bradlees and BSI is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and each has the requisite corporate power and authority to enter
into, execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery or performance of
this Agreement will not result in any breach of any provision of, or constitute
a default (or an event which with notice or lapse of time or both would
constitute a default) under, any charter documents or bylaws of Bradlees or BSI,
or any material agreement or instrument to which Bradlees or BSI is a party or
by which it is bound, or any statute, order, rule or regulation of any court or
other governmental authority applicable to it.
(b) This Agreement has been duly and validly authorized, executed and
delivered by Bradlees and BSI and constitutes the legal, valid and binding
obligation of Bradlees and BSI, enforceable against Bradlees and BSI in
accordance with its terms.
(c) No registration with, or consent or approval of, or any other
action by, any federal, state or governmental agency, authority, administrative
or regulatory body, arbitrator, court or other tribunal, foreign or domestic, is
required in connection with the
-16-
<PAGE>
execution, delivery and performance of this Agreement by Bradlees or BSI or the
purchase by Bradlees or BSI of the Discount Option Notes, that has not been
obtained.
8. Notices. All waivers, elections, notices, demands and consents which either
-------
party may be required or may desire to give under this Option Agreement, the
Collateral Agency Agreement, the Mortgage or any mortgage or security agreement
entered into in connection herewith ("NOTICES") shall be in writing and shall be
deemed to have been duly given (i) on the third business day after deposit in an
official United States Postal Service office if mailed by certified mail, return
receipt requested, postage prepaid, or (ii) on the date received, or refused, if
delivered by prepaid overnight delivery service or by telecopy if followed
promptly by delivery by overnight delivery service, to the party to whom the
same is so given or made, at the address of such party as set forth below as
follows:
To the Noteholders: At the address set forth for each Noteholder on the
signature pages hereto.
To the Collateral Agent: c/o Morgens, Waterfall, Vintiadis &
Company, Inc.
10 E. 50th Street, 26th Floor
New York, NY 10022
Attn: Neil Augustine
Telecopy No.: (212) 838-5540
with a copy to the Collateral Agent's
attorneys: Ropes & Gray
One International Place
Boston, MA 02110
Attn: William F. McCarthy, Esq.
Telecopy No.: (617) 951-7050
-17-
<PAGE>
To Bradlees or BSI: One Bradlees Circle
P.O. Box 859051
Braintree, MA 02185-9051
Attn: David Schmidt, Esq.
Telecopy No.: (781) 380-8096
With a copy to Bradlees'
and BSI's attorneys: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attn: Raymond C. Zemlin, Esq.
Telecopy No.: (617) 523-1231
Either party may designate by Notice to the other a new address to which Notices
shall thereafter be mailed or delivered.
9. Miscellaneous.
-------------
1. 9.1 Assignment. Bradlees and BSI shall not be entitled to assign their
----------
rights under this Agreement, without the prior written consent of all of the
Noteholders, which each Noteholder shall be entitled to grant or withhold in its
sole discretion, provided that, Bradlees or BSI shall be entitled to assign
their rights in connection with (a) any sale, transfer or other disposition of
all or substantially all of the assets of Bradlees or BSI, or (b) any
consolidation or merger of Bradlees or BSI with or into any other entity, if the
purchaser of such assets or such entity consolidated or merged with or into
Bradlees or BSI assumes in a writing delivered to the Noteholders the
obligations of Bradlees or BSI hereunder and under the Discount Option Notes.
Any Noteholder shall be entitled to assign its rights hereunder in connection
with any sale or assignment of the Discount Option Notes provided that any
successor or assign of a Noteholder shall deliver a Notice to Bradlees and BSI
of such succession, sale or assignment in the form of Exhibit H attached hereto
(an "ASSIGNMENT NOTICE"). Upon delivery of an Assignment Notice, any successor
or assign of a Noteholder shall be considered a Noteholder,
-18-
<PAGE>
shall have all rights and assume all obligations and liabilities of the
assigning Noteholder hereunder with respect to any assigned Discount Option
Notes and the assigning Noteholder shall have no further obligations or
liabilities under the Option Agreement with respect to such assigned Discount
Option Notes. Any assignment made in violation of the provisions of this Section
9.1 shall be null, void and of no effect whatsoever.
9.2 Further Assurances. From and after the date hereof, each
------------------
Noteholder and Bradlees and BSI each covenant and agree to execute and deliver
all such documents and to take all such further actions as the other party
hereto may reasonably deem necessary, from time to time, to carry out the intent
and purposes of this Agreement and to consummate the transactions contemplated
hereby with each party's costs and expenses associated therewith, including
legal expenses, to be borne individually by each party, except as otherwise
provided in this Agreement. The provisions of this Section 9.2 shall survive the
expiration or termination of this Agreement.
9.3 Choice of Law. This Agreement shall be governed and construed in
-------------
accordance with the internal laws of the State of New York without giving effect
to the principles of conflicts of law.
9.4 Survival. All representations, warranties, and covenants made by
--------
parties hereto in this Agreement and the documents delivered on the Effective
Date shall be considered to have been relied upon by the parties hereto, shall
be true when made and as of the Effective Date, and shall survive the execution,
performance and delivery of this Agreement and the Closing.
-19-
<PAGE>
9.5 Successors and Assigns. Subject to the provisions of Section 9.1
----------------------
hereof, this Agreement, including, without limitation, the representations,
warranties and covenants contained herein, shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their respective
successors and assigns.
9.6 Counterpart Execution. This Agreement may be executed in any
---------------------
number of counterparts, each of which, when so executed and delivered, shall be
an original, but all of which together shall constitute one agreement binding
both parties hereto.
9.7 Amendments; Waivers.
- --- -------------------
(a) No amendment or waiver of any provision of this Agreement shall be
effective unless it is in writing and signed by each Noteholder and Bradlees and
BSI, provided that, Schedule A and Schedule B hereto shall be amended to reflect
changes of ownership of Discount Option Notes or wire transfer instructions of
Noteholders upon Notice to Bradlees and BSI by any Noteholder.
(b) No failure on the part of any party to exercise, and no delay in
exercising, any right hereunder or under any related document shall operate as a
waiver thereof by such party, nor shall any single or partial exercise of any
right hereunder or under any other related document preclude any other or
further exercise thereof or the exercise of any other right. The rights and
remedies of each party provided herein and in other related documents are
cumulative and are in addition to, and not exclusive or in lieu of, any rights
or remedies provided by law (except as otherwise expressly set forth herein) and
are not conditioned or contingent on any attempt by such party to exercise any
of its rights under any other related document against the other party or any
other entity.
-20-
<PAGE>
9.8 Integration. This Agreement, together with the exhibits hereto and
-----------
the documents delivered or executed in connection herewith, constitutes the
entire agreement and understanding between the parties hereto with respect to
the transactions contemplated herein and supersedes all prior agreements,
understandings or representations pertaining thereto, whether oral or written.
There are no warranties, representations or other agreements between the parties
in connection with the subject matter hereof except as specifically set forth or
incorporated herein.
9.9 Captions and Headings. The section captions and headings in this
---------------------
Agreement are for convenience only and are not intended to be full or accurate
descriptions of the contents thereof. The section captions shall not be deemed
to be part of this Agreement and in no way define, limit, extend or describe the
scope or intent of any provisions hereof.
9.10 Restrictive Legend. Each Discount Option Note shall bear a legend
------------------
in substantially the following form:
"THIS NOTE IS SUBJECT TO THE TERMS OF AN OPTION AGREEMENT BETWEEN
BRADLEES, INC., BRADLEES STORES, INC. AND CERTAIN HOLDERS OF 9%
SECURED CONVERTIBLE NOTES OF BRADLEES STORES, INC. DUE 2004. SUCH
OPTION AGREEMENT, AMONG OTHER THINGS, OBLIGATES THE HOLDER HEREOF TO
SELL THIS NOTE AT A DISCOUNT IN CERTAIN CIRCUMSTANCES AND SUBJECT TO
CERTAIN CONDITIONS."
9.11 Expenses. On the Effective Date, Bradlees or BSI shall pay to MWV
--------
Separate Account Alpha, Morgens Waterfall Income Partners, Restart Partners,
L.P., Restart Partners II, L.P., Restart Partners III, L.P., Restart Partners
IV, L.P., Restart Partners V, L.P. and MWV International, Ltd. (the "MAJORITY
NOTEHOLDERS") an amount equal to all
-21-
<PAGE>
reasonable expenses incurred by the Majority Noteholders in connection with the
negotiation and documentation of this Agreement, the Collateral Agency
Agreement, the Mortgage and the consummation of the transactions contemplated
hereby, including without limitation, reasonable attorneys' fees and costs,
multiplied by a fraction the numerator of which is the aggregate principal
amount of all Discount Option Notes of Noteholders other than the Majority
Noteholders and the denominator of which is the aggregate principal amount of
all Discount Option Notes of all Noteholders (collectively, the "MAJORITY
NOTEHOLDER EXPENSES"). Notwithstanding the foregoing, Bradlees and BSI shall not
be obligated to pay Majority Noteholder Expenses in excess of an amount equal to
the aggregate Option Premium that would otherwise have been payable to
Noteholders other than the Majority Noteholders but for the payment of such
Majority Noteholder Expenses by Bradlees and BSI. Bradlees and BSI shall pay all
filing fees, title insurance premiums, recording fees, documentary stamp taxes
or other fees and costs associated with any tender offer made in connection with
this Agreement and the recording of the Mortgage.
9.12 Reaffirmation of Indebtedness Under Notes. BSI and Bradlees
-----------------------------------------
hereby acknowledge and reaffirm the indebtedness evidenced by the Notes and the
Indenture, including the indebtedness evidenced by the Discount Option Notes.
Bradlees acknowledges and reaffirms its guaranty of indebtedness evidenced by
the Notes and the Indenture pursuant to Article 13 of the Indenture, including
its guaranty of the indebtedness evidenced by the Discount Option Notes.
-22-
<PAGE>
IN WITNESS WHEREOF, Bradlees, BSI and the Noteholders have executed this
Option Agreement as of the date and year first above written.
BRADLEES, INC.
By: /s/ David L. Schmitt
-------------------------
Name: David L. Schmitt
Title: Senior Vice President
and General Counsel
BRADLEES STORES, INC.
By: /s/ David L. Schmitt
-------------------------
Name: David L. Schmitt
Title: Senior Vice President
and General Counsel
NOTEHOLDERS: See Schedule A attached hereto.
----------
-23-
<PAGE>
Schedule A
----------
<TABLE>
<CAPTION>
Noteholders Principal Amount of
- ----------- -------------------
Discount Option Notes Option Premium
---------------------- --------------
<S> <C> <C>
MWV SEPARATE ACCOUNT ALPHA $ 487,694 $2,438.47
By: /s/ Neil A. Augustine
-----------------------------
Name: Neil A. Augustine
Title: Authorized Agent
MORGENS WATERFALL INCOME PARTNERS $ 431,664 $2,158.32
By: MW Capital L.L.C., its General Partner
By: /s/ Neil A. Augustine
-----------------------------
Name: Neil A. Augustine
Title: Authorized Agent
RESTART PARTNERS, L.P. $1,277,115 $6,385.57
By: Prime Group, L.P., its General Partner
RESTART PARTNERS II, L.P. $1,917,889 $9,589.44
By: Prime Group II, L.P.
RESTART PARTNERS III, L.P. $1,315,001 $6,575.00
By: Prime Group III, L.P., its General Partner
RESTART PARTNERS IV, L.P. $1,466,390 $7,331.95
By: Prime Group IV, L.P., its General Partner
RESTART PARTNERS V, L.P. $ 531,966 $2,659.83
By: Prime Group V, L.P., its General Partner
By: Prime, Inc., their General Partner
By: /s/ Neil A. Augustine
-----------------------------
Name: Neil A. Augustine
Title: Authorized Agent
MWV INTERNATIONAL, LTD. $1,129,281 $5,646.40
By: /s/ Neil A. Augustine
-----------------------------
Name: Neil A. Augustine
Title: Authorized Agent
</TABLE>
<PAGE>
Schedule A
----------
Noteholders Principal Amount of
- --------------------------------- -------------------
Discount Option Notes Option Premium
--------------------- --------------
BANK OF BOSTON $111,000 $0
By: /s/ Michael R. Garfield
-----------------------------
Name: Michael R. Garfield
Title: Assistant Secretary
BEAR STEARNS $ 76,000 $0
By: /s/ John R. Crowley
-----------------------------
Name:
Title:
FLEET NATIONAL BANK $141,000 $0
By: /s/ Robert Q. Mahoney
-----------------------------
Name: Robert Q. Mahoney
Title: Senior Vice President
MITSUI LEASING $111,000 $0
By: Seijchiro Nozaki
-----------------------------
Name: Seijchiro Nozaki
Title: President
<PAGE>
Schedule B
----------
Noteholders Wire Instructions
- ------------------------------------ --------------------------------------
MWV Separate Account Alpha CITIBANK, NY
Morgens Waterfall Income Partners NEW YORK, NY
Restart Partners, L.P. ABA #021000089
Restart Partners II, L.P. For the Account of: MORGAN STANLEY &
Restart Partners III, L.P. COMPANY
Restart Partners IV, L.P. Account #: 38890774
Restart Partners V, L.P. For Further Credit of: Ned Morgens & Bruce
MWV International, Ltd. Waterfall as Agents
Account #: 038-30008
<PAGE>
Exhibit A
---------
Call Option Exercise Notice
---------------------------
To: [Name of Noteholder]
[address of Noteholder]
Pursuant to Section 2.5 of the Option Agreement dated August 12, 1999 (the
"Option Agreement") between Bradlees, Inc., Bradlees Stores, Inc.,and certain
holders of 9% Secured Convertible Notes of Bradlees Stores, Inc. Due 2004,
Bradlees hereby exercises the Call Option to purchase the Discount Option Notes
on the terms set forth herein. Capitalized terms used but not defined herein
shall have meanings as defined in the Option Agreement.
1. The Call Option has been exercised with respect to all outstanding Discount
Option Notes.
2. Discount Option Notes of [Name of Noteholder] in principal amount of
$________ are subject to the Call Option.
3. The Scheduled Call Option Closing Date is __________.
4. If the closing occurs on the Scheduled Call Option Closing Date, the
Call Option Purchase Price payable to [Name of Noteholder], is $_________.
Dated: ___________________
BRADLEES, INC.
By: _____________________
Name:
Title:
<PAGE>
Exhibit B
---------
Put Option Exercise Notice
--------------------------
To: Bradlees Stores, Inc.
One Bradlees Circle
P.O. Box 859051
Braintree, MA 02185-9051
Pursuant to Section 3.3 of the Option Agreement dated August 12, 1999 (the
"Option Agreement") between Bradlees, Inc., Bradlees Stores, Inc. and certain
holders of 9% Secured Convertible Notes of Bradlees Stores, Inc. Due 2004, the
undersigned hereby exercises the Put Option. Capitalized terms used but not
defined herein shall have meanings as defined in the Option Agreement.
1. The Put Option has been exercised with respect to $___________
principal amount of Discount Option Notes held by [Name of
Noteholder], which constitute all Discount Option Notes held by such
Noteholder.
2. The Scheduled Put Option Closing Date is ___________.
3. If the closing occurs on the Scheduled Put Option Closing Date, the
Put Option Purchase Price payable to [Name of Noteholder] is
$__________.
Dated: __________________
[Name of Noteholder]
[address of Noteholder]
By: _____________________
Name:
Title:
<PAGE>
Exhibit F
---------
ASSIGNMENT NOTICE
-----------------
To: Bradlees, Inc.
Bradlees Stores, Inc.
One Bradlees Circle
P.O. Box 859051
Braintree, MA 02185-9051
Pursuant to Section 9.1 of the Option Agreement dated August 12, 1999 (the
"Option Agreement") between Bradlees, Inc., Bradlees Stores, Inc. and certain
holders of 9% Secured Convertible Notes of Bradlees Stores, Inc. due 2004,
notice is hereby given that the undersigned is the successor or assign of [Name
of Assigning Noteholder] (the "Assignor") and is the beneficial owner of
Discount Option Notes (as such term is defined in the Option Agreement) in the
principal amount of $____________. The undersigned acknowledges that such
Discount Option Notes are subject to the terms of the Option Agreement and
agrees to assume all obligations and liabilities of the Assignor under the
Option Agreement with respect to such Discount Option Notes.
The undersigned further represents that it is an "accredited investor" as
defined in Rule 501 of the Securities Act of 1933, as amended. The undersigned
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the Option Agreement. The
undersigned is entering into the Option Agreement for its own account, for
investment only and not with a view to, or any present intention of, effecting a
distribution of the securities subject to the Option Agreement.
<PAGE>
Notices delivered to the undersigned as a Noteholder pursuant to Section 8
of the Option Agreement shall be mailed or delivered to the address set forth
below.
Dated: ____________________
[Name of Assignee]
By:__________________________________
Name:
Title:
[Address of Assignee]
-2-
<PAGE>
__________________________________________________
__________________________________________________
COLLATERAL AGENCY AGREEMENT
Dated as of August 12, 1999
among
BRADLEES, INC.
BRADLEES STORES, INC.
CERTAIN HOLDERS OF 9% SECURED CONVERTIBLE NOTES DUE 2004
OF BRADLEES STORES, INC.
and
SND HOLDING CORPORATION
as Collateral Agent
__________________________________________________
__________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS, ETC. -1-
2. SECURITY. -2-
2.1. Credit Security -2-
2.2. Application of Proceeds -2-
3. ACTIONS BY COLLATERAL AGENT; NOTEHOLDERS' DIRECTION -2-
3.1. Appointment of Collateral Agent -2-
3.2. Actions by the Collateral Agent -3-
3.3. Information Regarding Obligors, etc. -3-
4. COLLATERAL AGENT -3-
4.1. Concerning the Agent -3-
4.1.1. Action in Good Faith, etc -3-
4.1.2. No Implied Duties, etc -4-
4.1.3. Validity, etc -4-
4.1.4. Compliance -4-
4.1.5. Employment of Agents and Counsel -4-
4.1.6. Reliance on Documents and Counsel -4-
4.1.7. Collateral Agent's Reimbursement -5-
4.2. Indemnity -5-
4.3. Collateral Agent's Resignation or Removal -5-
5. REPRESENTATIONS AND WARRANTIES -6-
5.1. Authority -6-
5.2. Authorization and Enforceability -6-
5.3. No Legal Obstacle to Agreement -6-
6. SUCCESSORS AND ASSIGNS; FUTURE NOTEHOLDERS -6-
6.1. Successors and Assigns -6-
6.2. Joinder of Future Noteholders -6-
7. EXPENSES; INDEMNITY -7-
7.1. Expenses -7-
7.2. General Indemnity -7-
7.3. Indemnity with Respect to Discount Option Security -7-
8. CONTINUING AGREEMENT, DEFEASANCE, ETC -8-
8.1. Continuing Agreement -8-
8.2. Defeasance -8-
</TABLE>
<PAGE>
<TABLE>
<S> <C>
9. NOTICES -8-
10. VENUE; SERVICE OF PROCESS -8-
11. WAIVER OF JURY TRIAL -9-
12. GENERAL -9-
</TABLE>
<PAGE>
COLLATERAL AGENCY AGREEMENT
This Collateral Agency Agreement, dated as of August 12, 1999, is among
Bradlees, Inc., Bradlees Stores, Inc.("BSI"), the Noteholders listed on Schedule
A hereto and their successors and assigns and SND Holding Corporation, as
collateral agent (the "Collateral Agent") for itself and the Noteholders. The
parties agree as follows:
1. DEFINITIONS, ETC.
Capitalized terms used but not defined herein shall have meanings as
defined in the Option Agreement. The following terms shall have meanings as
defined below:
"Collateral Agent" means SND Holding Corporation, in its capacity as
----------------
Collateral Agent under this Agreement.
"Discount Option Documents" shall mean the Discount Option Notes, the
-------------------------
Option Agreement and the Security Documents.
"Discount Option Notes" shall mean the 9% Secured Convertible Notes due
---------------------
2004 of BSI that are held by the Noteholders and that are subject to the Option
Agreement.
"Noteholders" shall mean the holders of 9% Secured Convertible Notes due
-----------
2004 of BSI that are parties to the Option Agreement and their successors and
assigns
"Obligors" shall mean BSI and Bradlees, Inc.
--------
"Option Agreement" shall mean the Option Agreement dated as of the date
----------------
hereof among Bradlees, Inc., BSI and certain holders of 9% Secured Convertible
Notes Due 2004 of BSI.
"Person" shall mean an individual, partnership, corporation, limited
------
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, government entity or other cognizable person or
entity.
"Required Noteholders" means, with respect to any consent or other action
--------------------
to be taken by the Noteholders under this Agreement or with respect to
collateral securing the Discount Option Notes, such Noteholders as own not less
then a majority in principal amount of the Discount Option Notes.
"Secured Obligations" shall mean all obligations of Bradlees, Inc. or BSI
-------------------
to the Noteholders under the Discount Option Documents.
-1-
<PAGE>
"Security Documents" shall mean each of this Agreement, the Mortgage and
------------------
any other security agreement or mortgage now or hereafter entered into in
connection with the Option Agreement or the Discount Option Notes.
2. SECURITY.
2.1. Credit Security. As security for the payment and performance of the
---------------
Secured Obligations, BSI has mortgaged, pledged and collaterally granted and
assigned to the Collateral Agent for the benefit of the Noteholders and the
holders from time to time of any Secured Obligation, and created a security
interest in favor of the Collateral Agent for the benefit of the Noteholders and
such holders in, all of BSI's right, title and interest in and to (but none of
its obligations or liabilities with respect to) the items and types of present
and future property described in the Mortgage and any other Security Document
(the "Discount Option Security").
2.2. Application of Proceeds. The proceeds of all sales and collections in
-----------------------
respect of any Discount Option Security or other assets of any Obligor, all
funds collected by the Collateral Agent from the Obligors in respect of the
Discount Option Security and any portion of the Discount Option Security
consisting of cash, the application of which is not otherwise specifically
provided for herein, shall be applied as follows:
First, to the payment of the costs and expenses of such sales and
collections, the reasonable expenses of the Collateral Agent and the
reasonable fees and expenses of its special counsel;
Second, any surplus then remaining to the payment of the Secured
Obligations pro rata in accordance with the relative amounts due to the
Noteholders with respect to the Discount Option Notes, including without
limitation, principal and accrued interest in respect of the Discount
Option Notes, provided that, the Collateral Agent may withhold any
distribution of such surplus to a holder of Discount Option Notes that has
not executed and delivered to the Collateral Agent a copy of this Agreement
or an agreement in the form of Exhibit A hereto until the Collateral Agent
has received such delivery;
Third, any surplus then remaining shall be paid to BSI, subject,
however, to the rights of the holder of any then existing lien of which the
Collateral Agent has actual notice.
3. ACTIONS BY COLLATERAL AGENT; NOTEHOLDERS' DIRECTION.
3.1. Appointment of Collateral Agent. Each of the Noteholders hereby
-------------------------------
appoints and authorizes the Collateral Agent to act for them as their collateral
agent in connection with the transactions contemplated by this Agreement on the
terms set forth herein, and hereby agrees that all actions in connection with
Discount Option Security and the enforcement or exercise of any remedies in
respect of the Secured Obligations shall be taken solely by the Collateral Agent
pursuant to this Agreement.
-2-
<PAGE>
3.2. Actions by the Collateral Agent. The Collateral Agent shall not take
-------------------------------
any action under this Agreement, including in connection with Discount Option
Security and the enforcement or exercise of any remedies in respect of the
Secured Obligations, and shall not be obligated to take any such action, except
to the extent expressly specified in a written notice received by the Collateral
Agent signed by the Required Noteholders. All actions taken by the Collateral
Agent in accordance with this Section 3.2, including taking any action (i)
waiving in writing compliance with any covenant in this Agreement or any other
Security Document, (ii) releasing the Danbury Mortgage and accepting substitute
collateral therefor, or (iii) taking any other action, shall be binding upon all
Noteholders; provided, however, that the foregoing shall not be deemed a waiver
of any Noteholder's rights against any other party hereto with respect to the
taking of such action.
3.3. Information Regarding Obligors, etc. Each of the Noteholders
-----------------------------------
acknowledges and agrees that it has made such investigation as it deems
desirable of the risks undertaken by it in entering into this Agreement and is
fully satisfied that it understands all such risks. Each of the Noteholders
waives any obligation which may now or hereafter exist on the part of the
Noteholders or the Collateral Agent to inform it of the risks being undertaken
by entering into this Agreement or of any changes in such risks and, from and
after the date hereof, each of the Noteholders undertakes to keep itself
informed of such risks and any changes therein. Each of the Noteholders
expressly waives any duty which may now or hereafter exist on the part of the
Noteholders or the Collateral Agent to disclose to the Noteholders any matter
related to the business, operations, character, collateral, credit, condition
(financial or otherwise), income or prospects of the Obligors or their
properties or management, whether now or hereafter known by the Obligors. or the
Collateral Agent other than matters related to the disposition of the Discount
Option Security. Each of the Noteholders represents, warrants and agrees that it
assumes sole responsibility for obtaining from the Obligors all information
concerning this Agreement and all other Security Documents and all other
information as to the Obligors or their properties or management as such
Noteholder deems necessary or desirable.
4. COLLATERAL AGENT.
4.1. Concerning the Agent.
--------------------
4.1.1. Action in Good Faith, etc. In the exercise of its rights, powers
-------------------------
and duties hereunder, the Collateral Agent shall act in a commercially
reasonable manner. The Collateral Agent and its officers, directors,
employees and agents shall be under no duty to act except as expressly set
forth in Section 3.2 and shall have no liability to the Noteholders for any
action or failure to act taken or suffered without willful misconduct or
gross negligence. The Collateral Agent shall in all cases be entitled to
rely, and shall not be liable to the Noteholders for any action taken in
reliance, on instructions given to the Collateral Agent in accordance with
Section 3.2.
-3-
<PAGE>
4.1.2. No Implied Duties, etc. The Collateral Agent shall have and may
----------------------
exercise such powers as are specifically delegated to the Collateral Agent
under this Agreement together with all other powers as may be incidental
thereto. The Collateral Agent shall have no implied duties to any Person or
any obligation to take any action under this Agreement or any other
Security Document except for any action specifically provided for in this
Agreement or any other Security Document to be taken by the Collateral
Agent.
4.1.3. Validity, etc. The Collateral Agent shall not be responsible to
-------------
any Noteholder (a) for the legality, validity, enforceability or
effectiveness of this Agreement, (b) for any recitals, reports,
representations, warranties or statements contained in or made in
connection with this Agreement, (c) for the existence or value of any
assets included in the Discount Option Security, (d) for the effectiveness
of any lien purported to be included in the Discount Option Security, (e)
for the specification or failure to specify any particular assets to be
included in the Discount Option Security or (f) for any decision to release
the Danbury Mortgage or to accept substitute collateral therefor.
4.1.4. Compliance. The Collateral Agent shall not be obligated to
----------
ascertain or inquire as to the performance or observance of any of the
terms of this Agreement or any Security Document, including the occurrence
of any default under the Option Agreement or the Discount Option Notes.
4.1.5. Employment of Agents and Counsel. The Collateral Agent may
--------------------------------
execute any of its duties as Collateral Agent under this Agreement by or
through employees, agents and attorneys-in-fact and shall not be
responsible to any Noteholder or any Obligor (except as to money or
securities received by the Collateral Agent or the Collateral Agent's
authorized agents) for the default or misconduct of any such agents or
attorneys-in-fact selected by the Collateral Agent with reasonable care.
The Collateral Agent shall be entitled to advice of counsel concerning all
matters pertaining to the agency hereby created and its duties hereunder
and shall be reimbursed by the Obligors for all reasonable attorneys' fees
and costs incurred in connection with its responsibilities hereunder.
4.1.6. Reliance on Documents and Counsel. The Collateral Agent shall be
---------------------------------
entitled to rely, and shall be fully protected in relying, upon any
affidavit, certificate, cablegram, consent, instrument, letter, notice,
order, document, statement, telecopy, telegram, telex or teletype message
or writing believed in good faith by the Collateral Agent to be genuine and
correct and to have been signed, sent or made by the Person in question,
including without limitation any telephonic or oral statement made by such
Person and, with respect to legal matters, upon the opinion of counsel
selected by the Collateral Agent.
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<PAGE>
4.1.7. Collateral Agent's Reimbursement. Each of the Noteholders
--------------------------------
jointly and severally agrees to reimburse the Collateral Agent for any
expenses not reimbursed by the Obligors within 30 days (without limiting
their obligations to make such reimbursement): (a) for which the Collateral
Agent is entitled to reimbursement by the Obligors under this Agreement,
and (b) after the exercise of the Put Option or the occurrence of an Event
of Default under the Discount Option Notes, for any other expenses incurred
by the Collateral Agent on their behalf in connection with the enforcement
of their rights under this Agreement or any other Security Document.
4.2. Indemnity. The Noteholders hereby, jointly and severally, indemnify
---------
and hold harmless the Collateral Agent and its directors, officers, employees,
agents, professional advisers and representatives (to the extent that the
Collateral Agent is not indemnified by the Obligors, and without in any way
limiting the Obligations of the Obligors so to indemnify the Collateral Agent
pursuant to Sections 7.2 and 7.3) from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time be
imposed on, incurred by or asserted against the Collateral Agent and its
directors, officers, employees, agents, professional advisers and
representatives relating to or arising out of this Agreement, the Discount
Option Security, any other Security Document, the transactions contemplated
hereby or thereby, or any action taken or omitted by the Collateral Agent in
connection with any of the foregoing, provided, however, that the foregoing
shall not extend to actions or omissions which are taken by the Collateral Agent
with gross negligence or willful misconduct. The foregoing indemnity shall
survive the expiration of this Agreement or any of the agreements evidencing the
Secured Obligations. All amounts due under this Section 4.2 shall be immediately
payable on written demand therefor.
4.3. Collateral Agent's Resignation or Removal. The Collateral Agent may
-----------------------------------------
resign at any time by giving at least 30 days' prior written notice of its
intention to do so to each of the Noteholders and to BSI and upon the
appointment by the Required Noteholders of a successor Collateral Agent. If no
successor Collateral Agent shall have been so appointed and shall have accepted
such appointment within 30 days after the retiring Collateral Agent's giving of
such notice of resignation, then the retiring Collateral Agent may appoint a
successor Collateral Agent; Any Collateral Agent may be removed upon the written
request of the Required Noteholders, which request shall also appoint a
successor Collateral Agent. Upon the appointment of a new Collateral Agent
hereunder, the term "Collateral Agent" shall for all purposes of this Agreement
and any other Security Document thereafter mean such successor. After any
retiring Collateral Agent's resignation hereunder as Collateral Agent, or the
removal hereunder of any Collateral Agent, the provisions of this Agreement or
any other Security Document shall continue to inure to the benefit of such
Collateral Agent as to any actions taken or omitted to be taken by it while it
was Collateral Agent under this Agreement or any other Security Document.
-5-
<PAGE>
5. REPRESENTATIONS AND WARRANTIES.
Each of the parties to this Agreement represents and warrants that:
5.1. Authority. Such Person has all necessary power and has taken all
---------
necessary action to enter into and perform this Agreement and to make this
Agreement the legal, valid, binding and enforceable obligation it purports to
be.
5.2. Authorization and Enforceability. Each Person has taken all
--------------------------------
partnership or corporate action required to execute, deliver and perform this
Agreement and each other Discount Option Document to which it is party. Each of
this Agreement and each other Discount Option Document constitutes the legal,
valid and binding obligation of such Person and is enforceable against such
Person in accordance with its terms.
5.3. No Legal Obstacle to Agreement. Neither the execution and delivery of
------------------------------
this Agreement nor the consummation of any transaction contemplated hereby nor
the fulfillment of the terms hereof or of any other agreement or instrument
referred to herein has constituted or resulted in, or will constitute or result
in, a breach of the provisions of any agreement, instrument, deed or lease to
which such Person is a party or by which such Person is bound or of the charter
or by-laws of such Person, or the violation of any law, judgment, decree or
governmental or administrative order, rule or regulation applicable to it, or
has resulted in or will result in the creation under any agreement, instrument,
deed or lease of any lien upon any of the assets of such Person (other than the
lien created by this Agreement in the Discount Option Security). No approval,
authorization or other action by, or declaration to or filing with, any
governmental or administrative authority or any other Person is required to be
obtained or made by any such Person in connection with the execution, delivery
and performance of this Agreement.
6. SUCCESSORS AND ASSIGNS; FUTURE NOTEHOLDERS.
6.1. Successors and Assigns. The provisions of this Agreement shall inure to
----------------------
the benefit of the holders of Secured Obligations and their successors and
assigns and shall be binding upon each of the parties hereto and their
respective successors and assigns.
6.2. Joinder of Future Noteholders. Any assignee of a holder of Discount
-----------------------------
Option Notes, by accepting Discount Option Notes, agrees to become party to this
Agreement. Such assignee shall memorialize such agreement by duly authorizing,
executing and delivering to the Collateral Agent a fully executed agreement in
the form of Exhibit A to this Agreement agreeing to be bound by the terms and
conditions hereof.
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<PAGE>
7. EXPENSES; INDEMNITY.
7.1. Expenses. The Obligors will pay all expenses incurred by the Collateral
--------
Agent or any Noteholder in connection with the enforcement of any rights
hereunder or under any other Discount Option Documents, including without
limitation costs of collection and reasonable attorneys' fees and out-of-pocket
expenses.
7.2. General Indemnity. The Obligors hereby, jointly and severally,
-----------------
indemnify and hold harmless the Collateral Agent and its directors, officers,
employees, agents, professional advisers and representatives (the Collateral
Agent and each of such directors, officers, employees, agents, professional
advisers and representatives is referred to as an "Indemnitee"), against and
from, any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time be imposed on, incurred by or asserted against any such
Indemnitee relating to or arising out of this Agreement, the Discount Option
Security any other Security Document, the transactions contemplated hereby or
thereby, or any action taken or omitted by any such Indemnitee Agent in
connection with any of the foregoing; provided, however, that the foregoing
shall not extend to actions or omissions which are taken by an Indemnitee with
gross negligence or willful misconduct. The foregoing indemnity shall survive
the expiration of this Agreement or any of the agreements evidencing the Secured
Obligations. All amounts due under this Section 7.2 shall be payable on written
demand therefor.
7.3. Indemnity with Respect to Discount Option Security. The Obligors
--------------------------------------------------
hereby, jointly and severally, indemnify and hold harmless each Indemnitee and
each Noteholder and its partners, directors, officers, employees, agents,
professional advisers and representatives (each Noteholder and each of such
partners, directors, officers, employees, agents, professional advisers and
representatives is referred to as a "Noteholder Indemnitee") from and against
any and all claims, damages, losses, liabilities, judgments or reasonable
expenses (including all reasonable fees and disbursements of counsel with whom
any of them may consult in connection therewith and all reasonable expenses of
litigation or preparation therefor) which may be incurred or sustained by or
asserted against any of them, directly or indirectly, in connection with the
existence or exercise of any rights with respect to the Discount Option Security
in accordance with the Security Documents; provided, however, that the foregoing
shall not extend to actions or omissions which are taken by an Indemnitee or a
Noteholder Indemnitee with gross negligence or willful misconduct. The foregoing
indemnity shall survive the expiration of this Agreement or any of the
agreements evidencing the Secured Obligations. All amounts due under this
Section 7.3 shall be payable on written demand therefor.
8. CONTINUING AGREEMENT, DEFEASANCE, ETC.
8.1. Continuing Agreement. This Agreement shall be a continuing agreement,
--------------------
shall be irrevocable and shall remain in full force and effect until the payment
in full of the Secured
-7-
<PAGE>
Obligations then outstanding in accordance with the terms thereof. No action
which the holders of the Secured Obligations or the Obligors may take or refrain
from taking with respect to the Secured Obligations, including any amendments
thereto, shall affect the provisions of this Agreement or the obligations of the
Obligors or any Noteholder hereunder. No right of the Noteholders shall at any
time be prejudiced or impaired by any act or failure to act on the part of any
Obligor or by any act or failure to act, in good faith, by the Noteholders or
the Collateral Agent, or by any noncompliance by any Obligor with the terms of
this Agreement, regardless of any knowledge thereof which the Noteholders may
have or otherwise be charged with.
8.2. Defeasance. When all Secured Obligations have been performed, paid and
----------
reasonably determined by the Noteholders to have been indefeasibly discharged in
full, at the Obligors' written request, accompanied by such certificates and
proofs as the Collateral Agent shall reasonably deem necessary, the Discount
Option Security shall revert to the Obligors and the rights, title and interest
of the Collateral Agent therein shall terminate. Thereupon, on the Obligors'
demand and at their cost and expense, the Collateral Agent shall execute proper
instruments, acknowledging satisfaction of and discharging this Agreement, and
shall redeliver to the Obligors the Discount Option Security then in its
possession; provided, however, that Section 7 shall survive the termination of
this Agreement.
9. NOTICES.
Any notice or other communication in connection with this Agreement shall
be deemed to be delivered if in writing and delivered in the manner provided in
Section 9 of the Option Agreement.
10. VENUE; SERVICE OF PROCESS.
(a) Each of the Obligors and each of the Noteholders irrevocably
submits to the nonexclusive jurisdiction of the state courts of The State
of New York and to the nonexclusive jurisdiction of the United States
District Court for the Southern District of New York for the purpose of any
suit, action or other proceeding arising out of or based upon this
Agreement or the subject matter hereof brought by the Collateral Agent, any
Noteholder or their successors or assigns, and
(b) Each of the Obligors and each of the Noteholders waives to the
extent not prohibited by applicable law that cannot be waived, and agrees
not to assert, by way of motion, as a defense or otherwise, in any such
proceeding, any claim that it is not subject personally to the jurisdiction
of the above-named courts, that its property is exempt or immune from
attachment or execution, that any such proceeding brought in one of the
above-named courts is brought in an inconvenient forum, that the venue of
any such proceeding brought in one of the above-named courts is improper,
or that this Agreement or any other Security Document, or the subject
matter hereof or thereof, may not be enforced in or by such court.
-8-
<PAGE>
Each of the Obligors and each of the Noteholders hereby consents to service of
process in any such proceeding by registered or certified mail, return receipt
requested, at its address specified in or pursuant to Section 10 is reasonably
calculated to give actual notice.
11. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH
CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES AND COVENANTS THAT IT
WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO
TRIAL BY JURY IN ANY FORUM IN RESPECT TO ANY ISSUE, CLAIM, DEMAND, ACTION, CAUSE
OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER
HEREOF OR ANY SECURED OBLIGATIONS OR IN ANY WAY CONNECTED WITH THE DEALINGS OF
THE PARTIES HERETO IN CONNECTION WITH ANY OF THE ABOVE, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. Each
of the parties hereto may file an original counterpart or a copy of this Section
with any court as written evidence of consent by the parties hereto to the
waiver of the right to trial by jury.
12. GENERAL.
All covenants, agreements, representations and warranties made herein shall
be deemed to have been material and relied on by the Noteholders,
notwithstanding any investigation made by the Noteholders or on their behalf,
and shall survive the execution and delivery to the Noteholders hereof and
thereof. The headings in this Agreement are for convenience of reference only
and shall not limit, alter or otherwise affect the meaning hereof. No change,
amendment, modification or supplementation of this Agreement shall be binding on
any party unless it is in writing and signed by the parties hereto. The
invalidity or unenforceability of any term or provision hereof shall not affect
the validity or enforceability of any other term or provision hereof. This
Agreement and the other agreements referred to herein constitute the entire
understanding of the parties with respect to the subject matter hereof and
thereof and supersede all prior and current understandings and agreements,
whether written or oral. This Agreement is a Security Document. This Agreement
may be executed in any number of counterparts, which together shall constitute
one instrument. This Agreement shall be governed by and construed in accordance
with the laws of The State of New York (other than the conflict of law rules).
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
under seal as of the date first above written.
COLLATERAL AGENT: SND HOLDING CORPORATION
By: /s/ Neil A. Augustine
--------------------------
Name:
Title:
OBLIGORS: BRADLEES, INC.
By: /s/ Rick C. Welker
--------------------------
Name: Rick C. Welker
Title: Vice President and Controller
BRADLEES STORES, INC.
By: /s/ Rick C. Welker
--------------------------
Name: Rick C. Welker
Title: Vice President and Controller
NOTEHOLDERS: See Schedule A attached hereto.
----------
-10-
<PAGE>
Schedule A
----------
NOTEHOLDERS: MWV SEPARATE ACCOUNT ALPHA
By: /s/ Neil A. Augustine
-------------------------------
Name: Neil A. Augustine
Title: Authorized Agent
MORGENS WATERFALL INCOME PARTNERS
By: MW Capital L.L.C., its General Partner
By: /s/ Neil A. Augustine
-------------------------------
Name: Neil A. Augustine
Title: Authorized Agent
RESTART PARTNERS, L.P.
By: Prime Group, L.P., its General Partner
RESTART PARTNERS II, L.P.
By: Prime Group II, L.P.
RESTART PARTNERS III, L.P.
By: Prime Group III, L.P., its General Partner
RESTART PARTNERS IV, L.P.
By: Prime Group IV, L.P., its General Partner
RESTART PARTNERS V, L.P.
By: Prime Group V, L.P., its General Partner
By: Prime, Inc., their General Partner
By: /s/ Neil A. Augustine
-------------------------------
Name: Neil A. Augustine
Title: Authorized Agent
MWV INTERNATIONAL, LTD.
By: /s/ Neil A. Augustine
-------------------------------
Name: Neil A. Augustine
Title: Authorized Agent
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<PAGE>
Exhibit A
---------
To: SND Holding Corporation
c/o Morgens, Waterfall, Vintiadis
& Company, Inc.
10 E. 50th Street, 26th Floor
New York, NY 10022
Attn: Neil Augustine
Pursuant to Section 6.2 of the Collateral Agency Agreement dated August
12, 1999 (the "Collateral Agency Agreement") between Bradlees, Inc., Bradlees
Stores, Inc., certain holders of 9% Secured Convertible Notes of Bradlees
Stores, Inc. Due 2004 and SND Holding Corporation, as collateral agent (the
"Collateral Agent"), the undersigned hereby notifies the Collateral Agent that
the undersigned is an assignee of Discount Option Notes in principal amount of
$________________. The undersigned has received and has had an opportunity to
review the Collateral Agency Agreement. The undersigned hereby agrees that, by
accepting an assignment of the Discount Option Notes, the undersigned has become
a party to the Collateral Agency Agreement and acknowledges and agrees to be
bound by the terms and conditions thereof.
Dated: ___________________
[NAME OF NOTEHOLDER]
By: _____________________
Name:
Title:
-12-
