1
EXHIBIT 99.39
THIRD AMENDMENT TO LOAN AGREEMENT
This Third Amendment to Loan Agreement (this "Amendment") is
dated as of December 20, 1994 and is made by and among the
"Borrowers" (as hereinafter defined), the undersigned financial
institutions (collectively, the "Banks") and XXXXXXXXXX,
as Managing Agent (the "Agent").
W I T N E S S E T H:
WHEREAS, Kmart Corporation and certain other entities
(collectively, the "Borrowers"), the Banks and the Agent are
parties to that certain Loan Agreement dated as of January 21, 1992
(as amended, modified or supplemented and in effect from time to
time, the "Loan Agreement") pursuant to which the Banks have
provided to the Borrowers certain credit facilities; and
WHEREAS, the Borrowers have requested that the Loan Agreement
be amended in certain respects set forth herein and the Banks
and the Agent are agreeable to the same, subject to the terms
and conditions hereof;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants contained herein, and other good and
valuable consideration the receipt and adequacy of which
are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions. Terms capitalized herein and not otherwise
defined herein are used with the meanings ascribed to such terms
in the Loan Agreement.
2. Amendment of Loan Agreement. The Loan Agreement is hereby
amended, effective on the Third Amendment Effective Date,
as follows:
(A) Amendments to Definitions. Section 1.1 of the
Loan Agreement is amended by amending and restating the
definitions of "Guarantor Restructuring" in its entirety as
follows:
"Guarantor Restructuring" means any of: (a) any
merger or consolidation of the Guarantor with any other
Person, but excluding any merger or consolidation:
(i) in which the successor formed by or
resulting from such merger or consolidation is Kmart
Corporation or a Subsidiary of Kmart Corporation and,
if the survivor is a Subsidiary of Kmart Corporation,
such Subsidiary shall affirm the obligations of Kmart
Corporation under the Loan Documents in writing; and
(ii) occurring while no Unmatured Guarantor Event
of Default or Guarantor Event of Default exists; and
2
(iii) which will not otherwise give rise to
or cause an Unmatured Guarantor Event of Default or a
Guarantor Event of Default;
and (b) any sale, assignment, lease, conveyance, transfer or
other disposition (whether in one or a series of transactions)
of any property (including accounts and notes receivable, with
or without recourse), but excluding any Permitted Disposition
of a Specialty Retail Subsidiary and also excluding any of the
following:
(i) dispositions of inventory, or used,
worn out or surplus equipment, all in the ordinary
course of business; and/or
(ii) the sale of equipment to the extent
that such equipment is exchanged for credit against
the purchase price of similar replacement equipment,
or the proceeds of such sale are reasonably promptly
applied to the purchase price of such replacement
equipment; and/or
(iii) dispositions of inventory or
equipment by Kmart Corporation to any Subsidiary
pursuant to reasonable business requirements; and/or
(iv) other dispositions of assets
having, in any fiscal year of Kmart Corporation, an
aggregate book value not exceeding 10% of Kmart
Corporation's consolidated total assets as of the end
of the most recently ended fiscal year of Kmart
Corporation, as reflected in Kmart Corporation's
balance sheet contained in its audited financial
statements for such fiscal year.
(B) New Definitions Added to Section 1.1. Section 1.1 of
the Loan Agreement is further amended by adding the following
additional definitions thereto in their proper alphabetical
places:
"Consolidated Net Worth" means as of the date
of any determination thereof, the consolidated net
worth of the Guarantor, determined in accordance with
generally accepted accounting principles consistently
applied; provided, however, that any gains or losses
from the disposition of any Specialty Retail
Subsidiary and any changes after October 7, 1994 in
the foreign currency translation adjustment account
as presented in the Guarantor's financial statements
(and in accordance with generally accepted accounting
principles consistently applied) shall be excluded
from the determination of Consolidated Net Worth.
-2-
3
"EBITDAR" means, for any applicable period,
for the Guarantor the aggregate of the following,
without duplication: (a) consolidated net income for
such period, plus (b) consolidated interest expense
(net of any interest income) for such period, plus
(c) consolidated provision for taxes for such period,
plus (d) consolidated depreciation expense for such
period, plus (e) consolidated amortization expense
for such period, plus (f) consolidated Rent Expenses
for such period, minus (or plus, as applicable) (g)
on a consolidated basis, any extraordinary gains (or
plus extraordinary losses) for such period, minus (or
plus, as applicable) (h) any gains (or plus any
losses) attributable to the Specialty Retail
Subsidiaries for such period other than results of
operations in the ordinary course of business, plus
(i) solely with respect to the four fiscal quarter
period ending in October, 1994, the $1.348 billion
restructuring charge recorded in the fourth fiscal
quarter of the Guarantor's fiscal year ending January
26, 1994.
"Permitted Disposition of a Specialty Retail
Subsidiary" means any sale of all, substantially all,
or a part of the capital stock of, or of all,
substantially all or a part of the assets of, any
Specialty Retail Subsidiary, even if such an entity
is no longer a Subsidiary of Kmart Corporation at the
time in question, if (a) consideration received is
fair market value (as determined by Kmart
Corporation), or (b) Kmart Corporation's board of
directors deems such transaction to be necessary by
reason of applicable laws, regulations or
governmental policies applicable to Kmart
Corporation.
"Rent Expenses" means, for any period,
consolidated rent expense of the Guarantor for such
period, determined in accordance with generally
accepted accounting principles consistently applied,
less consolidated rental income for such period.
"Third Amendment" means that certain Third
Amendment to Loan Agreement dated as of December 20,
1994, by and among the Borrowers, the Banks and the
Managing Agent.
"Third Amendment Effective Date" means the
date upon which each of the conditions precedent set
forth in Section 4 of the Third Amendment have been
met.
"Specialty Retail Subsidiary" means any of
the following Subsidiaries of the Guarantor (or the
continuing investment of the Guarantor in any such
entity): Builders Square, Inc.; Borders Group, Inc.;
Coles Xxxx Ltd.; OfficeMax, Inc.; PACE Membership
-3-
4
Warehouse, Inc.; PayLess Drug Stores Northwest, Inc.;
and The Sports Authority, Inc.
(C) Amendment of Subsection 6.2(d). Subsection
6.2(d) of the Loan Agreement is amended and restated in its
entirety as follows:
(d) The long-term Indebtedness of the
Guarantor shall be rated BBB- or above by Standard &
Poor's Corporation and Baa3 or above by Xxxxx'x
Investors Service, Inc.
(D) Amendment of Subsection 7.1(a). Subsection
7.1(a) of the Loan Agreement is amended and restated in its
entirety as follows:
(a) Indebtedness of the Guarantor shall
be rated BB+ or lower by S&P or Bal or lower by
Moody's, or shall not be rated by either S&P
or Moody's.
(E) Amendment of Subsection 7.1(b). Subsection
7.1(b) of the Loan Agreement is amended by deleting the
references therein to "$40 million" and substituting in lieu
thereof references to "$100 million".
(F) Amendment of Subsection 7.1(f). Subsection
7.1(f) of the Loan Agreement is amended and restated in its
entirety as follows:
(f) Any Guarantor Restructuring shall occur; or
(G) Addition of New Subsections to Section 7.1.
Section 7.1 of the Loan Agreement is further amended by the
addition thereto of new subsections (h), (i) and (j) thereto
as follows:
(h) A final judgment or judgments in excess
of One Hundred Million Dollars ($100,000,000) shall
be entered against the Guarantor by a court of record
and not discharged in accordance with its terms or,
within sixty (60) days from the date of entry
thereof, stayed from execution and (within said
period of sixty (60) days or such longer period
during which execution of such judgment(s) shall have
been stayed) appeal taken therefrom and execution
thereof stayed during such appeal;
(i) The Guarantor shall permit its ratio of
(A) EBITDAR (measured as of the end of
any fiscal quarter of the Guarantor
ending after October 7, 1994 for the
four fiscal quarters then ended)
-4-
5
to
(B) the sum of (1) consolidated net
interest expense of the
Guarantor for such four fiscal
quarter period plus (2)
consolidated Rent Expense for
such four fiscal quarter period
to be less than 1.50 to 1.00; or
(j) The Guarantor shall permit its
Consolidated Net Worth at any time to be less than Four
Billion Five Hundred Million Dollars ($4,500,000,000).
3. Borrowers' Representations and Warranties. In order
to induce the Banks and the Managing Agent to enter into this
Amendment, each Borrower hereby severally represents and
warrants, solely as to itself that:
(a) such Borrower has the right, power and
capacity and has been duly authorized and empowered by
all requisite corporate and shareholder action to enter
into, execute, deliver and perform this Amendment;
(b) this Amendment constitutes such Borrower's
legal, valid and binding obligation, enforceable against
it, except as enforcement thereof may be subject to the
effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors' rights generally and general principles of
equity (regardless of whether such enforcement is sought
in a proceeding in equity or at law or otherwise);
(c) such Borrower's execution, delivery and
performance of this Amendment do not and will not
violate its Organizational Documents or any law, rule,
regulation, order, writ, judgment, decree or award
applicable to it or any contractual provision to which
it is a party or to which it or any of its property is
subject;
(d) no authorization or approval or other
action by, and no notice to or filing or registration
with, any governmental authority or regulatory body
(other than those which have been obtained and are in
force and effect) is required in connection with its
execution, delivery and performance of this Amendment;
and
(e) No Borrower Event of Default or Unmatured
Borrower Event of Default exists as to such Borrower as
of the date hereof under the Loan Agreement or would
exist after giving effect to the transactions
contemplated by this Amendment.
4. Conditions to Third Amendment's Effectiveness. The
effectiveness of this Third Amendment is specifically subject to
-5-
6
the satisfaction of the following conditions precedent or
concurrent:
(a) No Defaults. No Unmatured Guarantor
Event of Default or Guarantor Event of Default under
the Loan Agreement (as amended hereby) shall have
occurred and be continuing.
(b) Execution of Amendment. Each
Borrower and each Bank shall have delivered to the
Agent a counterpart of this Amendment duly executed
by such Borrower or Bank.
(c) Guaranty Reaffirmation. The
Guarantor shall have executed and delivered to the
Agent a Reaffirmation Agreement in substantially the
form of Exhibit A hereto.
5. MISCELLANEOUS. The parties hereto hereby
further agree as follows:
(a) Costs, Expenses and Taxes. Kmart Corporation
hereby agrees to pay all reasonable fees, costs and expenses
of the Agent incurred in connection with the negotiation,
preparation and execution of this Amendment and the
transactions contemplated hereby, including, without
limitation, the reasonable fees and expenses of Winston &
Xxxxxx, counsel to the Agent and the Banks.
(b) Counterparts. This Amendment may be
executed in one or more counterparts, each of which, when
executed and delivered, shall be deemed to be an original and
all of which counterparts, taken together, shall constitute
but one and the same document with the same force and effect
as if the signatures of all of the parties were on a single
counterpart, and it shall not be necessary in making proof of
this Amendment to produce more than one (1) such counterpart.
(c) Headings. Headings used in this Amendment
are for convenience of reference only and shall not affect the
construction of this Amendment.
(d) Integration. This Amendment and the Loan
Agreement (as amended hereby) and the Guaranty (as amended by
the Guaranty Amendment and Reaffirmation Agreement) constitute
the entire agreement among the parties hereto with respect to
the subject matter hereof.
(e) GOVERNING LAW. THIS AMENDMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS AND DECISIONS OF THE STATE OF NEW YORK
(WITHOUT REFERENCE TO CONFLICT OF LAWS PRINCIPLES).
(f) Binding Effect. This Amendment shall be
binding upon and inure to the benefit of and be enforceable by
the Borrowers, the Agent and the Banks and their respective
successors and permitted assigns. This Amendment shall not be
construed so as to confer any
-6-
7
right or benefit upon any Person other than the Borrowers, the
Agent and the Banks and their respective successors and
permitted assigns.
(g) Amendment; Waiver. The parties hereto agree
and acknowledge that nothing contained in this Amendment in
any manner or respect limits or terminates any of the
provisions of the Loan Agreement other than as expressly set
forth herein and further agree and acknowledge that the Loan
Agreement (as amended hereby) remains and continues in full
force and effect and is hereby ratified and confirmed. Except
to the extent expressly set forth herein, the execution,
delivery and effectiveness of this Amendment shall not operate
as a waiver of any rights, power or remedy of the Banks or the
Agent under the Loan Agreement, nor constitute a waiver of any
provision of the Loan Agreement. No delay on the part of any
Bank or the Agent in exercising any of their respective
rights, remedies, powers and privileges under the Loan
Agreement or partial or single exercise thereof, shall
constitute a waiver thereof. None of the terms and conditions
of this Amendment may be changed, waived, modified or varied
in any manner, whatsoever, except in accordance with Section
9.1 of the Loan Agreement.
[Balance of page left intentionally blank; signature pages
follow.]
-7-
8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first written above.
THE BORROWERS:
KMART CORPORATION
By: /s/
-------------------------------
Title: Vice President and Treasurer
----------------------------
XXXXXXXXXX, a Michigan
general partnership
By: BIG BEAVER DEVELOPMENT
CORPORATION, a Michigan
corporation, and its managing
general partner
By: /s/
-------------------------------
Its: President
-------------------------------
and
By: XXXXXXXXXX, a Michigan
limited partnership and its
managing general partner
By: XXXXXXXXXX, a Michigan
corporation and its sole
general partner
By: /s/
------------------------
Its:
-----------------------
-8-
9
[Additional Borrower Signature Pages
Intentionally Omitted]
10
[BANK SIGNATURE PAGES INTENTIONALLY OMITTED]
11
[Exhibit A Intentionally Omitted]
