EXHIBIT 4-V
[PRUDENTIAL FINANCIAL LOGO] Corporate and Project Workouts
7th Floor Gateway Center Four
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
December 30, 2002
TruServ Corporation
0000 Xxxx Xxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Chief Financial Officer
Re: Fifth Amendment of Note Agreement and Private Shelf Agreement
Ladies and Gentlemen:
Reference is made to that certain Amended and Restated Private Shelf Agreement
dated as of November 13, 1997, as amended by letter agreements dated September
9, 1998, May 12, 1999, April 14, 2000, and April 11, 2002 (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 4A(3) Intercreditor Distributions of the Note Agreements
shall be amended by replacing the first sentence with the following:
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
Notes.
1.2 Paragraph 5H Real Estate Documents of the Note Agreements is amended
by replacing the last paragraph therein in clause (b) with the following new
paragraph:
Additionally, in the case of any real property leased by the Company
or any Guarantor, the Company shall use its best efforts to, or shall
cause such Guarantor to use its best efforts to, provide a consent, in
form and substance satisfactory to the Required Holder(s), from the owner
and each mortgagee of such property (a) consenting to the Mortgage in
favor of the Collateral Agent with respect to such property and (b)
waiving any landlord's Lien in respect of personal property kept at the
premises subject to such lease; provided, however, consents in connection
with the Designated Sale-Leaseback Transactions shall not be required.
1.3 Paragraph 6B(1) Liens of the Note Agreements is amended by replacing,
respectively, clauses (x) and (xii) therein with the following new clauses:
(x) (i) Liens in favor of the Collateral Agent, provided that the
Intercreditor Agreement shall be in full force and effect and (ii) such
Liens on the Special Company Account solely to the extent such Liens
secure amounts due and owing BofA for its services rendered solely in
connection with routine administration of such account, provided that the
Security Agreement and the Intercreditor Agreement shall both be in full
force and effect;
(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 (other than the Designated Sale-Leaseback Transaction;
provided, that such interest or title attaches only to the property being
leased in connection therewith) or (iii) except as permitted by clause
(xvi) below, a Synthetic Lease;
1.3 Paragraph 6H Minimum 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
------------------------------------- -----
four quarters ending December 2002 0.70:1.0
four quarters ending March 2003 0.70:1.0
four quarters ending June 2003 0.65:1.0
four quarters ending September 2003 0.65:1.0
four quarters ending December 2003 0.90:1.0
four quarters ending March 2004 0.90:1.0
four quarters ending June 2004 0.90:1.0
each four quarter period thereafter 0.90:1.0
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1.4 Paragraph 6I(vii) Restricted Investments of the Note Agreements is
amended by replacing the clause with the following:
(vii) (i) maintain the Special Company Account; provided that as of the
close of business on any day on which the Total Outstandings (as defined
in the BA Credit Agreement) are greater than zero or during the existence
of an Event of Default after the commencement of an Enforcement (as
defined in the Intercreditor Agreement), the amount maintained in the
Special Company Account shall not be greater than zero; and (ii) maintain
other deposit accounts with financial institutions in the ordinary course
of business; provided that the amount maintained in deposit accounts with
financial institutions other than the Lenders shall not exceed (x) in the
case of any one such account, $200,000 for more than three consecutive
Business Days; and (y) in the case of all such accounts in the aggregate,
$600,000 for more than two consecutive Business Days,
1.5 Paragraph 6L Minimum Adjusted 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:
Fiscal Period(s) ending on or about Amount
----------------------------------- ------
twelve months ended 12/31/02 $100,000,000
twelve months ended 1/31/03 $ 95,000,000
twelve months ended 2/28/03 $ 95,000,000
twelve months ended 3/31/03 $ 90,000,000
twelve months ended 4/30/03 $ 90,000,000
twelve months ended 5/31/03 $ 85,000,000
twelve months ended 6/30/03 $ 80,000,000
twelve months ended 7/31/03 $ 75,000,000
twelve months ended 8/31/03 $ 70,000,000
twelve months ended 9/30/03 $ 70,000,000
twelve months ended 10/31/03 $ 70,000,000
twelve months ended 11/30/03 $ 70,000,000
twelve months ended 12/31/03 $ 70,000,000
twelve months ended 1/31/04 $ 70,000,000
twelve months ended 2/29/04 $ 70,000,000
twelve months ended 3/31/04 $ 70,000,000
twelve months ended 4/30/04 $ 70,000,000
twelve months ended 5/31/04 $ 70,000,000
twelve months ended 6/30/04 $ 70,000,000
each twelve month period
ended on the last day of each
month thereafter $ 70,000,000
1.6 Paragraph 6N Minimum Gross Sales of the Note Agreements is amended in
its entirety to read as follows:
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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
----------------------------------- ------
twelve months ended 12/31/02 $1,975,000,000
twelve months ended 1/31/03 $1,820,000,000
twelve months ended 2/28/03 $1,780,000,000
twelve months ended 3/31/03 $1,740,000,000
twelve months ended 4/30/03 $1,725,000,000
twelve months ended 5/31/03 $1,740,000,000
twelve months ended 6/30/03 $1,720,000,000
twelve months ended 7/31/03 $1,715,000,000
twelve months ended 8/31/03 $1,710,000,000
twelve months ended 9/30/03 $1,700,000,000
twelve months ended 10/31/03 $1,715,000,000
twelve months ended 11/30/03 $1,695,000,000
twelve months ended 12/31/03 $1,700,000,000
twelve months ended 1/31/04 $1,700,000,000
twelve months ended 2/29/04 $1,695,000,000
twelve months ended 3/31/04 $1,690,000,000
twelve months ended 4/30/04 $1,690,000,000
twelve months ended 5/31/04 $1,680,000,000
twelve months ended 6/30/04 $1,670,000,000
each twelve month period ended
on the last day of each month
thereafter $1,670,000,000
1.7 Paragraph 6O Minimum Interest Coverage Ratio of the Note Agreements is
amended in its entirety to read as follows:
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
---------------------------------- --------
four quarters ending December 2002 1.75:1.0
four quarters ending March 2003 1.75:1.0
four quarters ending June 2003 2.00:1.0
four quarters ending September 2003 2.00:1.0
four quarters ending December 2003 3.00:1.0
four quarters ending March 2004 3.00:1.0
four quarters ending June 2004 3.00:1.0
each twelve month period ended on the
last day of each month thereafter 3.00:1.0
1.8 Paragraph 6P Maximum Capital Expenditures of the Note Agreements is
amended by adding the following proviso at the end thereof:
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; provided that the aggregate amount of Capital Expenditures made during
any fiscal year ending after December 31, 2002 may be increased by an
amount equal to the lesser of (x) $2,000,000 and (y) the excess of the
maximum amount of Capital Expenditures permitted to be made in the prior
fiscal year over the actual amount of Capital Expenditures made during
such prior fiscal year. Such increased permitted Capital Expenditures may
be made in any fiscal quarter or fiscal quarters of such fiscal year.
1.9 Paragraph 6Q Adjustments to Financial Covenants of the Note Agreements
is amended in its entirety to read as follows:
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 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. If the sale-leaseback
of the regional distribution center located at 000 Xxxxxx Xxxx,
Xxxxxxxxxx, Xxx Xxxxxxxxx (the "Manchester RDC") does not occur by
February 15, 2003, the Company shall cause the financial covenant levels
set forth in Paragraph 6 to be amended to reflect the exclusion of the
Manchester RDC sale-leaseback from the Business Plan in a manner
satisfactory to the Required Holders in their sole discretion, and such
financial covenant levels will be established in a manner reasonably
satisfactory to the Required Holders on the basis of the same
methodologies used in preparing the covenant levels incorporated in the
Fifth Amendment.
1.10 Paragraph 7A(xviii) Acceleration of the Note Agreements is amended by
replacing the clause with the following:
(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; provided, that the commitment reductions
provided for by Section 2.4.2(a) of the Credit Agreement shall be deemed
voluntary reductions for purposes of this Paragraph 7A(xviii); or
1.11 Paragraph 8B Financial Statements of the Note Agreements is amended
to (a) replace in the last sentence of the first paragraph the words "Amendment
Effective Date" with December 30, 2002; (b) delete the first sentence of the
last paragraph thereof; and (c) replace the last sentence of the final paragraph
with the following:
The Business Plan was prepared on the basis of assumptions (all of which
were made by the Company in good faith), and reflects the reasonable
estimates of the Company of the financial conditions, results of
operations and other information projected therein.
1.12 Paragraph 8E Title to Properties of the Note Agreements is amended in
its entirety to read as follows:
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8E. TITLE TO PROPERTIES. The Company has and each of its
Subsidiaries has good and indefeasible title to its respective real
properties (other than properties which it leases) and good title to all
of its other respective properties and assets, including the properties
and assets reflected in the most recent audited balance sheet referred to
in paragraph 8B (other than properties and assets disposed of (x) in the
ordinary course of business, (y) in connection with the sale of the
Brookings regional distribution center or (z) pursuant to the Designated
Sale-Leaseback Transaction), subject to no Lien of any kind except Liens
permitted by paragraph 6B(1). All leases necessary in any material respect
for the conduct of the respective businesses of the Company and its
Subsidiaries are valid and subsisting and are in full force and effect
1.13 Paragraph 10B Other Terms of the Note Agreements is amended to delete
the following defined terms: "Adjusted Cash Flow", "Business Plan",
"Intercreditor Agreement", "Private Placement Agreements", and "Security
Agreement".
1.14 Paragraph 10B Other Terms of the Note Agreements is amended to add
the following defined terms in the appropriate alphabetical order:
"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, (vi) for the period ended December
31, 2002, $7,500,000 and (vii) 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.
"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), (v) any
sublease of, or assignment by the Company of its interest as lessee in,
properties sold pursuant to a Designated Sale-Leaseback Transaction
provided that any such sublease or assignment shall be on an arm's
length basis, reasonable and normal commercial terms, and no less
frequent than quarterly payment of rent or (vi) the Disposition of other
assets having a value not exceeding $250,000 in the aggregate in any
fiscal year.
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"BUSINESS PLAN" shall mean the business plan of the Company, which
was delivered by the Company to the Purchasers on December 18, 2002;
provided, with respect to Paragraph 5A(v) and financial reports relating
to the periods prior to 2003, the Business Plan shall mean the Business
Plan of the Company dated March 20, 2002, which was delivered by the
Company to the Purchasers.
"DESIGNATED SALE-LEASEBACK TRANSACTION" means the sale by the
Company of the regional distribution centers listed on Schedule
6B(4)(i)(b) and the concurrent lease, as lessee, of such properties by
the Company and/or one or more Subsidiaries pursuant to documentation
substantially in the form previously delivered to the Purchasers.
"FIFTH AMENDMENT" shall mean the Fifth Amendment of the Note
Agreement and the Private Shelf Agreement dated December 30, 2002
between the Company and the Purchasers.
"INTERCREDITOR AGREEMENT" shall mean the First Amended and Restated
Intercreditor Agreement, dated as of April 11, 2002 and amended as of
December 30 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.
"MANCHESTER RDC" shall have the meaning set forth in Paragraph 6Q.
"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 and December 30, 2002.
"SECURITY AGREEMENT" shall mean the Security Agreement among the
Company, various Subsidiaries and the Collateral Agent, dated April 14,
2000 and as amended by a First Amendment dated as of April 11, 2002 and
a Second Amendment as of December 30, 2002.
"SPECIAL COMPANY ACCOUNT" shall have the meaning given in the
Security Agreement.
1.11 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.
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, subject to in the case of the representations and warranties
contained in Paragraphs 8B and 8N to the matters disclosed in that Consent to
Waiver dated August 26, 2002 executed by the
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Purchasers, (b) no Event of Default or Default exists, and (c) no fee has been
paid or is payable to the Lenders or the Agent (each as defined under the
Intercreditor Agreement) in connection with the execution and effectiveness of
the First Amendment to the BA Credit Agreements..
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) To the extent due and payable, payment of all costs and expenses of
such Purchaser (including the reasonable fees and disbursements of legal counsel
(Xxxx, Gotshal & Xxxxxx LLP) to the Purchasers) 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, the "Operative Documents" (as defined in the
Intercreditor Agreement), and the Security 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, including the Confirmation (as attached to the First Amendment to the
BA Credit Agreements);
(d) A copy of the First Amendment to the Intercreditor Agreement duly
executed by all the parties thereto and in form and substance satisfactory to
the Purchasers;
(e) A copy of that certain Leases, deeds and a Closing Agreement, dated as
of December 30, 2002, duly executed by XxxXxxx and Xxxx (DE) Limited
Partnership, and all ancillary documents in connection therewith, including such
evidence as reasonably satisfactory to the Purchasers to substantiate the
execution and completion of the Designated Sale-Leaseback Transaction;
(f) Such other documents or certificates as any Purchaser may reasonably
request; and
(g) Evidence reasonably satisfactory to the Purchasers that all corporate
and other proceedings shall have occurred.
SECTION 4. Further Assurances. Upon the request of the Purchasers, the
Company agrees to provide or cause its Subsidiaries to provide to the Purchasers
such additional amendments, consents, reaffirmations and ancillary documentation
as necessary or advisable, in the sole reasonable discretion of the Required
Holders, to ensure that the Collateral Documents (as defined in the
Intercreditor Agreement) are in full force and effect in all respects.
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.
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SECTION 6. Waiver. Nothing contained herein shall be construed as a waiver
of or consent to any violation of the Note Agreements or any 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.
SECTION 9. Consents and Waiver. Notwithstanding any provision in the Note
Agreements to the contrary, the Purchasers consent to (a) the amendments to the
other Financing Agreements, (b) the consummation of the Designated
Sale-Leaseback Transaction and (c) the release of collateral by the Collateral
Agent to the extent subject to the Designated Sale-Leaseback Transaction.
Notwithstanding any provision in the Note Agreements to the contrary, the
Purchasers hereby confirm that the Make-Whole Amount (as defined in the
Intercreditor Agreement) due with respect to the Designated Sale-Leaseback
Transaction shall be the Make-Whole Original Amount (as defined in the
Intercreditor Agreement) and the Purchasers hereby waive any rights to any
Make-Whole Delta Obligations (as defined in the Intercreditor Agreement) in
connection with prepayments required in connection with the Designated
Sale-Leaseback Transaction.
[SIGNATURES ON FOLLOWING PAGE]
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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/ XXXXX XXXXXXXX
---------------------------
Name: Xxxxx Xxxxxxxx
Title: Sr. VP & CFO
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SCHEDULE 6B(4)(i)(b)
SCHEDULED RDC SALES
PROPERTY TYPE ADDRESS
-------- ---- -------
Allentown Distribution Center 0000 Xxxxxxxxx Xx
Xxxxxxxxxxx, XX 00000
Atlanta Distribution Center 0000 Xxxxxxxxx Xx
Xxxxxxxxx, XX 00000
Corsicana Distribution Center 0000 Xxxx Xxxxx
Xxxxxxx 00
Xxxxxxxxx, XX 00000
Kansas City Distribution Center 00000 XX Xxxxxxx 00
Xxxxxx Xxxx, XX 00000
Kingman Distribution Center 0000 Xxxxxx Xxxxxxx Xx
Xxxxxxx, XX 00000
Springfield Distribution Center 0000 Xxxxxxx Xxx
Xxxxxxxxxxx, XX 00000
Woodland Distribution Center 000 X. Xxxxxxx Xxx
Xxxxxxxx, XX 00000
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