April 11, 2002
TruServ Corporation
0000 Xxxx Xxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Chief Financial Officer
Re: Amendment of Note Agreement and Private Shelf Agreement
Ladies and Gentlemen:
Reference is made to that certain Xxxxxxx and Restated Private Shelf Agreement
dated as of November 13, 1997, as amended by letter agreements dated September
9, 1998, May 12, 1999, and April 14, 2000 (the "Shelf Note Agreement") between
TruServ Corporation, a Delaware corporation ("TruServ"), and The Prudential
Insurance Company of America ("Prudential") and each affiliate of Prudential
which is bound thereby pursuant to the terms thereof (Prudential together with
its affiliates, the "Purchasers").
Reference is also made to that certain Note Agreement dated as of April 13,
1992, as amended through the date hereof, between Xxxxxx & Company, the
predecessor to TruServ, and Prudential (the "Xxxxxx Note Agreement" and,
together with the Shelf Note Agreement, the "Note Agreements"). Capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Shelf Note Agreement.
Pursuant to the request of TruServ and in accordance with the provisions of (i)
Paragraph 11C of the Shelf Note Agreement and (ii) Paragraph 11C of the Xxxxxx
Note Agreement, the parties hereto consent to the amendment of the Note
Agreements and agree as follows:
SECTION 1. Amendment. From and after the date this letter agreement
becomes effective in accordance with its terms, the Note Agreements shall be
respectively amended as follows:
1.1 Paragraph 1 Amendment and Restatement; Authorization of the Note
Agreements is amended by deleting the last paragraph thereof in its entirety.
1.2 Paragraph 2 Purchase and Sale of Notes of the Note Agreements is
amended to add the following new clauses:
2B(8)(v). SUPPLEMENTAL FUNDING FEE. The Company shall pay
ratably to each Purchaser a supplemental funding fee from February 28,
2002 until the Termination Date on the average unpaid balance of the
aggregate principal amount of the Notes held by such Purchaser during
each quarter at the rate equal to the Supplemental Funding Fee
Rate. Such supplemental funding fee shall be computed on the basis of
the actual days elapsed over a 360 day year for each respective
preceding three month period ending on the last day of March, June,
September and December, and shall be payable on the first Business Day
of each April, July, October and January; provided that the first
supplemental funding fee shall accrue from February 28, 2002 through
March 31, 2002 and be payable on the Amendment Effective Date and the
second supplemental funding fee shall accrue from April 1, 2002 through
June 30, 2002 and be payable on July 1, 2002.
2B(8)(vi). ANNIVERSARY FEE. The Company shall pay ratably to
each Purchaser a fee calculated on the then unpaid balance of the
aggregate principal amount of the Notes held by such Purchaser of (a)
0.50% on the earlier of (x) the first anniversary of the April 2002
Modification and (y) the Termination Date and (b) if the Termination
Date has not occurred prior to the first anniversary of the Amendment
Effective Date, 0.25% on the earlier of (x) the second anniversary of
the April 2002 Modification and (y) the Termination Date.
1.3 Paragraph 4A Required Prepayments of the Note Agreements is amended
by adding the following at the end thereof:
4(A)(1). EXCESS CASH FLOW. The Notes shall be subject to
mandatory pro rata prepayment within 90 days after the end of each
fiscal year of the Company in an amount equal to the Excess Cash Flow
of the Company for such prior fiscal year, commencing with the fiscal
year ended for 2002, together with interest on such principal amount so
prepaid accrued to the prepayment date plus the Yield Maintenance
Amount determined for the prepayment date with respect to such prepaid
principal amount; provided, that for so long as the Intercreditor
Agreement is in effect, the Notes shall be subject to mandatory pro
rata prepayment within 90 days after the end of each fiscal year of the
Company in an amount equal to that portion of Excess Cash Proceeds (as
defined in the Intercreditor Agreement) for such prior fiscal year to
which the Purchasers are entitled to under the Intercreditor Agreement;
provided, further, that the Yield Maintenance Amount shall be based
upon the principal amount prepaid as required under the Intercreditor
Agreement (as opposed to the amount that would have been required to be
prepaid had the Intercreditor Agreement not been in effect).
4(A)(2). PROCEEDS RECAPTURE. The Notes shall further be
subject to mandatory pro rata prepayments from (i) all cash proceeds
received in connection with the Lumber Note, (ii) all Net Disposition
Proceeds and Net Debt Proceeds, and (iii) without duplication of
mandatory prepayments made pursuant to paragraph 4(A)(1) or other
payments made pursuant to paragraph 4(a)(2), Interim Proceeds and Final
Proceeds, each as defined in the Intercreditor Agreement; in each case
of clauses (i) through (iii), together with interest on such principal
amount so prepaid accrued to the prepayment date plus the Yield
Maintenance Amount determined for the prepayment date with respect to
such prepaid principal amount; provided, that for so long as the
Intercreditor Agreement is in effect, the Notes shall be subject to
mandatory pro rata prepayment in an amount equal to that portion of the
amounts in clauses (i) through (iii) above to which the Purchasers are
entitled to under the Intercreditor Agreement; provided, further, that
the Yield Maintenance Amount shall be based upon the principal amount
prepaid as
2
required under the Intercreditor Agreement (as opposed to the amount
that would have been required to be prepaid had the Intercreditor
Agreement not been in effect).
4(A)(3). INTERCREDITOR DISTRIBUTIONS. For so long as the
Intercreditor Agreement is in effect, amounts required to be prepaid
under this paragraph 4(A) shall be paid (subject to the true-up
provisions set forth therein), shared and distributed in accordance
with the Intercreditor Agreement and, to the extent provided for in the
Intercreditor Agreement, the Company's obligation to pay Yield
Maintenance Amount may be paid prior to the Final True-Up Date (as
defined in the Intercreditor Agreement) by the issuance of Make-Whole
Original Notes and Make-Whole Delta Notes (each as defined in the
Intercreditor Agreement). Upon the termination of the Intercreditor
Agreement, prepayments shall be made pro rata to the Purchasers
hereunder and all Net Disposition Proceeds, Net Debt Proceeds and notes
received in connection with any Asset Sales shall be delivered to the
Purchasers.
1.4 Paragraph 4D Application of Payments of the Note Agreements is
amended by adding the following immediately after the word "respective" at the
end of the last line on page eight and prior to the text beginning on page nine:
unpaid principal amounts thereof.
4E. NO ACQUISITION OF NOTES. The Company shall not, and shall
not
1.5 Paragraph 5A Financial Statements is amended by (a) replacing
clauses (i) and (ii) with the new clauses (i) and (ii) below; (b) renumbering
the existing clauses (iii) through (ix) as clauses (iv) through (x); (c)
replacing the newly numbered clause (v) with the new clause (v) below; (d)
adding a new clause (iii) as below; (e) replacing each occurrence of the words
"BofA Credit" in clause (ix) with "BA Credit"; (f) adding the phrase ",
information or documentation" after the word "data" in clause (x); (g) deleting
the "and" at the end of clause (ix) and the "." at the end of clause (x); and
(h) inserting at the end of clause (x) "; and" and adding a new clause (xi) as
below:
(i) as soon as available, but not later than 120 days after the end of
each fiscal year, a copy of the audited consolidated balance sheet of
the Company and its Subsidiaries as at the end of such year and the
related consolidated statements of income or operations, shareholders'
equity and cash flows for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, and
accompanied by the opinion of PriceWaterhouseCoopers LLP or another
nationally-recognized independent public accounting firm ("Independent
Auditor") which report (x) shall state that such consolidated financial
statements present fairly the financial position for the periods
indicated in conformity with GAAP applied on a basis consistent with
prior years and (y) shall not be qualified or limited because of a
restricted or limited examination by the Independent Auditor of any
material portion of the Company's or any Subsidiary's records;
(ii) as soon as available, but not later than 60 days after the end of
each of the first three fiscal quarters of each fiscal year, a copy of
the unaudited consolidated balance sheet of the Company and its
Subsidiaries as of the end of such quarter and the related consolidated
statements of income, shareholders' equity and cash flows for the
period
3
commencing on the first day and ending on the last day of such quarter,
and certified by a Responsible Officer as fairly presenting, in
accordance with GAAP (subject to the absence of footnotes and ordinary,
good faith year-end audit adjustments), the financial position and the
results of operations of the Company and the Subsidiaries;
(iii) as soon as available, but not later than 30 days after the end of
each fiscal month (or 60 days after the end of December of each year),
a copy of the financial report delivered to the Board of Directors of
the Company (or, if no such report is delivered to the Board of
Directors of the Company for any month a copy of a substantially
similar financial report for such month), including unaudited
consolidated balance sheet of the Company and its Subsidiaries as of
the end of such month and the related consolidated statements of income
and cash flows for the period commencing on the first day and ending on
the last day of such month, and certified by a Responsible Officer as
fairly presenting, in accordance with GAAP (subject to the absence of
footnotes and ordinary, good faith year-end audit adjustments), the
financial position and the results of operations of the Company and the
Subsidiaries;
(v) as soon as available, but not later than 15 days after delivery of
the financial report under clause (iii) above, and at the Company's
expense, a report from Xxxxx Xxxxxx or other financial consultants
acceptable to the Purchasers on the performance of the Company as set
forth in such financial report as against the Business Plan;
(xi) concurrently with the delivery of the financial statements
referred to in paragraph 5A(i) for the year ended December 31, 2002 and
each year thereafter, to the extent not prohibited by applicable
accounting guidelines, a certificate of the Independent Auditor stating
that in making the examination necessary therefor no knowledge was
obtained of any Event of Default or Unmatured Event of Default, except
as specified in such certificate.
1.6 Paragraph 5I Further Assurances of the Note Agreements is amended
by deleting the parenthetical "(other than Xxxxxx Canada Hardware and Variety
Company, Inc.)" in both places that it appears therein and adding at the end of
the proviso in clause (a) the following additional proviso:
provided, however, that if Advocate Services, Inc., Servistar
Paint Company, or the Canadian Subsidiary shall still be in existence on the
180th day following the Amendment Effective Date, then each such entity still in
existence shall execute and deliver a counterpart of the Guaranty:
1.7 Paragraph 6B(1) Liens of the Note Agreement is amended by replacing
clause (ix) therein as below and adding the following new clauses (xii) through
(xvii):
(ix) other Liens (including Liens arising under capital
leases), in addition to the Liens permitted by clauses (i) through
(viii) above and clauses (x) through (xvii) below, securing
Indebtedness of the Company or any Subsidiary (other than Indebtedness
that constitutes Subordinated Debt); provided, however, that (i) such
Indebtedness is permitted by the provisions of paragraph 6B(2) and (ii)
the aggregate outstanding principal amount of all such Indebtedness
(other than Indebtedness listed on Schedule 6B(1)(ix)) does not at any
time exceed $25,000,000;
4
(xii) any interest or title of a lessor in property subject to
any lease other than (i) subject to clause (vii) above, a Capitalized
Lease Obligation, (ii) a lease entered into as part of a sale and
leaseback transaction or (iii) except as permitted by clause (xvi)
below, a Synthetic Lease;
(xiii) any interest of a lessee or a sublessee in property
owned or leased by the Company or any Subsidiary;
(xiv) any escrow, holdback or similar arrangement in
connection with any sale, lease, transfer or other disposition of any
asset not prohibited hereunder (including any sale of the Paint
Business);
(xv) Liens in respect of mortgages on properties listed on
Schedule 6B(1)(xv) (the "Specified Facilities");
(xvi) Liens in effect on the Amendment Effective Date listed
on Schedule 6B(1)(xvi); and
(xvii) Liens in favor of BofA on cash collateral not to exceed
$4,000,000 in the aggregate for the Cash Management Bank and other cash
management services provided with respect thereto (including, without
limitation, the services provided by Fleet National Bank) and Liens in
favor of BofA on cash collateral not to exceed $30,000,000 in the
aggregate for letters of credit issued and outstanding on behalf of the
Company by BofA.
1.8 Paragraph 6B(2) Debt of the Note Agreements is amended by replacing
the semi-colon at the end of clause (d) therein with a period and deleting the
proviso.
1.9 Paragraph 6B(4)(i) Sale of Assets of the Note Agreements is amended
by deleting the clause in its entirety and replacing it with the following:
SALE OF ASSETS. Sell, lease or transfer or otherwise dispose
of any assets of the Company or any Subsidiary other than in the
ordinary course of business; provided that the Company and its
Subsidiaries may sell, lease, transfer or otherwise dispose of assets
(a) to the extent that such sale, lease, transfer or disposition
relates to a Designated Permitted Asset Sale, (b) in connection with
the sale and leaseback of distribution centers owned by the Company or
any Subsidiary, (c) in connection with the dissolution of any Inactive
Subsidiary, and (d) outside the ordinary course of business so long as
(1) the aggregate amount of all assets sold, leased, transferred or
otherwise disposed of outside the ordinary course of business for the
thirty-six months preceding such proposed sale added together, without
duplication, with (x) any shares of stock or Debt of any Subsidiary
sold or otherwise disposed of, or with respect to which the Company or
any Subsidiary has parted control of, except to the Company or another
Subsidiary, during such period and (y) any assets then proposed to be
sold outside of the ordinary course of business, do not constitute more
than 10% of the total assets of the Company and its Subsidiaries on a
consolidated basis as of the end of the most recent fiscal quarter for
which the Company has delivered financial statements pursuant to
paragraph 5A and (2) any such sale of assets is not in excess of
$2,500,000 per sale; and, provided, further, that, in the case of (a)
through (d) above, all such assets have been sold, leased,
5
transferred or otherwise disposed of for fair market value and the Net
Disposition Proceeds paid, and all notes received in respect thereto
delivered, to the Collateral Agent to be distributed in accordance with
the Intercreditor Agreement or as set forth in paragraph 4(A)(3).
1.10 Paragraph 6C Ratio of Asset Base to Debt of the Note Agreements is
deleted in its entirety and such paragraph shall read as follows:
[Intentionally Omitted.].
1.11 Paragraph 6D Compliance with ERISA of the Note Agreements is
amended to change the reference to section 4062(f) of ERISA to section 4062(e)
instead.
1.12 Paragraph 6F Nature of the Business of the Note Agreements is
amended in its entirety to read as follows:
6F. NATURE OF BUSINESS. The Company will not and will not
permit any Subsidiary to engage in the business of underwriting risks
for insurance purposes, or in any other aspect of insurance related
business other than in the ordinary course of business in accordance
with its practices as of the Amendment Effective Date; or purchase and
sell real estate (other than on an agency basis) for purposes other
than those relating directly to its principal business except for (i)
purchases and sales of store locations in the ordinary course of
business which in the aggregate for the Company and its Subsidiaries
taken as a whole do not exceed $10,000,000 during any rolling
consecutive five year period and (ii) sales of the Specified
Facilities.
1.13 Paragraph 6H Fixed Charge Coverage Ratio of the Note Agreements is
amended in its entirety to read as follows:
6H. FIXED CHARGE COVERAGE RATIO. The Company shall not permit
the Fixed Charge Coverage Ratio as of the end of any fiscal period set
forth below to be less than the applicable ratio set forth below for
such period:
Fiscal Period(s) ending on or about Ratio
----------------------------------- -----
quarter ending March 2002 0.80:1.0
two quarters ending June 2002 0.90:1.0
three quarters ending September 2002 0.90:1.0
four quarters ending December 2002 0.70:1.0
four quarters ending March 2003 0.70:1.0
four quarters ending June 2003 0.70:1.0
four quarters ending September 2003 0.60:1.0
four quarters ending December 2003 0.75:1.0
four quarters ending March 2004 0.70:1.0
four quarters ending June 2004 0.65:1.0
each four quarter period thereafter 0.65:1.0
1.14 Paragraph 6I Restricted Investments of the Note Agreements is
amended by (a) inserting in clause (vi) the word "Amendment" between the words
"the" and "Effective"; (b)
6
replacing "BofA" with "BA" and deleting the word "and" after clause (vii) and
the period after clause (viii); and (c) adding the following provisions:
(ix) enter into escrow, seller note, holdback or similar
arrangements in connection with any sale, lease, transfer or other
disposition of any asset not prohibited hereunder (including any sale
of the Paint Business); and
(x) maintain investment accounts for the cash collateral held
in connection with its cash management services and in support of its
outstanding letters of credit.
1.15 Paragraph 6J Restricted Payments of the Note Agreements is amended
by (a) deleting the end of the first sentence therein starting with the words
"except, if" and (b) adding:
; provided, that cash patronage source dividends may be paid to Members
up to the minimum percentage of patronage source income required to be
paid pursuant to the applicable regulations of the Internal Revenue
Service for cooperatives; provided, further, if Adjusted EBITDA for the
fiscal year most recently ended is at least equal to the amount set
forth on Schedule 6J for such fiscal year, the Company may pay cash
patronage source dividends in an amount not to exceed 30% of the
patronage source income attributable to patronage source income other
than income resulting from gains on Asset Sales plus 20% of patronage
source income resulting from gains on Asset Sales; provided, however,
none of the foregoing dividends based on Adjusted EBITDA shall be paid
unless on a pro forma basis the Company can demonstrate it has
sufficient liquidity to meet its obligations for the six months
following such proposed payments. The Company may not redeem or
purchase any shares of stock except for Hardship Case Payments.
1.16 Paragraph 6K Amendments to Financing Agreements or Subordinated
Debt; No Optional Prepayments of the Note Agreements is amended by: (a) adding
the words "except to the extent of Hardship Case Payments" to the end of clause
(b) therein; (b) deleting the words "that do not trigger a reduction in any
commitments of the lenders thereunder" in clause (b)(ii); (c) adding the words
"Synthetic Lease Obligations, the Senior Note Obligations and the" immediately
prior to the words "Shelf Obligations" in clause (ii) in the second sentence
thereof; (d) deleting the words "pursuant to the terms hereof" at the end of
clause (ii); and (e) adding a final sentence thereto as follows:
All such optional and voluntary prepayments shall be made in accordance
with the terms of the Intercreditor Agreement, and in the absence
thereof, in conformance with all of the other terms hereof.
1.17 Paragraph 6L Minimum EBITDA of the Note Agreements is amended in
its entirety to read as follows:
6L. MINIMUM ADJUSTED EBITDA. The Company shall not permit the
sum of Adjusted EBITDA as of the end of any fiscal period set forth
below to be less than the respective amount set forth below:
7
Fiscal Period(s) ending on or about Amount
----------------------------------- ------
three months ended 3/31/02 $ 20,000,000
four months ended 4/30/02 $ 25,000,000
five months ended 5/31/02 $ 35,000,000
six months ended 6/30/02 $ 50,000,000
seven months ended 7/31/02 $ 60,000,000
eight months ended 8/31/02 $ 65,000,000
nine months ended 9/30/02 $ 80,000,000
ten months ended 10/31/02 $ 90,000,000
eleven months ended 11/30/02 $ 95,000,000
twelve months ended 12/31/02 $100,000,000
twelve months ended 1/31/03 $100,000,000
twelve months ended 2/28/03 $100,000,000
twelve months ended 3/31/03 $100,000,000
twelve months ended 4/30/03 $ 95,000,000
twelve months ended 5/31/03 $ 95,000,000
twelve months ended 6/30/03 $ 95,000,000
twelve months ended 7/31/03 $ 90,000,000
twelve months ended 8/31/03 $ 90,000,000
twelve months ended 9/30/03 $ 80,000,000
twelve months ended 10/31/03 $ 80,000,000
twelve months ended 11/30/03 $ 80,000,000
twelve months ended 12/31/03 $ 80,000,000
twelve months ended 1/31/04 $ 75,000,000
twelve months ended 2/29/04 $ 75,000,000
twelve months ended 3/31/04 $ 70,000,000
twelve months ended 4/30/04 $ 70,000,000
twelve months ended 5/31/04 $ 65,000,000
twelve months ended 6/30/04 $ 60,000,000
and the twelve month period ended on
the last day of each month thereafter $ 60,000,000
1.18 Paragraph 6 Negative Covenants of the Note Agreements is amended
to add the following new clauses:
6N. MINIMUM GROSS SALES. The Company shall not permit the
Gross Sales as of the end of any fiscal period set forth below to be
less than the applicable amount set forth below:
Fiscal Period(s) ending on or about Amount
----------------------------------- ------
three months ended 3/31/02 $ 460,000,000
four months ended 4/30/02 $ 625,000,000
five months ended 5/31/02 $ 805,000,000
six months ended 6/30/02 $ 990,000,000
seven months ended 7/31/02 $1,200,000,000
eight months ended 8/31/02 $1,340,000,000
nine months ended 9/30/02 $1,520,000,000
ten months ended 10/31/02 $1,670,000,000
eleven months ended 11/30/02 $1,815,000,000
twelve months ended 12/31/02 $1,975,000,000
twelve months ended 1/31/03 $1,965,000,000
8
twelve months ended 2/28/03 $1,955,000,000
twelve months ended 3/31/03 $1,945,000,000
twelve months ended 4/30/03 $1,930,000,000
twelve months ended 5/31/03 $1,920,000,000
twelve months ended 6/30/03 $1,910,000,000
twelve months ended 7/31/03 $1,900,000,000
twelve months ended 8/31/03 $1,890,000,000
twelve months ended 9/30/03 $1,875,000,000
twelve months ended 10/31/03 $1,870,000,000
twelve months ended 11/30/03 $1,865,000,000
twelve months ended 12/31/03 $1,860,000,000
twelve months ended 1/31/04 $1,850,000,000
twelve months ended 2/29/04 $1,840,000,000
twelve months ended 3/31/04 $1,830,000,000
twelve months ended 4/30/04 $1,820,000,000
twelve months ended 5/31/04 $1,805,000,000
twelve months ended 6/30/04 $1,795,000,000
and the twelve month period ended on
the last day of each month thereafter $1,700,000,000
6O. MINIMUM INTEREST COVERAGE RATIO. The Company shall not
permit the Interest Coverage Ratio as of the end of any fiscal period
set forth below to be less than the applicable ratio set forth below:
Fiscal Period(s) Ratio
---------------- -----
quarter ending March 2002 1.20:1.0
two quarters ending June 2002 1.50:1.
three quarters ending September 2002 1.70:1.0
four quarters ending December 2002 1.70:1.0
four quarters ending March 2003 1.70:1.0
four quarters ending June 2003 1.75:1.0
four quarters ending September 2003 1.65:1.0
four quarters ending December 2003 1.70:1.0
four quarters ending March 2004 1.65:1.0
four quarters ending June 2004 1.50:1.0
and the four quarter period ended on
the last day of each month thereafter 1.50:1.0
6P. MAXIMUM CAPITAL EXPENDITURES. The Company shall not permit
its Capital Expenditures as of the end of any fiscal period set forth
below to be more than the applicable amount set forth below:
Fiscal Period(s) ending
on or about Amount
----------- ------
quarter ended 3/31/02 $6,400,000
1/1/02 - 6/30/02 $11,200,000
1/1/02 - 9/30/02 $13,600,000
1/1/02 - 12/31/02 $16,000,000
1/1/03 - 3/31/03 $6,400,000
9
1/1/03 - 6/30/03 $11,200,000
1/1/03 - 9/30/03 $13,600,000
1/1/03 - 12/31/03 $16,000,000
1/1/04 - 3/31/04 $6,400,000
1/1/04 - 6/30/04 $11,200,000
thereafter per fiscal year $16,000,000
6Q. ADJUSTMENTS TO FINANCIAL COVENANTS. The financial
covenants contained herein may be adjusted upon the mutual agreement of
the Company and the Purchasers to reflect (1) an acceleration of the
sale of the Paint Business if the closing of such sale occurs prior to
June 30, 2003 as contemplated in the Business Plan and (2) Asset Sales
not contemplated in the Business Plan, including but not limited to
sale-leaseback transactions; provided, however, that if the parties
cannot reach agreement within sixty days of negotiations, such covenant
shall remain unchanged.
6R. SUBORDINATED NOTES. The Company will discontinue the
Variable Denomination Subordinated Floating Rate Demand Notes program
on or before July 31, 2002, and no new TIP Notes will be issued after
the date hereof without the approval of the Required Holders.
6S. CHIEF EXECUTIVE OFFICER. Any appointment by the Company of
a chief executive officer shall be subject to the consent of the
Required Holders.
6T. SALE OF HAGERSTOWN FACILITY. The Hagerstown Facility shall
not be sold unless (a) the requisite Synthetic Lease Lenders (as
defined in the Intercreditor Agreement) approve such sale in writing
and (b) the Net Disposition Proceeds of such sale are applied to reduce
the balance of the Synthetic Lease Obligations (as defined in the
Intercreditor Agreement) to the extent permitted by the Intercreditor
Agreement.
1.19 Paragraph 7A Acceleration of the Note Agreements is amended by:
(a) adding the phrase ", including without limitation the Make-Whole Notes,
immediately after the word "Note" in clause (ii) therein; (b) changing the
number "30" in clause (vi) therein to the number "15"; (c) including the
parenthetical "(other than an Inactive Subsidiary or a Canadian Subsidiary)"
after the first occurrence of the word "Subsidiary" in each of clauses (vii),
(viii), (ix) and (x) therein; (d) changing the dollar amount of "$7,000,000" in
clause (xiii) therein to the dollar amount "$5,000,000"; (e) replacing clause
(xviii) therein as follows and adding the following new clauses immediately
after the end thereof:
(xviii) the Company shall, on any date, not have in effect a
BA Credit Agreement providing for a revolving loan facility to the
Company with a commitment in the amount of at least $200,000,000 as
such amount may be reduced by the application of Interim Proceeds as
provided in the Intercreditor Agreement and as such amount may be
voluntarily reduced by the Company in accordance with the BA Credit
Agreement so long as voluntary reductions of the revolving loan
facility do not exceed $50,000,000 in the aggregate; or
(xix) on June 30, 2003 (1) the aggregate outstanding principal
balance (exclusive of any Make-Whole Obligations) of the Shelf Notes,
the Senior Notes, the Hagerstown Note and the BA Credit Agreement is
more than $270,000,000 and (2) the aggregate
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outstanding principal balance (exclusive of any Make-Whole Obligations)
of the Shelf Notes, the Senior Notes, and the Hagerstown Note plus the
aggregate amount of all the commitments under the BA Credit Agreement
(less $30,000,000 which amount represents the "Unusable Amount" under
the BA Credit Agreement for such date) exceeds $320,000,000; or
(xx) the Company or a Subsidiary shall make any principal
payment of any Subordinated Debt other than, so long as no Default or
Event of Default exists or would be created thereby and the Company has
met or exceeded its Minimum Adjusted EBITDA covenant set forth in
paragraph 6L as of the most recent fiscal period for which such
covenant is applicable, (x) up to an aggregate of $2,800,000 in
principal amounts of variable denomination floating rate subordinated
notes after the date of the April 2002 Modification, (y) up to an
aggregate of $24,000,000 in principal amounts due in fiscal 2002, and
(z) up to an aggregate of $14,000,000 in principal amounts due in
fiscal 2003; or
(xxi) the Company fails to cause the appointment to its Board
of Directors of: (1) at least two independent outside directors by May
31, 2002, (2) at least two additional independent outside directors by
September 1, 2002 (raising the aggregate number of independent outside
directors to no less than four by that time) and (3) at least one
additional independent outside director by November 1, 2002 (raising
the aggregate number of independent outside directors to no less than
five by that time and thereafter); or
(xxii) the Intercreditor Agreement shall cease to be in full
force and effect;
1.20 Paragraph 8A Organization of the Note Agreements is amended to add
"organized or formed," after the word "incorporated" therein.
1.21 Paragraph 8B Financial Statements of the Shelf Note Agreement is
amended to: (a) add the following words to the last sentence thereof after the
word "furnished":
other than as has been previously disclosed by the Company to the
Purchasers for any changes through the Amendment Effective Date
(b) delete the last paragraph therein;
(c) add as a new final paragraph, the following:
The Business Plan relating to the Company and its Subsidiaries for the
period January 1, 2002-June 30, 2004, a copy of which was delivered
previously to the Purchasers, discloses all material assumptions used
in formulating such projections. The Company is not aware of any facts
that (individually or in the aggregate) would result in any material
change in the Business Plan. It was prepared on the basis of the
assumptions stated therein (all of which were made by the Company in
good faith), and reflect the reasonable estimates of the Company of the
financial condition, results of operations and other information
projected therein.
1.22 Paragraph 8B Financial Statements, Paragraph 8E Title to
Properties, and Paragraph 8G Conflicting Agreements and Other Matters of the
Xxxxxx Note Agreement are
11
amended by deleting each one in its entirety and substituting therefor
Paragraphs 8B, 8E and 8G of the Shelf Note Agreement as amended herein.
1.23 Paragraph 8C Actions Pending of the Note Agreements is amended to
add the following words to the last sentence thereof after the word "Agreement":
other than as described in reasonable detail on Schedule 8C
1.24 Paragraph 8D Outstanding Debt of the Note Agreements is amended to
add the following words to the last sentence thereof after the word "instrument"
and before the word "evidencing":
(as defined in the Uniform Commercial Code) or agreement
1.25 Paragraph 8J ERISA of the Note Agreements is amended by deleting
the last two sentences thereof.
1.26 Paragraph 8N Disclosure of the Shelf Note Agreement is amended to
add "as amended" after the words "this Agreement" at the end of the second
sentence therein and Paragraph 8M Disclosure of the Xxxxxx Note Agreement is
deleted in its entirety and replaced with the language contained in Paragraph 8N
of the Shelf Note Agreement as amended hereby.
1.27 Paragraph 8P Priority of Notes of the Shelf Note Agreement is
amended to add "1992" in the last line thereof immediately after the word
"Existing" and before the second occurrence of the word "Agreement" therein.
1.28 Paragraph 8Q Year 2000 Problem of the Shelf Note Agreement is
deleted in its entirety.
1.29 Paragraph 10A Yield-Maintenance Terms of the Note Agreements is
amended to delete the following defined terms: "Called Principal", "Remaining
Scheduled Payments", and "Settlement Date" and insert the following defined
terms in the appropriate alphabetical order:
"CALLED PRINCIPAL" shall mean, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to paragraph
4(A)(1), 4(A)(2) or 4B or has become or is declared to be immediately
due and payable pursuant to paragraph 7A, as the context requires.
"REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the
Called Principal of any Note, all payments of such Called Principal and
interest thereon that would be due on or after the Settlement Date with
respect to such Called Principal if no payment of such Called Principal
were made prior to its scheduled due date (it being understood and
agreed that the interest rate on the Notes, for purposes of this
calculation, shall be the interest rate that applies to the Notes on
the third Business Day immediately preceding such Settlement Date),
provided that if such Settlement Date is not a date on which interest
payments are due to be made under the terms of the Notes, then the
amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date pursuant to paragraph 4A,
4B or 7A.
12
"SETTLEMENT DATE" shall mean, with respect to the Called
Principal of any Note, the date on which such Called Principal is to be
prepaid pursuant to paragraph 4A or 4B or has become or is declared to
be immediately due and payable pursuant to paragraph 7A, as the context
requires.
1.30 Paragraph 10B Other Terms of the Note Agreements is amended to
delete the following defined terms: "Asset Base", "Designated Permitted Asset
Sale", "EBITDA", "Fixed Charge Coverage Ratio", "Indebtedness", "Intercreditor
Agreement", "Private Placement Agreements", "Restricted Payment", "Supplemental
Coupon Elimination Date", "Supplemental Interest Rate", and "Year 2000 Problem".
1.31 Paragraph 10B Other Terms of the Note Agreements is amended to (a)
add the words "or losses" immediately before the first parenthetical in clause
(a) of the proviso contained in the definition of "Consolidated Net Earnings"
and (b) add ", notes payable to Members and other Subordinated Debt" to first
parenthetical in the definition of "Funded Debt" immediately after the words
"Capitalized Lease Obligations" and to delete ", so long as no event has
occurred the result of which would be to cause or permit such Indebtedness to
become due prior to any stated maturity" at the end thereof.
1.32 Paragraph 10B Other Terms of the Note Agreements is amended to add
the following defined terms in the appropriate alphabetical order:
"ADJUSTED EBITDA" shall mean, for any period, EBITDA plus
Restructuring Charges to the extent taken in such period.
"ADJUSTED CASH FLOW" means, with respect to any period,
Consolidated Net Earnings for such period less (a) the sum of (i) to
extent not already deducted in the calculation of Consolidated Net
Earnings, gains from Asset Sales realized during such period, (ii)
Capital Expenditures during such period, (iii) amortization of all
Indebtedness (including amortization of Indebtedness from payments of
Excess Cash Flow but excluding amortization of Indebtedness from the
proceeds of Asset Sales) for such period, (iv) patronage dividends
accrued in the current fiscal year to be paid in the following fiscal
year, (v) any increase in restricted cash during such period and (vi)
Restructuring Charges taken during such period; plus (b) the sum of (i)
to the extent deducted in the calculation of Consolidated Net Earnings,
losses from Asset Sales realized during such period, (ii) depreciation
and amortization expense for such period, (iii) non-cash income tax
expense for such period and (iv) any decrease in restricted cash during
such period.
"ADJUSTED WORKING CAPITAL" shall mean, at any date of
determination, the result of (a) consolidated current assets of the
Company and its Subsidiaries at such date, minus (b) without
duplication, cash and restricted cash of the Company and its
Subsidiaries at such date, minus (c) current liabilities of the Company
and its Subsidiaries at such date plus (d) the sum of (i) the current
portion of Subordinated Debt and other Debt at such date, (ii) accrued
and unpaid patronage source dividends at such date, (iii) the value of
current assets purchased, transferred or assumed in connection with
Asset Sales consummated during such period, minus (e) the value of
current liabilities purchased, transferred or assumed in connection
with Asset Sales consummated during such period.
13
"ADJUSTED WORKING CAPITAL CHANGE" shall mean, for any fiscal
year, the result of (a) Adjusted Working Capital for such fiscal year
minus (b) Adjusted Working Capital for the fiscal year immediately
preceding such fiscal year.
"AMENDMENT EFFECTIVE DATE" shall have the meaning given in the
April 2002 Modification.
"APRIL 2002 MODIFICATION" shall mean that certain letter
agreement, dated April 11, 2002, between the Company and the Purchasers
amending this Agreement.
"ASSET SALES" shall mean the sale, lease, assignment, transfer
or other disposition of value (each a "Disposition") by the Company or
any Subsidiary to any Person (other than the Company or a Subsidiary)
of any assets of the Company or such Subsidiary, other than (i) the
Disposition of inventory in the ordinary course of business, (ii) the
Disposition of inventory or receivables to a Guarantor or to the
Company, (iii) leases or subleases entered into in the ordinary course
of business, (iv) the licensing of intellectual property by the Company
or any Subsidiary in the ordinary course of business (so long as such
licensing does not prevent the Company or such Subsidiary from using
intellectual property material to the business of the Company or such
Subsidiary ) or (v) the Disposition of other assets having a value not
exceeding $250,000 in the aggregate in any fiscal year.
"BUSINESS PLAN" shall mean the business plan of the Company
dated March 20, 2002, which was delivered by the Company to the
Purchasers.
"CANADIAN SUBSIDIARY" shall mean Xxxxxx Canada Hardware and
Variety Company, Inc.
"CAPITAL EXPENDITURES" shall mean, for any period, the sum
without duplication of (a) the aggregate amount of all expenditures of
the Company and its Subsidiaries for fixed or capital assets made
during such period which, in accordance with GAAP, would be classified
as capital expenditures; and (b) the aggregate amount of all
Capitalized Lease Obligations incurred during such period excluding, in
each case, (i) expenditures made in connection with replacement, repair
or restoration of fixed assets from insurance proceeds not to exceed
$1,000,00 in the aggregate per loss and (ii) refinancings or renewals
of Capitalized Lease Obligations in effect on the Amendment Effective
Date.
"DESIGNATED PERMITTED ASSET SALE" shall mean the sale or other
disposition of the properties set forth on Schedule 6B(4).
"DISPOSITION" shall have the meaning set forth in the
definition of "Asset Sales".
"EBITDA" shall mean, for any period, Consolidated Net Earnings
for such period plus, to the extent deducted in computing such
Consolidated Net Earnings, interest expense (including rent expense
with respect to Synthetic Leases), taxes, depreciation and
amortization.
14
"EXCESS CASH FLOW" shall mean, for any period, 80% of the sum
of (a) Adjusted Cash Flow for such period plus (b) any negative
Adjusted Working Capital Change for such period minus (c) any positive
Adjusted Working Capital Change for such period.
"FIXED CHARGE COVERAGE RATIO" shall mean, as of the last day
of any fiscal quarter, the ratio of:
(a) the result, for the period of four consecutive fiscal
quarters ending on such day, of (i) Consolidated Net Earnings, plus
(ii) to the extent deducted in determining such Consolidated Net
Earnings, interest expense (including rent expense with respect to
Synthetic Leases), taxes, depreciation and amortization, plus (iii)
Restructuring Charges taken during such period, minus (iv) gains from
Asset Sales realized during such period, to the extent included in
determining Consolidated Net Earnings, plus (v) losses from Asset Sales
realized during such period, to the extent deducted in determining
Consolidated Net Earnings
to
(b) the sum for such period of (i) scheduled payments of
principal with respect to the Shelf Notes and the Senior Notes, (ii)
interest expense (including rent expense with respect to Synthetic
Leases and excluding interest expense with respect to Make-Whole
Obligations and new Make-Whole Obligations of principal arising in such
period), and (iii) Capital Expenditures;
each as determined for the Company and its Subsidiaries on a
consolidated basis. The amount in each of clauses (a) and (b) shall be
calculated for the period ending (x) March 31, 2002 based upon such
period and then multiplied by four, (y) June 30, 2002 based upon the
period of two consecutive fiscal quarters ending on such date and then
multiplied by two and (z) September 30, 2002 based upon the period of
three consecutive fiscal quarters ending on such date and then
multiplied by one and one-third.
"GROSS SALES" shall mean the consolidated gross sales for the
Company and its Subsidiaries.
"HAGERSTOWN FACILITY" shall mean the distribution center
located at 00000 Xxxxxxx Xxxxx Xxxxxxx xx Xxxxxxxxxx, Xxxxxxxx.
"HAGERSTOWN NOTE" shall mean the "Synthetic Maximum Shortfall"
as defined in the Intercreditor Agreement.
"HARDSHIP CASE PAYMENTS" shall mean all payments to any
stockholder that has notified the Company of his termination and
requested an accelerated redemption payment of any portion of his stock
and/or Subordinated Debt investment pursuant to a hardship case request
authorized in the by-laws of the Company, in an aggregate amount for
all stockholders not to exceed $2,000,000 in any fiscal year. Such
redemption payments must be administered by a Responsible Officer and
made according to the Company's hardship case guidelines.
15
"INDEBTEDNESS" shall mean, with respect to any Person, without
duplication, (i) all items (excluding items of contingency reserves or
of reserves for deferred income taxes) which in accordance with
generally accepted accounting principles would be included in
determining total liabilities as shown on the liability side of a
balance sheet of such Person as of the date on which Indebtedness is to
be determined, (ii) all indebtedness secured by any Lien on any
property or asset owned or held by such Person subject thereto, whether
or not the indebtedness secured thereby shall have been assumed, (iii)
all indebtedness of others with respect to which such Person has become
liable by way of any Guarantee and (iv) obligations of such Person with
respect to Synthetic Leases.
"INTERCREDITOR AGREEMENT" shall mean the First Amended and
Restated Intercreditor Agreement dated as of April 11, 2002 among BofA
as agent under the BA Credit Agreements, the Collateral Agent, the
Purchasers, the holders of the Senior Notes, the Company and its
Subsidiaries, and various other parties.
"INTEREST COVERAGE RATIO" shall mean, as of the last day of
any fiscal quarter, the ratio of (a) the sum, for the period of four
consecutive fiscal quarters ending on such day, of (i) Consolidated Net
Earnings plus (ii) to the extent deducted in determining such
Consolidated Net Earnings, interest expense, taxes, depreciation and
amortization, plus (iii) Restructuring Charges less (iv) gains from
Asset Sales, to the extent included in determining Consolidated Net
Earnings plus (v) losses from Asset Sales, to the extent deducted in
determining Consolidated Net Earnings to (b) interest expense for such
period (including rent expense with respect to Synthetic Leases but
excluding interest expense with respect to Make-Whole Obligations and
new Make-Whole Obligations of principal arising in such period); each
as determined for the Company and its Subsidiaries on a consolidated
basis. Notwithstanding the foregoing, the amount in each of clauses (a)
and (b) shall be calculated for the period ending (x) March 31, 2002
based upon such period and then multiplied by four, (y) June 30, 2002
based upon the period of two consecutive fiscal quarters ending on such
date and then multiplied by two and (z) September 30, 2002 based upon
the period of three consecutive fiscal quarters ending on such date and
then multiplied by one and one-third.
"LUMBER NOTE" shall mean the $19,500,000 promissory note made
by Builder Marts of America, Inc. on December 29, 2000, payable to the
Company.
"MAKE-WHOLE NOTES" shall mean those notes issued to the
Purchasers under Section 4 of the Intercreditor Agreement.
"MAKE-WHOLE OBLIGATIONS" shall have the meaning set forth for
such term in the Intercreditor Agreement.
"NET DEBT PROCEEDS" shall mean, as to any issuance of
Indebtedness for borrowed money (other than any such Indebtedness
incurred to refinance existing Indebtedness, provided that the
principal amount of such existing Indebtedness is not increased) by any
Person, cash proceeds received by such Person in connection therewith,
net of reasonable out-of-pocket costs and expenses paid or incurred in
16
connection therewith in favor of any Person not an Affiliate of such
Person, such costs and expenses not to exceed 5% of the gross proceeds
of such issuance.
"NET DISPOSITION PROCEEDS" shall mean, as to any Asset Sale,
proceeds in cash, checks or other cash equivalent financial instruments
and proceeds from notes, each as and when received by such Person, net
of: (a) the direct costs relating to such disposition, excluding
amounts payable to such Person or any Affiliate of such Person, (b) an
estimate of cash taxes paid or payable by such Person within nine
months of the disposition as a direct result of such Asset Sale and (c)
amounts required to be applied to repay principal, interest and
prepayment premiums and penalties on purchase money liens on the asset
which is the subject of such Asset Sale, and in the case of proceeds
from the sale of the Hagerstown Facility, net of the amount required to
satisfy the obligations with respect to its Synthetic Lease. Net
Disposition Proceeds shall include any insurance proceeds received upon
the loss of, damage to, or destruction of property, except to the
extent such insurance proceeds are applied to replace, repair, restore
or rebuild such property up to an aggregate in proceeds per loss of
$1,000,000; provided, with the prior written consent of the Required
Holders, the Company may reinvest proceeds in excess of $1,000,000 to
replace, repair, restore or rebuild such property.
"PAINT BUSINESS" shall mean the manufacturing portion of the
business classified as the "Paint Segment" in the Company's Form 10-K
for the fiscal year ended December 31, 2000.
"PRIVATE PLACEMENT AGREEMENTS" shall mean the several Note
Purchase Agreements dated as of September 10, 1998 among the Company
and the purchasers listed in Schedule 1 thereto, pursuant to which the
Company issued its 6.85% Senior Notes due July 1, 2008 in the original
aggregate principal amount of $105,000,000, as such agreements were
amended as of April 1, 1999, as amended and restated as of April 14,
2000, and as further amended as of April 11, 2002.
"PROJECTIONS" shall mean a 12-month forecast (to include
forecasted consolidated balance sheets, income statements and cash flow
statements) for the Company and its Subsidiaries in fiscal quarter
periods to be delivered no later than forty-five days after the end of
each fiscal quarter of the Company.
"RESPONSIBLE OFFICER" shall mean the chief executive officer,
chief operating officer, chief financial officer, treasurer or chief
accounting officer of the Company, the general counsel of the Company
or any other officer of the Company involved principally in its
financial administration or its controllership function.
"RESTRICTED PAYMENT" shall have the meaning set forth in
paragraph 6J.
"RESTRUCTURING CHARGES" shall mean any charges recorded under
"Emerging Issues Task Force 94-3: Liability Recognition for Certain
Employee Benefits and Other Costs to Exit an Activity (including
certain costs incurred in a Restructuring)" issued by the American
Institute of Certified Public Accounts; provided that any such charges
in excess of $2,000,000 in the aggregate after the date hereof may not
be taken by the Company or its Subsidiaries for purposes of covenant
calculations and related
17
definitions without the prior written consent of the Required Holders.
Such charges include, but are not limited to, costs related to employee
benefits, such as severance and termination benefits, costs associated
with the elimination and reduction of product lines, costs to
consolidate or relocate facilities, costs for new systems development
or acquisition, costs to retrain employees to use newly-deployed
systems, costs incurred to reduce excess inventory (defined to be
inventory on hand in excess of 180 days' worth of supply), costs
incurred to dispose of any remaining inventory on hand at the time of
closure of a facility, and losses and asset impairments and disposals
of assets.
"SENIOR NOTES" shall mean the 6.85% Senior Notes issued
pursuant to the Private Placement Agreements.
"SPECIFIED FACILITIES" shall have the meaning set forth in
paragraph 6B(1)(xv).
"SUPPLEMENTAL FUNDING FEE RATE" shall mean 0.765% per quarter.
"SYNTHETIC LEASE" shall mean (a) a so-called synthetic,
off-balance sheet or tax retention, lease or (b) an agreement for the
use or possession of property creating obligations that do not appear
on the balance sheet of such Person but which, upon the insolvency or
bankruptcy of such Person, would be characterized as the indebtedness
of such Person (without regard to accounting treatment).
"TERMINATION DATE" shall mean the date on which all of the
obligations due hereunder have been paid in full and this Agreement has
been terminated.
"TIP NOTES" shall mean the registered subordinated debt
securities, as amended from time to time, issued under the Company's
investment program and designated "Variable Denomination Redeemable
Subordinated Fixed Rate Term Notes".
"UNMATURED EVENT OF DEFAULT" shall mean any event or
circumstance which, with the giving of notice, the lapse of time, or
both, would (if not cured or otherwise remedied during such time)
constitute an Event of Default.
1.33 Paragraph 11A Note Payments of the Note Agreements is amended to
add the following at the end thereof:
Notwithstanding any agreement to the contrary herein or in the Notes,
the Company hereby agrees that, to the extent any obligation (or part
thereof) hereunder or under the Notes which was originally intended to
be satisfied in whole or in part is rescinded or must otherwise be
restored whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, such obligation (or part thereof), and all
Liens, rights and remedies therefor and in respect thereof, shall be
deemed revived and continued in full force and effect as if such
original payment had not been made. The Company agrees that the books
and records of each Purchaser showing the outstanding amount of the
Notes and including amounts of principal, interest and other
obligations of the Company to such Purchaser shall constitute
rebuttably presumptive proof thereof, irrespective of whether any
principal or other obligation is or should be evidenced by a promissory
note or other instrument.
18
This provision shall supersede any action taken by a Purchaser in
reliance upon any payments received or proceeds applied and all such
actions taken are deemed hereby to be conditioned upon such payments or
applications of proceeds being final and irrevocable and not subject to
this paragraph 11A. The Company hereby indemnifies each Purchaser for
all reasonable costs and expenses incurred by such Purchaser in
connection with any rescission or restoration, including any costs and
expenses incurred in defending against any claim alleging that such
payment constituted a preference, fraudulent transfer or similar
payment under any bankruptcy, insolvency or similar law.
1.34 Paragraph 11 Miscellaneous of the Note Agreements is amended to
replace paragraph 11T and add a new paragraph 11U at the end thereof as follows:
11T. COMPANY INDEMNIFICATION. Whether or not the transactions
contemplated hereby are consummated, the Company shall indemnify and
hold each of the Purchasers and each of their respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each an
"Indemnified Person") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, charges, expenses and disbursements (including
all fees and expenses of legal counsel) of any kind or nature
whatsoever which may at any time (including at any time following
repayment or transfer by any Purchaser of the obligations hereunder) be
imposed on, incurred by or asserted against any such Person in any way
relating to or arising out of this Agreement, or the Notes, the
Intercreditor Agreement, the BA Credit Agreement, the Senior Notes, the
Private Placement Agreements, or the "Operative Documents" (as defined
in the Intercreditor Agreement) or any document contemplated by or
referred to herein or therein, or the transactions contemplated hereby
or thereby, or any action taken or omitted by any such Person under or
in connection with any of the foregoing, including with respect to any
investigation, litigation or proceeding (including any bankruptcy or
insolvency proceeding, reorganization or other similar proceeding, or
appellate proceeding) related to or arising out of this Agreement or
the Notes or the use of the proceeds thereof, whether or not any
Indemnified Person is a party thereto (all the foregoing, collectively,
the "Indemnified Liabilities"); provided that the Company shall have no
obligation under this paragraph 11T to any Indemnified Person with
respect to Indemnified Liabilities resulting solely and directly from
the gross negligence or willful misconduct of such Indemnified Person.
The agreements in this paragraph 11T shall survive repayment of all
obligations hereunder and the termination of this Agreement.
1.35 The Schedules and Exhibits attached hereto shall be deemed to
amend and restate the previous schedules or exhibits and any new schedules or
exhibits attached hereto shall be an integral part of the Note Agreements.
1.36 Each Note is amended by changing the Interest Payment Dates
thereon to be the last Business Day of each calendar quarter, commencing with
the last Business Day of June 2002; provided, however, that interest which is
due and payable on May 13, 2002 in respect to Series B Notes and Series C Notes
shall be paid on such date and the next interest payments shall for those Notes
accrue from May 13, 2002 through the last Business Day of June 2002; and,
provided, further, that interest which is due on the Series D Note on June 23,
2002 shall continue to accrue until the last Business Day of June and be due and
payable on such date.
19
1.37 Effective as of February 28, 2002, any principal, Yield
Maintenance Amount, premium and interest which was accruing interest at the
default rate under paragraph 1B of the Note Agreements shall cease to bear the
incremental default interest rate and shall bear interest at the non-default
interest rate; provided, however, that upon any subsequent Event of Default the
interest rate on the Notes shall be determined in accordance with paragraph 1(B)
of the Note Agreements and the Notes.
SECTION 2. Representations and Warranties. TruServ represents and
warrants to each of the Purchasers that, after giving effect hereto as though
all conditions of effectiveness have been met, (a) each and every representation
and warranty set forth in paragraph 8 of each of the Note Agreements (other than
paragraphs 8H, 8I, and 8O) is true and correct as of the date of execution and
delivery of this letter agreement by TruServ with the same effect as if made on
such date (except to the extent such representations and warranties expressly
refer to an earlier date, in which case they were true and correct as of such
earlier date and the defaults specifically disclosed in that certain letter from
the Company to the Purchasers dated April 11, 2002 (the "Default Letter")) and
(b) except for the Defaults arising from non-compliance with the financial
covenants contained in paragraph 6 under the Note Agreements and the defaults
set forth in the Default Letter being waived in Section 6 hereinbelow, no Event
of Default or Default exists.
SECTION 3. Effectiveness. The amendments described in Section 1 above
shall become effective as of the date upon which each Purchaser has received the
following (the "Amendment Effective Date"):
(a) Evidence of payment of the fees referred to in Section 4
below and all costs and expenses of such Purchaser (including reasonable fees
and disbursements of (i) the current legal counsel (Xxxx, Gotshal & Xxxxxx LLP)
to the Purchasers and their prior legal counsel (Xxxxxxxx, Xxxxxx, Xxxxx &
Xxxx)) in connection with this letter agreement and all prior negotiations and
documentation;
(b) A copy of this letter agreement duly executed by each
party hereto;
(c) A copy of each of the amendments to the BA Credit
Agreements, the Private Placement Agreements, and the "Operative Documents" as
defined in the Intercreditor Agreement, each certified as being in full force
and effect and each being in form and substance reasonably satisfactory to the
Purchasers and all ancillary documents in connection therewith;
(d) A copy of the Intercreditor Agreement duly executed by all
the parties thereto and in form and substance satisfactory to the Purchasers,
and all ancillary documents in connection therewith, including without
limitation all amendments, consents and reaffirmations to the Collateral
Documents (as defined in the Intercreditor Agreement);
(e) A copy of that certain Three Party Blocked Account Service
Agreement dated as of December 10, 2001, duly executed by XxxXxxx, the
Collateral Agent and Fleet National Bank.
(f) Such other documents or certificates as any Purchaser may
reasonably request, including a legal opinion of counsel to TruServ in form and
substance reasonably satisfactory to the Purchasers; and
20
(g) Evidence reasonably satisfactory to the Purchasers that
all corporate and other proceedings shall have occurred.
SECTION 4. Fees. In consideration of the Purchasers entering into this
letter agreement, XxxXxxx agrees to pay, on or before the Amendment Effective
Date, ratably to Prudential and each other Purchaser, an aggregate fee of
$2,180,363.
SECTION 5. Reference to and Effect on Note Agreements. Upon the
effectiveness of this letter agreement as set forth in Section 3 above, each
reference to the Shelf Note Agreement and the Xxxxxx Note Agreement in any other
document, instrument or agreement shall mean and be a reference to such
agreement as modified by this letter agreement. Except as specifically set forth
in and in conformity with Section 1 above, each Note Agreement shall remain in
full force and effect and each is hereby ratified and confirmed in all respects.
SECTION 6. Waiver. Effective on the Amendment Effective Date, the
Purchasers waive any Default or Event of Default arising from non-compliance
with financial covenants contained in paragraph 6 of the Note Agreements and the
defaults specifically disclosed in the Default Letter. Except as specifically
set forth in the preceding sentence, nothing contained herein shall be construed
as a waiver of or consent to any other violation of the Note Agreements or any
other Default or Event of Default under the Note Agreements.
SECTION 7. Governing Law. THIS LETTER AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS OF SUCH STATE WHICH WOULD OTHERWISE CAUSE THIS
LETTER TO BE CONSTRUED OR ENFORCED OTHER THAN IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.
SECTION 8. Counterparts; Section Titles. This letter agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which when taken together shall constitute
but one and the same instrument. The section titles contained in this letter
agreement are and shall be without substance, meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
[SIGNATURES ON FOLLOWING PAGE]
21
Very truly yours,
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ XXXXXX X. XXXXXX
------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
PRUCO LIFE INSURANCE COMPANY
By: /s/ XXXXXX X. XXXXXX
------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
U.S. PRIVATE PLACEMENT FUND
By: PRUDENTIAL PRIVATE PLACEMENT
INVESTORS, L.P.,
Investment Advisor
By: PRUDENTIAL PRIVATE PLACEMENT
INVESTORS, L.P.,
its General Partner
By: /s/ XXXXXX X. XXXXXX
------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
Accepted and Agreed:
TRUSERV CORPORATION
By: /s/ XXXXXXX X. XXXXXX
-----------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice President
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