EXHIBIT 10.4
CREDIT AGREEMENT
Dated as of May 6, 2003,
as amended and restated as of
October 7, 2004
among
KMART CORPORATION,
as Borrower,
THE OTHER CREDIT PARTIES SIGNATORY HERETO,
as Credit Parties,
THE LENDERS SIGNATORY HERETO
FROM TIME TO TIME,
as Lenders,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Administrative Agent, Co-Collateral Agent and Lender,
GECC CAPITAL MARKETS GROUP, INC.,
as Co-Lead Arranger and Co-Book Runner,
FLEET RETAIL FINANCE INC.,
as Syndication Agent, Co-Collateral Agent and Lender,
FLEET SECURITIES, INC.,
as Co-Lead Arranger and Co-Book Runner,
GMAC COMMERCIAL FINANCE LLC,
as Co-Documentation Agent,
and
XXXXX FARGO FOOTHILL, LLC
(f/k/a FOOTHILL CAPITAL CORP.),
as Co-Documentation Agent
TABLE OF CONTENTS
PAGE
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1. AMOUNT AND TERMS OF CREDIT.......................................................................... 1
1.1 Credit Facilities............................................................................. 1
1.2 Letters of Credit............................................................................. 5
1.3 Prepayments................................................................................... 5
1.4 Use of Proceeds............................................................................... 6
1.5 Interest and Applicable Margins............................................................... 6
1.6 Intentionally Omitted......................................................................... 9
1.7 Imposition of Reserves, etc................................................................... 9
1.8 Cash Management Systems....................................................................... 9
1.9 Fees.......................................................................................... 9
1.10 Receipt of Payments........................................................................... 11
1.11 Application and Allocation of Payments........................................................ 11
1.12 Loan Account and Accounting................................................................... 12
1.13 Indemnity..................................................................................... 13
1.14 Access........................................................................................ 14
1.15 Taxes......................................................................................... 14
1.16 Capital Adequacy; Increased Costs; Illegality................................................. 16
1.17 Change of Lending Office...................................................................... 18
1.18 Single Loan................................................................................... 18
2. CONDITIONS PRECEDENT................................................................................ 18
2.1 Conditions to the Effective Date.............................................................. 18
2.2 Further Conditions to Each Loan............................................................... 18
3. REPRESENTATIONS AND WARRANTIES...................................................................... 19
3.1 Corporate Existence; Compliance with Law...................................................... 19
3.2 Executive Offices, Collateral Locations, FEIN................................................. 20
3.3 Corporate Power, Authorization, Enforceable Obligations....................................... 20
3.4 Financial Statements and Projections.......................................................... 20
3.5 Material Adverse Effect....................................................................... 21
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TABLE OF CONTENTS
(CONTINUED)
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3.6 Ownership of Property; Liens.................................................................. 21
3.7 Labor Matters................................................................................. 22
3.8 Ventures and Subsidiaries; Outstanding Stock and Indebtedness................................. 22
3.9 Government Regulation......................................................................... 23
3.10 Margin Regulations............................................................................ 23
3.11 Taxes......................................................................................... 23
3.12 ERISA......................................................................................... 24
3.13 No Litigation................................................................................. 25
3.14 Brokers....................................................................................... 25
3.15 Intellectual Property......................................................................... 25
3.16 Full Disclosure............................................................................... 26
3.17 Environmental Matters......................................................................... 26
3.18 Insurance..................................................................................... 27
3.19 Deposit and Loan Proceeds Accounts............................................................ 27
3.20 Vendor and Trade Relations.................................................................... 27
3.21 Solvency...................................................................................... 27
3.22 Status of Holdings............................................................................ 28
3.23 Subordinated Debt............................................................................. 28
3.24 Obligations of Non-Credit Parties............................................................. 28
4. FINANCIAL STATEMENTS AND INFORMATION................................................................ 28
4.1 Reports and Notices........................................................................... 28
4.2 Communication with Accountants................................................................ 28
4.3 Collateral Monitoring and Review.............................................................. 28
5. AFFIRMATIVE COVENANTS............................................................................... 29
5.1 Maintenance of Existence and Conduct of Business.............................................. 29
5.2 Payment of Charges............................................................................ 29
5.3 Books and Records............................................................................. 30
5.4 Insurance; Damage to or Destruction of Collateral............................................. 30
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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5.5 Compliance with Laws.......................................................................... 32
5.6 Supplemental Disclosure....................................................................... 32
5.7 Intellectual Property......................................................................... 32
5.8 Environmental Matters......................................................................... 33
5.9 Landlords' Agreements, Mortgagee Agreements, Bailee Letters and Real Estate Purchases......... 34
5.10 Further Assurances............................................................................ 34
5.11 Compliance with Material Agreements........................................................... 35
5.12 Letters of Direction.......................................................................... 35
5.13 ERISA......................................................................................... 35
5.14 Disbursement of Third Party Funds............................................................. 35
5.15 Post-Closing Items............................................................................ 35
6. NEGATIVE COVENANTS.................................................................................. 36
6.1 Mergers....................................................................................... 36
6.2 Investments; Loans and Advances............................................................... 36
6.3 Indebtedness.................................................................................. 39
6.4 Employee Loans and Affiliate Transactions..................................................... 41
6.5 Capital Structure and Business................................................................ 42
6.6 Guaranteed Indebtedness....................................................................... 42
6.7 Liens......................................................................................... 43
6.8 Sale of Stock and Assets...................................................................... 43
6.9 ERISA......................................................................................... 46
6.10 Financial Covenants........................................................................... 47
6.11 Hazardous Materials........................................................................... 47
6.12 Sale-Leasebacks............................................................................... 47
6.13 Restricted Payments........................................................................... 47
6.14 Change of Corporate Name or Location; Change of Fiscal Year................................... 49
6.15 No Impairment of Intercompany Transfers....................................................... 49
6.16 Changes Relating to Subordinated Debt; Material Contracts..................................... 49
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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6.17 Holdings...................................................................................... 50
6.18 No Speculative Transactions................................................................... 50
7. TERM................................................................................................ 50
7.1 Termination................................................................................... 50
7.2 Survival of Obligations Upon Termination of Financing Arrangements............................ 50
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES.............................................................. 50
8.1 Events of Default............................................................................. 50
8.2 Remedies...................................................................................... 53
8.3 Waivers by Credit Parties..................................................................... 53
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT................................................. 54
9.1 Assignment and Participations................................................................. 54
9.2 Appointment of Administrative Agent........................................................... 57
9.3 Administrative Agent's Reliance, Etc.......................................................... 58
9.4 GE Capital and Affiliates..................................................................... 58
9.5 Lender Credit Decision........................................................................ 58
9.6 Indemnification............................................................................... 59
9.7 Successor Administrative Agent................................................................ 59
9.8 Setoff and Sharing of Payments................................................................ 60
9.9 Advances; Payments; Non-Funding Lenders; Information; Actions in Concert...................... 61
10. SUCCESSORS AND ASSIGNS.............................................................................. 63
10.1 Successors and Assigns........................................................................ 63
11. MISCELLANEOUS....................................................................................... 63
11.1 Complete Agreement; Modification of Agreement................................................. 63
11.2 Amendments and Waivers........................................................................ 65
11.3 Fees and Expenses............................................................................. 67
11.4 No Waiver..................................................................................... 68
11.5 Remedies...................................................................................... 68
11.6 Severability.................................................................................. 68
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TABLE OF CONTENTS
(CONTINUED)
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11.7 Conflict of Terms............................................................................. 69
11.8 Confidentiality............................................................................... 69
11.9 GOVERNING LAW................................................................................. 70
11.10 Notices....................................................................................... 70
11.11 Section Titles................................................................................ 71
11.12 Counterparts.................................................................................. 71
11.13 WAIVER OF JURY TRIAL.......................................................................... 71
11.14 Press Releases and Related Matters............................................................ 71
11.15 Reinstatement................................................................................. 72
11.16 Advice of Counsel............................................................................. 72
11.17 No Strict Construction........................................................................ 72
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INDEX OF APPENDICES
Annex A (Recitals) - Definitions
Annex B (Section 1.2) - Letters of Credit
Annex C (Section 1.8) - Cash Management System
Annex D (Section 2.1(a)) - Closing Checklist
Annex E (Section 4.1(a)) - Financial Statements and
Projections -- Reporting
Annex F (Section 4.1(b)) - Collateral Reports
Annex G (Section 6.10) - Financial Covenants
Annex H (Section 9.9(a)) - Lenders' Wire Transfer Information
Annex I (Section 11.10) - Notice Addresses
Annex J (from Annex A -
Commitments definition) - Commitments as of Closing Date
Annex K (Section 1.1) - Reserves/Other Changes to the Borrowing Base
Exhibit 1.1(a)(i) - Form of Notice of Revolving Credit Advance
Exhibit 1.1(a)(ii) - Form of Revolving Note
Exhibit 1.1(c)(ii) - Form of Swing Line Note
Exhibit 3.4(b) - Business Plan
Exhibit 3.19 - Form of Letter of Direction
Exhibit 1.5(e) - Form of Notice of Conversion/Continuation
Exhibit 4.1(b) - Form of Borrowing Base Certificate
Exhibit 9.1(a) - Form of Assignment Agreement
Exhibit B-1 - Application for Standby Letter of Credit
Exhibit B-2 - Application for Documentary Letter of Credit
Exhibit C-1 - Form of Control Agreement
Exhibit C-2 - Form of Investment Account Control Agreement
Exhibit D-2 - Form of ESL Notes
Exhibit D-2 - Form of ESL Guarantee
Exhibit E-1 - Form of Plan of Reorganization
Exhibit E-2 - Form of Disclosure Statement
Exhibit E-3 - Form of Confirmation Order
Exhibit F-1 - Form of Landlord Waiver
Exhibit F-2 - Form of Bailee/Warehouseman Waiver
Exhibit G-1 - Form of Supplement to Subsidiary Guaranty
Exhibit G-2 - Form of Supplement to Security Agreement
Schedule 1.1 - Agent's Representatives
Schedule 1.2 - Existing Letters of Credit
Disclosure Schedule 1.4 - Sources and Uses; Funds Flow Memorandum
Disclosure Schedule 3.2 - Executive Offices, Collateral Locations, FEIN
Disclosure Schedule 3.4(a) - Financial Statements
Disclosure Schedule 3.4(b) - Projections
Disclosure Schedule 3.6 - Real Estate and Leases
Disclosure Schedule 3.7 - Labor Matters
Disclosure Schedule 3.8 - Ventures, Subsidiaries and Affiliates;
Outstanding Stock
Disclosure Schedule 3.11 - Tax Matters
Disclosure Schedule 3.12 - ERISA Plans
Disclosure Schedule 3.14 - Brokers
Disclosure Schedule 3.15 - Intellectual Property
Disclosure Schedule 3.18 - Insurance
Disclosure Schedule 3.19 - Deposit and Loan Proceeds Accounts
Disclosure Schedule 3.20 - Top 10 Vendors
Disclosure Schedule 5.1 - Trade Names
Disclosure Schedule 5.15(b) - Franchise Tax Jurisdictions
Disclosure Schedule 6.2 - Investments
Disclosure Schedule 6.3 - Indebtedness
Disclosure Schedule 6.4(a) - Transactions with Affiliates
Disclosure Schedule 6.6 - Guaranteed Indebtedness
Disclosure Schedule 6.7 - Existing Liens
Disclosure Schedule 6.8 - Stores and DCs to be Closed
This CREDIT AGREEMENT (this "Agreement"), dated as of May 6, 2003,
as amended and restated as of October 7, 2004 among KMART CORPORATION, a
Michigan corporation ("Borrower"); the other Credit Parties signatory hereto;
GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation (in its individual
capacity, "GE Capital"), for itself, as Lender, and as Administrative Agent for
Lenders, and the other Lenders signatory hereto from time to time.
RECITALS
WHEREAS, Borrower, Administrative Agent and Lenders are parties to
that certain Credit Agreement dated as of May 6, 2003 (as amended and in effect
immediately prior to the effectiveness of this Agreement, the "Existing Credit
Agreement");
WHEREAS, in order to terminate the Synthetic Loan Commitments under
the Existing Credit Agreement and refund the Synthetic Loan Credit Linked
Deposits, Borrower has requested that Lenders amend and restate the Existing
Credit Agreement in its entirety;
WHEREAS, it is the intention of the parties hereto that (a) this
Agreement not constitute a novation of the obligations and liabilities existing
under the Existing Credit Agreement or evidence the payment of all or any of
such obligations, (b) this Agreement amend and restate in its entirety the
Existing Credit Agreement, (c) all obligations of the Credit Parties under the
Loan Documents, all guaranties and all Liens created under the Loan Documents
continue and not be cancelled or discharged and (d) from and after the Effective
Date, the Existing Credit Agreement be of no further force or effect except as
to evidence the incurrence of the "Obligations" under and as defined therein,
the representations and warranties made and the actions or omissions performed
or required to be performed thereunder, in each case prior to the Effective
Date; and
WHEREAS, capitalized terms used in this Agreement shall have the
meanings ascribed to them in Annex A and, for purposes of this Agreement and the
other Loan Documents, the rules of construction set forth in Annex A shall
govern. All Annexes, Disclosure Schedules, Exhibits and other attachments
(collectively, "Appendices") hereto, or expressly identified to this Agreement,
are incorporated herein by reference, and taken together with this Agreement,
shall constitute but a single agreement. These Recitals shall be construed as
part of the Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, and for other good and valuable consideration,
the parties hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1 Credit Facilities.
(a) Revolving Credit Facility.
(i) Subject to the terms and conditions hereof, each
Revolving Lender agrees to make available to Borrower from time to time until
the Commitment Termination Date its Pro Rata Share of advances (each, a
"Revolving Credit Advance"). The Pro Rata Share of the
Revolving Loan of any Revolving Lender shall not at any time exceed its separate
Revolving Loan Commitment. The obligations of each Revolving Lender hereunder
shall be several and not joint. Until the Commitment Termination Date, Borrower
may from time to time borrow, repay and reborrow under this Section 1.1(a);
provided, that the amount of any Revolving Credit Advance to be made at any time
shall not exceed, after giving effect to the use of proceeds thereof, Borrowing
Availability at such time. Each Revolving Credit Advance shall be (A) in an
aggregate principal amount not less than $1,000,000 and multiples of $100,000 in
excess thereof (or such other amount as may be required to repay any Swing Line
Loan required to be repaid pursuant to the terms hereof) and (B) made on notice
by Borrower to one of the representatives of Administrative Agent identified in
Schedule 1.1 at the address specified therein. Any such notice must be given no
later than (A) noon (New York time) on the Business Day of the proposed
Revolving Credit Advance, in the case of an Index Rate Loan, or (B) noon (New
York time) on the date which is three (3) Business Days prior to the proposed
Revolving Credit Advance, in the case of a LIBOR Loan. Each such notice (a
"Notice of Revolving Credit Advance") must be given in writing (by telecopy or
overnight courier) substantially in the form of Exhibit 1.1(a)(i), and shall
include the information required in such Exhibit. If Borrower desires to have
the Revolving Credit Advances bear interest by reference to a LIBOR Rate,
Borrower must comply with Section 1.5(e). Any voluntary prepayments of Revolving
Credit Advances shall be in an aggregate principal amount not less than
$1,000,000 and multiples of $100,000 in excess thereof.
(ii) Except as provided in Section 1.12, Borrower shall
execute and deliver to each Revolving Lender a promissory note to evidence the
Revolving Loan Commitment of that Revolving Lender. Each promissory note shall
be in the principal amount of the Revolving Loan Commitment of the applicable
Revolving Lender and substantially in the form of Exhibit 1.1(a)(ii) (each a
"Revolving Note" and, collectively, the "Revolving Notes"). Each Revolving Note
shall represent the obligation of Borrower to pay the amount of the applicable
Revolving Lender's Revolving Loan Commitment or, if less, such Revolving
Lender's Pro Rata Share (subject to Section 9.9) of the aggregate unpaid
principal amount of the Revolving Loan made to Borrower together with interest
thereon as prescribed in Section 1.5. The entire unpaid balance of the Revolving
Loan and all other non-contingent Obligations shall be immediately due and
payable in full in immediately available funds on the Commitment Termination
Date.
(iii) Any provision of this Agreement to the contrary
notwithstanding, at the request of Borrower, in its discretion Administrative
Agent may (but shall have absolutely no obligation to), make Revolving Credit
Advances to Borrower on behalf of Revolving Lenders in amounts that cause the
outstanding balance of the aggregate Revolving Loan to exceed the Borrowing Base
(less the Swing Line Loan and the amount set forth in paragraph (c) of Annex G)
(any such excess Revolving Credit Advances are herein referred to collectively
as "Overadvances"); provided that (A) no such event or occurrence shall cause or
constitute a waiver of Administrative Agent's, the Swing Line Lender's or
Revolving Lenders' right to refuse to make any further Overadvances, Swing Line
Advances or Revolving Credit Advances, or incur any Letter of Credit
Obligations, as the case may be, at any time that an Overadvance exists, (B) no
Overadvance shall result in a Default or Event of Default based on Borrower's
failure to comply with Section 1.3(b) for so long as Administrative Agent
permits such Overadvance to remain outstanding, but solely with respect to the
amount of such Overadvance
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and (C) such Overadvances shall only be made to protect and preserve the
Collateral. In addition, Overadvances may be made even if the conditions to
lending set forth in Section 2 have not been met. All Overadvances shall
constitute Index Rate Loans, shall bear interest at the Default Rate and shall
be payable on demand. The authority of Administrative Agent to make Overadvances
is limited to an aggregate amount not to exceed $50,000,000 at any time, shall
not cause the Loans to exceed the Maximum Amount, may be revoked prospectively
by a written notice to Administrative Agent signed by the Requisite Lenders and
may only be advanced and outstanding for sixty (60) days in each one hundred
twenty (120) day period occurring through the Commitment Termination Date.
(b) Intentionally Omitted.
(c) Swing Line Facility.
(i) Administrative Agent shall notify the Swing Line Lender
upon Administrative Agent's receipt of any Notice of Revolving Credit Advance.
Subject to the terms and conditions hereof, the Swing Line Lender may, in its
discretion, make available from time to time until the Commitment Termination
Date advances (each, a "Swing Line Advance") in accordance with any such notice.
The provisions of this Section 1.1(c) shall not relieve Revolving Lenders of
their obligations to make Revolving Credit Advances under Section 1.1(a);
provided that if the Swing Line Lender makes a Swing Line Advance pursuant to
any such notice, such Swing Line Advance shall be in lieu of any Revolving
Credit Advance that otherwise may be made by Revolving Lenders pursuant to such
notice. The aggregate amount of Swing Line Advances outstanding shall not exceed
at any time the lesser of (A) the Swing Line Commitment and (B) the lesser of
(1) the Maximum Amount less the outstanding balance of the Loans at such time
and (2) except for Overadvances, the Borrowing Base less the outstanding balance
of the Loans at such time ("Swing Line Availability"). Until the Commitment
Termination Date, Borrower may from time to time borrow, repay and reborrow
under this Section 1.1(c). Each Swing Line Advance shall be made pursuant to a
Notice of Revolving Credit Advance delivered by Borrower to Administrative Agent
in accordance with Section 1.1(a). Any such notice must be given no later than
1:00 p.m. (New York time) on the Business Day of the proposed Swing Line
Advance. Notwithstanding any other provision of this Agreement or the other
Credit Loan Documents, the Swing Line Loan shall constitute an Index Rate Loan.
Borrower shall repay the aggregate outstanding principal amount of the Swing
Line Loan upon demand therefor by Administrative Agent; provided that
Administrative Agent shall make reasonable efforts, so long as no Event of
Default then exists, to manage any such demand for payment to enable Borrower to
refinance such Swing Line Loan with the proceeds of a Revolving Credit Advance;
provided further that if an Event of Default then exists and Borrower does not
have sufficient cash or Cash Equivalents to repay such Swing Line Loan, then no
Cash Dominion Event shall occur solely as a result of the failure to repay such
Swing Line Loan.
(ii) Borrower shall execute and deliver to the Swing Line
Lender a promissory note to evidence the Swing Line Commitment. Such note shall
be in the principal amount of the Swing Line Commitment of the Swing Line
Lender, dated the Closing Date and substantially in the form of Exhibit
1.1(c)(ii) (the "Swing Line Note"). The Swing Line Note shall represent the
obligation of Borrower to pay the amount of the Swing Line Commitment or, if
less, the aggregate unpaid principal amount of all Swing Line Advances made to
Borrower
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together with interest thereon as prescribed in Section 1.5. The entire unpaid
balance of the Swing Line Loan and all other non-contingent Obligations shall be
immediately due and payable in full in immediately available funds on the
Commitment Termination Date if not sooner paid in full.
(iii) The Swing Line Lender, at any time and from time to time
no less frequently than once weekly, shall on behalf of Borrower (and Borrower
hereby irrevocably authorizes the Swing Line Lender to so act on its behalf)
request each Revolving Lender (including the Swing Line Lender) to make a
Revolving Credit Advance to Borrower (which shall be an Index Rate Loan) in an
amount equal to that Revolving Lender's Pro Rata Share of the principal amount
of the Swing Line Loan (the "Refunded Swing Line Loan") outstanding on the date
such notice is given. Unless any of the events described in Sections 8.1(h) or
8.1(i) has occurred (in which event the procedures of Section 1.1(c)(iv) shall
apply) and regardless of whether the conditions precedent set forth in this
Agreement to the making of a Revolving Credit Advance are then satisfied, each
Revolving Lender shall disburse directly to Administrative Agent, on behalf of
the Swing Line Lender, its Pro Rata Share of a Revolving Credit Advance prior to
3:00 p.m. (New York time), in immediately available funds on the Business Day
next succeeding the date that notice is given. The proceeds of those Revolving
Credit Advances shall be immediately paid to the Swing Line Lender and applied
to repay the Refunded Swing Line Loan.
(iv) If, prior to refunding a Swing Line Loan with a
Revolving Credit Advance pursuant to Section 1.1(c)(iii), one of the events
described in Sections 8.1(h) or 8.1(i) has occurred, then, subject to the
provisions of Section 1.1(c)(v) below, each Revolving Lender shall, on the date
such Revolving Credit Advance was to have been made for the benefit of Borrower,
purchase from the Swing Line Lender an undivided participation interest in the
Swing Line Loan in an amount equal to its Pro Rata Share of such Swing Line
Loan. Upon request, each Revolving Lender shall promptly transfer to the Swing
Line Lender, in immediately available funds, the amount of its participation
interest.
(v) Each Revolving Lender's obligation to make Revolving
Credit Advances in accordance with Section 1.1(c)(iii) and to purchase
participation interests in accordance with Section 1.1(c)(iv) shall be absolute
and unconditional and shall not be affected by any circumstance, including (A)
any setoff, counterclaim, recoupment, defense or other right that such Revolving
Lender may have against the Swing Line Lender, Borrower or any other Person for
any reason whatsoever, (B) the occurrence or continuance of any Default or Event
of Default, (C) any inability of Borrower to satisfy the conditions precedent to
borrowing set forth in this Agreement at any time or (D) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.
If any Revolving Lender does not make available to Administrative Agent or the
Swing Line Lender, as applicable, the amount required pursuant to Sections
1.1(c)(iii) or 1.1(c)(iv), as the case may be, the Swing Line Lender shall be
entitled to recover such amount on demand from such Revolving Lender or
Borrower, together with interest thereon for each day from the date of
nonpayment until such amount is paid in full at the Federal Funds Rate for the
first two (2) Business Days and at the Index Rate thereafter.
(d) Reliance on Notices. Administrative Agent shall be entitled to
rely upon, and shall be fully protected in relying upon, any Notice of Revolving
Credit Advance, Notice of
4
Conversion/Continuation or similar notice believed by Administrative Agent to be
genuine. Administrative Agent may assume that each Person executing and
delivering any notice in accordance herewith was duly authorized, unless the
responsible individual acting thereon for Administrative Agent has actual
knowledge to the contrary.
1.2 Letters of Credit. Subject to and in accordance with the terms and
conditions contained herein and in Annex B, Borrower shall have the right to
request, and Lenders agree to incur, or purchase participations in, Letter of
Credit Obligations in respect of Borrower and the other Credit Parties.
1.3 Prepayments.
(a) Voluntary Reductions in Revolving Loan Commitments. Borrower
may at any time and from time to time on at least five (5) Business Days' prior
written notice to Administrative Agent permanently reduce (but not terminate)
the Revolving Loan Commitment without penalty or premium (except as provided in
Section 1.9(d) and Section 1.13(b) to the extent applicable); provided that (A)
any such reductions shall be in a minimum amount of $50,000,000 and integral
multiples of $25,000,000 in excess of such amount, (B) the Revolving Loan
Commitment shall not be reduced to an amount less than the amount of the
Revolving Loan and Swing Line Loan then outstanding and (C) after giving effect
to such reductions, Borrower shall comply with Section 1.3(b). In addition,
Borrower may at any time on at least five (5) Business Days' prior written
notice to Administrative Agent (or such shorter period as Administrative Agent
may agree to) terminate the Commitments without penalty or premium (except as
provided in Section 1.9(d) and Section 1.13(b) to the extent applicable);
provided that upon such termination all Loans and other Obligations shall be
immediately due and payable in full and all Letter of Credit Obligations shall
be cash collateralized or otherwise satisfied in accordance with Annex B hereto.
Any voluntary reduction or termination of the Revolving Loan Commitment must be
accompanied by payment of the accrued but unpaid Unused Line Fee on the amount
of the Revolving Loan Commitment so reduced or terminated, as applicable,
through the date of such termination or reduction, as applicable, plus the
payment of any LIBOR funding breakage costs in accordance with Section 1.13(b)
and, if applicable, the fee payable in accordance with Section 1.9(d). Upon any
such reduction of the Revolving Loan Commitment, Borrower's right to request
Revolving Credit Advances or Swing Line Advances, or to request that Letter of
Credit Obligations be incurred on its behalf or on behalf of any other Credit
Party shall simultaneously be permanently reduced. A permanent reduction of the
Revolving Loan Commitment shall not require a corresponding pro rata reduction
in the L/C Sublimit; provided that if the Revolving Loan Commitment is reduced
to an amount less than the L/C Sublimit, then the L/C Sublimit shall be reduced
to an amount equal to (or, at Borrower's option, less than) the Revolving Loan
Commitment. Upon any termination of the Commitments, Borrower's right to request
Revolving Credit Advances or Swing Line Advances, or to request that Letter of
Credit Obligations be incurred on its behalf (or on behalf of any other Credit
Party) shall be simultaneously terminated.
(b) Mandatory Prepayments. If at any time the aggregate
outstanding balances of the Loans exceed the lesser of (i) the Maximum Amount
and (ii) the Borrowing Base (any such excess amount, the "Overage"), Borrower
shall immediately repay (to the extent required to eliminate the Overage) first,
the aggregate outstanding Swing Line Advances and
5
second, the aggregate outstanding Revolving Credit Advances. If any such Overage
remains after repayment in full of the aggregate outstanding Swing Line Advances
and Revolving Credit Advances, Borrower shall provide cash collateral for the
Letter of Credit Obligations in the manner set forth in Annex B to the extent
required to eliminate such Overage and, in the absence of a Default or Event of
Default, any such cash collateral in excess of the amount required pursuant to
Annex B to eliminate the Overage shall be promptly returned to Borrower on a
weekly basis. Notwithstanding the foregoing, any Overadvance made pursuant to
Section 1.1(a)(iii) shall be repaid in accordance with Section 1.1(a)(iii).
(c) Reduction in Commitments for Dispositions under Section
6.8(i). Upon the earlier to occur of (i) the date upon which the exception
provided by Section 6.8(g) is no longer available and (ii) the date upon which
the five hundredth (500th) Store is sold under Section 6.8, Borrower shall
permanently reduce the Commitments, without premium or penalty, to the extent,
and in the amounts, required pursuant to Section 6.8(i)(Y); provided that after
giving effect to such reductions, Borrower shall comply with Section 1.3(b).
1.4 Use of Proceeds. Borrower (a) may utilize the proceeds of the Loans
as of the Closing Date solely for the following purposes: (i) to repay certain
post-petition secured Indebtedness on the Plan Effective Date, (ii) to otherwise
enable Borrower to consummate the Plan of Reorganization (excluding payments of
pre-petition Claims in cash other than payments (A)(1) to a class of convenience
Claims in an amount not to exceed $20,000,000 in the aggregate and (2) in
respect of any pre-petition letters of credit that have not been replaced or
backstopped with a Letter of Credit in an amount not to exceed $16,500,000 in
the aggregate; provided that in no event shall payments permitted under this
clause (A) exceed $30,000,000 in the aggregate, (B) in respect of pre-petition
Claims and cure payments in respect of assumed executory contracts in an amount
not to exceed $80,000,000 and (C) in respect of pre-petition Claims otherwise
entitled to payment in cash or priority pursuant to the Bankruptcy Code or prior
Bankruptcy Court order, in each case, to the extent reflected in the Business
Plan) and (iii) to fund certain fees and expenses associated with this Agreement
and (b) may, on or after the Closing Date, utilize the proceeds of the Loans
solely for (i) Borrower's and the other Credit Parties' working capital
requirements, (ii) Borrower's and the other Credit Parties' general corporate
purposes (including, without limitation, obligations incurred after the filing
of the Chapter 11 Cases and Capital Expenditures permitted hereunder) and (iii)
other purposes permitted hereunder; provided that in no event may Borrower
utilize the proceeds of the Loans to make Investments pursuant to clauses (j),
(k) or (l) of Section 6.2. Disclosure Schedule (1.4) contains a description of
Borrower's sources and uses of funds as of the Closing Date, including Loans and
Letter of Credit Obligations to be made or incurred on that date, and a funds
flow memorandum detailing how funds from each source are to be transferred to
particular uses.
1.5 Interest and Applicable Margins.
(a) Borrower shall pay interest to Administrative Agent, for the
ratable benefit of Lenders in accordance with the various Loans being made by
each Lender, in arrears on each applicable Interest Payment Date, at the
following rates: (i) with respect to the Revolving Credit Advances, the Index
Rate plus the Applicable Revolver Index Margin per annum or, at the election of
Borrower, the applicable LIBOR Rate plus the Applicable Revolver LIBOR Margin
6
per annum and (ii) with respect to the Swing Line Loan, the Index Rate plus the
Applicable Revolver Index Margin per annum.
During the period from the Second Amendment Effective Date through
the Fiscal Quarter ending on or about July 31, 2004, the Applicable Margins
shall be based on Level II (regardless of EBITDA during such period).
Thereafter, the Applicable Margins may be adjusted (up or down) by reference to
each of the following grids:
LEVEL OF
IF LTM EBITDA IS: APPLICABLE MARGINS:
------------------------------------ -------------------
< $300,000,000 Level I
>or= $300,000,000 but < $500,000,000 Level II
>or= $500,000,000 but < $600,000,000 Level III
>or= $600,000,000 Level IV
APPLICABLE MARGINS
LEVEL I LEVEL II LEVEL III LEVEL IV
------- -------- --------- --------
Applicable Revolver Index Margin 1.75% 1.50% 1.25% 1.00%
Applicable Revolver LIBOR Margin 2.75% 2.50% 2.25% 2.00%
Applicable Revolving Standby L/C Margin 2.75% 2.50% 2.25% 2.00%
Applicable Revolving Documentary L/C Margin 1.50% 1.25% 1.25% 1.25%
Any such adjustments in the Applicable Margins shall be implemented
quarterly on a prospective basis on the fifth (5th) day following the delivery
of Financial Statements in accordance with paragraphs (b) or (d), as applicable,
of Annex E evidencing the need for an adjustment. Concurrently with the delivery
of those Financial Statements, Borrower shall deliver to Administrative Agent
and Lenders a certificate, signed by a Financial Officer, setting forth in
reasonable detail the basis for the continuance of, or any change in, the
Applicable Margins (the "LTM EBITDA Certificate"). Failure to timely deliver
such Financial Statements shall, in addition to any other remedy provided for in
this Agreement, result in an increase in the Applicable Margins to the highest
level set forth in the foregoing grid, until the fifth (5th) day following the
delivery of those Financial Statements demonstrating that such an increase is
not required. If an Event of Default has occurred and is continuing at the time
any reduction in the Applicable Margins is to be implemented, that reduction
shall be deferred until the third (3rd) Business Day following the date on which
such Event of Default is waived or ceases to continue, as the case may be.
(b) If any payment hereunder becomes due and payable on a day
other than a Business Day, the maturity thereof will be extended to the next
succeeding Business Day (except as set forth in the definition of LIBOR Period)
and, with respect to payments of principal, interest thereon shall be payable at
the then applicable rate during such extension.
7
(c) All computations of Fees calculated on a per annum basis and
interest based on the LIBOR Rate or calculated by reference to clause (b) of the
definition of Index Rate shall be made by Administrative Agent on the basis of a
360-day year, in each case for the actual number of days occurring in the period
for which such interest and Fees are payable. If the Index Rate is calculated by
reference to clause (a) of the definition thereof, then computation of such
interest shall be made by Administrative Agent on the basis of a 365/6-day year,
as applicable, for the actual number of days occurring in the period for which
such interest is payable. The Index Rate is a floating rate determined for each
day. Each determination by Administrative Agent of interest rates and Fees
hereunder shall be conclusive, final and binding on Borrower, absent manifest
error.
(d) So long as either (i) an Event of Default has occurred and is
continuing under Section 8.1(a), (h) or (i), or (ii) so long as any other Event
of Default has occurred and is continuing and, in the case of this clause (ii),
at the election of Administrative Agent (or upon the written request of the
Majority Lenders) confirmed by written notice from Administrative Agent to
Borrower, the interest rates applicable to the Loans and the Letter of Credit
Fees shall be increased by two percentage points (2%) per annum above the rates
of interest or the rate of such Fees otherwise applicable hereunder (the
"Default Rate"), and all outstanding Obligations shall bear interest at the
Default Rate applicable to such Obligations. Interest and Letter of Credit Fees
at the Default Rate shall accrue from the initial date of such Event of Default
until that Event of Default is waived or ceases to continue, as the case may be,
and shall be payable upon demand.
(e) So long as no Event of Default has occurred and is continuing,
Borrower shall have the option to (i) request that any Revolving Credit Advance
be made as a LIBOR Loan, (ii) convert at any time all or any part of outstanding
Revolving Credit Advances from Index Rate Loans to LIBOR Loans, or (iii)
continue all or any portion of any Revolving Loan as a LIBOR Loan upon the
expiration of the applicable LIBOR Period and the succeeding LIBOR Period of
that continued Revolving Loan shall commence on the last day of the LIBOR Period
of the Loan to be continued. Borrower shall have the option to convert any LIBOR
Loan to an Index Rate Loan, subject to payment of LIBOR breakage costs in
accordance with Section 1.13(b) if such conversion is made prior to the
expiration of the LIBOR Period applicable thereto, irrespective of whether an
Event of Default has occurred. Any Revolving Credit Advances or group of
Revolving Credit Advances having the same proposed LIBOR Period to be made or
continued as, or converted into, a LIBOR Loan must be in a minimum amount of
$5,000,000 and integral multiples of $1,000,000 in excess of such amount. Any
such election must be made by noon (New York time) on the third (3rd) Business
Day prior to (A) the date of any proposed Revolving Credit Advance which is to
bear interest at the LIBOR Rate, (B) the end of each LIBOR Period with respect
to any LIBOR Loans to be continued as such, or (C) the date on which Borrower
wishes to convert any Index Rate Loan to a LIBOR Loan for a LIBOR Period
designated by Borrower in such election. If no election is received with respect
to a LIBOR Loan by noon (New York time) on the third (3rd) Business Day prior to
the end of the LIBOR Period with respect thereto (or if an Event of Default has
occurred and is continuing), that LIBOR Loan shall be converted to an Index Rate
Loan at the end of its LIBOR Period. Borrower must make such election by notice
to Administrative Agent in writing, including by telecopy or overnight courier.
In the case of any conversion or continuation, such election must be made
pursuant to a written notice (a "Notice of Conversion/Continuation") in the form
of
8
Exhibit 1.5(e). In furtherance of the foregoing, to the extent that any Loans
are made as or converted into LIBOR Loans on or after the Closing Date but prior
to the earlier of (i) forty-five (45) days after the Closing Date and (ii) the
completion of primary syndication as determined by Administrative Agent,
Borrower acknowledges and agrees that to the extent additional Lenders become
parties to this Agreement during such period Borrower will, at the request of
Administrative Agent, be required to repay any such outstanding LIBOR Loans
prior to the end of the related Interest Period (which may be repaid with the
proceeds of a new Revolving Credit Advance) and will pay any associated breakage
costs as provided in Section 1.13(b).
(f) Notwithstanding anything to the contrary set forth in this
Section 1.5, if a court of competent jurisdiction determines in a final order
that the rate of interest payable hereunder exceeds the highest rate of interest
permissible under law (the "Maximum Lawful Rate"), then so long as the Maximum
Lawful Rate would be so exceeded, the rate of interest payable hereunder shall
be equal to the Maximum Lawful Rate and any amounts received by any Lender
hereunder in excess of the Maximum Lawful Rate shall be applied to the reduction
of the principal amount of the Loans on a pro rata basis and not refunded to
Borrower; provided, however, that if at any time thereafter the rate of interest
payable hereunder is less than the Maximum Lawful Rate, Borrower shall continue
to pay interest hereunder at the Maximum Lawful Rate until such time as the
total interest received by Administrative Agent, on behalf of Lenders, is equal
to the total interest that would have been received had the interest rate
payable hereunder been (but for the operation of this paragraph) the interest
rate payable since the Closing Date as otherwise provided in this Agreement. In
no event shall the total interest received by any Lender pursuant to the terms
hereof exceed the amount that such Lender could lawfully have received had the
interest due hereunder been calculated for the full term hereof at the Maximum
Lawful Rate.
1.6 Intentionally Omitted.
1.7 Imposition of Reserves, etc. Administrative Agent shall have the
right, at any time and from time to time after the Closing Date (with the
consent of the respective Lenders required under Section 11.2, if any) to (a)
establish, modify or eliminate Reserves solely in accordance with Annex K and
(b) (i) adjust any of the criteria set forth in the definitions of "Eligible
Inventory Amount" and "Eligible L/C Inventory Amount" or establish new criteria,
and (ii) reduce advance rates, in each of the foregoing cases, either (x) in
Administrative Agent's reasonable and customary credit judgment upon ten (10)
Business Days' notice to Borrower or (y) in Administrative Agent's reasonable
and customary credit judgment without notice if a Trigger Event has occurred.
1.8 Cash Management Systems. On or prior to the Closing Date, the Credit
Parties will establish and will maintain until the Termination Date, the cash
management systems described in Annex C (the "Cash Management Systems").
1.9 Fees.
(a) Borrower shall pay to each of GE Capital, FRFI and BofA,
individually, the Fees specified in the Fee Letter at the times specified for
payment therein.
9
(b) As additional compensation for the Revolving Lenders, Borrower
shall pay to Administrative Agent, for the ratable benefit of such Revolving
Lenders, in arrears, on the first Business Day of each month prior to the
Commitment Termination Date, as required pursuant to Section 1.3(a) and on the
Commitment Termination Date, a Fee for Borrower's non-use of available funds in
an amount equal to the Applicable Unused Line Fee Percentage per annum
multiplied by the difference between (x) the Revolving Maximum Amount (as it may
be reduced from time to time) and (y) the average for the period of the daily
closing balances of the Revolving Loan and the Swing Line Loan outstanding
during the period for which such Fee is due (such fee, the "Unused Line Fee").
During the period from the Second Amendment Effective Date through
the Fiscal Quarter ending on or about July 31, 2004, the Applicable Unused Line
Fee Percentage shall be based on Level I (regardless of EBITDA during such
period). Thereafter, the Applicable Unused Line Fee Percentage may be adjusted
(up or down) by reference to each of the following grids:
LEVEL OF
APPLICABLE UNUSED LINE FEE
IF LTM EBITDA IS: PERCENTAGE:
------------------ --------------------------
or= $500,000,000 Level II
APPLICABLE UNUSED LINE FEE PERCENTAGE
Level I 0.50%
Level II 0.375%
Any such adjustments in the Applicable Unused Line Fee Percentage
shall be implemented quarterly on a prospective basis on the fifth (5th) day
following the delivery of Financial Statements in accordance with paragraphs (b)
or (d), as applicable, of Annex E evidencing the need for an adjustment.
Concurrently with the delivery of those Financial Statements, Borrower shall
deliver to Administrative Agent and Lenders an LTM EBITDA Certificate, setting
forth in reasonable detail the basis for the continuance of, or any change in,
the Applicable Unused Line Fee Percentage. Failure to timely deliver such
Financial Statements shall, in addition to any other remedy provided for in this
Agreement, result in an increase in the Applicable Unused Line Fee Percentage to
the highest level set forth in the foregoing grid, until the fifth (5th) day
following the delivery of those Financial Statements demonstrating that such an
increase is not required. If an Event of Default has occurred and is continuing
at the time any reduction in the Applicable Unused Line Fee Percentage is to be
implemented, that reduction shall be deferred until the third (3rd) Business Day
following the date on which such Event of Default is waived or ceases to
continue, as the case may be.
(c) Borrower shall pay to Administrative Agent, for the ratable
benefit of Lenders, the Letter of Credit Fee as provided in Annex B.
(d) Upon any voluntary reduction or termination, as the case may
be, in the Revolving Loan Commitments pursuant to Section 1.3 after the Second
Amendment Effective
10
Date, Borrower shall pay to Administrative Agent, for the ratable benefit of the
Revolving Lenders, a prepayment penalty in the amount equal to 1.00% of the
amount so reduced or terminated, as the case may be, to the extent it reduces
the total Revolving Loan Commitments to less than $1,000,000,000 and such
reduction or termination, as the case may be, occurs after July 1, 2004 and on
or prior to December 31, 2004.
1.10 Receipt of Payments. Borrower shall make each payment under this
Agreement not later than 2:00 p.m. (New York time) on the day when due in
immediately available funds in Dollars to the Collection Account. For purposes
of computing interest and Fees and determining Borrowing Availability as of any
date, all payments shall be deemed received on the Business Day on which
immediately available funds therefor are received in the Collection Account
prior to 2:00 p.m. New York time. Payments received after 2:00 p.m. New York
time on any Business Day or on a day that is not a Business Day shall be deemed
to have been received on the following Business Day.
1.11 Application and Allocation of Payments.
(a) All payments and prepayments of principal and interest in
respect of the Revolving Loan and Swing Line Loan (except as provided in
Sections 1.13, 1.15 and 1.16) shall be applied ratably to the portion thereof
held by each Revolving Lender as determined by its Pro Rata Share. Except as set
forth below in clauses (i) and (ii) of this Section 1.11(a) or as set forth in
Section 1.3, Borrower shall have the right to direct the application of all
payments made by it toward Revolving Loans, Swing Line Loans, interest, fees,
expenses or any other Obligations. As to any payment the application of which is
not so directed, and as to all payments made when an Event of Default or a Cash
Dominion Event has occurred and is continuing (and, in respect of such Cash
Dominion Event, no corresponding Cash Dominion Termination Event has occurred),
or following the Commitment Termination Date, Borrower hereby irrevocably waives
the right to direct the application of any and all funds on deposit in the
Collection Account, the Cash Collateral Account and/or, in the case of a Cash
Dominion Event or an acceleration of the Obligations, the Concentration Account
or any other proceeds of Collateral and all payments received from or on behalf
of Borrower or any Guarantor, and Borrower hereby irrevocably agrees that
Administrative Agent shall have the exclusive right to apply any and all such
funds on deposit in the Collection Account, the Cash Collateral Account, and/or,
in the case of a Cash Dominion Event or an acceleration of the Obligations, the
Concentration Account or any other proceeds of Collateral and all payments
against the Obligations in the following order: (i) in the event the Obligations
have been accelerated or following the Commitment Termination Date: (A) to Fees
and Administrative Agent's and each Co-Syndication Agent's expenses reimbursable
hereunder, (B) to accrued but unpaid interest on the Swing Line Loan, (C) to
principal payments on the Swing Line Loan until paid in full, (D) pro rata to
accrued but unpaid interest on the Revolving Credit Advances, (E) pro rata to
the outstanding principal amount of the Revolving Loans (and applied, with
respect to the Revolving Loans, ratably between the Revolving Credit Advances
and the cash collateralization of the Letters of Credit in accordance with Annex
B) and to the outstanding Obligations constituting Pari Passu Cash Management
Obligations, (F) to all other Obligations (other than the Cash Management
Obligations) including expenses of Lenders to the extent reimbursable under
Section 11.3, (G) to the Cash Management Banks ratably in an amount not to
exceed the outstanding Obligations constituting Subordinated Cash Management
Obligations and (H) any surplus shall be remitted to Borrower or any other
Person lawfully
11
entitled thereto and (ii) on each Business Day in the event either an Event of
Default has occurred and is continuing or a Cash Dominion Event has occurred
(and no corresponding Cash Dominion Termination Event has occurred), in each
case, other than as described in clause (i) above: (A) to Fees and
Administrative Agent's and each Co-Syndication Agent's expenses reimbursable
hereunder, (B) to accrued but unpaid interest on the Swing Line Loan, (C) to
principal payments on the Swing Line Loan until paid in full, (D) to accrued but
unpaid interest on the Revolving Credit Advances, (E) to the outstanding
principal amount of the Revolving Credit Advances, (F) to the cash
collateralization of the Letters of Credit in accordance with Annex B, (G) to
all other Obligations (other than the Cash Management Obligations) then due and
payable including expenses of Lenders to the extent reimbursable under Section
11.3 and (H) any surplus shall be remitted to Borrower or any other Person
lawfully entitled thereto.
(b) Administrative Agent is authorized to, and at its sole
election may, charge to the Revolving Loan balance on behalf of Borrower and
cause to be paid all Fees, expenses, Charges, reimbursable costs (including
insurance premiums in accordance with Sections 5.4(a) and (b)) and interest and
principal, other than principal of the Revolving Credit Advances, owing by
Borrower under this Agreement or any of the other Credit Loan Documents if and
to the extent Borrower fails to pay promptly any such amounts as and when due,
even if the amount of such charges would exceed Borrowing Availability at such
time, but in no event in an amount in excess of the Overadvance amount permitted
under Section 1.1(a)(iii), provided that after making such election
Administrative Agent shall use reasonable efforts to give Borrower written
notice of such election, but the failure of Administrative Agent to so give any
such written notice shall not affect the validity of such charges to the Loan
Account. At Administrative Agent's option and to the extent permitted by law,
any charges so made shall constitute part of the Revolving Loan hereunder, but
such charge shall not constitute a waiver of Section 1.3(b).
1.12 Loan Account and Accounting. Administrative Agent, acting as agent
for Lenders and solely for the purpose of Treasury Regulation Section
5f.103-1(c) under this Section 1.12, shall maintain a loan account (the "Loan
Account") on its books to record: all Advances, all payments made by Borrower,
and all other debits and credits as provided in this Agreement with respect to
the Loans or any other Obligations, and Borrower and Administrative Agent shall
treat each Lender whose name is entered in the Loan Account as a Lender for all
purposes hereunder, and amounts due and owing to Administrative Agent and
Lenders by Borrower will be paid only to those Lenders entered in the Loan
Account as such. All entries in the Loan Account shall be made in accordance
with Administrative Agent's customary accounting practices as in effect from
time to time. The balance in the Loan Account, as recorded on Administrative
Agent's most recent printout or other written statement, shall, absent manifest
error, be presumptive evidence of the amounts due and owing to Administrative
Agent and Lenders by Borrower; provided that any failure to so record or any
error in so recording shall not limit or otherwise affect Borrower's duty to pay
the Obligations. Administrative Agent shall render to Borrower a monthly
accounting of transactions with respect to the Loans setting forth the balance
of the Loan Account for the immediately preceding month. Unless Borrower
notifies Administrative Agent in writing of any objection to any such accounting
(specifically describing the basis for such objection), within sixty (60) days
after the date thereof, each and every such accounting shall (absent manifest
error) be presumptive evidence as to all matters reflected therein.
Notwithstanding any provision herein contained to the contrary, any Lender may
elect (which election may be revoked) to dispense with the issuance of Notes to
that Lender.
12
1.13 Indemnity.
(a) Each Credit Party that is a signatory hereto shall jointly and
severally indemnify and hold harmless each of Administrative Agent, Lenders, the
L/C Issuer and their respective Affiliates, and each such Person's respective
officers, directors, employees, attorneys, agents and representatives (each, an
"Indemnified Person"), from and against any and all suits, actions, proceedings,
claims, damages, losses, liabilities and out-of-pocket expenses (including
reasonable attorneys' fees and disbursements and other costs of investigation or
defense, including those incurred upon any appeal) that may be instituted or
asserted against or incurred by any such Indemnified Person as the result of
credit having been extended, suspended or terminated under this Agreement and
the other Loan Documents and the administration of such credit, and in
connection with or arising out of the transactions contemplated hereunder and
thereunder and any actions or failures to act in connection therewith, including
any and all Environmental Liabilities and reasonable out-of-pocket legal costs
and expenses arising out of or incurred in connection with disputes between or
among any parties to any of the Loan Documents (collectively, "Indemnified
Liabilities"); provided, that no such Credit Party shall be liable for any
indemnification to an Indemnified Person to the extent that any such suit,
action, proceeding, claim, damage, loss, liability or expense results from (i)
that Indemnified Person's gross negligence or willful misconduct or (ii) any
dispute among or between Lenders pertaining to the Loan Documents but only so
long as Administrative Agent or any Credit Party is not also a party to such
dispute. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY
TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH
PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR
INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A
RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN
DOCUMENT AND THE ADMINISTRATION OF SUCH CREDIT, AND IN CONNECTION WITH OR
ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THEREUNDER AND ANY
ACTIONS OR FAILURES TO ACT IN CONNECTION THEREWITH.
(b) To induce Lenders to provide the LIBOR Rate option on the
terms provided herein, if (i) any LIBOR Loans are repaid in whole or in part
prior to the last day of any applicable LIBOR Period (whether that repayment is
made pursuant to any provision of this Agreement or any other Credit Loan
Document or occurs as a result of acceleration, by operation of law or
otherwise), (ii) Borrower shall default in payment when due of the principal
amount of any LIBOR Loan, (iii) Borrower shall refuse to accept any borrowing
of, or shall request a termination of, any borrowing of, conversion into or
continuation of LIBOR Loans after Borrower has given notice requesting the same
in accordance herewith or (iv) Borrower shall fail to make any prepayment of a
LIBOR Loan after Borrower has given a notice thereof in accordance herewith,
then Borrower shall indemnify and hold harmless each Lender from and against all
losses, costs and expenses resulting from or arising from any of the foregoing.
Such indemnification shall include any loss (including an amount equal to the
excess, if any, of (x) the amount of interest that would have accrued on the
amount so prepaid, or not so borrowed, converted or continued, for the period
from the date of such prepayment or of such failure to borrow, convert or
continue to the last day of such Interest Period (or, in the case of a failure
to borrow, convert or continue, the Interest Period that would have commenced on
the date of such
13
failure) in each case at the applicable rate of interest for such Advances
provided for herein (excluding, however, the Applicable Margin included therein,
if any) over (y) the amount of interest (as reasonably determined by such
Lender) that would have accrued to such Lender on such amount by placing such
amount on deposit for a comparable period with leading banks in the interbank
eurodollar market) or expense arising from the reemployment of funds obtained by
it or from fees payable to terminate deposits from which such funds were
obtained. For the purpose of calculating amounts payable to a Lender under this
Section 1.13(b), each Lender shall be deemed to have actually funded its
relevant LIBOR Loan through the purchase of a deposit bearing interest at the
LIBOR Rate in an amount equal to the amount of that LIBOR Loan and having a
maturity comparable to the relevant LIBOR Period; provided that each Lender may
fund each of its LIBOR Loans in any manner it sees fit, and the foregoing
assumption shall be utilized only for the calculation of amounts payable under
this Section 1.13(b). This covenant shall survive the termination of this
Agreement and the payment of the Notes and all other amounts payable hereunder.
As promptly as practicable under the circumstances, each Lender shall provide
Borrower with its written calculation of all amounts payable pursuant to this
Section 1.13(b), and such calculation shall be binding on the parties hereto
unless Borrower shall object in writing within ten (10) Business Days of receipt
thereof, specifying the basis for such objection in detail.
1.14 Access. Without limiting Section 4.3, each Credit Party that is a
party hereto shall, during normal business hours, from time to time upon
reasonable prior notice as frequently as Administrative Agent reasonably
requests: (a) provide Administrative Agent and any of its officers, employees
and agents (including any Consultants) access to its properties, facilities,
advisors (with the opportunity for an officer to participate), officers and
employees (having direct responsibility for the matters being reviewed in
connection with such inspection) of each Credit Party and to the Collateral and
(b) permit Administrative Agent, and any of its officers, employees and agents
(including the Consultants), to inspect, audit and make extracts from any Credit
Party's books and records. If a Default or an Event of Default has occurred and
is continuing or if access is reasonably necessary to preserve or protect the
Collateral as determined by Administrative Agent, each such Credit Party shall
provide such access to Administrative Agent and its officers, employees and
agents (including the Consultants) at all times and without advance notice.
Subject to any applicable confidentiality obligations affecting books and
records which do not pertain to the Collateral which either (x) exist on the
Closing Date or (y) thereafter, have been previously consented to by
Administrative Agent, each Credit Party shall make available to Administrative
Agent and its counsel reasonably promptly originals or copies of all books and
records that Administrative Agent may reasonably request. Each Credit Party
shall deliver any document or instrument necessary for Administrative Agent, as
it may from time to time reasonably request, to obtain records from any service
bureau or other Person that maintains records for such Credit Party.
Representatives of the Collateral Agents may accompany Administrative Agent's
representatives on regularly scheduled audits.
1.15 Taxes.
(a) Any and all payments by Borrower or any other Credit Party
hereunder, under the Notes or under any other Loan Document shall be made, in
accordance with this Section 1.15, free and clear of and without deduction for
or on the account of Taxes or Other Taxes. If Borrower or any other Credit Party
shall be required by law to deduct any Taxes or
14
Other Taxes from or in respect of any sum payable hereunder, or under the Notes
or under any other Loan Document, (i) the sum payable shall be increased as much
as shall be necessary so that after making all required deductions
Administrative Agent, the L/C Issuer or Lenders, as applicable, receive an
amount equal to the sum they would have received had no such deductions been
made, (ii) Borrower or such other Credit Party shall make such deductions, and
(iii) Borrower or such other Credit Party shall pay the full amount deducted to
the relevant taxing or other authority in accordance with applicable law. Within
thirty (30) days after the date of any payment of Taxes, Borrower shall furnish
to Administrative Agent the original or a certified copy of a receipt evidencing
payment thereof. Administrative Agent, the L/C Issuer and Lenders shall not be
obligated to return or refund any amounts received pursuant to this Section
1.15.
(b) In addition, Borrower and each Credit Party agrees to pay any
present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies of the United States or any political
subdivision thereof or any applicable foreign jurisdiction, and all liabilities
with respect thereto, which arise from any payment made under any Loan Document
or from the execution, delivery or registration of, or otherwise with respect
to, any Loan Document (collectively, "Other Taxes"). Within thirty (30) days
after the date of any payment of Other Taxes, Borrower or such Credit Party
shall furnish to Administrative Agent the original or certified copy of a
receipt evidencing payment thereof.
(c) Borrower and each Credit Party that is a signatory hereto
shall jointly and severally indemnify and, within twenty (20) days of demand
therefor (which demand shall be made in writing as promptly as practicable after
the date the officer of Administrative Agent, the L/C Issuer or Lender, as
appropriate, who is administering this Agreement learns of the written demand
for payment of such Taxes or Other Taxes from the relevant Governmental
Authority), pay Administrative Agent, the L/C Issuer and each Lender for the
full amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed
by any jurisdiction on amounts payable under this Section 1.15) paid by
Administrative Agent, the L/C Issuer or such Lender, as appropriate, and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted.
(d) If Administrative Agent, the L/C Issuer, or any Lender, as the
case may be, shall become aware that it is entitled to claim a refund from a
Governmental Authority in respect of Taxes or Other Taxes paid by Borrower
pursuant to this Section 1.15, including Taxes or Other Taxes as to which it has
been indemnified by Borrower, or with respect to which Borrower or a Credit
Party that is a signatory hereto has paid additional amounts pursuant to this
Section 1.15, it shall promptly notify Borrower of the availability of such
refund claim and, if Administrative Agent, the L/C Issuer, or such Lender, as
the case may be, determines in good faith that making a claim for refund will
not have any adverse consequence to its taxes or business operations, shall,
within thirty (30) days after receipt of a request by Borrower, make a claim to
such Governmental Authority for such refund at Borrower's expense.
(e) Each Lender organized under the laws of a jurisdiction outside
the United States (a "Foreign Lender") and each Lender, other than a Foreign
Lender, that is not a domestic corporation within the meaning of Section
7701(a)(30) of the IRC (a "Non-Corporate Domestic Lender", and a Foreign Lender
or a Non-Corporate Domestic Lender, each a "Certifying Lender") represents that
all payments to be made under this Agreement, the Notes or any other
15
Loan Documents to it are exempt from United States withholding tax (including
backup withholding tax) under an applicable statute or tax treaty and shall
provide to Borrower and Administrative Agent a properly completed and executed
IRS Form W-8ECI or Form W-8BEN or Form W-9 (as applicable) or other applicable
form, certificate or document prescribed by the IRS or the United States
certifying as to such Lender's entitlement to such exemption (a "Certificate of
Exemption"). Each foreign Person and each Person, other than a foreign Person,
that is not a domestic corporation within the meaning of Section 7701(a)(30) of
the IRC (a "Non-Corporate Domestic Person") that seeks to become a Lender under
this Agreement shall provide a Certificate of Exemption to Borrower and
Administrative Agent prior to becoming a Lender hereunder and on or before the
date, if any, such Foreign Lender changes its applicable lending office by
designating a different lending office with respect to its obligations under
this Agreement. No foreign Person and no Non-Corporate Domestic Person may
become a Lender hereunder if such Person fails to deliver a Certificate of
Exemption in advance of becoming a Lender. In addition, each Certifying Lender,
as applicable, shall provide, prior to any previously delivered Certificate of
Exemption expiring, becoming incorrect or incomplete in any material respect or
becoming obsolete, and from time to time if requested by Borrower or
Administrative Agent, a new Certificate of Exemption. Notwithstanding any
provision herein contained to the contrary, each Certifying Lender, as
applicable, shall not be required to deliver a Certificate of Exemption pursuant
to this Section 1.15(e) after the time such Lender has become a Lender hereunder
if such Lender is not legally able to deliver such Certificate of Exemption due
solely to a change in applicable law occurring after the time such Lender has
become a Lender hereunder.
(f) Borrower shall not be required to pay additional amounts to
any Foreign Lender or any Non-Corporate Domestic Lender pursuant to this Section
1.15 (or to make an indemnification payment pursuant to this Section 1.15) to
the extent that the obligation to pay additional amounts (or indemnify) would
not have arisen but for the failure of such Lender to comply with Section
1.15(e).
1.16 Capital Adequacy; Increased Costs; Illegality.
(a) If any Lender shall have determined that any applicable law,
treaty, governmental (or quasi-governmental) rule, regulation, guideline or
order regarding capital adequacy, reserve requirements or similar requirements
or compliance by any Lender with any request or directive regarding capital
adequacy, reserve requirements or similar requirements (whether or not having
the force of law), in each case, adopted after the Closing Date, from any
central bank or other Governmental Authority increases or would have the effect
of increasing the amount of capital, reserves (other than reserves reflected in
the LIBOR Rate) or other funds required to be maintained by such Lender and
thereby reducing the rate of return on such Lender's capital as a consequence of
its obligations hereunder, then Borrower shall from time to time upon demand by
such Lender (with a copy of such demand to Administrative Agent) pay to
Administrative Agent, for the account of such Lender, additional amounts
sufficient to compensate such Lender for such reduction. A certificate as to the
amount of that reduction and showing the basis of the computation thereof
submitted by such Lender to Borrower and to Administrative Agent shall, absent
manifest error, be conclusive, final and binding for all purposes.
16
(b) If, due to either (i) the introduction of or any change in any
applicable law or regulation (or any change in the interpretation thereof) or
(ii) the compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), in each case
adopted after the Closing Date, there shall be any increase in the cost (other
than Taxes, which shall be governed by Section 1.15) to any Lender of agreeing
to make or making, funding or maintaining any Loan, then Borrower shall from
time to time, upon demand by such Lender (with a copy of such demand to
Administrative Agent), pay to Administrative Agent for the account of such
Lender additional amounts sufficient to compensate such Lender for such
increased cost. A certificate as to the amount of such increased cost, submitted
to Borrower and to Administrative Agent by such Lender, shall, absent manifest
error, be conclusive, final and binding for all purposes. Each Lender agrees
that, as promptly as practicable after it becomes aware of any circumstances
referred to above which would result in any such increased cost, the affected
Lender shall, to the extent not inconsistent with such Lender's internal
policies of general application, use reasonable commercial efforts to minimize
costs and expenses incurred by it and payable to it by Borrower pursuant to this
Section 1.16(b).
(c) Notwithstanding anything to the contrary contained herein, if
the introduction of or any change in any applicable law or regulation (or any
change in the interpretation thereof) shall make it unlawful, or any central
bank or other Governmental Authority shall assert that it is unlawful, for any
Lender to agree to make or to make or to continue to fund or maintain any LIBOR
Loan, then, unless that Lender is able to make or to continue to fund or to
maintain such LIBOR Loan at another branch or office of that Lender without, in
that Lender's reasonable opinion, materially adversely affecting it or its Loans
or the income obtained therefrom, on notice thereof and demand therefor by such
Lender to Borrower through Administrative Agent, (i) the obligation of such
Lender to agree to make or to make or to continue to fund or maintain LIBOR
Loans shall be suspended until such time it is lawful to fund or maintain such
LIBOR Loan and (ii) Borrower shall forthwith prepay in full all outstanding
LIBOR Loans owing to such Lender, together with interest accrued thereon, unless
Borrower, within five (5) Business Days after the delivery of such notice and
demand, converts all LIBOR Loans of such Lender into Index Rate Loans.
(d) Within thirty (30) days after receipt by Borrower of written
notice and demand from any Lender (an "Affected Lender") for payment of
additional amounts or increased costs as provided in Sections 1.15(a), 1.16(a)
or 1.16(b), Borrower may, at its option, notify Administrative Agent and such
Affected Lender of its intention to replace the Affected Lender. So long as no
Event of Default has occurred and is continuing, Borrower, with the consent of
Administrative Agent (such consent not to be unreasonably withheld), may obtain,
at Borrower's expense, a replacement Lender ("Replacement Lender") for the
Affected Lender, which Replacement Lender must be reasonably satisfactory to
Administrative Agent. If Borrower obtains a Replacement Lender within ninety
(90) days following notice of its intention to do so, the Affected Lender must
sell and assign its Loans and Commitments to such Replacement Lender for an
amount equal to the principal balance of all Loans held by the Affected Lender
and all accrued and unpaid interest and Fees with respect thereto and all unpaid
expense reimbursement, breakage costs and other amounts to which such Affected
Lender is entitled hereunder through the date of such sale and such assignment
shall not require the payment of an assignment fee to Administrative Agent;
provided that Borrower shall have reimbursed such
17
Affected Lender for the additional amounts or increased costs that it is
entitled to receive under this Agreement through the date of such sale and
assignment. Notwithstanding the foregoing, Borrower shall not have the right to
obtain a Replacement Lender if the Affected Lender rescinds its demand for
increased costs or additional amounts within fifteen (15) days following its
receipt of Borrower's notice of intention to replace such Affected Lender.
Furthermore, if Borrower gives a notice of intention to replace and does not so
replace such Affected Lender within ninety (90) days thereafter, Borrower's
rights under this Section 1.16(d) shall terminate with respect to such Affected
Lender and Borrower shall promptly pay all increased costs or additional amounts
demanded by such Affected Lender pursuant to Sections 1.15(a), 1.16(a) and
1.16(b).
1.17 Change of Lending Office. Each Lender shall use its best efforts to
designate a different funding office if such designation will avoid (or reduce
the cost to Borrower of) any event described in Sections 1.15 or 1.16 so long as
such designation would not, in such Lender's sole judgment, be otherwise
disadvantageous to such Lender.
1.18 Single Loan. All Loans to Borrower and all of the other Obligations
of the Credit Parties arising under this Agreement and the other Loan Documents
shall constitute one general obligation of the Credit Parties secured, until the
Termination Date, by all of the Collateral.
2. CONDITIONS PRECEDENT
2.1 Conditions to the Effective Date. This Agreement shall become
effective and in full force and effect when the following conditions have been
satisfied or provided for in a manner reasonably satisfactory to Administrative
Agent, or waived in writing, duly executed and delivered by Administrative Agent
and Lenders (the "Effective Date"):
(a) Credit Agreement; Loan Documents. This Agreement or
counterparts hereof shall have been duly executed by Borrower, each other Credit
Party, Administrative Agent, the Majority Lenders and the Synthetic Loan
Lenders; and Administrative Agent shall have received such documents,
instruments, agreements and legal opinions listed in the Closing Checklist
attached hereto as Annex D, each in form and substance (unless indicated
otherwise) satisfactory to Administrative Agent.
(b) Approvals. Administrative Agent shall have received reasonably
satisfactory evidence that the Credit Parties have obtained all required
consents, waivers and approvals, if any, of all Persons (including all requisite
Governmental Authorities), to the execution, delivery and performance of this
Agreement and the other Credit Loan Documents and the consummation of the
Related Transactions.
(c) Payment of Fees and Expenses. Borrower shall have reimbursed
the Administrative Agent for all fees, costs and expenses incurred in connection
with the preparation, negotiation and execution of this Agreement and the other
Loan Documents.
2.2 Further Conditions to Each Loan. Except as otherwise expressly
provided herein, no Lender shall be obligated to fund any Advance (excluding
conversions of any LIBOR Loan into an Index Rate Loan) or incur any Letter of
Credit Obligation, if, as of the date thereof:
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(a) any representation or warranty by any Credit Party contained
herein or in any other Credit Loan Document is untrue or incorrect as of the
Closing Date or untrue or incorrect in any material respect as of any other
date, except to the extent that such representation or warranty expressly
relates to an earlier date and except for changes therein expressly permitted or
expressly contemplated by this Agreement, and Administrative Agent or the
Majority Lenders have determined not to make such Advance, or incur such Letter
of Credit Obligation as a result of the fact that such warranty or
representation is untrue or incorrect;
(b) (i) any Default or Event of Default has occurred and is
continuing or would result after giving effect to any Advance (or the incurrence
of any Letter of Credit Obligation), and Administrative Agent or the Majority
Lenders shall have determined not to make any Advance, or incur any Letter of
Credit Obligation as a result of that Default or Event of Default; or
(c) after giving effect to any Advance (or the incurrence of any
Letter of Credit Obligations) and the use of the proceeds thereof, the
outstanding principal amount of (i) in the case of Revolving Credit Advances,
Swing Line Advances or Letter of Credit Obligations, the sum of Loans would
exceed the lesser of the Borrowing Base and the Maximum Amount, (ii) in the case
of Letter of Credit Obligations, the L/C Sublimit and (iii) in the case of Swing
Line Advances, the Swing Line Commitment.
The request and acceptance by Borrower of the proceeds of any
Advance or the incurrence of any Letter of Credit Obligations shall be deemed to
constitute, as of the date thereof, (i) a representation and warranty by
Borrower that the conditions in this Section 2.2 have been satisfied and (ii) a
reaffirmation by Borrower of the granting and continuance of Administrative
Agent's Liens, on behalf of itself and the Secured Parties, pursuant to the Loan
Documents.
3. REPRESENTATIONS AND WARRANTIES
To induce Lenders to make the Loans and to incur Letter of Credit
Obligations, the Credit Parties executing this Agreement, jointly and severally,
make the following representations and warranties to Administrative Agent and
each Lender with respect to Holdings and each of its Subsidiaries, each and all
of which shall survive the execution and delivery of this Agreement.
3.1 Corporate Existence; Compliance with Law. Each of Holdings and its
Subsidiaries (a) is a corporation, limited liability company or limited
partnership duly organized, validly existing and in good standing under the laws
of its respective jurisdiction of incorporation or organization, (b) is duly
qualified to conduct business and is in good standing in each other jurisdiction
where its ownership or lease of property or the conduct of its business requires
such qualification, except where the failure to be so qualified would not result
in exposure to losses or liabilities which could reasonably be expected to have
a Material Adverse Effect, (c) has the requisite power and authority and the
legal right to own, pledge, mortgage or otherwise encumber and operate its
properties, to lease the property it operates under lease and to conduct its
business as now conducted or proposed to be conducted, (d) subject to specific
representations regarding Environmental Laws, has all licenses, permits,
consents or approvals
19
from or by, and has made all filings with, and has given all notices to, all
Governmental Authorities having jurisdiction, to the extent required for such
ownership, operation and conduct, except to the extent the failure to do so
could not reasonably be expected to have a Material Adverse Effect, (e) is in
compliance with its charter and bylaws or partnership or operating agreement, as
applicable, and (f) subject to specific representations set forth herein
regarding ERISA, Environmental Laws, tax and other laws, is (and its respective
properties are) in compliance with all applicable provisions of law, except
where the failure to comply with such laws, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
3.2 Executive Offices, Collateral Locations, FEIN. Disclosure Schedule
(3.2) sets forth, as of the Closing Date, each Credit Party's name as it appears
in official filings in its state of incorporation or organization, state of
incorporation or organization, organization type, organization number, if any,
issued by its state incorporation or organization, and its federal employer
identification number. As of the Closing Date, the location of each Credit
Party's chief executive office and the warehouses and premises at which
substantially all of the Collateral (which in any event includes all Stores,
DC's and other locations at which Collateral included in the Eligible Inventory
Amount is located) which is not in transit is located are set forth in
Disclosure Schedule (3.2).
3.3 Corporate Power, Authorization, Enforceable Obligations. The
execution, delivery and performance by each Credit Party of the Loan Documents
to which it is a party and the creation of all Liens provided for therein: (a)
are within such Person's power, (b) have been duly authorized by all necessary
corporate, limited liability company or limited partnership action, (c) do not
contravene any provision of such Person's charter, bylaws or partnership or
operating agreement, as applicable, (d) do not violate any law or regulation, or
any order or decree of any court or Governmental Authority, (e) do not conflict
with or result in the breach or termination of, constitute a default under or
accelerate or permit the acceleration of any performance required by, any
material indenture, mortgage, deed of trust, lease, agreement or other
instrument to which such Person is a party or by which such Person or any of its
property is bound, (f) do not result in the creation or imposition of any Lien
upon any of the property of such Person other than those in favor of
Administrative Agent, on behalf of itself and the Secured Parties, pursuant to
the Loan Documents, and (g) do not require the consent or approval of any
Governmental Authority or any other Person, except those referred to in Sections
2.1(c) and (e), all of which will have been duly obtained, made or complied with
prior to the Closing Date. Each of the Loan Documents shall be duly executed and
delivered by each Credit Party that is a party thereto and each such Loan
Document shall constitute the legal, valid and binding obligation of such Credit
Party enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
3.4 Financial Statements and Projections. All Financial Statements
concerning Borrower and its Subsidiaries that are referred to in clause (a)
below have been prepared in accordance with GAAP, consistently applied
throughout the periods covered (except as disclosed therein and except, with
respect to unaudited Financial Statements, for the absence of footnotes and
normal year-end audit adjustments) and present fairly in all material respects
the financial
20
position of the Persons covered thereby as at the dates thereof and the results
of their operations and cash flows for the periods then ended.
(a) Financial Statements. The following Financial Statements
attached hereto as Disclosure Schedule (3.4(a)) have been delivered on or prior
to the Closing Date:
(i) The audited consolidated balance sheet at January 29,
2003 and the related statements of income and cash flows of Borrower and its
Subsidiaries for such period ended, certified by PriceWaterhouseCoopers LLP.
(ii) The unaudited consolidated balance sheet(s) at January
29, 2003 and the related statement(s) of income and cash flows of Borrower and
its Subsidiaries for the four (4) Fiscal Quarters then ended.
(b) Business Plan. Each of the Projections delivered on or prior
to the date hereof and attached hereto as Disclosure Schedule (3.4(b)) have been
prepared by or on behalf of the Credit Parties for the five (5) year period
beginning in February 2003, and presented on a month-by-month basis for the
Fiscal Year 2003, on a year-by-year basis thereafter, and, with respect to the
projected balance sheet of Holdings and its consolidated Subsidiaries, on a
monthly basis through April 2006. Borrower believes that the estimates and
assumptions stated in the Projections are reasonable and fair in light of
conditions and facts known to Borrower at the time of the preparation thereof
and the Projections reflect Borrower's estimates (which were made in good faith
and believed to be reasonable at the time made) of the future financial
performance of Borrower and its Subsidiaries for the period(s) set forth
therein. The Projections are not a guaranty of future performance, and actual
results may differ from the Projections.
3.5 Material Adverse Effect. Between January 29, 2003 and the Closing
Date, (a) neither Holdings nor any of its Subsidiaries has incurred any
obligations, contingent or non-contingent liabilities, liabilities for Charges,
long-term leases or unusual forward or long-term commitments that are not
reflected in the Projections and that, alone or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, (b) no contract, lease
or other agreement or instrument has been entered into by any of Holdings nor
any of its Subsidiaries or has become binding upon such Person's assets and no
law or regulation applicable to any of Holdings or any of its Subsidiaries has
been adopted, in either case, that has had or could reasonably be expected to
have a Material Adverse Effect and (c) neither Holdings nor any of its
Subsidiaries is in default and to the best of each Credit Party's knowledge no
third party is in default under any material contract, lease or other agreement
or instrument, that alone or in the aggregate could reasonably be expected to
have a Material Adverse Effect. Since January 29, 2003 no event (other than the
termination of the Xxxxxxx Contract) has occurred, that alone or together with
other events, could reasonably be expected to have a Material Adverse Effect.
3.6 Ownership of Property; Liens. As of the Closing Date, the real
estate ("Real Estate") listed in Disclosure Schedule (3.6) constitutes
substantially all of the real property owned, leased or subleased by Holdings or
its Subsidiaries but in any event includes all Stores, DC's and other locations
at which Collateral included in the Eligible Inventory Amount is located. Except
where the failure of such could not reasonably be expected to have a Material
Adverse Effect, each of Holdings and its Subsidiaries owns good and indefeasible
(subject to
21
Permitted Liens) fee simple title to all of its owned Real Estate, and valid
leasehold interests in all of its leased Real Estate, all as described on
Disclosure Schedule (3.6), and copies of all leases pertaining to DC's have been
delivered to Administrative Agent. Each of Holdings and its Subsidiaries also
has good title to, or valid leasehold interests in, all of its material personal
property and assets. As of the Closing Date, after giving effect to the Related
Transactions, none of the properties and assets of any Credit Party (other than
the Collateral) are subject to any Liens other than Permitted Liens. The
Collateral is not subject to any Liens other than Permitted Encumbrances. As of
the Closing Date, no material portion of any Real Estate of Holdings or its
Subsidiaries has suffered any material damage by fire or other casualty loss
that has not heretofore been repaired and restored in all material respects to
its original condition or otherwise remedied. As of the Closing Date, all
permits required to have been issued or appropriate to enable the Real Estate
where any Collateral is located to be lawfully occupied and used for all of the
purposes for which it is currently occupied and used have been lawfully issued
and are in full force and effect, except as such which could not reasonably be
expected to have a Material Adverse Effect.
3.7 Labor Matters. Except where such could not reasonably be expected to
have a Material Adverse Effect: (a) no strikes, work stoppages, slowdowns,
lockouts or other labor disputes against any of Holdings or its Subsidiaries are
pending or, to any Credit Party's knowledge, threatened by or involving any
employee of Holdings or its Subsidiaries, (b) hours worked by and payment made
to employees of each of Holdings and its Subsidiaries comply with the Fair Labor
Standards Act and each other federal, state, local or foreign law applicable to
such matters, (c) all payments due from any of Holdings or its Subsidiaries for
employee health and welfare insurance have been paid or accrued as a liability
on the books of such Person, (d) neither Holdings nor any of its Subsidiaries is
a party to or bound by any collective bargaining agreement, management
agreement, employment agreement, bonus, restricted stock, stock option, or stock
appreciation plan or agreement or any similar plan, agreement or arrangement
(provided all of such material agreements existing as of the Closing Date are
set forth on Disclosure Schedule (3.7), and, if requested by Administrative
Agent, true and complete copies of any agreements described on Disclosure
Schedule (3.7) have been delivered to Administrative Agent on or prior to the
Closing Date), (e) neither Holdings nor any of its Subsidiaries is represented
by a labor organization and there are no organizing activities involving any of
Holdings or its Subsidiaries pending or, to any Credit Party's knowledge,
threatened by any labor organization or group of employees, (f) there are no
representation proceedings pending or, to any Credit Party's knowledge,
threatened in writing to be filed with the National Labor Relations Board, and
no labor organization or group of employees of any of Holdings or its
Subsidiaries has made a pending demand for recognition and (g) there are no
complaints, unfair labor practice charges, grievances, arbitrations, unfair
employment practices charges or any other claims or complaints against any of
Holdings or its Subsidiaries pending or, to the knowledge of any Credit Party,
threatened in writing to be filed with any Governmental Authority or arbitrator
based on, arising out of, in connection with, or otherwise relating to the
employment or termination of employment of any employee of Holdings or its
Subsidiaries.
3.8 Ventures and Subsidiaries; Outstanding Stock and Indebtedness.
Except as set forth in Disclosure Schedule (3.8), as of the Effective Date,
neither Holdings nor any of its Subsidiaries has any Subsidiaries or is engaged
in any joint venture or partnership with any other Person. As of the Effective
Date, all of the issued and outstanding Stock of each of Borrower
22
and its Subsidiaries is owned by each of the Stockholders and in the amounts set
forth in Disclosure Schedule (3.8). As of the Effective Date, except as set
forth in Disclosure Schedule (3.8), there are no outstanding rights to purchase,
options, warrants or similar rights or agreements pursuant to which any of
Borrower or its Subsidiaries may be required to issue, sell, repurchase or
redeem any of its Stock or other equity securities or any Stock or other equity
securities of its Subsidiaries. All outstanding Indebtedness and Guaranteed
Indebtedness of each of Holdings and its Subsidiaries as of the Effective Date
is permitted under Section 6.3 (including Disclosure Schedule (6.3)) and Section
6.6 (including Disclosure Schedule (6.6)).
3.9 Government Regulation. Neither Holdings nor any of its Subsidiaries
is an "investment company" or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are defined
in the Investment Company Act of 1940. Neither Holdings nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, or any other federal or state statute that
restricts or limits its ability to incur Indebtedness or to perform its
obligations hereunder. The making of the Loans by Lenders to Borrower, the
incurrence of the Letter of Credit Obligations, the application of the proceeds
thereof and repayment thereof and the consummation of the Related Transactions
will not violate any provision of any such statute or any rule, regulation or
order issued by the Securities and Exchange Commission.
3.10 Margin Regulations. Neither Holdings nor any of its Subsidiaries is
engaged, nor will it engage, principally or as one of its important activities,
in the business of extending credit for the purpose of "purchasing" or
"carrying" any "margin stock" as such terms are defined in Regulation U of the
Federal Reserve Board as now and from time to time hereafter in effect (such
securities being referred to herein as "Margin Stock"). None of the proceeds of
the Loans or other extensions of credit under this Agreement will be used,
directly or indirectly, for the purpose of purchasing or carrying any Margin
Stock, for the purpose of reducing or retiring any Indebtedness that was
originally incurred to purchase or carry any Margin Stock or for any other
purpose that might cause any of the Loans or other extensions of credit under
this Agreement to be considered a "purpose credit" within the meaning of
Regulations T, U or X of the Federal Reserve Board.
3.11 Taxes. All Federal and other material tax returns, reports and
statements, including information returns, required by any Governmental
Authority to be filed by any of Holdings or its Subsidiaries have been filed
with the appropriate Governmental Authority, and all Taxes have been paid prior
to the date on which any fine, penalty, interest or late charge may be added
thereto for nonpayment thereof, excluding (i) Taxes being contested in
accordance with Section 5.2(b), (ii) Taxes to the extent that the failure to so
file or pay could not reasonably be expected to result in Taxes, fines,
penalties or interest in excess of $50,000,000 in the aggregate, and (iii) Taxes
that are priority tax claims pursuant to section 507 of the Bankruptcy Code and
that are to be treated pursuant to the Plan of Reorganization, as implemented by
the Confirmation Order. Proper and accurate amounts have been withheld by each
of Holdings and its Subsidiaries from its respective employees for all periods
in material compliance with all applicable federal, state, local and foreign
laws and such withholdings have been timely paid to the respective Governmental
Authorities. Disclosure Schedule (3.11) sets forth as of the Closing Date those
taxable years for which any of Holdings or its Subsidiaries' tax returns are
currently being audited by the IRS or any other applicable Governmental
Authority and any assessments
23
or threatened assessments in connection with such audit, or otherwise currently
outstanding, other than assessments or threatened assessments with respect to
Taxes that are priority tax claims pursuant to section 507 of the Bankruptcy
Code and that are to be treated pursuant to the Plan of Reorganization, as
implemented by the Confirmation Order. Except as described in Disclosure
Schedule (3.11), as of the Closing Date, neither Holdings nor any of its
Subsidiaries has executed or filed with the IRS or any other Governmental
Authority any agreement or other document extending, or having the effect of
extending, the period for assessment or collection of any Taxes. Except as
described in Disclosure Schedule (3.11), as of the Closing Date, none of
Holdings or its Subsidiaries and their respective predecessors are liable for
any Charges: (a) under any agreement (including any tax sharing agreements other
than tax sharing agreements between Holdings and its Subsidiaries) or (b) to
each Credit Party's knowledge, as a transferee. Neither Holdings nor any of its
Subsidiaries has agreed or been requested to make any adjustment under IRC
Section 481(a), by reason of a change in accounting method or otherwise, which
could reasonably be expected to have a Material Adverse Effect, except for any
adjustment under Section 481(a) of the IRC, resulting from a request for an
accounting method change currently pending with the IRS.
3.12 ERISA.
(a) Disclosure Schedule (3.12) lists as of the Closing Date, all
material Plans and separately identifies all Pension Plans, including Title IV
Plans, Multiemployer Plans, ESOPs and all material Welfare Plans, including all
Retiree Welfare Plans. If requested by Administrative Agent, copies of all such
listed Plans, together with a copy of the latest form IRS/DOL 5500-series for
each such Plan have been delivered to Administrative Agent. Except where such
could not reasonably be expected to result in liability in excess of
$50,000,000, individually or in the aggregate, with respect to Multiemployer
Plans, each Qualified Plan has been determined by the IRS to qualify under
Section 401 of the IRC, the trusts created thereunder have been determined to be
exempt from tax under the provisions of Section 501 of the IRC, and, nothing has
occurred that would cause the loss of such qualification or tax-exempt status.
Each Plan is in compliance in all material respects with the applicable
provisions of ERISA and the IRC, including the timely filing of all reports
required under the IRC or ERISA, except to the extent that any such
non-compliance with any of the foregoing could not, individually or in the
aggregate, reasonably be expected to result in liability in excess of
$50,000,000. Neither Holdings nor any of its Subsidiaries or their respective
ERISA Affiliates has failed to make any material contribution or pay any
material amount due as required by either Section 412 of the IRC or Section 302
of ERISA or the terms of any such Plan except to the extent that any such
non-compliance with any of the foregoing could not, individually or in the
aggregate, reasonably be expected to result in liability in excess of
$50,000,000. Neither Holdings nor any of its Subsidiaries or their respective
ERISA Affiliates has engaged in a "prohibited transaction," as defined in
Section 406 of ERISA and Section 4975 of the IRC, in connection with any Plan,
that would subject any of them to a material tax on prohibited transactions
imposed by Section 502(i) of ERISA or Section 4975 of the IRC, except to the
extent that any such non-compliance with any of the foregoing could not,
individually or in the aggregate, reasonably be expected to result in liability
in excess of $50,000,000.
(b) Except as set forth in Disclosure Schedule (3.12), as of the
Closing Date, (i) no Title IV Plan has an Unfunded Pension Liability which could
reasonably be expected to
24
result in liability in excess of $50,000,000, (ii) no ERISA Event or event
described in Section 4062(e) of ERISA with respect to any Title IV Plan has
occurred or, to Borrower's knowledge, is reasonably expected to occur, (iii)
there are no pending, or to the knowledge of any Credit Party, threatened
material claims (other than claims for benefits in the normal course),
sanctions, actions or lawsuits, asserted or instituted against any Plan or any
Person as fiduciary or sponsor of any Plan, (iv) with respect to any
Multiemployer Plan, neither Holdings nor any of its Subsidiaries or their
respective ERISA Affiliates has incurred any material liability as a result of a
complete or partial withdrawal from any such plan that has not been satisfied in
full, and neither Holdings nor any of its Subsidiaries or their respective ERISA
Affiliates reasonably expects to incur any such material liability, (v) within
the last five (5) years no Title IV Plan of any of Holdings, its Subsidiaries or
their respective ERISA Affiliates (determined at any time within the past five
years) has been transferred outside of the "controlled group" (within the
meaning of Section 4001(a)(14) of ERISA) of any of Holdings, its Subsidiaries or
their respective ERISA Affiliates (determined at such time), (vi) except in the
case of any ESOP, Stock of Holdings, its Subsidiaries and their respective ERISA
Affiliates makes up, in the aggregate, no more than ten percent (10%) of the
fair market value of the assets of any Plan measured on the basis of fair market
value as of the latest valuation date of any Plan, and (vii) neither Holdings
nor any of its Subsidiaries or any ERISA Affiliate maintains a material welfare
benefit plan within the meaning of Section 3(1) of ERISA which provides for
continuing benefits or coverage for any participant or any beneficiary of a
participant after such participant's termination of employment except as may be
required by the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA"), and the regulations thereunder or by applicable federal or
other statutory law or regulation (whether domestic or foreign).
3.13 No Litigation. No action, claim, lawsuit, demand, investigation or
proceeding is now pending or, to the knowledge of any Credit Party, threatened
against any of Holdings or its Subsidiaries, before any Governmental Authority
or before any arbitrator or panel of arbitrators (collectively, "Litigation"),
(a) that challenges any Credit Party's right or power to enter into or perform
any of its obligations under the Loan Documents to which it is a party, or the
validity or enforceability of any Loan Document or any action taken thereunder
or (b) that could reasonably be expected to have a Material Adverse Effect.
3.14 Brokers. Except as set forth on Disclosure Schedule (3.14) as of the
Closing Date, no broker or finder acting on behalf of any of Holdings or its
Subsidiaries brought about the obtaining, making or closing of the Loans or the
Related Transactions, and neither Holdings nor any of its Subsidiaries thereof
has any obligation to any Person in respect of any finder's or brokerage fees in
connection therewith.
3.15 Intellectual Property. Each of Holdings and its Subsidiaries owns or
has rights to use all Intellectual Property necessary to continue to conduct its
business as now or heretofore conducted by it or presently proposed to be
conducted by it, and each material registered Patent, material registered
Trademark and material registered Copyright owned or licensed by any of Holdings
or its Subsidiaries as of the Closing Date, as applicable, is listed, together
with application or registration numbers, as applicable, in Disclosure Schedule
(3.15). Except in such instance which could not reasonably be expected to have a
Material Adverse Effect, each of Holdings and its Subsidiaries conducts its
business and affairs without infringement of or interference with any
intellectual property (including patents, trademarks and copyrights and any
25
licenses of the foregoing) of any other Person. Except as set forth in
Disclosure Schedule (3.15), as of the Closing Date, neither Holdings nor any of
its Subsidiaries is aware of any material pending or threatened infringement
claim by any other Person with respect to any Intellectual Property.
3.16 Full Disclosure. No information contained in this Agreement, any of
the other Loan Documents, Financial Statements or Collateral Reports or other
written reports from time to time delivered hereunder or any written statement
furnished by or on behalf of any of Holdings and its Subsidiaries to
Administrative Agent or any Lender pursuant to the terms of this Agreement
contains or will contain (taken as a whole) any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made. Projections from time to time
delivered hereunder are or will be based upon the estimates and assumptions
stated therein, all of which Borrower believed at the time made to be reasonable
and fair in light of conditions and facts known to Borrower as of such date, and
reflect Borrower's estimates (which were made in good faith and believed to be
reasonable at the time made) of the future financial performance of Borrower and
of the other information projected therein for the period set forth therein.
Such Projections are not a guaranty of future performance and actual results may
differ from those set forth in such Projections. Assuming the filing of
financing statements in appropriate form in the jurisdictions set forth on
Disclosure Schedule (3.2)(which financing statements will be filed within ten
(10) days of the Closing Date), the Liens granted to Administrative Agent, on
behalf of itself and the Secured Parties, pursuant to the Loan Documents (other
than the Liens pertaining to the Depository Accounts, other Deposit Accounts not
required to be subject to a Control Agreement pursuant to the Credit Loan
Documents and Store Cash) will at all times be fully perfected first priority
Liens in and to the Collateral described therein, subject, as to priority, only
to Permitted Encumbrances having priority under applicable law.
3.17 Environmental Matters.
(a) Except with respect to facts or circumstances in the following
clauses (i) through (v) that could not reasonably be expected to have a Material
Adverse Effect: (i) Holdings and each of its Subsidiaries are and, except for
matters that have been resolved by a final, non-appealable consent order,
consent decree or judicial order, have been in compliance with all Environmental
Laws, (ii) Holdings and each of its Subsidiaries have obtained, and, except for
matters that have been resolved by a final, non-appealable consent order,
consent decree or judicial order, are in compliance with, all Environmental
Permits required by Environmental Laws for the operations of their respective
businesses as presently conducted or as proposed to be conducted, and all such
Environmental Permits are valid, uncontested and in good standing, (iii) neither
Holdings nor any of its Subsidiaries is involved in operations or knows of any
facts, circumstances or conditions, including any Releases of Hazardous
Materials, that are likely to result in any Environmental Liabilities of such
Person, (iv) there is no Litigation arising under or related to any
Environmental Laws, Environmental Permits or Hazardous Material that seeks
damages, penalties, fines, costs or expenses, injunctive relief against, or that
alleges criminal misconduct by, any of Holdings or its Subsidiaries, (v) except
for matters that have been resolved by a final, non-appealable consent order,
consent decree or judicial order, no notice has been received by any of Holdings
or its Subsidiaries identifying it as a "potentially
26
responsible party" or requesting information under CERCLA or analogous state
statutes, and to the knowledge of the Credit Parties, there are no facts,
circumstances or conditions that may result in any of Holdings or its
Subsidiaries being identified as a "potentially responsible party" under CERCLA
or analogous state statutes and (vi) Holdings and each of its Subsidiaries has
provided to Administrative Agent copies of all existing environmental reports,
reviews and audits and all written information pertaining to actual or potential
Environmental Liabilities, in each case relating to any Credit Party that are in
such Credit Party's possession (or in the possession of its representatives or
agents) and only to the extent requested by Administrative Agent.
(b) Each Credit Party hereby acknowledges and agrees that neither
Administrative Agent nor any Lender (i) is now, or has ever been, in control of
any of the Real Estate or any of Holdings' or its Subsidiaries' affairs, or (ii)
has the capacity through the provisions of the Loan Documents or otherwise to
influence any of Holdings' or its Subsidiaries' conduct with respect to the
ownership, operation or management of any of its Real Estate or compliance with
Environmental Laws or Environmental Permits.
3.18 Insurance. Disclosure Schedule (3.18) lists (a) all insurance
policies maintained as of the Closing Date with respect to the Collateral and
(b) all other material insurance policies of any nature maintained, as of the
Closing Date, for current occurrences by each of Holdings and each of its
Subsidiaries, as well as a summary of the terms of each such policy.
3.19 Deposit and Loan Proceeds Accounts. Part A of Disclosure Schedule
(3.19) lists all banks and other financial institutions at which Holdings and
each of its Subsidiaries maintains deposit or other accounts (other than the
Collection Account and Loan Proceeds Account) as of the Closing Date, including
any disbursement accounts and Part B of Disclosure Schedule (3.19) lists all
banks and other financial institutions at which Holdings and each of its
Subsidiaries maintains concentration accounts (or accounts having a similar
function), and such Schedule correctly identifies (other than immaterial
clerical errors), as of the Closing Date, the name, address and telephone number
of each depository, the name in which the account is held, a description of the
purpose of the account, and the complete account number therefor.
3.20 Vendor and Trade Relations. Disclosure Schedule (3.20) sets forth,
as of the Closing Date, the names, addresses and telephone numbers of the Credit
Parties' ten (10) largest vendors.
3.21 Solvency. After giving effect to (a) (i) the Loans and Letter of
Credit Obligations to be made or incurred on the Closing Date, (ii) the
disbursement of the proceeds of such Loans pursuant to the instructions of
Borrower, (iii) the consummation of the other Related Transactions and (iv) the
payment and accrual of all transaction costs in connection with the foregoing,
Holdings and its Subsidiaries, on a consolidated basis, are and will be Solvent
and (b) both before and after giving effect to (i) any Loans and Letter of
Credit Obligations to be made or incurred after the Closing Date, (ii) the
disbursement of the proceeds of such Loans pursuant to the instructions of
Borrower, (iii) the consummation of the other Related Transactions and (iv) the
payment and accrual of all transaction costs in connection with the foregoing,
Holdings and its Subsidiaries, on a consolidated basis, are and will be Solvent.
27
3.22 Status of Holdings. Prior to the Closing Date, Holdings will not
have engaged in any business or incurred any Indebtedness or any other
liabilities (except in connection with its corporate formation, the Related
Transactions Documents and this Agreement and the other Credit Loan Documents to
which it is a party).
3.23 Subordinated Debt. As of the Closing Date, Borrower has delivered to
Administrative Agent a complete and correct copy of all ESL Note Documentation.
All Obligations, including the Letter of Credit Obligations, constitute
Indebtedness entitled to the benefits of the subordination provisions contained
in the ESL Note Documentation.
3.24 Obligations of Non-Credit Parties. Except as otherwise permitted by
this Agreement, as of the Closing Date, none of Holdings and its Subsidiaries
has any obligation or liability (whether primary or contingent, direct or
indirect or matured or unmatured) in respect of any Indebtedness, liability or
other obligation of any Affiliate or Subsidiary of any Credit Party which is not
also a Credit Party.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1 Reports and Notices.
(a) Each Credit Party executing this Agreement hereby agrees that
from and after the Closing Date and until the Termination Date, it shall
deliver, or shall cause to be delivered, to Administrative Agent or to
Administrative Agent and Lenders, as required, the Financial Statements,
notices, Projections and other information at the times, to the Persons and in
the manner set forth in Annex E.
(b) Each Credit Party executing this Agreement hereby agrees that
from and after the Closing Date and until the Termination Date, it shall
deliver, or shall cause to be delivered, to Administrative Agent or to
Administrative Agent and Lenders, as required, the various Collateral Reports
(including Borrowing Base Certificates) at the times, to the Persons and in the
manner set forth in Annex F.
4.2 Communication with Accountants. Each Credit Party executing this
Agreement authorizes Administrative Agent to communicate directly with its
independent certified public accountants, including PriceWaterhouseCoopers LLP,
and authorizes and shall instruct those accountants and advisors to communicate
to Administrative Agent information relating to any Credit Party or its
Subsidiaries with respect to the business, results of operations and financial
condition of any Credit Party or its Subsidiaries; provided that, so long as no
Event of Default has occurred and is continuing, one or more of the senior
officers of Borrower has been given prior notice and an opportunity to attend
(if a meeting) or otherwise participate in such communications; provided further
that, subject to compliance with the foregoing, the actual attendance or
participation of such senior officers shall not be required prior to any
communications by Administrative Agent with such accountants.
4.3 Collateral Monitoring and Review. At any time upon the request of
Administrative Agent and, so long as no Event of Default then exists, upon
reasonable prior notice to Borrower, each Credit Party shall permit (i)
Administrative Agent and any Consultants to review and evaluate Borrower's
practices in the computation of the Borrowing Base, including
28
a field audit exam and (ii) Abacus, or other appraisers retained by
Administrative Agent after consultation with Co-Syndication Agents and Borrower
(it being understood and agreed that the consent of Borrower to the appointment
of such new appraiser is not required), to conduct appraisals of (and make test
verifications and counts with respect to) the assets included in the Borrowing
Base and pay the reasonable fees and out-of-pocket expenses in connection with
each of clauses (i) and (ii) hereof; provided that so long as no Event of
Default has occurred and is continuing, Administrative Agent shall not order, at
Borrower's expense, appraisals more often than once per Fiscal Quarter during
the period from the Closing Date through the first anniversary thereof, and
thereafter, not more frequently than every six months. In connection with any
collateral monitoring or review and appraisal relating to the computation of the
Borrowing Base, Borrower shall make such adjustments to the Borrowing Base as
Administrative Agent shall reasonably require based upon and subject to the
terms of this Agreement as a result of such collateral monitoring, review or
appraisal.
5. AFFIRMATIVE COVENANTS
Each Credit Party executing this Agreement jointly and severally
agrees as to Holdings and each of its Subsidiaries that from and after the date
hereof and until the Termination Date:
5.1 Maintenance of Existence and Conduct of Business. Each of Holdings
and its Subsidiaries shall: (a) other than as permitted under Section 6.1 do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence in its jurisdiction of formation or organization,
as applicable, and its rights and franchises, except to the extent the failure
to maintain its rights and franchises could not reasonably be expected to have a
Material Adverse Effect, (b) do or cause to be done all things necessary to
preserve and keep in full force and effect its qualification as a foreign entity
in each jurisdiction where the ownership or lease of its properties or the
conduct of its business requires such qualification, except to the extent the
failure to be so qualified could not reasonably be expected to have a Material
Adverse Effect, (c) except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect, at all times maintain, preserve and
protect all of its material assets and properties used or useful in the conduct
of its business, and keep the same in good repair, working order and condition
(taking into consideration ordinary wear and tear) and from time to time make,
or cause to be made, all necessary or appropriate repairs, replacements and
improvements thereto consistent with industry practices, and (d) transact
business only in such corporate and trade names as are set forth in Disclosure
Schedule (5.1) or as supplemented in accordance with Section 5.6 and Annex E.
5.2 Payment of Charges.
(a) This Section 5.2(a) shall not require a Credit Party to pay
Taxes that are priority tax claims pursuant to section 507 of the Bankruptcy
Code and that are to be treated pursuant to the Plan of Reorganization, as
implemented by the Confirmation Order. Additionally, subject to Section 5.2(b),
each of Holdings and its Subsidiaries shall pay and discharge or cause to be
paid and discharged promptly before any of the following shall become past due
(it being understood that any Taxes that relate to a tax period (or portion
thereof) ending on or before the commencement of the Chapter 11 Cases that are
not priority tax claims pursuant
29
to section 507 of the Bankruptcy Code and are addressed in the Plan of
Reorganization shall not be considered past due unless any scheduled payment in
respect thereof is not paid when due): (i) all federal Taxes and all other
material Taxes imposed upon it, its income and profits, or any of its property
(real, personal or mixed) and (ii) lawful claims for labor and materials, or
otherwise, except, in the case of this clause (ii), where the failure to pay or
discharge such Charges (A) would not result in a Lien on the Collateral (other
than Liens arising in the ordinary course of business in favor of (x) landlords
to secure the payment of rent for Stores in an amount not to exceed five percent
(5%) of the monthly base rent due for the immediately preceding calendar month
then ended in respect of Stores, which amounts shall not be more than thirty
(30) days overdue unless contested in accordance with Section 5.2(b), unless
otherwise agreed by Administrative Agent and (y) carriers', warehousemen's or
other similar possessory liens arising by operation of law securing liabilities
not yet due and payable or which are being contested in good faith in accordance
with Section 5.2(b) unless otherwise agreed by Administrative Agent and for
which Reserves have been established therefor in accordance with Annex K if
deemed necessary by Administrative Agent) or (B) in the case of assets other
than Collateral could not reasonably be expected to have a Material Adverse
Effect.
(b) Each of Holdings and its Subsidiaries may in good faith
contest, by appropriate proceedings, the validity or amount of any Taxes, other
Charges or claims; provided, that (i) adequate reserves with respect to such
contest are maintained on the books of such Person, in accordance with GAAP,
(ii) no Lien shall be imposed or otherwise arise to secure payment of such
Charges that is superior to any of the Liens securing the Obligations (other
than Liens in favor of warehousemen and bailees, constituting Permitted
Encumbrances) and such contest is maintained and prosecuted continuously and
with diligence and operates to suspend collection or enforcement of such
Charges, (iii) no portion of the Collateral exceeding $50,000,000 individually
or in the aggregate would be subject to forfeiture or loss as a result of any
such contest or contests at any time and (iv) such Person shall promptly pay or
discharge such contested Charges, Taxes or claims and all additional charges,
interest, penalties and expenses, if any, if such contest is terminated or
discontinued adversely to such Person or the conditions set forth in this
Section 5.2(b) are no longer met and, at the request of Administrative Agent,
shall deliver to Administrative Agent evidence reasonably acceptable to it of
the foregoing.
5.3 Books and Records. Each of Holdings and its Subsidiaries shall keep
adequate books and records consistent with past practices with respect to its
business activities in which proper entries, reflecting all financial
transactions, are made in a manner sufficient to enable the preparation of
consolidated financial statements in accordance with GAAP and on a basis
consistent with the Financial Statements attached as Disclosure Schedule
(3.4(a)).
5.4 Insurance; Damage to or Destruction of Collateral.
(a) The Credit Parties shall, at their sole cost and expense,
maintain insurance policies with respect to the Collateral as is customary
(giving effect to self insurance for Commercial General Liability, hereinafter
"Self-Insurance") for companies of the same or similar size in the same or
similar businesses and in the same geographic area, which such policies,
together with any endorsements thereto, shall (i) provide that the Inventory
constituting Collateral is insured at one hundred percent (100%) of the
replacement value thereof and
30
(ii) name Administrative Agent, for the benefit of itself and the Secured
Parties, as loss payee and additional insured with respect to insurance proceeds
for losses with respect to the Collateral, subject to Section 5.4(e).
(b) The Credit Parties shall, at their sole cost and expense,
maintain additional policies of insurance as are customary (after giving effect
to Self-Insurance) for companies of the same or similar size in the same or
similar businesses and in the same geographic area.
(c) The policies of insurance described in clauses (a) and (b)
above (or the loss payable and additional insured endorsements delivered to
Administrative Agent) shall contain provisions pursuant to which the insurer
agrees to provide thirty (30) days prior written notice to Administrative Agent
in the event of any non-renewal, cancellation or amendment of any such insurance
policy and, except as otherwise agreed by Administrative Agent, shall not be
invalidated or suspended: (i) by any error, omission, or change respecting the
ownership, description, possession, or location of the subject of the insurance
or the interest therein, or the title thereto; or (ii) by any breach of
warranty, act, omission, neglect, or non-compliance with any of the provisions
of such policies, including any and all riders now or hereafter attached
thereto, by the named insured, or any one else, whether before or after a loss,
which under the provisions of such policies of insurance or any rider or
endorsement attached thereto would invalidate or suspend the insurance as to the
named insured, excluding therefrom, however, any acts or omissions of
Administrative Agent or any other Lender, arising to the level of willful
misconduct while exercising active control and management of the property. If
any Credit Party at any time or times hereafter shall fail to obtain or maintain
any of the policies of insurance required above or to pay all premiums relating
thereto, Administrative Agent may at any time or times thereafter obtain and
maintain such policies of insurance and pay such premiums and take any other
action with respect thereto that Administrative Agent deems advisable.
Administrative Agent shall have no obligation to obtain insurance for any Credit
Party or pay any premiums therefor. By doing so, Administrative Agent shall not
be deemed to have waived any Default or Event of Default arising from any Credit
Party's failure to maintain such insurance or pay any premiums therefor. All
sums so disbursed, including reasonable attorneys' fees, court costs and other
charges related thereto, shall be payable on demand by Borrower to
Administrative Agent in accordance with Section 11.3 and shall be additional
Obligations hereunder secured by the Collateral.
(d) Administrative Agent reserves the right at any time upon any
change in any Credit Party's risk profile (including any change in the product
mix maintained by any Credit Party or any laws affecting the potential liability
of such Credit Party) to require additional forms and limits of insurance to, in
Administrative Agent's reasonable opinion, adequately protect both
Administrative Agent's and Lenders' interests in all or any portion of the
Collateral and to ensure that each Credit Party is protected by insurance in
amounts and with coverage customary (after giving effect to Self-Insurance) for
companies of the same or similar size in the same geographic area. If reasonably
requested by Administrative Agent, each Credit Party shall deliver to
Administrative Agent from time to time a report of a reputable insurance broker
reasonably satisfactory to Administrative Agent, with respect to its insurance
policies.
(e) Each Credit Party shall deliver to Administrative Agent, in
form and substance reasonably satisfactory to Administrative Agent, certificates
of insurance with respect
31
to (i) all "All Risk" insurance naming Administrative Agent, on behalf of itself
and Lenders, as loss payee, with respect to Collateral and (ii) all general
liability and other liability policies naming Administrative Agent, on behalf of
itself and the Secured Parties, as additional insured. Each Credit Party
irrevocably makes, constitutes and appoints Administrative Agent (and all
officers, employees or agents designated by Administrative Agent), so long as
any Default or Event of Default has occurred and is continuing or the
anticipated insurance proceeds in respect of the Collateral exceed $10,000,000,
as each Credit Party's true and lawful agent and attorney-in-fact for the
purpose of making, settling and adjusting claims relating to the Collateral
under such "All Risk" policies of insurance, endorsing the name of each Credit
Party on any check or other item of payment for the proceeds of such "All Risk"
policies of insurance and for making all determinations and decisions with
respect to such "All Risk" policies of insurance. Administrative Agent shall
have no duty to exercise any rights or powers granted to it pursuant to the
foregoing power-of-attorney. Borrower shall promptly notify Administrative Agent
of any loss, damage, or destruction to the Collateral in the amount of
$10,000,000 or more, whether or not covered by insurance. After deducting from
such insurance proceeds of $10,000,000 or more (i) the expenses incurred by
Administrative Agent in the collection or handling thereof, and (ii) amounts
required to be paid to creditors (other than Lenders) having Permitted
Encumbrances which are prior to the Liens granted to Administrative Agent under
the Loan Documents (such net proceeds, the "Net Insurance Proceeds"),
Administrative Agent shall apply such Net Insurance Proceeds to the repayment of
the Loans (including cash collateralization of the Letters of Credit if then
required pursuant to Section 1.3(b)) and if no Loans are then outstanding and no
Event of Default is then continuing, as Borrower shall direct.
5.5 Compliance with Laws. Each of Holdings and its Subsidiaries shall
comply with all federal, state, local and foreign laws and regulations
applicable to it, including those related to PACA, PASA, ERISA, employee
benefits and labor matters, and Environmental Laws and Environmental Permits,
except to the extent that the failure to comply, individually or in the
aggregate, (a) would not cause a breach or violation of Sections 3.11, 3.12, 5.2
and 5.13 or (b) otherwise could not reasonably be expected to have a Material
Adverse Effect.
5.6 Supplemental Disclosure. From time to time as may be reasonably
requested by Administrative Agent, the Credit Parties shall supplement each
Disclosure Schedule hereto, or any representation herein or in any other Credit
Loan Document, with respect to any matter hereafter arising that, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described in such Disclosure Schedule or as an exception to such
representation or that is necessary to correct any information in such
Disclosure Schedule or representation which has been rendered inaccurate thereby
(and, in the case of any supplements to any Disclosure Schedule, such Disclosure
Schedule shall be appropriately marked to show the changes made therein);
provided that no such supplement to any such Disclosure Schedule or
representation shall amend, supplement or otherwise modify any Disclosure
Schedule or representation, or be or be deemed a waiver of any Default or Event
of Default resulting from the matters disclosed therein, except as consented to
by Administrative Agent and the Majority Lenders in writing.
5.7 Intellectual Property. Each of Holdings and its Subsidiaries (a)
will conduct its business and affairs without infringement of or interference
with any intellectual property (including patents, trademarks and copyrights and
any licenses of the foregoing) of any other
32
Person if such infringement or interference could reasonably be expected to have
a Material Adverse Effect and (b) shall comply in all material respects with the
terms of its Licenses material to the conduct of its business subject to its
rights to amend or otherwise modify, dispute a claim under or terminate such
License, in each case in the ordinary course of business and, as determined by
such Person to be necessary in such Person's commercially reasonable business
judgment; provided that, to the extent such Person terminates such License,
Administrative Agent shall have received prior notice thereof and shall make
such adjustments to the Borrowing Base (including, without limitation, the
imposition or modification of Reserves in accordance with Annex K) as
Administrative Agent, in its reasonable credit judgment, deems necessary as a
result of such termination.
5.8 Environmental Matters. Each of Holdings and its Subsidiaries shall
and shall cause each Person within its control to: (a) conduct its operations
and keep and maintain its Real Estate in compliance with all Environmental Laws
and Environmental Permits other than noncompliance that could not reasonably be
expected to have a Material Adverse Effect, (b) implement any and all
investigation, remediation, removal and response actions that are appropriate or
necessary to maintain the value and marketability of the Real Estate or to
otherwise comply with Environmental Laws and Environmental Permits pertaining to
the presence, generation, treatment, storage, use, disposal, transportation or
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of its Real Estate, except to the extent that non-compliance with any of the
foregoing could not reasonably be expected to have a Material Adverse Effect,
(c) notify Administrative Agent promptly after such Person becomes aware of any
violation of Environmental Laws or Environmental Permits or any Release on, at,
in, under, above, to, from or about any Real Estate that is reasonably likely to
result in Environmental Liabilities in excess of $50,000,000 individually or in
the aggregate, and (d) promptly forward to Administrative Agent a copy of any
order, notice, request for information or any communication or report received
by such Person in connection with any such violation or Release or any other
matter relating to any Environmental Laws or Environmental Permits that could
reasonably be expected to result in Environmental Liabilities in excess of
$50,000,000 individually or in the aggregate in each case whether or not the
Environmental Protection Agency or any Governmental Authority has taken or
threatened any action in connection with any such violation, Release or other
matter. If Administrative Agent at any time has a reasonable basis to believe
that there may be a violation of any Environmental Laws or Environmental Permits
by any of Holdings or its Subsidiaries or any Environmental Liability arising
thereunder, or a Release of Hazardous Materials on, at, in, under, above, to,
from or about any of its Real Estate, that, in each case, could reasonably be
expected to have a Material Adverse Effect, or after an Event of Default in
connection with the exercise of rights and remedies under the Credit Loan
Documents by Administrative Agent, then each Credit Party shall, upon
Administrative Agent's written request (i) cause the performance of such
environmental audits including subsurface sampling of soil and groundwater, and
preparation of such environmental reports, at Borrower's expense, as
Administrative Agent may from time to time reasonably request, which shall be
conducted by reputable environmental consulting firms reasonably acceptable to
Administrative Agent and shall be in form and substance reasonably acceptable to
Administrative Agent and (ii) permit Administrative Agent or its representatives
to have access to all Real Estate for the purpose of conducting such
environmental audits and testing as Administrative Agent reasonably deems
appropriate, including subsurface sampling of soil and groundwater. Borrower
shall reimburse Administrative Agent on demand in accordance
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with Section 11.3 for the costs of such audits and tests and the same will
constitute a part of the Obligations secured hereunder.
5.9 Landlords' Agreements, Mortgagee Agreements, Bailee Letters and Real
Estate Purchases. Each Credit Party shall, from and after the Closing Date, use
commercially reasonable efforts to obtain a landlord's consent, mortgagee
agreement or bailee letter, as applicable, from the lessor of each leased
property, mortgagee of owned property or bailee with respect to any warehouse,
processor or converter facility or other location where Collateral is stored or
located (other than in respect of those locations set forth in Disclosure
Schedule (3.6) as of the Closing Date), which agreement or letter shall be
substantially in the form attached hereto as Exhibit F-1 or F-2, as applicable,
or otherwise in form and substance reasonably satisfactory to Administrative
Agent.
5.10 Further Assurances. (a) Each Credit Party executing this Agreement
agrees that it shall and shall cause the Subsidiary Credit Parties to, at such
Credit Party's expense and upon the reasonable request of Administrative Agent,
duly execute and deliver, or cause to be duly executed and delivered, to
Administrative Agent such further instruments and do and cause to be done such
further acts as may be necessary or proper in the reasonable opinion of
Administrative Agent to create, perfect and maintain the priority of the Liens
on the Collateral contemplated by the Credit Loan Documents or to enable
Administrative Agent or Lenders to exercise their rights and remedies under the
Credit Loan Documents.
(b) With respect to any domestic Subsidiary created or acquired
after the Closing Date by any Credit Party, including any Acquired Entity, such
Credit Party shall promptly cause such Subsidiary to (i) deliver to
Administrative Agent a supplement to the Subsidiary Guaranty, in substantially
the form attached hereto as Exhibit G-1, pursuant to which such Subsidiary
becomes a Guarantor and Credit Party, (ii) deliver to Administrative Agent a
supplement to the Security Agreement, in substantially the form attached hereto
as Exhibit G-2, and to take such other actions necessary or advisable to grant
to Administrative Agent for the benefit of the Secured Parties, a perfected
first priority security interest in the Collateral, other than Liens pertaining
to the Depository Accounts, other Deposit Accounts not required to be subject to
a Control Agreement pursuant to the Credit Loan Documents and Store Cash and
subject to Permitted Encumbrances, with respect to such new Subsidiary,
including without limitation, the filing of financing statements under the UCC
and in such jurisdictions as may be required by this Agreement or by law or as
may be reasonably requested by Administrative Agent and (iii) deliver to
Administrative Agent legal opinions relating to the matters described above,
which opinions shall be in form and substance reasonably satisfactory to
Administrative Agent, and any other documentation reasonably requested by
Administrative Agent in connection with the matters described above.
(c) In no event shall any Credit Party's or its Subsidiaries'
compliance with this Section 5.10 (i) waive or be deemed a waiver or consent to
any transaction giving rise to the need to comply with this Section 5.10 if such
transaction was not otherwise expressly permitted by this Agreement or (ii)
constitute or be deemed to constitute, with respect to any Subsidiary Credit
Party (or any other assets acquired by any Approved Credit Party after the
Closing Date), an approval of such Person as an "Approved Credit Party" or
permit the inclusion of such acquired assets in the computation of the Borrowing
Base.
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5.11 Compliance with Material Agreements. Holdings and each of its
Subsidiaries shall comply with the terms and conditions of each of (a) the
following agreements: the ESL Subordination Agreement and each of the Qualified
Trade Credit Documents (if, in the case of the Trust Agreement (as defined in
the Vendor Intercreditor Agreement), such noncompliance would result in an event
of default (as defined therein)) and (b) except to the extent the failure to do
so could not reasonably be expected to have a Material Adverse Effect, its
material contractual obligations.
5.12 Letters of Direction. With respect to any Depository Account opened
by any Credit Party after the Closing Date, such Credit Party shall,
simultaneously with the opening of any such account, obtain a Letter of
Direction executed by such Credit Party and the Depository Bank at which such
Depository Account is maintained and shall deliver such executed Letter of
Direction to Administrative Agent within five (5) Business Days following the
opening of any such account.
5.13 ERISA. Each Credit Party and its Subsidiaries shall pay and
discharge, and shall cause each other Credit Party and each ERISA Affiliate to
pay and discharge, when due (including any permissible extensions) any material
liability imposed upon it pursuant to the provisions of Title IV of ERISA.
5.14 Disbursement of Third Party Funds. All Third Party Funds on deposit
in any Concentration Account have been or will be remitted to the segregated
accounts identified on Part C of Disclosure Schedule (3.19) on a basis
consistent with past practices (but in any event no less frequently than weekly)
or as otherwise approved by Administrative Agent and then remitted from such
segregated accounts to the Persons entitled thereto on a basis consistent with
past practices (but in any event no less frequently than weekly) or as otherwise
approved by Administrative Agent.
5.15 Post-Closing Items. (a) Borrower shall cause to be delivered to
Administrative Agent, no later than thirty (30) days after the Closing Date (or
such later date as Administrative Agent may agree), a duly executed original of
opinion of counsel for the Credit Parties in Indiana, in form and substance
reasonably satisfactory to Administrative Agent and its counsel and
Co-Syndication Agents and their respective counsel.
(b) Borrower and its Subsidiaries shall pay all delinquent
franchise taxes owing by each of them in each jurisdiction set forth on
Disclosure Schedule (5.15(b)) and deliver certificates of good standing from
each such jurisdiction, in each case, no later than one hundred twenty (120)
days after the Closing Date, or such later date as Administrative Agent shall
agree.
(c) Borrower shall cause to be delivered to Administrative Agent,
no later than fifteen (15) days after the Closing Date (or such later date as
Administrative Agent may agree but not to exceed an additional fifteen (15) days
without the consent of Administrative Agent and each Co-Syndication Agent), a
duly executed Control Agreement by and among (i) Bank of America, N.A., Borrower
and Administrative Agent and (ii) The Bank of New York, Borrower and
Administrative Agent.
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6. NEGATIVE COVENANTS
Each Credit Party executing this Agreement jointly and severally
agrees as to Holdings and each of its Subsidiaries that from and after the date
hereof until the Termination Date:
6.1 Mergers. No Credit Party shall, nor shall it permit any of its
Subsidiaries to, directly or indirectly, by operation of law or otherwise, merge
or consolidate with or into any Person other than (a)(i) mergers and
consolidations among Borrower and the Subsidiary Guarantors (other than a
Restricted Entity) which are not consummated in connection with a Permitted
Acquisition, (ii) mergers and consolidations between or among non-Credit Party
Subsidiaries of Borrower, (iii) mergers and consolidations of Subsidiaries of
Borrower with and into any Subsidiary Guarantor (other than a Restricted Entity)
and (b) mergers and consolidations in connection with any Permitted Acquisition
between any Subsidiary Credit Party or Subsidiary Credit Parties created or
formed in connection with such Permitted Acquisition, any Restricted Entity or
any Subsidiary which is not a Credit Party on the one hand and the Person or
Persons to be acquired on the other hand; provided that (y) in the case of
mergers or consolidations involving Borrower, Borrower shall be the surviving
entity and (z) in connection with any merger or consolidation contemplated by
clauses (a)(iii) or (b) above, the surviving entity shall be a Subsidiary Credit
Party (or shall become one simultaneously with such merger or consolidation).
6.2 Investments; Loans and Advances. Except as otherwise expressly
permitted by this Section 6.2, no Credit Party shall, nor shall it permit any of
its Subsidiaries to, make or permit to exist any investment in, or make, accrue
or permit to exist any loans or advances of money to, any Person, through the
direct or indirect lending of money, holding of securities or otherwise (each of
the foregoing, an "Investment", and collectively, the "Investments"), except
that:
(a) Borrower and its Subsidiaries may hold Investments comprised
of notes payable, or stock or other securities issued by Account Debtors in
complete or partial settlement of such Account Debtor's accounts receivable or
other obligations in the ordinary course of business;
(b) Borrower and its Subsidiaries may acquire and hold trade
receivables owing to any of them, if created or acquired in the ordinary course
of business and payable or dischargeable in accordance with customary trade
terms of Borrower or such Subsidiary;
(c) Holdings and its Subsidiaries may hold the Investments held by
them on the Closing Date (which Investment in any Person which is not a Credit
Party or which is a Restricted Entity or Investment by any Subsidiary that is
not a Credit Party or which is a Restricted Entity in Holdings or any other
Credit Party is described on Disclosure Schedule (6.2)); provided that any
additional Investments made with respect thereto shall be permitted only if
independently permitted under the other provisions of this Section 6.2;
(d) Cash, Cash Equivalents and Marketable Securities; provided,
that any cash and Cash Equivalents, other than Store Cash, must be (i)
maintained in a Concentration Account
36
or Excluded Account, as applicable or (ii) otherwise invested in accordance with
this Section 6.2; provided, further, that Marketable Securities must (i) be
maintained in an Investment Account covered by an Investment Account Control
Agreement or otherwise be subject to a first-priority, perfected security
interest in favor of Administrative Agent, (ii) be maintained in an Excluded
Account or (iii) be held in connection with or as a result of Investments
permitted to be made pursuant to clause (l) below;
(e) Without duplication, Investments permitted as Capital
Expenditures pursuant to Annex G;
(f) Investments by (i) Kmart HQ in any Wholly Owned Subsidiary
Credit Party (other than a Restricted Entity) and (ii) any Subsidiary of Kmart
HQ in Kmart HQ or any Wholly Owned Subsidiary Credit Party (other than a
Restricted Entity); provided that, in the case of clause (ii), any repayment of
or return on such Investments shall be subordinated to the indefeasible payment
in full of the Obligations;
(g) Other Investments by Kmart HQ and the Subsidiary Credit
Parties to or in Subsidiaries of Kmart HQ that are (i) not Subsidiary Credit
Parties or (ii) Restricted Entities which, when taken together with amounts
expended pursuant to Section 6.3(a)(iv)(E) and obligations incurred pursuant to
Section 6.6(d) (without duplication), do not exceed $100,000,000 at any one time
outstanding (net of dividends, returns of capital and repayments of loans and
advances received after the Closing Date);
(h) Guaranteed Indebtedness permitted by Section 6.6;
(i) Travel, relocation and similar advances or loans made by the
Credit Parties and their Subsidiaries to their respective officers and employees
in the ordinary course of business to the extent permitted by Section 6.4(b);
and
(j) During any Fiscal Quarter, Borrower and its Subsidiaries may
use Surplus Cash as calculated for the immediately preceding Fiscal Quarter (to
the extent not otherwise utilized pursuant to clauses (k), (l) or (m) below) to
make Investments in Marketable Instruments; provided that no Default or Event of
Default has occurred and is continuing at the time of such Investment (or would
result therefrom);
(k) During any Fiscal Quarter, Borrower and its Subsidiaries may
use Surplus Cash as calculated for the immediately preceding Fiscal Quarter (to
the extent not otherwise utilized pursuant to clause (j) above or clauses (l) or
(m) below), Indebtedness permitted under Section 6.3, the cash proceeds of any
issuance of Stock of Holdings and Stock of Holdings to make Investments
constituting Permitted Acquisitions; provided that (i) no Default or Event of
Default has occurred and is continuing at the time of such Investment (or would
result therefrom), (ii) the total consideration in the aggregate during the term
of the Agreement to be paid by Borrower or any of its Subsidiaries (including
(other than Acquisition Indebtedness) any (x) Indebtedness issued or incurred by
Borrower or its Subsidiaries (other than the Acquired Entity) pursuant to
Section 6.3 in connection therewith (the amount thereof to be calculated in
accordance with GAAP), (y) the Market Value of any Stock of Holdings issued in
connection therewith and (z) the cash proceeds of any issuance of Stock of
Holdings (the amount of any
37
consideration referred to in clauses (y) and (z), collectively the "Stock
Consideration")) in connection with Acquisitions pursuant to this clause (k)
(the "Total Consideration") shall not exceed $1,750,000,000 in the aggregate
during the term of this Agreement (as such amount may be increased or decreased
as provided below, the "Total Consideration Basket") (provided that (1) in no
event may the Total Consideration less the Stock Consideration for all such
Investments exceed $750,000,000 in the aggregate during the term of this
Agreement (as the same may be increased or decreased as provided below, the
"Cash Consideration Basket") and (2) in no event may the Stock Consideration for
all such Investments exceed $1,000,000,000 in the aggregate during the term of
this Agreement (as the same may be decreased as provided below, the "Stock
Consideration Basket")), and (iii) no Inventory acquired pursuant to any
Permitted Acquisition shall become eligible for inclusion in the Borrowing Base
until Administrative Agent has completed an appraisal and audit thereof (both at
Borrower's expense and upon its request) and approved such inclusion in writing
as determined by Administrative Agent in its sole and absolute discretion;
provided, further, that in the event that LTM EBITDA is equal to or greater than
$600,000,000 as evidenced in an LTM EBITDA Certificate, the Total Consideration
Basket shall be increased to $2,000,000,000 and the Cash Consideration Basket
shall be increased to $1,000,000,000; provided, further, that if subsequent to
any such increase LTM EBITDA is less than $600,000,000 as evidenced in an LTM
EBITDA Certificate, the Total Consideration Basket shall be reduced to the
greater of $1,750,000,000 or the amount actually spent pursuant to the
immediately preceding proviso and the Cash Consideration Basket shall be reduced
to the greater of $750,000,000 or the amount actually spent or deemed spent
under the Cash Consideration Basket pursuant to the immediately preceding
proviso; and provided, further, that in the event that following any Acquisition
pursuant to this clause (k) Borrower or any of its Subsidiaries makes any Asset
Transfer to any Stock Acquisition Subsidiary to the extent permitted by clauses
(f) and (g) above, then the Asset Transfer Amount in respect thereof shall (i)
first be deducted from the Stock Consideration Basket less amounts spent or
deemed spent under the Stock Consideration Basket pursuant to this clause (k)
and (ii) then, to the extent that the Stock Consideration Basket has been
reduced to zero, be deducted from the Cash Consideration Basket less amounts
spent or deemed spent under the Cash Consideration Basket pursuant to this
clause (k);
(l) During any Fiscal Quarter, Borrower and its Subsidiaries may
use Surplus Cash as calculated for the immediately preceding Fiscal Quarter (to
the extent not otherwise utilized pursuant to clauses (j) or (k) above or (m)
below) to (i) make deposits consisting of cash, Cash Equivalents and Marketable
Securities with finance companies, suppliers, insurers, vendors and other third
parties that provide goods or services to the Credit Parties or their vendors
and suppliers in the ordinary course of business and (ii) make Investments in
any securities, Indebtedness, assets or other interests, in each case, that
directly relate to real property owned or leased by any of the Credit Parties;
provided, that not more than $500,000,000 of Surplus Cash in the aggregate
during the term of this Agreement may be used for such deposits pursuant to this
clause (l); and
(m) During any Fiscal Quarter, Borrower and its Subsidiaries may
use Surplus Cash as calculated for the immediately preceding Fiscal Quarter (to
the extent not otherwise utilized pursuant to clauses (j) and (k) above), to
make Investments constituting Capital Expenditures in excess of those permitted
pursuant to Annex G;
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provided, however, that
(A) for purposes of clause (d) above, any Investment
which complies with the requirements of the definition of the
term "Cash Equivalent" or "Marketable Securities" on the date
such Investment is made may continue to be held
notwithstanding that such Investment if made thereafter would
not comply with such requirements;
(B) no new Investment otherwise permitted by clauses
(g) or (l) shall be permitted to be made if, immediately
before or after giving effect thereto, any Event of Default
shall have occurred and be continuing; and
(C) no proceeds of Advances may be utilized to make
Investments described in clauses (j), (k) and (l) above.
6.3 Indebtedness.
(a) No Credit Party shall, nor shall it permit any of its
Subsidiaries to, create, incur, assume or permit to exist any Indebtedness,
except (without duplication) the following:
(i) Indebtedness of Borrower and its Subsidiaries secured by
purchase money security interests and Capital Leases permitted as Capital
Expenditures pursuant to Annex G and refinancings thereof;
(ii) the Loans and the other Obligations;
(iii) existing Indebtedness of Borrower and its Subsidiaries
described in Disclosure Schedule (6.3) and refinancings thereof or amendments or
modifications thereof that do not have the effect of increasing the principal
amount thereof (other than for accrued interest, fees and expenses), or changing
the amortization thereof (other than to extend the same);
(iv) Indebtedness consisting of unsecured intercompany loans
and advances made by:
(A) Kmart HQ to Holdings in respect of the taxes and
actual out of pocket expenses permitted to be paid under
Section 6.13(g);
(B) any Subsidiary Credit Party to Kmart HQ or any
other Subsidiary Credit Party (other than a Restricted
Entity);
(C) any Subsidiary to Holdings in respect of the taxes
and actual out of pocket expenses permitted to be paid under
Section 6.13(g);
(D) any Subsidiary that is not a Subsidiary Credit
Party or which is a Restricted Entity to any other Subsidiary
that is not a Subsidiary Credit Party or which is a Restricted
Entity;
39
(E) Kmart HQ or any other Subsidiary Credit Party, on
the one hand, to any Subsidiary of Kmart HQ which is not a
Credit Party or which is a Restricted Entity, on the other
hand, to the extent permitted by Section 6.2(g);
(F) any Subsidiary of Kmart HQ which is not a Credit
Party or which is a Restricted Entity to Kmart HQ or any
Subsidiary Credit Party (other than a Restricted Entity);
(G) Holdings to Kmart HQ or any Wholly-Owned
Subsidiary Credit Party (other than a Restricted Entity); and
(H) Kmart HQ to any Subsidiary Credit Party (other
than a Restricted Entity);
provided that the repayment of any Indebtedness set forth in this clause (iv)
shall be subordinated to the indefeasible payment in full of the Obligations;
provided further, that Holdings and its Subsidiaries shall record all
intercompany transactions to which they are a party on their respective books
and records;
(v) Indebtedness of Borrower and its Subsidiaries incurred
after the Closing Date in an amount not to exceed $250,000,000 in the aggregate
at any time outstanding and, if such Indebtedness is secured, secured solely by
Liens on Real Estate, Fixtures and/or Equipment and refinancings thereof;
(vi) Indebtedness owed to banks or other financial
institutions in the ordinary course of business in respect of any overdrafts and
related liabilities arising from treasury, depository and cash management
services or in connection with any automated clearing house transfers of funds;
(vii) Indebtedness of Borrower and its Subsidiaries in respect
of surety, appeal or customs bonds incurred in the ordinary course of business
of such Person;
(viii) other unsecured Indebtedness of Borrower and its
Subsidiaries in an aggregate amount not to exceed at any time outstanding
$100,000,000 and refinancings thereof;
(ix) obligations with respect to Inventory consigned to
Borrower or any Subsidiary;
(x) Subordinated Debt of Borrower or any other Credit Party
on terms and conditions satisfactory to Administrative Agent (A) in an aggregate
principal amount not to exceed $250,000,000 (including, without limitation and
duplication, the ESL Notes and the ESL Note Guarantee) and (B) after the
occurrence and during the continuance of any Event of Default and upon the
receipt of Administrative Agent's prior written approval (which may be given or
withheld in its sole and absolute discretion), additional Subordinated Debt
owing by Holdings to ESL;
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(xi) non-speculative Hedging Obligations in the ordinary
course of business to the extent permitted by Section 6.18;
(xii) Acquisition Indebtedness; and
(xiii) Indebtedness in respect of obligations under
sale/leaseback arrangements permitted under Section 6.12 hereof;
provided, however, that no new Indebtedness incurred in reliance on clauses (i),
(v), (viii), (x)(A) or (xii) shall be permitted if, after giving effect to the
incurrence thereof, any Event of Default shall have occurred and be continuing.
(b) No Credit Party shall, nor shall it permit any of its
Subsidiaries to, directly or indirectly, voluntarily purchase, redeem, defease
or prepay any principal of, premium, if any, interest or other amount payable in
respect of any Indebtedness for borrowed money prior to the stated maturity
thereof, other than (i) the Obligations, (ii) Indebtedness secured by Permitted
Liens if the asset securing such Indebtedness has been sold or otherwise
disposed of in accordance with Section 6.8, (iii) Indebtedness permitted by
Sections 6.3(a)(iii) and (iv)(other than, upon the occurrence and during the
continuance of an Event of Default, Indebtedness permitted under Section
6.3(a)(iv)(F)) and Section 6.3(a)(vi), (iv) Indebtedness upon any refinancing
thereof permitted by Section 6.3, (v) other Indebtedness permitted hereunder
(excluding Subordinated Debt) in a principal amount not in excess of $50,000,000
and (vi) Indebtedness constituting revolving Indebtedness permitted under
Section 6.3(a)(viii) or Section 6.3(a)(xii) (so long as, in the case of any such
Indebtedness which also constitutes Subordinated Debt, such repayment is
expressly permitted by the Subordination Agreement relating thereto).
6.4 Employee Loans and Affiliate Transactions.
(a) Except as otherwise expressly permitted in this Section 6 with
respect to Affiliates, no Credit Party shall, nor shall it permit any of its
Subsidiaries to, enter into or be a party to any transaction with any Affiliate
thereof that is not a Credit Party except in the ordinary course of, and
pursuant to the reasonable requirements of such Person's, business and upon fair
and reasonable terms that are no less favorable to such Person than would be
obtained in a comparable arm's length transaction with a Person not an Affiliate
of such Person; provided that the foregoing shall not prohibit Holdings and its
Subsidiaries from entering into employment arrangements with its officers and
retention and other agreements with officers and directors pursuant to the
reasonable requirements of its business, on fair and reasonable terms and
similar to those entered into by similarly situated companies. All such material
transactions existing as of the Closing Date are described in Disclosure
Schedule (6.4(a)).
(b) No Credit Party shall, nor shall it permit any of its
Subsidiaries to, enter into any lending or borrowing transaction with any
directors, officers or employees of any Credit Party or its Subsidiaries, except
loans to its respective directors, officers or employees on an arm's-length
basis in the ordinary course of business for a similarly situated company for
business expenses, relocation costs and similar purposes.
41
(c) No Credit Party shall enter into a management or consulting
agreement with any Affiliate except (i) agreements among the Credit Parties,
(ii) agreements between any Credit Party and its Subsidiaries which are not
Credit Parties to the extent payments thereunder are made by such non-Credit
Party Subsidiaries to such Credit Party, (iii) agreements with officers and
directors permitted under clause (a) above and (iv) other agreements on terms
and conditions satisfactory to Administrative Agent.
6.5 Capital Structure and Business. No Credit Party shall, nor shall it
permit any of its Subsidiaries to, amend its charter or bylaws in a manner that
could materially adversely affect Administrative Agent or Lenders or any Credit
Party's duty or ability to repay the Obligations. No Credit Party shall, nor
shall it permit any of its Subsidiaries to, engage in any business other than
the businesses currently engaged in by it or businesses reasonably related,
ancillary or complementary thereto.
6.6 Guaranteed Indebtedness. No Credit Party shall, nor shall it permit
any of its Subsidiaries to, create, incur, assume or permit to exist any
Guaranteed Indebtedness except:
(a) by endorsement of instruments or items of payment for deposit
to the general account of such Person;
(b) Guaranteed Indebtedness in respect of Indebtedness incurred by
any Credit Party for the benefit of Borrower or any Subsidiary Credit Party if
the primary obligation is expressly permitted by this Agreement (other than any
such obligation constituting (i) Subordinated Debt or (ii) Acquisition
Indebtedness);
(c) to the extent existing on the Closing Date and described on
Disclosure Schedule (6.6); provided that any renewal or extension of any such
Guaranteed Indebtedness shall be permitted only if independently justified under
the other provisions of this Section 6.6;
(d) Guaranteed Indebtedness incurred by any Credit Party for the
benefit of any Subsidiary which is not a Credit Party or which is a Restricted
Entity, but only to the extent that such Guaranteed Indebtedness does not exceed
the amount set forth in Section 6.2(g);
(e) Guaranteed Indebtedness incurred by any Subsidiary which is
not a Credit Party for the benefit of any Credit Party (other than a Restricted
Entity); provided that any indemnification of or rights of subrogation in favor
of such non-Credit Party Subsidiary is subordinated to the indefeasible payment
in full of the Obligations;
(f) Guaranteed Indebtedness incurred by any Subsidiary which is
not a Credit Party or which is a Restricted Entity for the benefit of any other
Subsidiary which is not a Credit Party or which is a Restricted Entity;
(g) Guaranteed Indebtedness (other than in respect of
Indebtedness) incurred by any Credit Party for the benefit of Borrower or any
Subsidiary Credit Party (other than a Restricted Entity) in the ordinary course
of business and which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect;
42
(h) Guaranteed Indebtedness by Borrower or any Subsidiary of
Borrower for the benefit of Persons who are not Affiliates of the Credit Parties
and who are vendors of Borrower or any Subsidiary of Borrower outstanding at any
one time in an aggregate amount not to exceed $25,000,000;
(i) other Guaranteed Indebtedness in an aggregate amount
outstanding at any one time not to exceed $2,500,000; and
(j) Guarantees of Subordinated Debt so long as such Guaranteed
Indebtedness is subordinated to the Obligations in a manner and form
satisfactory to Administrative Agent in its sole discretion, as to right and
time of payment and as to any other rights and remedies thereunder.
6.7 Liens. No Credit Party shall, nor shall it permit any of its
Subsidiaries to, create, incur, assume or permit to exist any Lien on or with
respect to (a) the Collateral, (b) its right, title and interest in or to any
leasehold interest in respect of Real Estate and (c) Marketable Instruments,
except in each case for Permitted Encumbrances, Liens constituting or arising as
a result of deposits permitted pursuant to Section 6.2(l), and, with respect to
clause (b), Liens created under the Leasehold Subordination Arrangements and
Permitted Liens. In addition, no Credit Party nor its Subsidiaries shall become
a party to any agreement, note, indenture or instrument, or take any other
action, that would prohibit the creation of a Lien on any of the Collateral in
favor of Administrative Agent, on behalf of itself and the Secured Parties, or
require a pari passu Lien on any of the Collateral in favor of any Person other
than Administrative Agent and the Secured Parties.
6.8 Sale of Stock and Assets. No Credit Party shall, nor shall it permit
any of its Subsidiaries to, sell, transfer, convey, assign or otherwise dispose
of any of its properties or other assets, including the Stock of any of its
Subsidiaries (whether in a public or a private offering or otherwise) or any of
its accounts receivable, other than:
(a) the sale of Inventory by Borrower and its Subsidiaries in the
ordinary course of business;
(b) the sale or other disposition by Borrower and its Subsidiaries
of surplus assets in the ordinary course of business;
(c) the sale or other disposition by Borrower and its Subsidiaries
of assets (other than Collateral) that are obsolete or no longer used or useful
in such Person's business, in such Person's reasonable judgment;
(d) transfers or other dispositions of assets (i) by and among
Kmart HQ and the Subsidiary Credit Parties (other than any Restricted Entity),
(ii) by and among Subsidiaries of Kmart HQ that are not Credit Parties, (iii) by
and among Restricted Entities, and (iv) by any Subsidiary Credit Party to any
Restricted Entity of (A) assets (other than Collateral) so long as such
Subsidiary Credit Party retains its rights to use such assets to the extent
necessary to allow Administrative Agent and Lenders to exercise the rights and
remedies set forth in Section 8 of the Security Agreement and (B) Inventory to
the extent such transfer is either permitted under Section 6.2(g) (with the cost
of such Inventory (or the portion thereof not received in cash) to be
43
counted in such basket thereunder) or the consideration paid in respect thereof
is no less than one hundred percent (100%) of the cost of such Inventory in
cash; provided that, in the case of this clause (iv), Administrative Agent shall
have the right, notwithstanding anything to the contrary contained in this
Agreement, at its option (and at Borrower's expense), at any time prior to such
transfer or thereafter, to (x) have an appraisal conducted of the Inventory
remaining at the Stores after giving effect to such transfer and (y) subject to
the consent of Lenders under Section 11.2, if necessary, make such adjustments
to the Borrowing Base (including, without limitation, the imposition or
modification of Reserves in accordance with Annex K) as Administrative Agent, in
its reasonable credit judgment, deems necessary as a result of such transfer in
each case, in the ordinary course of business;
(e) sales by Kmart HQ and its Subsidiaries of Real Estate and
Equipment in conjunction with permitted sale/leaseback transactions permitted
under Section 6.12;
(f) sales by Borrower and its Subsidiaries of Stores and DCs
identified on Disclosure Schedule (6.8) and the related Inventory and other
assets located in such Stores or DCs;
(g) other dispositions by Borrower and its Subsidiaries of assets
with an aggregate book value not exceeding $450,000,000, and to the extent that
such disposition is a disposition of Collateral, such Person shall receive an
amount not less than fair value as determined by Borrower in good faith in
respect thereof, and, after giving effect to such disposition and the use of
proceeds in respect thereof, there is no Default or Event of Default in
existence; provided that, in the case of dispositions of Stores in excess of
twenty-five (25) Stores individually or fifty (50) Stores in the aggregate
effected pursuant to this clause (g), Borrower shall deliver to Administrative
Agent at least twenty (20) days prior to the commencement or closing date
thereof, as applicable, a revised business plan demonstrating that Borrower, on
a pro forma basis, at such time as the Inventory subject to such disposition is
no longer eligible for inclusion in the Borrowing Base, is and will be in
compliance with each of the covenants set forth on Annex G through the end of
the term of this Agreement;
(h) the sale or discounting by Borrower and its Subsidiaries, in
each case without recourse and in the ordinary course of business, of accounts
receivable more than ninety (90) days overdue and arising in the ordinary course
of business, but only in connection with the compromise or collection thereof
consistent with customary industry practice (and not as part of any bulk sale or
financing of accounts receivable);
(i) from and after the date upon which the exception provided by
clause (g) above is no longer available to Borrower and its Subsidiaries, other
dispositions by Borrower and its Subsidiaries of assets in conjunction with the
sale of Stores (including the related Inventory and other assets located in such
Stores) as a going concern (each, a "Going Concern Sale") or pursuant to Store
Closure Sales so long as:
(V) no Default or Event of Default has occurred and is
continuing as of the date of such asset disposition (or would result
therefrom);
44
(W) Borrower and its Subsidiaries receive fair market value
for such Stores and all assets relating thereto (as reasonably
determined by (x) Borrower for the first twenty-five (25) Stores and
(y) Borrower's Board of Directors for all Stores in excess thereof)
and, in the case of a Going Concern Sale, the amount of the cash
purchase price allocated to Inventory sold as part of such sale
shall not be less than ninety percent (90%) of the cost of the
Eligible Inventory included in such Inventory;
(X) 100% of the consideration for such disposition (other than
with respect to the Store leases subject to such disposition) is
payable in cash and, in the case of a Going Concern Sale, either (i)
the purchaser of such assets assumes all of the obligations (whether
as lessee, guarantor or otherwise) of Borrower and its Subsidiaries
under the Store leases or (ii) Borrower or the applicable Subsidiary
subleases such leased Stores to the purchaser of such assets on the
same economic terms as the primary Store lease being subleased;
provided that such purchaser may assume or sublease, as applicable,
less than all of the obligations under such Store leases and
Borrower or such Subsidiary may remain primarily obligated for such
obligations not so assumed or subleased (the "Remaining Lease
Obligations") to the extent such Remaining Lease Obligations do not
exceed $25,000,000 in aggregate annual rental expenses;
(Y) the Commitments shall be simultaneously and permanently
reduced on a dollar-for-dollar basis by an amount equal to the
consideration payable in respect of the Collateral sold pursuant to
such disposition and the gross cash proceeds in respect thereof
shall be used to make any prepayment required as a result of such
reduction in accordance with Section 1.3(b); and
(Z) Borrower has delivered to Administrative Agent at least
twenty (20) Business Days prior to the commencement of a Store
Closure Sale or anticipated closing date, in the case of a Going
Concern Sale a (1) notice describing the material terms of such
disposition (including, without limitation, the anticipated sale
date or dates, the consideration to be received or expected to be
received by Borrower or its Subsidiaries, as applicable, and the
location of the Store or Stores being disposed of) and (2) revised
business plan demonstrating that Borrower, on a pro forma basis both
(x) after giving effect to such disposition and (y) at such time as
the Inventory is no longer eligible for inclusion in the Borrowing
Base, is and will be in compliance with each of the covenants set
forth on Annex G through the end of the term of this Agreement;
provided that Administrative Agent shall have the right, notwithstanding
anything to the contrary in this Agreement, at its option (and at Borrower's
expense), and at any time prior to the anticipated closing date of such
disposition or thereafter, to (a) have an appraisal conducted of the Inventory
remaining at the Stores after giving effect to such disposition and (b) subject
to the consent of Lenders under Section 11.2, if necessary, make such
adjustments to the Borrowing Base (including, without limitation, the imposition
or modification of Reserves in accordance with Annex K) as Administrative Agent,
in its reasonable credit judgment, deems necessary as a result of such
disposition; provided further in no event shall a disposition be permitted under
this
45
Section 6.8(i) that would, after taking into account Going Concern Sales or
Store Closure Sales effected pursuant to any provision of this Agreement, result
in the total number of Stores owned or operated by Borrower and its Subsidiaries
being less than 1,013; and
(j) transfers resulting from casualty or condemnation so long as
Borrower complies with Section 5.4(e);
(k) Restricted Payments permitted by Section 6.13; and
(l) transfers or other dispositions of assets among the Credit
Parties and their Subsidiaries as contemplated by the Plan of Reorganization.
6.9 ERISA. No Credit Party shall, or shall cause or permit any of its
Subsidiaries or its ERISA Affiliates to:
(a) cause or permit to occur an event that could reasonably be
expected to result in the imposition of a Lien under Section 412 of the IRC or
Section 302 or 4068 of ERISA; or
(b) cause or permit to occur an ERISA Event to the extent such
ERISA Event could reasonably be expected to result in taxes, penalties and other
liability in excess of $50,000,000 individually or in the aggregate; or
(c) engage in any transaction in connection with which a Credit
Party or any ERISA Affiliate could be reasonably expected to be subject to
either a civil penalty assessed pursuant to the provisions of Section 502(i) of
ERISA or a tax imposed under the provisions of Section 4975 of the IRC which, in
each case, could reasonably be expected to result in liability in excess of
$50,000,000 either individually or in the aggregate; or
(d) adopt an amendment to any Pension Plan requiring the provision
of security under Section 307 of ERISA or Section 401(a)(29) of the IRC which
could reasonably be expected to result in liability in excess of $50,000,000
either individually or in the aggregate; or
(e) terminate any Pension Plan under Section 4041(c) of ERISA
without the prior consent of Administrative Agent which could reasonably be
expected to result in liability in excess of $50,000,000 either individually or
in the aggregate; or
(f) fail in any material respect to make payment when due
(including permissible extensions) of all amounts which, under the provisions of
any Plan, or Multiemployer Plan, it is required to pay as contributions thereto
or as premiums to the PBGC, or, with respect to any Pension Plan, permit to
exist any material "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA and Section 412 of the IRC) which could reasonably be
expected to result in liability in excess of $50,000,000 either individually or
in the aggregate; or
(g) enter into a new agreement or agreements that would (i)
obligate a Credit Party or any ERISA Affiliate to make contributions to a
Multiemployer Plan subject to
46
subtitle (e) of Title IV of ERISA in excess of $50,000,000 per year, (ii) to
create, extend or increase an obligation to provide health or medical benefits
for retirees of a Credit Party or an ERISA Affiliate that would increase the
accumulated post retirement benefit obligation by more than $50,000,000 in the
aggregate during the term of this Agreement.
6.10 Financial Covenants. Borrower shall not breach or fail to comply
with any of the Financial Covenants.
6.11 Hazardous Materials. No Credit Party shall, nor shall it cause or
permit any of its Subsidiaries to, cause or permit a Release of any Hazardous
Material on, at, in, under, above, to, from or about any of the Real Estate
where such Release would (a) violate in any respect, or form the basis for any
Environmental Liabilities under, any Environmental Laws or Environmental Permits
or (b) otherwise adversely impact the value or marketability of any of the Real
Estate or any of the Collateral, other than such violations or Environmental
Liabilities that could not reasonably be expected to have a Material Adverse
Effect.
6.12 Sale-Leasebacks. No Credit Party shall, nor shall it permit any of
its Subsidiaries to, engage in any sale-leaseback, synthetic lease or similar
transaction involving any of its assets except (a) in the case of new Stores,
sale-leaseback transactions involving no more than forty (40) new Stores in the
aggregate during the term of this Agreement, (b) in the case of Stores owned as
of the Closing Date, sale-leaseback transactions not to exceed $100,000,000 in
the aggregate during the term of this Agreement and (c) with respect to
Equipment, sale-leaseback transactions in respect of such Equipment entered into
within 90 days of the acquisition of such Equipment for the purpose of providing
permanent financing of such Equipment, in each case, so long as such lease
obligations, if the same constitute Indebtedness, are otherwise permitted by
Section 6.3(a).
6.13 Restricted Payments. No Credit Party shall, nor shall it permit any
of its Subsidiaries to, make any Restricted Payment, except:
(a) intercompany loans and advances between Kmart HQ and its
Subsidiaries to the extent permitted by Section 6.3;
(b) (i) dividends or distributions by Subsidiaries of Kmart HQ
paid to Kmart HQ or any Subsidiary Credit Party (other than a Restricted
Entity), (ii) management fees to Kmart HQ from its Subsidiaries, (iii) dividends
or distributions by a non-Subsidiary Credit Party or a Restricted Entity paid to
any non-Subsidiary Credit Party or a Restricted Entity, (iv) dividends or
distributions by a Restricted Entity to Kmart HQ or any Subsidiary Credit Party
and (v) Restricted Payments of the type set forth in clause (f) of the
definition thereof to the extent otherwise permitted under Sections 6.3 and 6.8;
(c) loans and advances by Holdings and its Subsidiaries permitted
under Section 6.4(b);
(d) scheduled payments of principal and interest with respect to
Subordinated Debt to the extent permitted pursuant to the related Subordination
Agreement (and dividends or distributions by Borrower to Kmart HQ and by Kmart
HQ to Holdings to enable Holdings to make such payments);
47
(e) to the extent that any Person makes a capital contribution to
Holdings (which is in turn immediately contributed to Kmart HQ and thereafter
immediately contributed to Borrower) following the Closing Date (each, a
"Post-Closing Contribution"), a capital distribution by Borrower to Kmart HQ,
and by Kmart HQ to Holdings (immediately followed by a corresponding capital
distribution by Holdings directly or indirectly to such Person) in an amount not
to exceed the aggregate of any such Post-Closing Contributions, but only to the
extent that both: (i) the Liquidity Threshold is (A) greater than $1,000,000,000
for the thirty (30) consecutive days immediately prior to the date of such
proposed capital distribution and (B) projected to exceed $1,000,000,000 for the
ninety (90) consecutive days immediately after giving effect to such capital
distribution and (ii) no Event of Default has occurred, both before and after
giving effect to the payment of and immediate distribution to such capital
distribution;
(f) to the extent Borrower delivers to Administrative Agent an
officer's certificate executed by a Financial Officer together with its audited
Financial Statements demonstrating that, as of the last day of the immediately
preceding Fiscal Year, Borrower and its consolidated Subsidiaries had positive
Excess Cash Flow as of such date, then Borrower shall be permitted to use fifty
percent (50%) of such Excess Cash Flow during the then-current Fiscal Year, to
make a one-time cash distribution to Kmart HQ (which in turn directly or
indirectly makes an immediate distribution to Holdings) to enable Holdings to
either (i) make a one-time repayment or prepayment of the ESL Notes, if any or
(ii) make a distribution to its Stockholders; provided that no distributions or
payments may be made pursuant to this clause (f) unless (A) the Liquidity
Threshold is (x) greater than $1,000,000,000 for the thirty (30) consecutive
days immediately prior to the date of such payment or distribution and (y)
projected to exceed $1,000,000,000 for the ninety (90) consecutive days
immediately after giving effect to such payment or distribution and (B) no Event
of Default has occurred, both before and after giving effect to any such payment
or distribution;
(g) dividends or distributions by Kmart HQ to Holdings and
payments by Subsidiaries of Holdings to Holdings under tax sharing agreements,
the proceeds of which shall be applied by Holdings directly to pay (i) actual
taxes and (ii) actual out-of-pocket expenses in respect of accounting and legal
services rendered in the ordinary course of business and compensation of
officers and directors pursuant to the reasonable requirements of its business,
on fair and reasonable terms and similar to the compensation paid by similarly
situated companies;
(h) the payment by the Credit Parties of up to $10,000,000 in the
aggregate to purchase the unrestricted Stock of Holdings freely traded on a
national securities exchange (the "Incentive Stock"); provided, that Incentive
Stock may be used solely as incentives for officers, executives or other
employees of the Credit Parties; and
(i) the payment by the Credit Parties of up to $250,000,000 of
Surplus Cash as calculated for the immediately preceding Fiscal Quarter (to the
extent not otherwise utilized pursuant to clauses (j), (k), (l) or (m) of
Section 6.2) in the aggregate during the term of this Agreement to purchase the
unrestricted stock of Holdings freely traded on a national securities exchange;
provided that in the event that LTM EBITDA is equal to or greater than
$600,000,000 as evidenced in an LTM EBITDA Certificate, the limitation referred
to above shall be increased to $500,000,000; provided, further, that if
subsequent to any such increase LTM EBITDA is less than $600,000,000 as
evidenced in an LTM EBITDA Certificate, the limitation shall be reduced
48
to the greater of $250,000,000 or the amount actually spent pursuant to the
immediately preceding proviso.
6.14 Change of Corporate Name or Location; Change of Fiscal Year. No
Credit Party shall (a) change its name as it appears in official filings in the
state of its incorporation or other organization, (b) change the type of entity
that it is, (c) change its organization identification number, if any, issued by
its state of incorporation or other organization or (d) change its state of
incorporation or organization, in each case without at least thirty (30) days
prior written notice to Administrative Agent. No Credit Party shall, nor shall
it permit any of its Subsidiaries to, change its Fiscal Year.
6.15 No Impairment of Intercompany Transfers. No Credit Party shall, nor
shall it permit any of its Subsidiaries to, directly or indirectly enter into or
become bound by any agreement, instrument, indenture or other obligation (other
than this Agreement and the other Loan Documents) that would (currently or upon
the occurrence of any contingency or otherwise) directly or indirectly restrict,
prohibit or require the consent of any Person with respect to the payment of
dividends or distributions or the making or repayment of intercompany loans by a
Subsidiary of Borrower to Borrower or by Holdings to Borrower or any Subsidiary
of Borrower, other than customary restrictions and conditions contained in
agreements relating to the sale of all or a substantial part of the capital
Stock or assets of any Subsidiary pending such sale, provided such restrictions
and conditions apply only to the Subsidiary which is to be (or whose assets are
to be) sold and such sale is otherwise permitted hereunder.
6.16 Changes Relating to Subordinated Debt; Material Contracts.
(a) No Credit Party shall, nor shall it permit any of its
Subsidiaries to, change or amend the terms of any Subordinated Debt (or any
indenture or agreement in connection therewith) if the effect of such amendment
is to: (i) increase the interest rate on such Subordinated Debt, (ii) change the
dates upon which payments of principal or interest are due on such Subordinated
Debt other than to extend such dates, (iii) change any default or event of
default other than to delete or make less restrictive any default provision
therein, or add any covenant with respect to such Subordinated Debt, (iv) change
the redemption or prepayment provisions of such Subordinated Debt other than to
extend the dates therefor or to reduce the premiums payable in connection
therewith, (v) grant any security or collateral to secure payment of such
Subordinated Debt, (vi) change the terms of the subordination of such
Subordinated Debt or (vii) change or amend any other term if such change or
amendment would materially increase the obligations of such Person thereunder or
confer additional material rights on the holder of such Subordinated Debt in a
manner adverse to any such Person, Administrative Agent or any Lender.
(b) No Credit Party shall, nor shall it permit any of its
Subsidiaries to, change or amend the terms of (i) the ESL Subordination
Agreement or (ii) any of the Qualified Trade Credit Documents.
(c) No Credit Party shall, nor shall it permit any of its
Subsidiaries to, change or amend the terms of any other material document or
agreement to the extent such changes or
49
amendments could reasonably be expected to materially and adversely affect the
rights or remedies of Administrative Agent or Lenders under the Credit Loan
Documents.
6.17 Holdings. Holdings shall not directly engage in any trade or
business (other than through its Subsidiaries) or own any assets (other than the
Stock of Kmart HQ and cash, as and when necessary, for purposes of paying
amounts permitted to be paid by it under Section 6.13) or incur any Indebtedness
or Guaranteed Indebtedness (other than as permitted pursuant to Sections 6.3 and
6.6, respectively).
6.18 No Speculative Transactions. No Credit Party shall, nor shall it
permit any of its Subsidiaries to, engage in any transaction involving commodity
options, futures contracts or similar transactions for speculative purposes.
7. TERM
7.1 Termination. The financing arrangements contemplated hereby shall be
in effect until the Commitment Termination Date, and the Loans and all other
Obligations shall be automatically due and payable in full on such date.
7.2 Survival of Obligations Upon Termination of Financing Arrangements.
Except as otherwise expressly provided for in the Loan Documents, no termination
or cancellation (regardless of cause or procedure) of any financing arrangement
under this Agreement shall in any way affect or impair the obligations, duties
and liabilities of the Credit Parties or the rights of Administrative Agent and
Lenders relating to any unpaid portion of the Loans or any other Obligations,
due or not due, liquidated, contingent or unliquidated or any transaction or
event occurring prior to such termination, or any transaction or event, the
performance of which is required after the Commitment Termination Date. Except
as otherwise expressly provided herein or in any other Loan Document, all
undertakings, agreements, covenants, warranties and representations of or
binding upon the Credit Parties, and all rights of Administrative Agent and each
Lender, all as contained in the Loan Documents, shall not terminate or expire,
but rather shall survive any such termination or cancellation and shall continue
in full force and effect until the Termination Date; provided, that the
provisions of Section 11, the payment obligations under Sections 1.15 and 1.16,
and the indemnities contained in the Loan Documents shall survive the
Termination Date.
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder:
(a) Borrower (i) fails to make any payment of principal in respect
of Loans or reimbursement obligations in respect of Letter of Credit Obligations
when due and payable, (ii) fails to make any payment of interest on, or Fees
owing in respect of the Loans or Commitments within five (5) Business Days
following the date upon which such interest or Fees were due and payable or
(iii) fails to pay or reimburse Administrative Agent or Lenders for any expense
reimbursable hereunder or under any other Credit Loan Document within fifteen
(15) Business Days following Administrative Agent's demand for such
reimbursement or payment of expenses.
50
(b) Any Credit Party fails or neglects to perform, keep or observe
any of the provisions of Sections 1.4, 1.8, 5.4(a), 5.15(c) or 6, or any of the
provisions set forth in Annexes C or G, respectively.
(c) Any Credit Party fails or neglects to perform, keep or observe
any of the provisions of Section 1.14, Section 4.1, Section 4.3 or Section
5.4(b) or any provisions set forth in Annexes E or F, respectively, and the same
shall remain unremedied for five (5) Business Days or more.
(d) (i) Any Credit Party fails or neglects to perform, keep or
observe any other provision of this Agreement or of any of the other Credit Loan
Documents (other than any provision embodied in or covered by any other clause
of this Section 8.1) and the same shall remain unremedied for thirty (30) days
or more after receipt of written notice thereof from Administrative Agent, (ii)
a default or breach by any Person other than Administrative Agent occurs under
the Vendor Intercreditor Agreement or (iii) an event of default shall occur
under and as defined in the Trust Agreement.
(e) (i) A default or breach occurs under any other agreement,
document or instrument to which any Credit Party or any of its Subsidiaries is a
party that is not cured within any applicable grace period therefor, and such
default or breach involves the failure to make any payment when due in respect
of any Indebtedness or Guaranteed Indebtedness (other than the Obligations) of
any Credit Party or any of its Subsidiaries in excess of $50,000,000 in the
aggregate (including amounts owing to all creditors under any combined or
syndicated credit arrangements) and such failure is a failure to pay at maturity
such Indebtedness or causes, or permits any holder of such Indebtedness or
Guaranteed Indebtedness or a trustee to cause, Indebtedness or Guaranteed
Indebtedness or a portion thereof in excess of $50,000,000 in the aggregate to
become due prior to its stated maturity or prior to its regularly scheduled
dates of payment, or cash collateral to be demanded in respect thereof as a
result of such default, in each case, regardless of whether such right is
exercised, by such holder or trustee or (ii) an "Event of Default" occurs under,
and as defined in, any ESL Note.
(f) Any information contained in any Borrowing Base Certificate is
untrue or incorrect in any material respect and an Overage occurs as a result
thereof, or any representation or warranty herein or in any Credit Loan Document
or in any written statement, report, financial statement or certificate made or
delivered to Administrative Agent or any Lender by any Credit Party is untrue or
incorrect in any material respect as of the date when made or deemed made.
(g) (i) Assets of any Credit Party or any of its Subsidiaries with
a fair market value, individually or in the aggregate, of $50,000,000 or more
are attached, seized, levied upon or subjected to a writ or distress warrant, or
come within the possession of any receiver, trustee, custodian or assignee for
the benefit of creditors of any Credit Party or any of its Subsidiaries and such
condition continues for thirty (30) days or more or (ii) any assets of any
Credit Party or any of its Subsidiaries is attached, seized, levied upon or
subjected to a writ or distress warrant and such event could reasonably be
expected to have a Material Adverse Effect.
(h) A case or proceeding is commenced against any Credit Party or
any of its Subsidiaries seeking a decree or order in respect of such Credit
Party or any of its Subsidiaries
51
(i) under the Bankruptcy Code or any other applicable federal, state or foreign
bankruptcy or other similar law, (ii) appointing a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) for such
Person or for any substantial part of any such Person's assets, or (iii)
ordering the winding-up or liquidation of the affairs of such Person, and such
case or proceeding shall remain undismissed or unstayed for forty-five (45) days
or more or a decree or order granting the relief sought in such case or
proceeding is granted by a court of competent jurisdiction.
(i) Any Credit Party or any of its Subsidiaries (i) files a
petition seeking relief under the Bankruptcy Code or any other applicable
federal, state or foreign bankruptcy or other similar law, (ii) consents to or
fails to contest in a timely and appropriate manner to the institution of
proceedings thereunder or to the filing of any such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) for such Person or for
any substantial part of any such Person's assets, (iii) makes an assignment for
the benefit of creditors, or (iv) takes any action in furtherance of any of the
foregoing, or (v) admits in writing its inability to, or is generally unable to,
pay its debts as such debts become due.
(j) Any Credit Party or any Subsidiary thereof fails to (i) make
any termination payment under a Specified Hedging Agreement or (ii) fails to
make any payment due under any Bank Product Agreement in excess of $5,000,000 in
the aggregate and such default continues for fifteen (15) days following the
date upon which such payment was due.
(k) A final judgment or judgments for the payment of money in
excess of $50,000,000 in the aggregate at any time are outstanding against one
or more of the Credit Parties or any of their respective Subsidiaries (but only
to the extent such judgments are not covered by insurance policies as to which
liability has not been denied by the insurance carrier in writing), and the same
are not, within sixty (60) days after the entry thereof, discharged or execution
thereof stayed or bonded pending appeal, or such judgments are not discharged
prior to the expiration of any such stay.
(l) Any material provision of any Loan Document for any reason
ceases to be valid, binding and enforceable in accordance with its terms (or
Holdings or any of its Subsidiaries or ESL shall challenge the enforceability of
any Loan Document or shall assert in writing, or engage in any action or
inaction based on any such assertion, that any provision of any of the Loan
Documents has ceased to be or otherwise is not valid, binding and enforceable in
accordance with its terms), or any Lien created under any Loan Document ceases
to be a valid and perfected first priority Lien (except as otherwise permitted
herein or therein) in any of the Collateral purported to be covered thereby.
(m) The Confirmation Order is reversed or modified or stayed in a
manner adverse to the rights or remedies of Administrative Agent or the Lenders
as determined by Administrative Agent and the Co-Syndication Agents in their
sole and absolute discretion.
(n) Any Change of Control occurs.
52
8.2 Remedies.
(a) If any Event of Default has occurred and is continuing,
Administrative Agent may (and at the written request of the Majority Lenders
shall), without notice, suspend the Revolving Loan facility with respect to
additional Advances and/or the incurrence of additional Letter of Credit
Obligations, whereupon any additional Advances and additional Letter of Credit
Obligations shall be made or incurred in the sole discretion of the Majority
Lenders (or, in the case of any Overadvance, the sole discretion of
Administrative Agent) so long as such Event of Default is continuing. If any
Event of Default has occurred and is continuing, Administrative Agent may (and
at the written request of the Majority Lenders shall), without notice except as
otherwise expressly provided in Section 1.5(d), increase the rate of interest
applicable to the Loans and the Letter of Credit Fees to the Default Rate.
(b) If any Event of Default has occurred and is continuing,
Administrative Agent may (and at the written request of the Majority Lenders
shall), without notice: (i) terminate the Commitments with respect to further
Advances or the incurrence of further Letter of Credit Obligations, (ii) reduce
the Commitments from time to time, (iii) declare all or any portion of the
Obligations, including all or any portion of any Loan to be forthwith due and
payable, and require that the Letter of Credit Obligations be cash
collateralized as provided in Annex B, all without presentment, demand, protest
or further notice of any kind, all of which are expressly waived by Borrower and
each other Credit Party, (iv) exercise any rights and remedies provided to
Administrative Agent under the Credit Loan Documents or at law or equity,
including all remedies provided under the Code and/or (v) set-off amounts in the
Cash Collateral Account or the Concentration Account or any other accounts
maintained with Administrative Agent (or over which Administrative Agent has
sole dominion and control) and apply such amounts to the obligations of the
Credit Parties hereunder and in the other Loan Documents; provided, that upon
the occurrence of an Event of Default specified in Sections 8.1(h) or (i), the
Commitments shall be immediately terminated and all of the Obligations,
including the Loans, shall become immediately due and payable without
declaration, notice or demand by any Person.
8.3 Waivers by Credit Parties. Except as otherwise provided for in this
Agreement or by applicable law, each Credit Party waives: (a) presentment,
demand and protest and notice of presentment, dishonor, notice of intent to
accelerate, notice of acceleration, protest, default, nonpayment, maturity,
release, compromise, settlement, extension or renewal of any or all commercial
paper, accounts, contract rights, documents, instruments, chattel paper and
guaranties at any time held by Administrative Agent on which any Credit Party
may in any way be liable, and hereby ratifies and confirms whatever
Administrative Agent may do in this regard, (b) all rights to notice and a
hearing prior to Administrative Agent's taking possession or control of, or to
Administrative Agent's replevy, attachment or levy upon, the Collateral or any
bond or security that might be required by any court prior to allowing
Administrative Agent to exercise any of its remedies and (c) the benefit of all
valuation, appraisal, marshaling and exemption laws.
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9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT
9.1 Assignment and Participations.
(a) Subject to the terms of this Section 9.1, any Lender may make
an assignment to a Qualified Assignee of, or sale of participations in, at any
time or times, the Credit Loan Documents, Loans, Letter of Credit Obligations
and any Commitment or any portion thereof or interest therein, including any
Lender's rights, title, interests, remedies, powers or duties thereunder. Any
assignment by a Lender shall:
(i) require the consent of Administrative Agent (other than
with respect to assignments to a Person qualifying under clause (a) of the
definition of Qualified Assignee) which consent shall not be unreasonably
withheld or delayed with respect to a Qualified Assignee qualifying under clause
(b) of the definition thereof;
(ii) require the consent of Borrower (other than with respect
to assignments to a Person qualifying under clause (a) of the definition of
Qualified Assignee and so long as no Event of Default has occurred and is
continuing), which consent shall not be unreasonably withheld or delayed;
(iii) require the execution of an assignment agreement (an
"Assignment Agreement" substantially in the form attached hereto as Exhibit
9.1(a) and otherwise in form and substance reasonably satisfactory to, and
acknowledged by, Administrative Agent and, if required, Borrower;
(iv) be conditioned on such assignee Lender representing to
the assigning Lender, Borrower and Administrative Agent that it is purchasing
the applicable Loans to be assigned to it for its own account, for investment
purposes and not with a view to the distribution thereof;
(v) after giving effect to any such partial assignment, the
assignee Lender shall have Commitments in an amount at least equal to
$10,000,000 with respect to the Revolving Credit Commitment and/or Revolving
Loans and, if such transfer relates to less than all of the assigning Lender's
rights and obligations under this Agreement and the Notes, such assigning Lender
shall have retained Commitments in an amount at least equal to $10,000,000 with
respect to the Revolving Credit Commitment and/or Revolving Loans; and
(vi) include a payment to Administrative Agent of an
assignment fee of $3,500.
In the case of an assignment by a Lender under this Section 9.1(a),
the assignee shall have, to the extent of such assignment, the same rights,
benefits and obligations as all other Lenders hereunder. The assigning Lender
shall be relieved of its obligations hereunder with respect to its Commitments
or assigned portion thereof from and after the date of such assignment. Borrower
hereby acknowledges and agrees that any assignment shall give rise to a direct
obligation of Borrower to the assignee and that the assignee shall be considered
to be a "Lender". In all instances, each Lender's liability to make Loans
hereunder shall be several and not joint and shall be limited to such Lender's
Pro Rata Share of the applicable Commitment. In
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the event Administrative Agent or any Lender assigns or otherwise transfers all
or any part of the Obligations, Administrative Agent or any such Lender shall so
notify Borrower and Borrower shall, upon the request of Administrative Agent or
such Lender, execute new Notes in exchange for the Notes, if any, being
assigned. Notwithstanding the foregoing provisions of this Section 9.1(a), any
Lender may at any time pledge the Obligations held by it and such Lender's
rights under this Agreement and the other Credit Loan Documents to a Federal
Reserve Bank; provided that no such pledge to a Federal Reserve Bank shall
release such Lender from such Lender's obligations hereunder or under any other
Credit Loan Document, and any Lender that is an investment fund may assign the
Obligations held by it and such Lender's rights under this Agreement and the
other Loan Documents to another investment fund managed by the same investment
advisor; provided that such Lender shall notify Administrative Agent of any such
assignment for purposes of maintaining the Loan Account in accordance with
Section 1.12 hereof, such assignment to become effective upon the recordation of
such assignment in the Loan Account.
(b) Any participation by a Lender of all or any part of its
Commitments shall be made with the understanding that all amounts payable by
Borrower hereunder shall be determined as if that Lender had not sold such
participation, and that the holder of any such participation shall not be
entitled to require such Lender to take or omit to take any action hereunder
except actions directly affecting:
(i) any reduction in the principal amount of, or interest
rate or Fees payable with respect to, any Loan in which such holder
participates;
(ii) any extension of the final maturity date of any Loan in
which such holder participates; and
(iii) any release of all or substantially all of the
Collateral (other than in accordance with the terms of this Agreement or the
other Credit Loan Documents).
Solely for purposes of Sections 1.15, 1.16 and 9.8, Borrower acknowledges and
agrees that a participation shall give rise to a direct obligation of Borrower
to the participant and solely for the purposes of such Sections the participant
shall be considered to be a "Lender"; provided that Borrower shall not be
required to pay any amount under Section 1.15 or Section 1.16 that is greater
than the amount it would have been required to pay had no participation been
sold. Except as set forth in the preceding sentence neither Borrower nor any
other Credit Party shall have any obligation or duty to any participant. Neither
Administrative Agent nor any Lender (other than the Lender selling a
participation) shall have any duty to any participant and may continue to deal
solely with the Lender selling a participation as if no such sale had occurred.
In addition, each Lender granting a participation under this Section 9.1(b)
shall keep a register, meeting the requirements of Treasury Regulation Section
5f.103-1(c), of each participant, specifying such participant's entitlement to
payments of principal and interest with respect to such participation, and for
the avoidance of doubt, each participant shall be obligated to comply with
Section 1.15(d) as if it were a "Lender."
(c) Except as expressly provided in this Section 9.1, no Lender
shall, as between Borrower and that Lender, or Administrative Agent and that
Lender, be relieved of any
55
of its obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the Loans,
the Notes or other Obligations owed to such Lender.
(d) Each Credit Party executing this Agreement shall assist any
Lender permitted to sell assignments under this Section 9.1 as reasonably
required to enable the assigning or selling Lender to effect any such
assignment, including the execution and delivery of any and all agreements,
notes and other documents and instruments as shall be reasonably requested to
effect such transfer and the participation of management in discussions with,
potential assignees.
(e) A Lender may furnish any information concerning Credit Parties
in the possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants); provided that such Lender
shall obtain for the express benefit of the Credit Parties from assignees or
participants confidentiality covenants substantially equivalent to those
contained in Section 11.8.
(f) No Lender shall assign or sell participations in any portion
of its Loans or Commitments to a potential Lender or participant, if, as of the
date of the proposed assignment or sale, the assignee Lender or participant
would be subject to capital adequacy or similar requirements under Section
1.16(a), increased costs under Section 1.16(b), an inability to fund LIBOR Loans
under Section 1.16(c), or withholding taxes in accordance with Section 1.15(a).
(g) Notwithstanding anything to the contrary contained herein, any
Lender (a "Granting Lender"), may grant to a special purpose funding vehicle (an
"SPC"), identified as such in writing by the Granting Lender to Administrative
Agent and Borrower, the option to provide to Borrower all or any part of any
Loans that such Granting Lender would otherwise be obligated to make to Borrower
pursuant to this Agreement; provided that (i) nothing herein shall constitute a
commitment by any SPC to make any Loan and (ii) if an SPC elects not to exercise
such option or otherwise fails to provide all or any part of such Loan, the
Granting Lender shall be obligated to make such Loan pursuant to the terms
hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of
the Granting Lender to the same extent, and as if such Loan were made by such
Granting Lender. No SPC shall be liable for any indemnity or similar payment
obligation under this Agreement (all liability for which shall remain with the
Granting Lender). Any SPC may (A) with notice to, but without the prior written
consent of, Borrower and Administrative Agent and without paying any processing
fee therefor assign all or a portion of its interests in any Loans to the
Granting Lender or to any financial institutions (consented to by Borrower and
Administrative Agent) providing liquidity and/or credit support to or for the
account of such SPC to support the funding or maintenance of Loans and (B)
disclose on a confidential basis any non-public information relating to its
Loans to any rating agency, commercial paper dealer or provider of any surety,
guarantee or credit or liquidity enhancement to such SPC. This Section 9.1(g)
may not be amended without the prior written consent of each Granting Lender,
all or any of whose Loans are being funded by an SPC at the time of such
amendment. For the avoidance of doubt, the Granting Lender shall for all
purposes, including without limitation, the approval of any amendment or waiver
of any provision of any Credit Loan Document or the obligation to pay any amount
otherwise payable by the Granting Lender under the Loan Documents, continue to
be the Lender of record hereunder. In addition, each
56
Granting Lender (1) shall keep a register, meeting the requirements of Treasury
Regulation Section 5f.103-1(c), of each SPC which has funded all or any part of
any Loans that such Granting Lender would otherwise be obligated to make to
Borrower pursuant to this Agreement, specifying such SPC's entitlement to
payments of principal and interest with respect to such Loan and (2) shall
collect, prior to the time such SPC received payments with respect to such
funded Loans, from each such SPC a Certificate of Exemption described in Section
1.15(e) (and updated as required by Section 1.15(e)) as if such SPC were a
Certifying Lender under Section 1.15(e).
9.2 Appointment of Administrative Agent.
(a) GE Capital is hereby appointed to act on behalf of all Lenders
as Administrative Agent under this Agreement and the other Credit Loan
Documents. The provisions of this Section 9.2 are solely for the benefit of
Administrative Agent and Lenders and no Credit Party nor any other Person shall
have any rights as a third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement and the other Credit
Loan Documents (except to the limited extent provided in Section 1.12),
Administrative Agent shall act solely as an agent of Lenders and does not assume
and shall not be deemed to have assumed any obligation toward or relationship of
agency or trust with or for any of Holdings or its Subsidiaries or any other
Person. Administrative Agent shall have no duties or responsibilities except for
those expressly set forth in this Agreement and the other Credit Loan Documents.
The duties of Administrative Agent shall be mechanical and administrative in
nature and Administrative Agent shall not have, or be deemed to have, by reason
of this Agreement, any other Credit Loan Document or otherwise a fiduciary
relationship in respect of any Lender. Except as expressly set forth in this
Agreement and the other Credit Loan Documents, Administrative Agent shall not
have any duty to disclose, and shall not be liable for failure to disclose, any
information relating to any Credit Party or any of their respective Subsidiaries
or any Account Debtor that is communicated to or obtained by GE Capital or any
of its Affiliates in any capacity. Neither Administrative Agent nor any of its
Affiliates nor any of their respective officers, directors, employees, agents or
representatives shall be liable to any Lender for any action taken or omitted to
be taken by it hereunder or under any other Credit Loan Document, or in
connection herewith or therewith, except for damages caused by its or their own
gross negligence or willful misconduct.
(b) If Administrative Agent shall request instructions from the
Majority Lenders, Requisite Lenders, Supermajority Lenders or all affected
Lenders, as applicable, with respect to any act or action (including failure to
act) in connection with this Agreement or any other Credit Loan Document, then
Administrative Agent shall be entitled to refrain from such act or taking such
action unless and until Administrative Agent shall have received instructions
from the Majority Lenders, Requisite Lenders, Supermajority Lenders, or all
affected Lenders, as the case may be, and Administrative Agent shall not incur
liability to any Person by reason of so refraining. Administrative Agent shall
be fully justified in failing or refusing to take any action hereunder or under
any other Credit Loan Document (i) if such action would, in the opinion of
Administrative Agent, be contrary to law or the terms of this Agreement or any
other Credit Loan Document, (ii) if such action would, in the opinion of
Administrative Agent, expose Administrative Agent to Environmental Liabilities
or (iii) if Administrative Agent shall not first be indemnified to its
satisfaction against any and all liability and expense which may be incurred
57
by it by reason of taking or continuing to take any such action. Without
limiting the foregoing, no Lender shall have any right of action whatsoever
against Administrative Agent as a result of Administrative Agent acting or
refraining from acting hereunder or under any other Credit Loan Document in
accordance with the instructions of the Majority Lenders, Requisite Lenders,
Supermajority Lenders or all affected Lenders, as applicable.
9.3 Administrative Agent's Reliance, Etc. Neither Administrative Agent
nor any of its Affiliates nor any of their respective directors, officers,
agents or employees shall be liable for any action taken or omitted to be taken
by it or them under or in connection with this Agreement or the other Loan
Documents, except for damages caused by its or their own gross negligence or
willful misconduct. Without limiting the generality of the foregoing,
Administrative Agent: (a) may treat the payee of any Note as the holder thereof
until Administrative Agent receives written notice of the assignment or transfer
thereof signed by such payee and in form reasonably satisfactory to
Administrative Agent, (b) may consult with legal counsel, independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts, (c) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations made in or in connection with this
Agreement or the other Loan Documents, (d) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms, covenants
or conditions of this Agreement or the other Loan Documents on the part of any
Credit Party or its Subsidiaries or to inspect the Collateral (including the
books and records) of any Credit Party (other than the satisfaction on the
Closing Date of the conditions set forth in Section 2.1), (e) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or the other
Loan Documents or any other instrument or document furnished pursuant hereto or
thereto and (f) shall incur no liability under or in respect of this Agreement
or the other Loan Documents by acting upon any notice, consent, certificate or
other instrument or writing (which may be by telecopy, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
9.4 GE Capital and Affiliates. With respect to its Commitments
hereunder, GE Capital shall have the same rights and powers under this Agreement
and the other Loan Documents as any other Lender and may exercise the same as
though it were not Administrative Agent, and the term "Lender" or "Lenders"
shall, unless otherwise expressly indicated, include GE Capital in its
individual capacity. GE Capital and its Affiliates may lend money to, invest in,
and generally engage in any kind of business with, any Credit Party, any of
their Affiliates and any Person who may do business with or own securities of
any Credit Party or any such Affiliate, all as if GE Capital were not
Administrative Agent and without any duty to account therefor to Lenders. GE
Capital and its Affiliates may accept fees and other consideration from any
Credit Party for services in connection with this Agreement or otherwise without
having to account for the same to Lenders. Each Lender acknowledges the
potential conflict of interest between GE Capital as a Lender holding
disproportionate interests in the Loans and GE Capital as Administrative Agent.
9.5 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon Administrative Agent or any other Lender
and based on the Financial Statements and Projections referred to in Sections
3.4(a) and (b), respectively, and such other
58
documents and information as it has deemed appropriate, made its own credit and
financial analysis of the Credit Parties and its own decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon Administrative Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement. Each Lender acknowledges the potential conflict of interest of each
other Lender as a result of Lenders holding disproportionate interests in the
Loans and expressly consents to, and waives any claim based upon, such conflict
of interest.
9.6 Indemnification. Lenders agree to indemnify Administrative Agent (to
the extent not reimbursed by Credit Parties and without limiting the obligations
of the Credit Parties hereunder), ratably according to their respective Pro Rata
Shares, from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted
against Administrative Agent in any way relating to or arising out of this
Agreement or any other Loan Document or any action taken or omitted to be taken
by Administrative Agent in connection therewith; provided that no Lender shall
be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from Administrative Agent's gross negligence or willful misconduct. Without
limiting the foregoing, each Lender agrees to reimburse Administrative Agent
promptly upon demand for its ratable share of any out-of-pocket expenses
(including reasonable counsel fees) incurred by Administrative Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement and each other Loan Document, to the
extent that Administrative Agent is not reimbursed for such expenses by the
Credit Parties.
9.7 Successor Administrative Agent. Administrative Agent may resign at
any time by giving not less than thirty (30) days' prior written notice thereof
to Lenders and Borrower. Upon any such resignation, the Majority Lenders shall
have the right to appoint a successor Administrative Agent. If no successor
Administrative Agent shall have been so appointed by the Majority Lenders and
shall have accepted such appointment within thirty (30) days after the resigning
Administrative Agent's giving notice of resignation, then the resigning
Administrative Agent may, on behalf of Lenders, appoint a successor
Administrative Agent, which shall be a Lender, if a Lender is willing to accept
such appointment, or otherwise shall be a commercial bank or financial
institution or a subsidiary of a commercial bank or financial institution if
such commercial bank or financial institution is organized under the laws of the
United States of America or of any State thereof and has a combined capital and
surplus of at least $300,000,000. If no successor Administrative Agent has been
appointed pursuant to the foregoing, within thirty (30) days after the date such
notice of resignation was given by the resigning Administrative Agent, such
resignation shall become effective and the Majority Lenders shall thereafter
perform all the duties of Administrative Agent hereunder until such time, if
any, as the Majority Lenders appoint a successor Administrative Agent as
provided above. Any successor Administrative Agent appointed by the Majority
Lenders or Administrative Agent hereunder shall be subject to the approval of
Borrower, such approval not to be unreasonably withheld or delayed; provided
that such approval shall not be required if an Event of Default has occurred and
is continuing. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor
59
Administrative Agent, such successor Administrative Agent shall succeed to and
become vested with all the rights, powers, privileges and duties of the
resigning Administrative Agent. Upon the earlier of the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent or the effective date of the resigning Administrative Agent's resignation,
the resigning Administrative Agent shall be discharged from its duties and
obligations under this Agreement and the other Credit Loan Documents, except
that any indemnity rights or other rights in favor of such resigning
Administrative Agent shall continue. After any resigning Administrative Agent's
resignation hereunder, the provisions of this Section 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was acting
as Administrative Agent under this Agreement and the other Loan Documents.
9.8 Setoff and Sharing of Payments. In addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any such
rights, upon the occurrence and during the continuance of any Event of Default
and subject to Section 9.9(f), each Lender is hereby authorized at any time or
from time to time, without prior notice to any Credit Party or to any Person
other than Administrative Agent, any such notice being hereby expressly waived,
to offset and to appropriate and to apply any and all balances held by it at any
of its offices for the account of Borrower or any Guarantor (regardless of
whether such balances are then due to Borrower or any Guarantor) and any other
properties or assets at any time held or owing by that Lender or that holder to
or for the credit or for the account of Borrower or any Guarantor against and on
account of any of the Obligations that are not paid when due; provided that the
Lender exercising such offset rights shall give notice thereof to the affected
Credit Party promptly after exercising such rights. Any Lender exercising a
right of setoff or otherwise receiving any payment on account of the Obligations
in excess of its Pro Rata Share thereof shall purchase for cash (and the other
Lenders or Secured Parties shall sell) such participations in each such other
Lender's or holder's Pro Rata Share of the Obligations as would be necessary to
cause such Lender to share the amount so offset or otherwise received with each
other Lender or holder in accordance with their respective Pro Rata Shares,
(other than offset rights exercised by any Lender with respect to Sections 1.13,
1.15 or 1.16). Each Lender's obligation under this Section 9.8 shall be in
addition to and not in limitation of its obligations to purchase a participation
in an amount equal to its Pro Rata Share of the (a) Swing Line Loans under
Section 1.1 and (b) the Letter of Credit participation, as provided in Annex B,
as applicable. Borrower and each Guarantor agrees, to the fullest extent
permitted by law, that (i) any Lender may exercise its right to offset with
respect to amounts in excess of its Pro Rata Share of the Obligations and may
sell participations in such amounts so offset to other Lenders and Secured
Parties and (ii) any Lender so purchasing a participation in the Loans made or
other Obligations held by other Lenders or Secured Parties may exercise all
rights of offset, bankers' lien, counterclaim or similar rights with respect to
such participation as fully as if such Lender or holder were a direct holder of
the Loans and the other Obligations in the amount of such participation.
Notwithstanding the foregoing, if all or any portion of the offset amount or
payment otherwise received is thereafter recovered from the Lender that has
exercised the right of offset, the purchase of participations by that Lender
shall be rescinded and the purchase price restored without interest.
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9.9 Advances; Payments; Non-Funding Lenders; Information; Actions in
Concert.
(a) Advances; Payments.
(i) Revolving Lenders shall refund or participate in the
Swing Line Loan in accordance with clauses (iii) and (iv) of Section 1.1(c). If
the Swing Line Lender declines to make a Swing Line Loan or if Swing Line
Availability is zero, Administrative Agent shall notify Revolving Lenders,
promptly after receipt of a Notice of Revolving Advance and in any event prior
to 2:00 p.m. (New York time) on the date such Notice of Revolving Advance is
received, by telecopy, telephone or other similar form of transmission. Each
Revolving Lender shall make the amount of such Lender's Pro Rata Share of such
Revolving Credit Advance available to Administrative Agent in same day funds by
wire transfer to Administrative Agent's account as set forth in Annex H not
later than 3:00 p.m. (New York time) on the requested funding date, in the case
of an Index Rate Loan and not later than 11:00 a.m. (New York time) on the
requested funding date in the case of a LIBOR Loan. Forthwith after receipt of
such wire transfers (or, in Administrative Agent's sole discretion, before
receipt of such wire transfers), subject to the terms hereof, Administrative
Agent shall make the requested Revolving Credit Advance to Borrower. All
payments by each Revolving Lender shall be made without setoff, counterclaim or
deduction of any kind.
(ii) Not less than once during each calendar week, more
frequently at Administrative Agent's election or, in the event Administrative
Agent receives payments of principal, interest and Fees in excess of $10,000,000
in the aggregate, within two (2) Business Days of receipt of such funds by
Administrative Agent (each, a "Settlement Date"), Administrative Agent shall
advise each Lender by telephone, or telecopy of the amount of such Lender's Pro
Rata Share of principal, interest and Fees paid for the benefit of Lenders with
respect to each applicable Loan. Provided that each Lender has funded all
payments and Advances required to be made by it and has purchased all
participations required to be purchased by it under this Agreement and the other
Credit Loan Documents as of such Settlement Date, Administrative Agent shall pay
to each Lender such Lender's Pro Rata Share of principal, interest and Fees paid
by Borrower since the previous Settlement Date for the benefit of such Lender on
the Loans held by it. To the extent that any Lender (a "Non-Funding Lender") has
failed to fund all such payments and Advances or failed to fund the purchase of
all such participations, Administrative Agent shall be entitled to set off the
funding short-fall against that Non-Funding Lender's Pro Rata Share of all
payments received from Borrower. Such payments shall be made by wire transfer to
such Lender's account (as specified by such Lender in Annex H or the applicable
Assignment Agreement) not later than 2:00 p.m. (New York time) on the next
Business Day following each Settlement Date.
(b) Availability of Lender's Pro Rata Share. Administrative Agent
may assume that each Revolving Lender will make its Pro Rata Share of each
Revolving Credit Advance available to Administrative Agent. If such Pro Rata
Share is not, in fact, paid to Administrative Agent by such Revolving Lender
when due, Administrative Agent will be entitled to recover such amount on demand
from such Lender without setoff, counterclaim or deduction of any kind. If any
Lender fails to pay the amount of its Pro Rata Share forthwith upon
Administrative Agent's demand, Administrative Agent shall promptly notify
Borrower and Borrower shall immediately repay such amount to Administrative
Agent. Nothing in this
61
Section 9.9(b) or elsewhere in this Agreement or the other Credit Loan Documents
shall be deemed to require Administrative Agent to advance funds on behalf of
any Lender or to relieve any Lender from its obligation to fulfill its
Commitments hereunder or to prejudice any rights that Borrower may have against
any Lender as a result of any default by such Lender hereunder. To the extent
that Administrative Agent advances funds to Borrower on behalf of any Lender and
is not reimbursed therefor on the same Business Day as such advance is made,
Administrative Agent shall be entitled to retain for its account all interest
accrued on such advance until reimbursed by the applicable Lender.
(c) Return of Payments.
(i) If Administrative Agent pays an amount to a Lender under
this Agreement in the belief or expectation that a related payment has been or
will be received by Administrative Agent from Borrower and such related payment
is not received by Administrative Agent, then Administrative Agent will be
entitled to recover such amount from such Lender on demand without setoff,
counterclaim or deduction of any kind.
(ii) If Administrative Agent determines at any time that any
amount received by Administrative Agent under this Agreement must be returned to
Borrower or paid to any other Person pursuant to any insolvency law or
otherwise, then, notwithstanding any other term or condition of this Agreement
or any other Credit Loan Document, Administrative Agent will not be required to
distribute any portion thereof to any Lender. In addition, each Lender will
repay to Administrative Agent on demand any portion of such amount that
Administrative Agent has distributed to such Lender, together with interest at
such rate, if any, as Administrative Agent is required to pay to Borrower or
such other Person, without setoff, counterclaim or deduction of any kind.
(d) Non-Funding Lenders. The failure of any Non-Funding Lender to
make any Revolving Credit Advance or any payment required by it hereunder, or to
purchase any participation in any Swing Line Loan or, Letter of Credit to be
made or purchased by it on the date specified therefor shall not relieve any
other Lender (each such other Lender, an "Other Lender") of its obligations to
make such Advance or purchase such participation on such date, but neither any
Other Lender nor Administrative Agent shall be responsible for the failure of
any Non-Funding Lender to make an Advance, purchase a participation or make any
other payment required hereunder. Notwithstanding anything set forth herein to
the contrary, a Non-Funding Lender shall not have any voting or consent rights
under or with respect to any Credit Loan Document or constitute a "Lender" or a
"Revolving Lender", as applicable (or be included in the calculation of
"Majority Lenders", "Requisite Lenders" or "Supermajority Lenders" hereunder)
for any voting or consent rights under or with respect to any Credit Loan
Document, except to the extent such consent or voting right is in respect of (i)
an increase in the Commitment of such Non-Funding Lender, (ii) a release of all
of the Collateral, (iii) the forgiveness or release of any portion of the
Obligations held by such Non-Funding Lender, (iv) an extension of the Stated
Maturity Date in respect of Obligations owed to such Non-Funding Lender, or (v)
a reduction of the rate of interest on the Loans held by such Non-Funding
Lender. At Borrower's request, Administrative Agent or a Person acceptable to
Administrative Agent shall have the right with Administrative Agent's consent
and in Administrative Agent's sole discretion (but shall have no obligation) to
purchase from any Non-Funding Lender, and each Non-Funding Lender agrees
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that it shall, at Administrative Agent's request, sell and assign to
Administrative Agent or such Person, all of the Revolving Loan Commitments of
that Non-Funding Lender for an amount equal to the principal balance of all
Loans held by such Non-Funding Lender and all accrued and unpaid interest and
Fees with respect thereto through the date of sale, such purchase and sale to be
consummated pursuant to an executed Assignment Agreement.
(e) Dissemination of Information. Administrative Agent shall use
reasonable efforts to provide Lenders with any notice of Default or Event of
Default received by Administrative Agent from, or delivered by Administrative
Agent to, any Credit Party, of which Administrative Agent has actually become
aware and with notice of any action taken by Administrative Agent following any
Event of Default; provided that Administrative Agent shall not be liable to any
Lender for any failure to do so, except to the extent that such failure is
attributable to Administrative Agent's gross negligence or willful misconduct.
Lenders acknowledge that Borrower is required to provide Financial Statements
and Collateral Reports to Lenders in accordance with Annexes E and F hereto and
agree that Administrative Agent shall have no duty to provide the same to
Lenders.
(f) Actions in Concert. Anything in this Agreement to the contrary
notwithstanding, each Lender hereby agrees with each other Lender that no Lender
shall take any action to protect or enforce its rights arising out of this
Agreement or the Notes (including exercising any rights of setoff) without first
obtaining the prior written consent of Administrative Agent and the Majority
Lenders, it being the intent of Lenders that any such action to protect or
enforce rights under this Agreement and the Notes shall be taken in concert and
at the direction or with the consent of Administrative Agent or the Majority
Lenders.
10. SUCCESSORS AND ASSIGNS
10.1 Successors and Assigns. This Agreement and the other Credit Loan
Documents shall be binding on and shall inure to the benefit of each Credit
Party, Administrative Agent, Lenders and their respective successors and
permitted assigns (including, in the case of any Credit Party, a
debtor-in-possession on behalf of such Credit Party), except as otherwise
provided herein or therein. Except pursuant to a merger permitted by Section
6.1, no Credit Party may assign, transfer, hypothecate or otherwise convey its
rights, benefits, obligations or duties hereunder or under any of the other
Credit Loan Documents without the prior express written consent of
Administrative Agent and Lenders. Any such purported assignment, transfer,
hypothecation or other conveyance by any Credit Party without the prior express
written consent of Administrative Agent and Lenders shall be void. The terms and
provisions of this Agreement are for the purpose of defining the relative rights
and obligations of each Credit Party, Administrative Agent and the Secured
Parties with respect to the transactions contemplated hereby and no Person shall
be a third party beneficiary of any of the terms and provisions of this
Agreement or any of the other Credit Loan Documents.
11. MISCELLANEOUS
11.1 Complete Agreement; Modification of Agreement. (a) The Loan
Documents constitute the complete agreement between the parties with respect to
the subject matter thereof and may not be modified, altered or amended except as
set forth in Section 11.2. Any letter of
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interest, commitment letter, fee letter (other than the Fee Letter) or
confidentiality agreement, if any, between any Credit Party and Administrative
Agent or any Lender or any of their respective Affiliates, predating this
Agreement and relating to a financing of substantially similar form, purpose or
effect shall be superseded by this Agreement other than (i) with respect to the
Commitment Letter, the provisions set forth therein which by their terms
expressly survive the execution and delivery of the Existing Credit Agreement
and the other Loan Documents, (ii) the Fee Letter and (iii) the Syndication
Letter (as defined in the Commitment Letter), each of which shall continue to be
binding obligations of the parties.
(b) On the Effective Date, the Existing Credit Agreement shall be
amended and restated in its entirety by this Agreement and the Existing Credit
Agreement shall thereafter be of no further force and effect except to evidence
(i) the incurrence by the Borrower of the "Obligations" under and as defined
therein (whether or not such "Obligations" are contingent as of the Effective
Date), (ii) the representations and warranties made by the Borrower prior to the
Effective Date and (iii) any action or omission performed or required to be
performed pursuant to such Existing Credit Agreement prior to the Effective Date
(including any failure, prior to the Effective Date, to comply with the
covenants contained in such Existing Credit Agreement); provided that references
to the term of this Agreement or similar references (including, without
limitation, references to periods from the Closing Date through any date) refer
to the period beginning on the Closing Date and ending on the Termination Date
or such other date, as applicable. The amendments and restatements set forth
herein shall not cure any breach or any "Default" or "Event of Default" under
and as defined in the Existing Credit Agreement existing prior to the date
hereof. This Agreement is not in any way intended to constitute a novation of
the obligations and liabilities existing under the Existing Credit Agreement or
evidence payment of all or any portion of such obligations and liabilities.
(c) The terms and conditions of this Agreement and Administrative
Agent's and Lenders' rights and remedies under this Agreement and the other Loan
Documents, shall apply to all of the Obligations incurred under the Existing
Credit Agreement and the Notes issued thereunder.
(d) The Borrower reaffirms the Liens granted pursuant to this
Existing Credit Agreement and the Loan Documents to Administrative Agent for the
benefit of Lenders, which Liens shall continue in full force and effect and
shall continue to secure the Obligations.
(e) On and after the Effective Date, (i) all references to the
Existing Credit Agreement (or to any amendment, supplement, modification or
amendment and restatement thereof) in the Loan Documents (other than this
Agreement) shall be deemed to refer to the Existing Credit Agreement as amended
and restated hereby, (ii) all references to any section (or subsection) of the
Existing Credit Agreement in any Loan Document (but not herein) shall be amended
to become, mutatis mutandis, references to the corresponding provisions of this
Agreement and (iii) except as the context otherwise provides, on or after the
Effective Date, all references to this Agreement herein (including for purposes
of indemnification and reimbursement of fees) shall be deemed to be reference to
the Existing Credit Agreement as amended and restated hereby.
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(f) This amendment and restatement is limited as written and is
not a consent to any other amendment, restatement, waiver or other modification,
whether or not similar, and, except as expressly provided herein or in any other
Loan Document, all terms and conditions of the Loan Documents remain in full
force and effect unless otherwise specifically amended by this Agreement or any
other Loan Document.
11.2 Amendments and Waivers.
(a) Except for actions expressly permitted to be taken by
Administrative Agent, no amendment, modification, termination or waiver of any
provision of this Agreement or any other Credit Loan Document, or any consent to
any departure by any Credit Party therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Credit Parties party to
such Loan Document and by the Majority Lenders, Requisite Lenders, Supermajority
Lenders or all affected Lenders, as applicable (or by Administrative Agent at
the direction of the Majority Lenders, Requisite Lenders, Supermajority Lenders
or all affected Lenders, as applicable). Except as set forth in clauses (b), (c)
and (d) below, all such amendments, modifications, terminations or waivers
requiring the consent of any Lenders shall only require the written consent of
the Majority Lenders.
(b) No amendment, modification, termination or waiver of or
consent with respect to any provision of this Agreement that increases the
percentage advance rates set forth in the definitions of Borrowing Base, Gross
Available Inventory Amount or Gross Available L/C Inventory Amount or adds any
new classes of assets (other than Inventory) to the Borrowing Base shall be
effective unless the same shall be in writing and signed by the Supermajority
Lenders (or by Administrative Agent at the direction of the Supermajority
Lenders) and Borrower.
(c) No amendment, modification, termination or waiver of or
consent with respect to any provision of this Agreement that would either (i)
modify, amend or waive any non-discretionary component of the Borrowing Base (or
any constituent definition thereof) if the result would increase the amount of
the Borrowing Base or (ii) lower the dollar requirement set forth in paragraph
(c) of Annex G shall be effective unless the same shall be in writing and signed
by the Requisite Lenders (or by Administrative Agent at the direction of the
Requisite Lenders) and Borrower. Furthermore, Administrative Agent shall not
consent to any amendment, supplement or other modification of or to the Vendor
Intercreditor Agreement without the prior written consent of the Requisite
Lenders.
(d) No amendment, modification, termination or waiver shall,
unless in writing and signed by Borrower and each Lender directly affected
thereby (or by Administrative Agent at the direction of each Lender directly
affected thereby): (i) increase the principal amount of any Lender's Commitment
(which action shall be deemed to directly affect all Lenders), (ii) reduce the
principal of, rate of interest on or Fees payable with respect to any
Commitment, Loan or Letter of Credit Obligations of such affected Lender, (iii)
extend the final maturity date of the principal amount of any Loan of such
affected Lender, (iv) waive, forgive, defer, extend or postpone any payment of
interest or Fees as to such affected Lender, (v) release any Guaranty (other
than pursuant to a transaction permitted by the Credit Loan Documents) or,
release any Lien on, or permit any Credit Party to sell or otherwise dispose of,
all or substantially
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all the Collateral, (vi) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans that shall be required for
Lenders or any of them to take any action hereunder, (vii) amend or waive (A)
Section 1.11(a) or (B) Section 1.9(b) to the extent Section 1.9(b) requires
ratable payment or disbursements to the Lenders of any Fees, and (viii) amend or
waive this Section 11.2 or the definitions of the terms "Majority Lenders",
"Requisite Lenders", or "Supermajority Lenders" insofar as such definitions
affect the substance of this Section 11.2. Furthermore, no amendment,
modification, termination or waiver affecting the rights or duties of
Administrative Agent, the Swing Line Lender or L/C Issuer under this Agreement
or any other Credit Loan Document shall be effective unless in writing and
signed by Administrative Agent, the Swing Line Lender or L/C Issuer, as the case
may be, in addition to Lenders required hereinabove to take such action. Each
amendment, modification, termination or waiver shall be effective only in the
specific instance and for the specific purpose for which it was given. No
amendment, modification, termination or waiver shall be required for
Administrative Agent to take additional Collateral pursuant to any Loan
Document. No notice to or demand on any Credit Party in any case shall entitle
such Credit Party or any other Credit Party to any other or further notice or
demand in similar or other circumstances. Any amendment, modification,
termination, waiver or consent effected in accordance with this Section 11.2
shall be binding upon Lenders and their respective successors and assigns and
upon each holder of the Notes at the time outstanding and each future holder of
the Notes.
(e) If, in connection with any proposed amendment, modification,
waiver or termination (a "Proposed Change"):
(i) requiring the consent of all affected Lenders, the
consent of the Supermajority Lenders is obtained but the consent of other
Lenders whose consent is required is not obtained (any such Lender whose consent
is not obtained as described in this clause (i) and in clauses (ii) and (iii)
below being referred to as "Non-Consenting Lender");
(ii) requiring the consent of the Supermajority Lenders, the
consent of the Requisite Lenders is obtained, but the consent of Supermajority
Lenders is not obtained;
(iii) requiring the consent of the Requisite Lenders, the
consent of the Majority Lenders is obtained, but the consent of the Requisite
Lenders is not obtained;
then, so long as Administrative Agent is not a Non-Consenting Lender, at
Borrower's request (which request shall be delivered within 180 days after the
date of such Non-Funding Lender's failure to consent to such amendment,
modification, waiver or termination) Administrative Agent, or a Person
reasonably acceptable to Administrative Agent, shall have the right with
Administrative Agent's consent and in Administrative Agent's sole discretion
(but shall have no obligation) to purchase from such Non-Consenting Lenders, and
such Non-Consenting Lenders agree that they shall, upon Administrative Agent's
request, sell and assign to Administrative Agent or such Person, all of the
Loans and Commitments of such Non-Consenting Lenders for an amount equal to the
principal balance of all Loans held by the Non-Consenting Lenders and all
accrued interest and Fees with respect thereto through the date of sale, such
purchase and sale to be consummated pursuant to an executed Assignment
Agreement.
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(iv) On the Termination Date, and so long as no suits,
actions proceedings, or claims are pending against any Indemnified Person
asserting any damages, losses or liabilities that are Indemnified Liabilities,
all Liens under the Loan Documents shall automatically terminate and
Administrative Agent shall promptly deliver to Borrower (at Borrower's expense)
to the extent reasonably requested from time to time by Borrower termination
statements, mortgage releases and other documents necessary or appropriate to
evidence the termination of the Liens securing payment of the Obligations.
11.3 Fees and Expenses. Borrower shall reimburse (i) with respect to any
appraisers engaged by Administrative Agent, the out-of-pocket costs and expenses
of Administrative Agent incurred in connection with appraisals performed by such
appraisers and (ii) Administrative Agent and Co-Syndication Agents (and, with
respect to clauses (c) and (d) below, all Lenders) for all out-of-pocket fees,
costs and expenses, including the reasonable fees, costs and expenses of counsel
or other advisors (including Consultants and with respect to any Collateral
Agent, a field examination fee of $750 per person per day plus actual
out-of-pocket expenses of such Collateral Agent in connection with the conduct
of such field audits) incurred in connection with the negotiation, preparation
and filing and/or recordation of the Loan Documents and incurred in connection
with:
(a) any amendment, modification or waiver of, or consent with
respect to, or termination of, any of the Loan Documents or Related Transactions
Documents or advice in connection with the syndication and administration of the
Loans made pursuant hereto or its rights hereunder or thereunder;
(b) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Administrative Agent, any Lender, any Credit Party or its
Subsidiaries, or any other Person and whether as a party, witness or otherwise)
in any way relating to the Collateral, any of the Loan Documents or any other
agreement to be executed or delivered in connection herewith or therewith,
including any litigation, contest, dispute, suit, case, proceeding or action,
and any appeal or review thereof, in connection with a case commenced by or
against any or all of the Credit Parties, their respective Subsidiaries or any
other Person that may be obligated to Administrative Agent by virtue of the Loan
Documents, including any such litigation, contest, dispute, suit, proceeding or
action arising in connection with any work-out or restructuring of the Loans
during the pendency of one or more Events of Default; provided that no Person
shall be entitled to reimbursement under this clause (b) in respect of any
litigation, contest, dispute, suit, proceeding or action to the extent any of
the foregoing results from such Person's gross negligence or willful misconduct;
(c) any attempt to enforce any remedies of Administrative Agent or
any Lender against any or all of the Credit Parties or any other Person that may
be obligated to Administrative Agent or any Lender by virtue of any of the Loan
Documents, including any such attempt to enforce any such remedies in the course
of any work-out or restructuring of the Loans during the pendency of one or more
Events of Default; provided that in the case of reimbursement of counsel for
Lenders other than Administrative Agent (in its capacity as such) and
Co-Syndication Agents (in their capacity as such), such reimbursement shall be
limited to one counsel for all such Lenders;
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(d) any workout or restructuring of the Loans during the pendency
of one or more Events of Default; provided that in the case of reimbursement of
counsel for Lenders other than Administrative Agent (in its capacity as such)
and Co-Syndication Agents (in their capacity as such), such reimbursement shall
be limited to one counsel for all such Lenders; and
(e) efforts by any such Person in connection with its rights under
this Agreement to (i) monitor the Loans or any of the other Obligations, (ii)
evaluate, observe or assess any of the Credit Parties, their respective
Subsidiaries or their respective affairs and (iii) verify, protect, evaluate,
assess, appraise, collect, sell, liquidate or otherwise dispose of any of the
Collateral;
including, as to each of clauses (a) through (e) above, all out-of-pocket
reasonable attorneys' and other professional and service providers' fees arising
from such services and other advice, assistance or other representation,
including those in connection with any appellate proceedings, and all
out-of-pocket expenses, costs, charges and other fees incurred by such counsel
and others which (except in the case of the appraisers referred to in clause (i)
of the introductory paragraph of this Section 11.2) are reasonable in connection
with or relating to any of the events or actions described in this Section 11.3,
all of which shall be payable, promptly after demand therefor, by Borrower to
Administrative Agent. Without limiting the generality of the foregoing, such
expenses, costs, charges and fees may include: those of accountants, appraisers,
Consultants and paralegals; court costs and expenses; photocopying and
duplication expenses; court reporter fees, costs and expenses; long distance
telephone charges; air express charges; telegram or telecopy charges;
secretarial overtime charges; and expenses for travel, lodging and food paid or
incurred in connection with the performance of such legal or other advisory
services.
11.4 No Waiver. Administrative Agent's or any Lender's failure, at any
time or times, to require strict performance by the Credit Parties of any
provision of this Agreement or any other Loan Document shall not waive, affect
or diminish any right of Administrative Agent or such Lender thereafter to
demand strict compliance and performance herewith or therewith. Any suspension
or waiver of an Event of Default shall not suspend, waive or affect any other
Event of Default whether the same is prior or subsequent thereto and whether the
same or of a different type. Subject to the provisions of Section 11.2, none of
the undertakings, agreements, warranties, covenants and representations of any
Credit Party or its Subsidiaries contained in this Agreement or any of the other
Loan Documents and no Default or Event of Default by any Credit Party or its
Subsidiaries shall be deemed to have been suspended or waived by Administrative
Agent or any Lender, unless such waiver or suspension is by an instrument in
writing signed by an officer of or other authorized employee of Administrative
Agent and the applicable required Lenders and directed to Borrower specifying
such suspension or waiver.
11.5 Remedies. Administrative Agent's and Lenders' rights and remedies
under this Agreement shall be cumulative and nonexclusive of any other rights
and remedies that Administrative Agent or any Lender may have under any other
agreement, including the other Loan Documents, by operation of law or otherwise.
Recourse to the Collateral shall not be required.
11.6 Severability. Wherever possible, each provision of this Agreement
and the other Loan Documents shall be interpreted in such a manner as to be
effective and valid under
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applicable law, but if any provision of this Agreement or any other Loan
Document shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Agreement or such other Loan Document.
11.7 Conflict of Terms. Except as otherwise provided in this Agreement or
any of the other Loan Documents by specific reference to the applicable
provisions of this Agreement, if any provision contained in this Agreement
conflicts with any provision in any of the other Loan Documents, the provision
contained in this Agreement shall govern and control.
11.8 Confidentiality. Administrative Agent and each Lender agree to use
commercially reasonable efforts (equivalent to the efforts Administrative Agent
or such Lender applies to maintain the confidentiality of its own confidential
information) to maintain as confidential all confidential information provided
to them by the Credit Parties that is either financial in nature or designated
as confidential for a period of (i) five (5) years following the Termination
Date with respect to any such information broken out on a store-by-store basis
and (ii) three (3) years following the Termination Date with respect to any
other information, except that Administrative Agent and each Lender may disclose
such information (a) on a confidential basis, to Persons employed or engaged by
Administrative Agent or such Lender or any Affiliate thereof, (b) to any bona
fide assignee or participant or potential assignee or participant that has
agreed for the benefit of the Credit Parties to comply with the covenant
contained in this Section 11.8 (and any such bona fide assignee or participant
or potential assignee or participant may disclose such information on a
confidential basis, to Persons employed or engaged by them as described in
clause (a) above), (c) as required or requested by any Governmental Authority or
reasonably believed by Administrative Agent or such Lender to be compelled by
any court decree, subpoena or legal or administrative order or process, (d) as,
on the advice of Administrative Agent's or such Lender's counsel, is required by
law, (e) in connection with the exercise of any right or remedy under the Credit
Loan Documents or in connection with any Litigation to which Administrative
Agent or such Lender is a party or (f) that ceases to be confidential through no
fault of Administrative Agent or any Lender. Administrative Agent and Lenders
agree not to share any such confidential information with competitors of
Holdings and its Subsidiaries. Notwithstanding anything to the contrary set
forth herein or in any other Loan Document or any other express or implied
agreement, arrangement or understanding, if any, the obligations of
confidentiality contained herein and therein, as they relate to the Related
Transactions shall not apply to the tax structure or tax treatment of the
Related Transactions, and each party hereto (and any employee, representative,
or agent of any party hereto) may disclose to any and all Persons, without
limitation of any kind, the tax structure and tax treatment of the Related
Transactions except where confidentiality is reasonably necessary to comply with
U.S. federal or state securities laws. The preceding sentence is intended to
cause the Related Transactions not to be treated as having been offered under
conditions of confidentiality for purposes of Section 1.6011-4(b)(3) (or any
successor provision) of the Treasury Regulations promulgated under Section 6011
of the IRC and shall be construed in a manner consistent with such purpose. In
addition, each party hereto acknowledges that it has no proprietary or exclusive
rights to the tax structure of the Related Transactions or any tax matter or tax
idea related to the Related Transactions.
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11.9 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE
LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH CREDIT PARTY HEREBY
CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN XXX XXXX XXXXXX,
XXXX XX XXX XXXX, XXX XXXX SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE CREDIT PARTIES, ADMINISTRATIVE
AGENT, THE L/C ISSUER AND LENDERS PERTAINING TO THIS AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED THAT ADMINISTRATIVE
AGENT, THE L/C ISSUER, LENDERS AND THE CREDIT PARTIES ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW
YORK COUNTY AND; PROVIDED, FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE
DEEMED OR OPERATE TO PRECLUDE ADMINISTRATIVE AGENT FROM BRINGING SUIT OR TAKING
OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY
OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF ADMINISTRATIVE AGENT. EACH CREDIT PARTY EXPRESSLY SUBMITS AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY
SUCH COURT, AND EACH CREDIT PARTY HEREBY WAIVES ANY OBJECTION THAT SUCH CREDIT
PARTY MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM
NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH CREDIT PARTY HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT
PARTY AT THE ADDRESS SET FORTH IN ANNEX I OF THIS AGREEMENT AND THAT SERVICE SO
MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH CREDIT PARTY'S ACTUAL
RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS,
PROPER POSTAGE PREPAID.
11.10 Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other parties, or whenever any of the parties desires to give or
serve upon any other parties any communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been validly
served, given or delivered: (a) upon the earlier of actual receipt and three (3)
Business Days after deposit in the
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United States Mail, registered or certified mail, return receipt requested, with
proper postage prepaid, (b) upon transmission, when sent by telecopy or other
similar facsimile transmission (with such telecopy or facsimile promptly
confirmed by delivery of a copy by personal delivery or United States Mail as
otherwise provided in this Section 11.10), (c) one (1) Business Day after
deposit with a reputable overnight courier with all charges prepaid or (d) when
delivered, if hand-delivered by messenger, all of which shall be addressed to
the party to be notified and sent to the address or facsimile number indicated
in Annex I or to such other address (or facsimile number) as may be substituted
by notice given as herein provided. The giving of any notice required hereunder
may be waived in writing by the party entitled to receive such notice. Failure
or delay in delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to any Person (other than Borrower or
Administrative Agent) designated in Annex I to receive copies shall in no way
adversely affect the effectiveness of such notice, demand, request, consent,
approval, declaration or other communication.
11.11 Section Titles. The Section titles and Table of Contents contained
in this Agreement are and shall be without substantive meaning or content of any
kind whatsoever and are not a part of the agreement between the parties hereto.
11.12 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall collectively and separately
constitute one agreement.
11.13 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE, AMONG AGENT, LENDERS AND ANY CREDIT PARTY ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
11.14 Press Releases and Related Matters. Each Credit Party executing this
Agreement agrees that neither it nor its Affiliates will in the future issue any
press releases or other public disclosure using the name of GE Capital or its
Affiliates or referring to this Agreement, the other Loan Documents or the
Related Transaction Documents without at least two (2) Business Days' prior
notice to GE Capital and without the prior written consent of GE Capital unless
(and only to the extent that) such Credit Party or Affiliate is required to do
so under law and then, in any event, such Credit Party or Affiliate will consult
with GE Capital before issuing such press release or other public disclosure.
Each Credit Party consents to the publication by Administrative Agent or any
Lender of advertising material relating to the financing transactions
contemplated by this Agreement using Borrower's name, product photographs, logo
or
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trademark. Administrative Agent or such Lender shall provide a draft reasonably
in advance of any advertising material to each Credit Party for review and
comment prior to the publication thereof. Administrative Agent reserves the
right to provide to industry trade organizations information necessary and
customary for inclusion in league table measurements.
11.15 Reinstatement. This Agreement shall remain in full force and effect
and continue to be effective should any petition be filed by or against any
Credit Party for liquidation or reorganization, should any Credit Party become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of any
Credit Party's assets, and shall continue to be effective or to be reinstated,
as the case may be, if at any time payment and performance of the Obligations,
or any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the
Obligations, whether as a "voidable preference," "fraudulent conveyance," or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.
11.16 Advice of Counsel. Each of the parties represents to each other
party hereto that it has discussed this Agreement and, specifically, the
provisions of Sections 11.9 and 11.13, with its counsel.
11.17 No Strict Construction. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
72
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
KMART CORPORATION
By:_____________________________________
Name:___________________________________
Title:__________________________________
GENERAL ELECTRIC CAPITAL
CORPORATION, as Administrative Agent and
Lender
By:_____________________________________
Name: Xxxxx Xxxxx
Title: Duly Authorized Signatory
LENDERS:
FLEET RETAIL FINANCE INC., as a Lender
By:_____________________________________
Name:___________________________________
Title:__________________________________
[SIGNATURE PAGE TO CREDIT AGREEMENT]
[OTHER LENDERS], as a Lender
By:_____________________________________
Name:___________________________________
Title:__________________________________
[SIGNATURE PAGE TO CREDIT AGREEMENT]
The following Persons are signatories to this Agreement in their
capacity as Credit Parties and not as borrowers.
KMART HOLDING CORPORATION
KMART MANAGEMENT CORPORATION
BIG BEAVER DEVELOPMENT CORPORATION
BIG BEAVER OF FLORIDA DEVELOPMENT LLC
BIG BEAVER OF GUAYNABO DEVELOPMENT
CORPORATION
XXXXXXXXX.XXX LLC
XXXXXXXXX.XXX, INC.
KBL HOLDING INC.
KMART CORPORATION OF ILLINOIS, INC.
KMART EXPRESS LLC
KMART INTERNATIONAL SERVICES, INC.
KMART OF FLORIDA LLC
KMART STORES OF ILLINOIS LLC
KMART OF MICHIGAN, INC.
KMART OF NORTH CAROLINA LLC
KMART OF NY HOLDINGS, INC.
KMART OF OHIO LLC
KMART STORES OF TEXAS, LLC
KMART OF WASHINGTON LLC
KMART OVERSEAS CORPORATION
KMART SERVICES CORPORATION
KMART STORES OF TNCP, INC.
MEDIA MOMENTUM, INC.
STI MERCHANDISING, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
[SIGNATURE PAGE TO CREDIT AGREEMENT]
XXXX XXXXXXXX NO. 1, LLC
XXXX XXXXXXXX NO. 2, LLC
XXXX XXXXXXXX NO. 3, LLC
XXXX XXXXXXXX NO. 4, LLC
XXXX XXXXXXXX NO. 5, LLC
XXXX XXXXXXXX NO. 6, LLC
XXXX XXXXXXXX NO. 7, LLC
XXXX XXXXXXXX NO. 8, LLC
XXXX XXXXXXXX NO. 9, LLC
XXXX XXXXXXXX NO. 10, LLC
XXXX XXXXXXXX NO. 11, LLC
XXXX XXXXXXXX NO. 12, LLC
XXXX XXXXXXXX NO. 13, LLC
XXXX XXXXXXXX NO. 14, LLC
XXXX XXXXXXXX NO. 15, LLC
XXXX XXXXXXXX NO. 16, LLC
XXXX XXXXXXXX NO. 17, LLC
XXXX XXXXXXXX NO. 18, LLC
XXXX XXXXXXXX NO. 19, LLC
XXXX XXXXXXXX NO. 20, LLC
XXXX XXXXXXXX NO. 21, LLC
XXXX XXXXXXXX NO. 22, LLC
XXXX XXXXXXXX NO. 23, LLC
XXXX XXXXXXXX NO. 24, LLC
XXXX XXXXXXXX NO. 25, LLC
XXXX XXXXXXXX NO. 26, LLC
XXXX XXXXXXXX NO. 27, LLC
XXXX XXXXXXXX NO. 28, LLC
XXXX XXXXXXXX NO. 29, LLC
XXXX XXXXXXXX NO. 30, LLC
XXXX XXXXXXXX NO. 31, LLC
XXXX XXXXXXXX NO. 32, LLC
XXXX XXXXXXXX NO. 33, LLC
XXXX XXXXXXXX NO. 34, LLC
XXXX XXXXXXXX NO. 35, LLC
XXXX XXXXXXXX NO. 36, LLC
XXXX XXXXXXXX NO. 37, LLC
XXXX XXXXXXXX NO. 38, LLC
XXXX XXXXXXXX NO. 39, LLC
XXXX XXXXXXXX NO. 40, LLC
XXXX XXXXXXXX NO. 41, LLC
XXXX XXXXXXXX NO. 42, LLC
XXXX XXXXXXXX NO. 43, LLC
XXXX XXXXXXXX NO. 44, LLC
XXXX XXXXXXXX NO. 45, LLC
XXXX XXXXXXXX NO. 46, LLC
[SIGNATURE PAGE TO CREDIT AGREEMENT]
XXXX XXXXXXXX NO. 47, LLC
XXXX XXXXXXXX NO. 48, LLC
XXXX XXXXXXXX NO. 49, LLC
XXXX XXXXXXXX NO. 50, LLC
XXXX XXXXXXXX NO. 51, LLC
XXXX XXXXXXXX NO. 52, LLC
XXXX XXXXXXXX NO. 53, LLC
XXXX XXXXXXXX NO. 54, LLC
XXXX XXXXXXXX NO. 55, LLC
XXXX XXXXXXXX NO. 56, LLC
XXXX XXXXXXXX NO. 57, LLC
XXXX XXXXXXXX NO. 58, LLC
XXXX XXXXXXXX NO. 59, LLC
XXXX XXXXXXXX NO. 60, LLC
XXXX XXXXXXXX NO. 61, LLC
XXXX XXXXXXXX NO. 62, LLC
XXXX XXXXXXXX NO. 63, LLC
XXXX XXXXXXXX NO. 64, LLC
XXXX XXXXXXXX NO. 65, LLC
XXXX XXXXXXXX NO. 66, LLC
XXXX XXXXXXXX NO. 67, LLC
XXXX XXXXXXXX NO. 68, LLC
XXXX XXXXXXXX NO. 69, LLC
XXXX XXXXXXXX NO. 70, LLC
XXXX XXXXXXXX NO. 71, LLC
XXXX XXXXXXXX NO. 72, LLC
XXXX XXXXXXXX NO. 73, LLC
XXXX XXXXXXXX NO. 74, LLC
XXXX XXXXXXXX NO. 75, LLC
XXXX XXXXXXXX NO. 76, LLC
XXXX XXXXXXXX NO. 77, LLC
XXXX XXXXXXXX NO. 78, LLC
XXXX XXXXXXXX NO. 79, LLC
XXXX XXXXXXXX NO. 80, LLC
XXXX XXXXXXXX NO. 81, LLC
XXXX XXXXXXXX NO. 82, LLC
XXXX XXXXXXXX NO. 83, LLC
XXXX XXXXXXXX NO. 84, LLC
XXXX XXXXXXXX NO. 85, LLC
XXXX XXXXXXXX NO. 86, LLC
XXXX XXXXXXXX NO. 87, LLC
XXXX XXXXXXXX NO. 88, LLC
XXXX XXXXXXXX NO. 89, LLC
XXXX XXXXXXXX NO. 90, LLC
XXXX XXXXXXXX NO. 91, LLC
XXXX XXXXXXXX NO. 92, LLC
[SIGNATURE PAGE TO CREDIT AGREEMENT]
XXXX XXXXXXXX NO. 93, LLC
XXXX XXXXXXXX NO. 94, LLC
XXXX XXXXXXXX NO. 95, LLC
XXXX XXXXXXXX NO. 96, LLC
XXXX XXXXXXXX XX. 00, XXX
XXXX XXXXXXXX XX. 00, LLC
By:_____________________________________
Name:___________________________________
Title:__________________________________
KMART OF PENNSYLVANIA LP
KMART OF TEXAS L.P.
THE XXXXXXXX GROUP LLC
By: KMART CORPORATION, its sole member,
partner or general partner
as applicable
By:_________________________________
Name:_______________________________
Title:______________________________
[SIGNATURE PAGE TO CREDIT AGREEMENT]
MARIN ACCESS LLC
By:_____________________________________
Name:___________________________________
Title:__________________________________
[SIGNATURE PAGE TO CREDIT AGREEMENT]
KLC, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
ANNEX A (RECITALS)
TO
CREDIT AGREEMENT
DEFINITIONS
Capitalized terms used in the Credit Loan Documents shall have
(unless otherwise provided elsewhere in the Credit Loan Documents) the following
respective meanings and all references to Sections, Exhibits, Schedules or
Annexes in the following definitions shall refer to Sections, Exhibits,
Schedules or Annexes of or to the Agreement:
"Account Debtor" means any Person who may become obligated to any
Credit Party under, with respect to, or on account of, an account receivable, an
Account, Chattel Paper or General Intangibles (including a payment intangible).
"Account Party" has the meaning ascribed to it in Annex B.
"Accounting Changes" has the meaning ascribed thereto in Annex G.
"Accounts" means all "accounts," as such term is defined in the
Code, arising out of the use of a credit card or charge card or information
contained on or for use with such card for purchases from the Credit Parties,
whether now owned or hereafter acquired by any Credit Party.
"Acquired Entity" means any Person acquired after the Closing Date
by Borrower or any of its Subsidiaries in connection with or pursuant to a
Permitted Acquisition (including any Subsidiaries of such Person).
"Acquisition" means any transaction or series of related
transactions for the purpose of, or resulting directly or indirectly in, (a) the
acquisition by Kmart HQ or any of its Subsidiaries of all or substantially all
of the assets of any Person or of all or substantially all of any business or
division of a Person, (b) the acquisition by Kmart HQ or any of its Subsidiaries
of all of the capital stock, partnership interests, membership interests or
other equity interests of any Person or otherwise causing any Person to become a
Subsidiary or (c) a merger or consolidation or any other combination with
another Person (other than mergers or consolidations permitted pursuant to
Section 6.1(a) of the Agreement).
"Acquisition Business Plan" has the meaning ascribed to it in the
definition of Permitted Acquisition.
"Acquisition Indebtedness" means Indebtedness of an Acquired Entity
existing at the time such Acquisition is consummated (not created or incurred in
contemplation of such Person becoming an Acquired Entity); provided that such
Indebtedness is recourse only to the Acquired Entity and/or the assets of such
Acquired Entity and that (a) none of Holdings or any of its Subsidiaries (other
than such Acquired Entity) is (or may become) directly or indirectly liable
(whether as a primary obligor, surety or guarantor) for such Indebtedness and
(b) none of the assets of Holdings or any of its Subsidiaries (other than those
of such Acquired Entity) is (or may become) subject to any Lien securing such
Indebtedness.
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"Adjusted Eligible Inventory Amount" means an amount equal to (a)
the Eligible Inventory Amount less (b) the Inventory Reserves relating to
Inventory.
"Administrative Agent" means GE Capital in its capacity as
Administrative Agent for Lenders or its successor appointed pursuant to Section
9.7.
"Advance" means any Revolving Credit Advance or Swing Line Advance,
as the context may require.
"Affected Lender" has the meaning ascribed to it in Section 1.16(d).
"Affiliate" means, with respect to any Person, (a) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, ten percent (10%) or more of the Stock having
ordinary voting power in the election of directors of such Person, (b) each
Person that controls, is controlled by or is under common control with such
Person, and (c) each of such Person's officers and directors. For the purposes
of this definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise; provided, however, that the term "Affiliate", when used with respect
to any Credit Party, shall specifically exclude Administrative Agent and each
Lender.
"Affiliate Guaranty" means the guaranty of even date herewith
executed by and among each of Holdings, Kmart HQ, Kmart Services and
Administrative Agent, on behalf of itself and the Secured Parties.
"Agreement" means the Credit Agreement by and among Borrower, the
other Credit Parties party thereto, GE Capital, as Administrative Agent and
Lender and the other Lenders from time to time party thereto, as the same may be
amended, supplemented, restated or otherwise modified from time to time.
"Ancillary Loan Documents" means each Bank Product Agreement, each
Specified Hedging Agreement and all other agreements, instruments, documents and
certificates executed and delivered by Borrower or any of its Subsidiaries to,
or in favor of, any holder of Obligations in respect of any of the foregoing.
"Appendices" has the meaning ascribed to it in the recitals to the
Agreement.
"Applicable Margins" means, collectively, the Applicable Revolving
Documentary L/C Margin, the Applicable Revolving Standby L/C Margin, the
Applicable Revolver Index Margin and the Applicable Revolver LIBOR Margin.
"Applicable Revolver Index Margin" means the per annum interest rate
margin from time to time in effect and payable in addition to the Index Rate
applicable to the Revolving Loan, as determined by reference to Section 1.5(a).
"Applicable Revolver LIBOR Margin" means the per annum interest rate
from time to time in effect and payable in addition to the LIBOR Rate applicable
to the Revolving Loan, as determined by reference to Section 1.5(a).
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"Applicable Revolving Documentary L/C Margin" means, the per annum
interest rate from time to time in effect and payable with respect to
outstanding Letter of Credit Obligations, as determined by reference to Section
1.5(a).
"Applicable Revolving Standby L/C Margin" means, the per annum
interest rate from time to time in effect and payable with respect to
outstanding Letter of Credit Obligations, as determined by reference to Section
1.5(a).
"Applicable Trigger" means (a) with respect to the period of January
through July of any Fiscal Year, the sum of Excess Availability and Suppressed
Availability shall be less than $400,000,000 for any day occurring during such
period and (b) with respect to the period of August through December of any
Fiscal Year, the sum of Excess Availability and Suppressed Availability shall be
less than $250,000,000 for any day (or, during the months of October, November
and December, for three (3) consecutive Business Days) occurring during such
period.
"Applicable Unused Line Fee Percentage" means, the per annum
interest rate from time to time in effect, as determined by reference to Section
1.9(b).
"Appraisal Inventory Value" means an amount equal to (a) Gross
Inventory Value per the stockledger (b) minus, to the extent included therein
(without duplication), in-transit inventory and consigned Inventory, and (c)
plus or minus, as applicable, any other reconciling items, calculated in a
manner consistent with the Closing Date Appraisal.
"Appraisal L/C Inventory Value" means an amount equal to the Gross
L/C Inventory Value per the stockledger of the Approved Credit Parties as
in-transit inventory which, in the case of determinations made in appraisals
performed after the Closing Date, will be determined on the basis set forth in
the most recent appraisal, if any.
"Approved Credit Parties" means collectively (a) Borrower and each
other Subsidiary Credit Party as of the Closing Date (so long as such Person
continues to remain a Subsidiary Credit Party) and (b) to the extent approved in
writing by the Collateral Agents, any Person becoming a Subsidiary Credit Party
after the Closing Date.
"Asset Transfer" means any transfer of assets, including cash, Cash
Equivalents and Marketable Securities, whether by contribution or other means of
transfer.
"Asset Transfer Amount" means the fair market value or book value,
whichever is greater, of any and all assets transferred pursuant to an Asset
Transfer.
"Assignment Agreement" has the meaning ascribed to it in Section
9.1(a).
"Availability Certificate" has the meaning ascribed to it in Annex
F.
"Average Cash on Hand" means, for any Fiscal Quarter, an amount
equal to the result of (a) the aggregate sum of the Weekly Cash on Hand for all
calendar weeks occurring during such Fiscal Quarter divided by (b) the number of
calendar weeks occurring during such Fiscal Quarter.
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"Average Projected Cash on Hand" means, for any Fiscal Quarter, an
amount equal to the result of (a) the aggregate sum of Business Plan Cash on
Hand reflected in the Business Plan for the three (3) Fiscal Months occurring
during such Fiscal Quarter divided by (b) three (3).
"Bank Product Agreements" means those certain agreements entered
into from time to time by Holdings or its Subsidiaries in connection with any
service or facility extended to Holdings or its Subsidiaries by any Lender or
any Affiliate of any Lender in respect of credit cards or credit card processing
services.
"Bankruptcy Code" means the provisions of Title 11 of the United
States Code, 11 U.S.C. Sections 101 et seq.
"Bankruptcy Court" means the United States Bankruptcy Court for the
Northern District of Illinois (Eastern Division) or such other court as may have
jurisdiction over the Chapter 11 Cases (as defined in the Plan of
Reorganization).
"Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedure
and the Official Bankruptcy Forms, as amended, the Federal Rules of Civil
Procedure, as amended, as applicable to the Chapter 11 Cases (as defined in the
Plan of Reorganization) or proceedings therein, and the Local Rules of the
Bankruptcy Court, as applicable to the Chapter 11 Cases or proceedings therein,
as the case may be.
"Benchmark LIBOR Rate" means the LIBOR Rate for a LIBOR Period of
one month.
"BofA" means Bank of America, N.A., a national banking association.
"BofA L/C Facility" means that certain Letter of Credit Agreement
dated as of August 13, 2004 among Borrower, Bank of America, National
Association and Fleet National Bank.
"BofA Letters of Credit" has the meaning ascribed to it in Annex B.
"Borrower" has the meaning ascribed thereto in the preamble to the
Agreement.
"Borrower Guaranteed Obligations" has the meaning ascribed to it in
Annex B.
"Borrowing Availability" means, as of any date of determination, the
lesser of (a) the Maximum Amount and (b) the Borrowing Base, in each case, less
the sum of the Loans then outstanding.
"Borrowing Base" means, as of any date of determination, an amount
(calculated based on the most recent Borrowing Base Certificate delivered
pursuant to the Agreement) that is equal to the sum at such time of the
following:
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(a) the lesser of (i) an amount equal to the result of eighty
percent (80%) multiplied by the Recovery Rate multiplied by the Appraisal
Inventory Value or (ii) the Net Available Inventory Amount; plus
(b) the lesser of (i) an amount equal to the result of sixty
percent (60%) multiplied by the Recovery Rate multiplied by the Appraisal L/C
Inventory Value or (ii) the Net Available L/C Inventory Amount; less
(c) the Primary Reserves established from time to time by
Administrative Agent in accordance with Annex K.
"Borrowing Base Certificate" means a certificate substantially in
the form attached to the Agreement as Exhibit 4.1(b) (with such changes therein
as may be required by Administrative Agent in its reasonable discretion to
reflect the components of and Reserves against the Borrowing Base established
under the terms of this Agreement from time to time), executed and certified by
a Financial Officer of Borrower, which shall include appropriate exhibits,
schedules and collateral reporting requirements as referred to therein and as
provided for in Annex F.
"Business Day" means any day that is not a Saturday, a Sunday or a
day on which banks are required or permitted to be closed in the State of New
York and in reference to LIBOR Loans shall mean any such day that is also a
LIBOR Business Day.
"Business Plan" has the meaning ascribed to it in Section 2.1(i).
"Business Plan Cash on Hand" means, for any Fiscal Month, an amount
equal to the positive difference between (a) Cash on Hand as reflected in the
Business Plan for such Fiscal Month minus (b) the amount of outstanding Advances
as reflected under the heading "Credit Facility" in the Business Plan for such
Fiscal Month.
"Capital Expenditures" means, with respect to any Person, all
expenditures (by the expenditure of cash or the incurrence of Indebtedness) by
such Person during any measuring period for any fixed assets or improvements or
for replacements, substitutions or additions thereto, that have a useful life of
more than one year and that are required to be capitalized under GAAP.
"Capital Factors Ruling" means the decision rendered by the federal
district court in respect of avoidance actions under section 549 of the
Bankruptcy Code in the case styled Capital Factors, Inc. v. Kmart Corporation,
Case No. 02 C 1264 (N.D. Ill. 2002).
"Capital Lease" means, with respect to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, would be required to be classified and accounted for as a
capital lease on a balance sheet of such Person.
"Capital Lease Obligation" means, with respect to any Capital Lease
of any Person, the amount of the obligation of such Person thereunder that, in
accordance with GAAP, would appear on a balance sheet of such Person in respect
of such Capital Lease.
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"Cash Collateral Account" has the meaning ascribed to it Annex B.
"Cash Consideration Basket" has the meaning ascribed to it in
Section 6.2(k).
"Cash Dominion Event" means (a) the occurrence of an Event of
Default pursuant to Section 8.1(a) or the occurrence of an Event of Default
under Section 8.1(b) with respect to the financial covenants set forth on Annex
G, unless, in either case, both (i) the Majority Lenders agree to waive the
requirement for cash dominion pursuant to paragraph (f) of Annex C and (ii)
average Excess Availability is greater than $500,000,000 for thirty (30)
consecutive days immediately prior to the date of the waiver referred to in
clause (i) above, (b) Excess Availability is less than the Applicable Trigger
for ten (10) consecutive Business Days or (c) the occurrence and continuation of
an Event of Default pursuant to Sections 8.1(h) or (i).
"Cash Dominion Termination Event" means, unless otherwise agreed to
in a Control Agreement among the applicable Concentration Account Bank (or Loan
Proceeds Account Bank), the applicable Credit Party and Administrative Agent, in
the case of a Cash Dominion Event occurring pursuant to clause (b) of the
definition thereof, the date upon which average Excess Availability is greater
than $500,000,000 for a period of thirty (30) consecutive days, so long as no
Default or Event of Default has occurred and is continuing on such date.
"Cash Equivalents" shall mean any of the following:
(a) obligations of the United States or any agency thereof to the
extent such obligations are backed by the full faith and credit of the United
States;
(b) general obligations of or obligations guaranteed by any state
of the United States or the District of Columbia that at the time of acquisition
thereof are assigned a rating not lower than A-2 by S&P or P-2 by Xxxxx'x;
(c) interests in any money market mutual fund which at the date of
investment in such funds has (i) the highest rating by each of Xxxxx'x and S&P
which has issued a rating for such fund or (ii) invests substantially all of its
assets in securities of the types described in clauses (a), (b), (d), (e) and
(f) hereto;
(d) commercial paper which at the date of investment has ratings
of not lower than A-2 by S&P or P-2 by Xxxxx'x;
(e) certificates of deposit, demand or time deposits, including
Eurodollar time deposits, federal funds or banker's acceptances issued by any
depository institution or trust company incorporated under the laws of the
United States or of any State thereof (or any U.S. branch or agency of a foreign
bank) and subject to supervision and examination by Federal or state banking
authorities, provided that the short-term unsecured deposit obligations of such
depository institution or trust company (or its parent holding company) at the
date of investment are then rated at least P-2 by Xxxxx'x and A-2 by S&P;
(f) demand or time deposits of, or certificates of deposit issued
by, any bank, trust company, savings bank or other savings institution, provided
that the long-term unsecured
A-6
debt obligations of such bank, trust company, savings bank or other savings
institution are rated at the date of investment at least Aa2 by Xxxxx'x and AA-
by S&P;
(g) investments in repurchase obligations with a term not more
than seven (7) days for underlying securities of the types described in clause
(a) above entered into with any office of a bank or trust company meeting the
qualifications specified in clause (e) above; and
(h) investments in any open-end or closed-end management type
investment company or investment trust: (i) which is registered under the
Investment Company Act of 1940, (ii) the portfolio of which is limited to the
obligations of, or guaranteed by, the United States and to agreements to
repurchase such obligations, which agreements, with respect to principal and
interest are at least 100% collateralized by such obligations marked to market
on a daily basis and (iii) the investment company or investment trust shall take
delivery of such obligations either directly or through an independent custodian
designated in accordance with the Investment Company Act of 1940.
"Cash Management Bank" means The Bank of New York or any Lender
providing cash management services to any Credit Party.
"Cash Management Obligations" means the amount from time to time
owing by the Credit Parties to any Cash Management Bank in respect of overdrafts
and related liabilities arising from treasury, depository and cash management
services provided by such Cash Management Bank after the Closing Date in an
amount not to exceed $150,000,000 in the aggregate or such other amount as may
from time to time be approved in writing by Administrative Agent at the written
request of Borrower.
"Cash Management Systems" has the meaning ascribed to it in Section
1.8.
"Cash on Hand" means, as of any date of determination, the amount of
unrestricted cash (including Store Cash) and Cash Equivalents and the fair
market value of unrestricted Marketable Securities on a xxxx-to-market basis for
such date maintained by Borrower and its Subsidiaries in a Depository Account,
the Concentration Accounts, an Investment Account or an Excluded Account as of
such date.
"CERCLA" has the meaning ascribed to it in the definition of
Environmental Laws.
"Certificate of Exemption" has the meaning ascribed to it in Section
1.15(e).
"Certifying Lender" has the meaning ascribed to it in Section
1.15(e).
"Change of Control" means (a) the Board of Directors of Holdings
shall cease to consist of a majority of the Continuing Directors, (b) any person
or group of persons (within the meaning of Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934) (i) other than Third Avenue Trust and ESL and
their respective Affiliates shall acquire, directly or indirectly, the power to
direct or cause the direction of the management or policies of Holdings, whether
through the ability to exercise voting power, by contract or otherwise or (ii)
shall acquire more than the percentage of the then issued and outstanding shares
of capital Stock of Holdings having
A-7
the right to vote for the election of directors of Holdings under ordinary
circumstances owned directly or indirectly by ESL, Third Avenue and their
respective Affiliates, (c) Holdings ceases to own and control directly or
indirectly all of the economic and voting rights associated with all of the
outstanding capital Stock of Borrower or Kmart HQ or (d) Borrower ceases to own
and control directly or indirectly all of the economic and voting rights
associated with all of the outstanding capital Stock of the Subsidiary Credit
Parties of Borrower, other than in connection with a transaction permitted under
the Agreement
"Chapter 11 Cases" has the meaning ascribed to it in the Plan of
Reorganization.
"Charges" means all federal, state, county, city, municipal, local,
foreign or other governmental taxes (including taxes owed to the PBGC at the
time due and payable), levies, assessments, charges or Liens upon or relating to
(a) the Collateral, (b) the employees, payroll, income or gross receipts of any
Credit Party, (c) any Credit Party's ownership or use of any properties or other
assets or (d) any other aspect of any Credit Party's business.
"Claims" has the meaning ascribed to it in the Bankruptcy Code.
"Closing Date" means May 6, 2003.
"Closing Date Appraisal" means the appraisal delivered to
Administrative Agent and Lenders pursuant to Annex D of the Existing Credit
Agreement.
"Closing Checklist" means the schedule, including all appendices,
exhibits or schedules thereto, listing certain documents and information to be
delivered in connection with the Agreement, the other Credit Loan Documents and
the transactions contemplated thereunder, substantially in the form attached as
Annex D of the Existing Credit Agreement and Annex D hereto.
"Closing Date Store Cash" means cash used to supply the Stores with
cash for the cash registers or in deposit at Store Depository Accounts existing
on the Closing Date in an amount deemed to be equal to $300,000,000 as of the
Closing Date.
"Code" means the Uniform Commercial Code as the same may, from time
to time, be enacted and in effect in the State of New York; provided, that to
the extent that the Code is used to define any term herein or in any Credit Loan
Document and such term is defined differently in different Articles or Divisions
of the Code, the definition of such term contained in Article or Division 9
shall govern; provided further, that in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection or priority of, or
remedies with respect to, Administrative Agent's or any Secured Party's Lien on
any Collateral is governed by the Uniform Commercial Code as enacted and in
effect in a jurisdiction other than the State of New York, the term "Code" shall
mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions thereof relating to such
attachment, perfection, priority or remedies and for purposes of definitions
related to such provisions.
"Collateral" means the property covered by the Security Agreement
and any other property, real or personal, tangible or intangible, now existing
or hereafter acquired, that at any
A-8
time is or becomes subject to a security interest or Lien in favor of
Administrative Agent, on behalf of itself and the Secured Parties, to secure the
Obligations.
"Collateral Agents" means each of GE Capital and FRFI, together with
their respective successors and assigns in such capacity.
"Collateral Reports" means the reports with respect to the
Collateral furnished or required to be furnished by Borrower pursuant to Annex
F.
"Collection Account" means that certain account of Administrative
Agent, account number 000-000-00 in the name of Administrative Agent at
DeutscheBank Trust Company Americas in New York, New York ABA No. 021 001 033,
or such other account as may be specified in writing by Administrative Agent as
the "Collection Account."
"Commitment Letter" means that certain Joint Commitment Letter dated
as of January 13, 2003 by and among Borrower and the Commitment Letter Parties,
as the same may be amended, modified or supplemented from time to time.
"Commitment Letter Parties" means each of GE Capital, GECC Capital
Markets Group, Inc., Bank of America, N.A., Banc of America Securities LLC,
Fleet Retail Finance Inc. and Fleet Securities, Inc.
"Commitment Termination Date" means the earliest of (a) the Stated
Maturity Date, (b) the date of termination of Lenders' obligations to make
Advances and to incur Letter of Credit Obligations pursuant to Section 8.2, (c)
the date of prepayment in full by Borrower of the Loans and the cancellation and
return (or stand-by guarantee) of all Letters of Credit or the cash
collateralization of all Letter of Credit Obligations pursuant to Annex B, and
the permanent reduction of the Commitments to zero dollars ($0) and (d) the date
upon which all or substantially all of the assets of Kmart HQ and the Subsidiary
Credit Parties are sold, transferred, leased, conveyed or otherwise disposed of,
whether pursuant to a single transaction or a series of related transactions,
unless Administrative Agent and Lenders have previously consented thereto in
writing.
"Commitments" means (a) as to any Lender, the aggregate of such
Lender's Revolving Loan Commitment (including without duplication the Swing Line
Lender's Swing Line Commitment as a subset of its Revolving Loan Commitment) and
(b) as to all Lenders, the aggregate of all Lenders' Revolving Loan Commitments
(including without duplication the Swing Line Lender's Swing Line Commitment as
a subset of its Revolving Loan Commitment) and as to each of clauses (a) and
(b), as such Commitments may be reduced, terminated or adjusted from time to
time in accordance with the Agreement.
"Compliance Certificate" has the meaning ascribed to it in Annex E.
"Concentration Account" has the meaning ascribed to it in Annex C.
"Concentration Account Bank" has the meaning ascribed to it in Annex
C.
"Confirmation Order" has the meaning ascribed to it in Section
2.1(c).
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"Consultants" means (a) consultants engaged by Administrative Agent
to review Borrower's calculation of the Borrowing Base from time to time or (b)
financial consultants engaged by Administrative Agent to review any other matter
or matters relating to the condition (financial or otherwise) or operations of
Borrower and its Subsidiaries (unless an Event of Default has occurred and is
continuing, subject to, in the case of clause (b), the prior consent of
Borrower, which consent shall not be unreasonably withheld or delayed).
"Continuing Directors" means the directors of Holdings who take
office on the Closing Date in accordance with Section 7.5 of the Plan of
Reorganization and each other director, if, in each case (a) commencing with the
Closing Date and ending on the second (2nd) anniversary thereof, such other
director's nomination for election to the board of directors of Holdings is
recommended by (i) in the case of directors nominated by the Financial
Institutions Committee (as defined in the Plan of Reorganization), a majority of
the directors elected by the Financial Institutions Committee, (ii) in the case
of directors nominated by the Unsecured Creditor's Committee (as defined in the
Plan of Reorganization), a majority of the directors elected by the Unsecured
Creditor's Committee and (iii) in the case of directors nominated by the Plan
Investors (as defined in the Plan of Reorganization), a majority of the
directors elected by the Plan Investors and (b) after such second (2nd)
anniversary, such other director's nomination for election to the board of
directors of Holdings is recommended by a majority of the then Continuing
Directors.
"Control Agreement" means (a) those certain Deposit Account Control
Agreements by and among The Bank of New York and Bank of America, N.A. and the
Loan Proceeds Account Bank, Borrower and Administrative Agent and covering each
Concentration Account and the Loan Proceeds Account maintained at any financial
institution and (b) any other control account agreements entered into by and
among any Credit Party, Administrative Agent and any financial institution from
time in accordance with Annex C, in each case, substantially in the form of
Exhibit C-1.
"Copyright License" means, as to any Person, any and all rights now
owned or hereafter acquired under any written agreement granting such Credit
Party the right to use any copyright (other than "shrink-wrap" licenses and
licenses of Software embedded in goods acquired by such Credit Party).
"Copyrights" means all of the following now owned or hereafter
adopted or acquired by any Credit Party and which are reasonably necessary to
enable Administrative Agent and Lenders to exercise their rights and remedies
under the Credit Loan Documents with respect to the Collateral: (a) all
copyrights (whether registered or unregistered), all registrations and
recordings thereof, and all applications in connection therewith, including all
registrations, recordings and applications in the United States Copyright Office
or in any similar office or agency of the United States, any state or territory
thereof, or any other country or any political subdivision thereof, and (b) all
reissues, extensions or renewals thereof.
"Corporate Domestic Person" has the meaning ascribed to it in
Section 1.5(e).
"Credit Loan Documents" means the Agreement, the Security Agreement,
the Notes, the Guaranties, the Control Agreements, the Investment Account
Control Agreements, the
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ESL Subordination Agreement, any Subordination Agreements, the Master Standby
Agreement, the Master Documentary Agreement, the Escrow Agreement and all other
agreements, instruments, documents and certificates identified in the Closing
Checklist executed and delivered by any Credit Party to, or in favor of,
Administrative Agent or any Lenders and including all other pledges, powers of
attorney, consents, assignments, contracts, notices and letter of credit
agreements whether heretofore, now or hereafter executed by or on behalf of any
Credit Party, or any employee of any Credit Party, and delivered to
Administrative Agent, L/C Issuer or any Lender in connection with the Agreement,
the Loans, the Letters of Credit, the Collateral or the transactions
contemplated thereby, but in any event excluding any Ancillary Loan Document.
"Credit Parties" means Holdings, Kmart HQ, Kmart Services, Borrower,
and each of the other Subsidiary Credit Parties.
"DC" means any distribution center owned or leased/rented and
operated by any Credit Party.
"Default" means any event that, with the passage of time or notice
or both, would, unless cured or waived, become an Event of Default.
"Default Rate" has the meaning ascribed to it in Section 1.5(d).
"Depository Account" has the meaning ascribed to it in Annex C.
"Depository Bank" has the meaning ascribed to it in Annex C.
"Disclosure Schedules" means the Schedules prepared by Borrower and
denominated as Disclosure Schedules (1.4) through (6.8) in the Index to the
Agreement.
"Disclosure Statement" means the written disclosure statement that
relates to the Plan of Reorganization, as approved by the Bankruptcy Court
pursuant to section 1125 of the Bankruptcy Code and Bankruptcy Rule 3017, as
such disclosure statement may be amended, modified or supplemented from time to
time prior to the Closing Date.
"Documents" means any "documents," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, wherever located.
"Dollars" or "$" means lawful currency of the United States of
America.
"EBITDA" means, for any period, all as determined in accordance with
GAAP, the consolidated net income (or net loss) of Holdings and its Subsidiaries
for such period, plus (a) without duplication, the sum of (i) depreciation and
amortization expense, (ii) amortized debt discount for such period, (iii) net
total Federal, state and local income tax expense, (iv) gross interest expense
for such period less gross interest income for such period, (v) extraordinary
losses, (vi) any non-cash, non-recurring charge which has been deducted in the
calculation of net income, (vii) non-cash restructuring charges which have been
deducted in the calculation of net income, (viii) charges related to the Chapter
11 Cases in an amount not to exceed $550,000,000, (ix) UNICAP expense, (x)
provision for LIFO adjustment for inventory valuation, (xi) charges
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arising from the grant of Stock or options to management and (xii) any aggregate
net loss during such period arising from the sale, exchange or other disposition
of capital assets by such Person (including any fixed assets, whether tangible
or intangible, all Inventory sold in conjunction with the disposition of fixed
assets and all securities) less (b) without duplication, the sum of (i)
extraordinary gains, (ii) any aggregate net gain during such period arising from
the sale, exchange or other disposition of capital assets by such Person
(including any fixed assets, whether tangible or intangible, all Inventory sold
in conjunction with the disposition of fixed assets and all securities) and
(iii) any other non-cash gains that have been added in determining the
calculation of consolidated net income of such Person for such period. For
purposes of this definition, the following items shall be excluded in
determining consolidated net income of a Person: (A) the income (or deficit) of
any Acquired Entity accrued prior to the date it became a subsidiary of, or was
merged or consolidated into, such Person or any of such Person's Subsidiaries
and (B) the income (or deficit) of any Acquired Entity (other than a Subsidiary)
in which such Person has an ownership interest, except to the extent any such
income has actually been received by such Person in the form of cash dividends
or distributions.
"EBITDA Release Date" means, with respect to any Fiscal Month
occurring during or after the applicable EBITDA Trigger Date, the date upon
which Borrower delivers to Administrative Agent a certificate, executed by a
Financial Officer of Borrower, demonstrating (with sufficient supporting details
and calculations) that: (a) Holdings and its Subsidiaries are in compliance with
the EBITDA covenant set forth in clause (b) of Annex G with respect to such
Fiscal Month, (b) Borrower has maintained an average Excess Availability in
excess of the Applicable Trigger for five (5) consecutive Business Days after
the EBITDA Trigger Date and thereafter continued to maintain daily Excess
Availability in excess of the Applicable Trigger through the date of such
certificate, and (c) no Default or Event of Default has occurred and is
continuing on such date.
"EBITDA Trigger Date" means, as at any date of determination, the
date upon which Excess Availability as at such date of determination is or was
less than the Applicable Trigger for the period covered by such date.
"Effective Date" has the meaning ascribed to it in Section 2.1.
"Eligible Inventory" has the meaning ascribed to it in the
definition of Eligible Inventory Amount.
"Eligible Inventory Amount" means, without duplication, the Gross
Inventory Value of Inventory held for sale to third party customers of the
Approved Credit Parties at the time of such determination that is not ineligible
for inclusion in the calculation of the Borrowing Base pursuant to any of
clauses (a) through (p) below (such non-excluded Inventory, "Eligible
Inventory"). Without limiting the foregoing, to qualify as "Eligible Inventory"
no Person other than an Approved Credit Party shall have any direct or indirect
ownership, interest or title to such Inventory and no Person other than the
particular Approved Credit Party shall be indicated on any purchase order or
invoice with respect to such Inventory as having or purported to have an
interest therein. Unless otherwise from time to time approved in accordance with
Annex K, no Inventory shall be deemed included in the Eligible Inventory Amount
if, without duplication:
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(a) it is not owned by an Approved Credit Party free and clear of
all Liens and rights of any other Person (including the rights of a purchaser
that has made progress payments and the rights of a surety that has issued a
bond to assure Borrower's performance with respect to that Inventory), except
for Liens of the type set forth in clauses (a), (b), (c), (e) or (l) of the
definition of Permitted Encumbrances;
(b) it (i) is not located on premises owned, leased or rented by
an Approved Credit Party (except for Inventory in transit between such
locations), unless Administrative Agent has given its prior consent thereto,
(ii) is stored with a bailee or warehouseman unless an acknowledged bailee
letter in substantially the form of Exhibit F-2 (or otherwise in form and
substance reasonably satisfactory to Administrative Agent) has been received by
Administrative Agent and Reserves reasonably satisfactory to Administrative
Agent have been established with respect thereto, (iii) is located at an owned
location subject to a mortgage in favor of a lender other than Administrative
Agent, unless a reasonably satisfactory mortgagee waiver has been delivered to
Administrative Agent or (iv) is located at a closed Store (except pursuant to
clause (f)) or is located at a closed DC;
(c) it is in transit from a vendor, and (i) has not yet been
received into a DC or Store and (ii) does not constitute L/C Inventory;
(d) it is consigned from a vendor or is at a customer location but
still accounted for in the Approved Credit Party's inventory balance;
(e) it is identified as accrued Inventory without a receiver in
the applicable Approved Credit Party's stockledger;
(f) it is Inventory located at a Store which is being closed;
provided, however that such Inventory will be deemed eligible for the first four
(4) weeks after the commencement of the Store Closure Sale for that Store;
(g) it is identified in the stockledger of the applicable Approved
Credit Party as any of the following departments or consists of Inventory which
is ordinarily classified by the applicable Approved Credit Party consistent with
its historical practices as the following: bakery; dairy; deli; digital imaging,
photofinishing and one hour lab; floral; gasoline; home fragrances and party
supplies; live plants; meat; miscellaneous or other as classified on the
applicable Approved Credit Party's stockledger; produce; books; magazines;
restaurant operations; or seafood;
(h) it is Inventory that is packed-away and stored at a DC or a
Store for future sale;
(i) from and after the delivery by Borrower of the first Borrowing
Base Certificate after a specified holiday or event has occurred, it is
Inventory (other than seasonal apparel) identified as seasonal per the
applicable Approved Credit Party's stockledger for sale for such specific
holiday or event;
(j) from and after any date that is more than four (4) weeks past
a specified selling season, it is Inventory that is seasonal apparel and that
the applicable Approved Credit
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Party has identified, in accordance in all material respects with the applicable
Approved Credit Party's current or historical accounting practices, as related
to such specific selling season;
(k) it is identified per the applicable Approved Credit Party's
stockledger as candy; and the Inventory Value thereof is greater than two
percent (2%) of Gross Inventory Value (but only to the extent of such excess);
(l) it is identified per the applicable Approved Credit Party's
stockledger as Inventory on layaway, or a third party has placed a deposit on
the specific Inventory;
(m) it is identified by the applicable Approved Credit Party as
Inventory in a vending machine based on its reasonable estimate of the Inventory
Value of such Inventory from time to time;
(n) it is identified per the applicable Approved Credit Party's
stockledger as Inventory that is in a leased department;
(o) it is not subject to a first priority Lien in favor of
Administrative Agent on behalf of itself and the Secured Parties, subject to
Liens arising by operation of law in the ordinary course of business in favor of
(i) landlords to secure the payment of rent for Stores in an amount not to
exceed five percent (5%) of the monthly base rent due for the immediately
preceding calendar month then ended in respect of Stores, which amounts shall
not be more than thirty (30) days overdue unless contested in accordance with
Section 5.2(b) or as otherwise agreed by Administrative Agent, (ii) landlords to
secure the payment of rent for Stores in an amount in excess of five percent
(5%) of the monthly base rent due for the immediately preceding calendar month
then ended in respect of Stores, so long as such amounts are being contested,
unless otherwise agreed by Administrative Agent, in accordance with Section
5.2(b) and Reserves in respect of such excess amount have been established in
accordance with Annex K and (iii) carriers', warehousemen's or similar
possessory Liens securing liabilities not yet due and payable or which are being
contested, unless otherwise agreed by Administrative Agent, in accordance with
Section 5.2(b) and for which Reserves have been established in accordance with
Annex K.
(p) it consists of any costs associated with "freight-in" charges
relating to Inventory that is not located at a Store or DC.
"Eligible L/C Inventory Amount" means, without duplication, the
Gross L/C Inventory Value of all finished good Inventory owned by the Approved
Credit Parties which is (a) covered by documentary Letters of Credit, (b) in
transit to the Approved Credit Parties' facilities (such Inventory, the "L/C
Inventory") and (c) at the time of such determination, not ineligible for
inclusion in the Borrowing Base pursuant to clauses (d), (e), and (g) through
(n) or (p) of the definition of Eligible Inventory or any of clauses (i) through
(v) below (such non-excluded L/C Inventory, "Eligible L/C Inventory"). Unless
otherwise from time to time approved in accordance with Annex K, no L/C
Inventory shall be deemed included in the Eligible L/C Inventory Amount if,
without duplication, such L/C Inventory:
(i) is not owned by an Approved Credit Party;
A-14
(ii) is not fully insured in accordance with the requirements of
Section 5.4;
(iii) is not subject to a first priority, perfected Lien in favor of
Administrative Agent, for the benefit of itself and the Secured Parties (except
for any possessory Lien upon such Inventory in the possession of a freight
carrier or shipping company securing only the freight charges for the
transportation of such Inventory to such Approved Credit Party);
(iv) is evidenced or deliverable pursuant to Documents that have
not been delivered to Administrative Agent or an agent acting on its behalf or
designating Administrative Agent as consignee; or
(v) will be or has been in transit for more than thirty (30) days.
"Environmental Laws" means all applicable federal, state, local and
foreign laws, statutes, ordinances, codes, rules, regulations and other legal
requirements, now or hereafter in effect, imposing liability or standards of
conduct for or relating to the regulation and protection of the environment and
natural resources (including ambient air, surface water, groundwater, wetlands,
land surface or subsurface strata, wildlife, aquatic species and vegetation) and
the protection of human health and safety with respect to exposure to Hazardous
Materials. Environmental Laws include the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.)
("CERCLA"); the Hazardous Materials Transportation Authorization Act of 1994 (49
U.S.C. Sections 5101 et seq.); the Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C. Sections 136 et seq.); the Solid Waste Disposal Act
(42 U.S.C. Sections 6901 et seq.); the Toxic Substance Control Act (15 U.S.C.
Sections 2601 et seq.); the Clean Air Act (42 U.S.C. Sections 7401 et seq.); the
Federal Water Pollution Control Act (33 U.S.C. Sections 1251 et seq.); the
Occupational Safety and Health Act (29 U.S.C. Sections 651 et seq.); and the
Safe Drinking Water Act (42 U.S.C. Sections 300(f) et seq.), and any and all
regulations promulgated thereunder, and all analogous state, local and foreign
counterparts or equivalents and any transfer of ownership notification or
approval statutes.
"Environmental Liabilities" means, with respect to any Person, all
liabilities, obligations, responsibilities, response, remedial and removal
costs, investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts
and consultants), fines, penalties, sanctions and interest incurred as a result
of or related to any claim, suit, action, investigation, proceeding or demand by
any Person relating to the protection of human health, the environment or
natural resources, whether based in contract, tort, implied or express warranty,
strict liability, criminal or civil statute or common law, including any arising
under or related to any Environmental Laws, Environmental Permits, or in
connection with any Release or presence of a Hazardous Material whether on, at,
in, under, from or about or in the vicinity of any real or personal property.
"Environmental Permits" means all permits, licenses, authorizations,
certificates, approvals or registrations required by any Governmental Authority
under any Environmental Laws.
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"Equipment" means all "equipment," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, wherever located.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any regulations promulgated thereunder.
"ERISA Affiliate" means, with respect to any Credit Party, any trade
or business (whether or not incorporated) that, together with such Credit Party,
are treated as a single employer within the meaning of Sections 414(b), (c), (m)
or (o) of the IRC.
"ERISA Event" means, with respect to any Credit Party or any ERISA
Affiliate, (a) any event described in Section 4043(c) of ERISA with respect to a
Title IV Plan for which the 30-day notice period has not been waived, (b) the
withdrawal of any Credit Party or ERISA Affiliate from a Title IV Plan subject
to Section 4063 of ERISA during a plan year in which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA, (c) the complete or partial
withdrawal of any Credit Party or any ERISA Affiliate from any Multiemployer
Plan with respect to which such Credit Party's or ERISA Affiliate's liability
has not been satisfied, (d) the filing of a notice of intent to terminate a
Title IV Plan or the treatment of a plan amendment as a termination under
Section 4041 of ERISA, (e) the institution of proceedings to terminate a Title
IV Plan or Multiemployer Plan by the PBGC, (f) the failure by any Credit Party
or ERISA Affiliate to make when due required contributions to a Multiemployer
Plan or Title IV Plan unless such failure is cured within thirty (30) days, (g)
any other event or condition that would reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Title IV Plan or Multiemployer Plan or for the
imposition of liability under Section 4069 or 4212(c) of ERISA, (h) the loss of
a Qualified Plan's qualification or tax exempt status, (i) the termination of a
Plan described in Section 4064 of ERISA with respect to which such Credit
Party's or ERISA Affiliate's liability has not been satisfied, (j) any event for
which a Credit Party or any ERISA Affiliate has incurred or is likely to incur a
liability under the provisions of Section 4063, 4064 or 4201 of ERISA or (k) any
event or transaction in connection with which any Credit Party or any ERISA
Affiliate could be subject to either a civil penalty assessed pursuant to the
provisions of Section 502(i) of ERISA or a tax imposed under the provisions of
Section 4975 of the IRC.
"Escrow Agreement" means that certain Escrow Agreement dated as of
the Closing Date by and among Borrower, Administrative Agent and Bankers Trust
Company.
"ESL" means ESL Investments, Inc., a Delaware corporation.
"ESL Note" means the certain promissory notes held by certain
Affiliates of ESL, in each case in form attached hereto as Exhibit D.
"ESL Note Documentation" means the ESL Notes, the ESL Note Guarantee
, ESL Subordination Agreement, and including all schedules, exhibits,
amendments, supplements, modifications, assignments and all other material
documents delivered pursuant thereto or in connection therewith.
"ESL Note Guarantee" means the Guarantee Agreement dated as of the
Closing Date, between Borrower and CRK Partners, L.P. in respect of the ESL
Notes.
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"ESL Subordination Agreement" means that certain Subordination
Agreement dated as of the Closing Date by and among CRK Partners, L.P., certain
Affiliates of ESL, Holdings, Borrower and Administrative Agent.
"ESOP" means a Plan that is intended to satisfy the requirements of
Section 4975(e)(7) of the IRC.
"Event of Default" has the meaning ascribed to it in Section 8.1.
"Excess Availability" means, as of any date of determination, an
amount equal to (a) the lesser of (i) the Maximum Amount and (ii) the Borrowing
Base minus (b) the sum of then-outstanding amount (without duplication) of (i)
Revolving Advances, (ii) Swing Line Advances and (iii) Letter of Credit
Obligations.
"Excess Cash Flow" means, without duplication, with respect to any
Fiscal Year of Holdings and its Subsidiaries, EBITDA minus (a) Capital
Expenditures during such Fiscal Year (excluding the financed portion thereof),
minus (b) Interest Expense paid (excluding any original issue discount, interest
paid in kind or amortized debt discount, to the extent included in determining
Interest Expense) and scheduled principal payments paid or payable in respect of
Funded Debt, minus (c) taxes paid for in cash.
"Excluded Account" means a Deposit Account or Securities Account as
to which Borrower has presented evidence reasonably satisfactory to
Administrative Agent and Co-Syndication Agents that no proceeds of Collateral
were deposited therein or credited thereto and Administrative Agent has
acknowledged same in writing.
"Existing Credit Agreement" has the meaning assigned thereto in the
recitals to the Agreement.
"Existing Letters of Credit" has the meaning ascribed to it in Annex
B.
"Existing Depository Account" has the meaning ascribed to it in
Annex C.
"Existing Depository Bank" has the meaning ascribed to it in Annex
C.
"Fair Labor Standards Act" means the Fair Labor Standards Act, 29
U.S.C. Section 201 et seq.
"Federal Funds Rate" means, for any day, a floating rate equal to
the weighted average of the rates on overnight federal funds transactions among
members of the Federal Reserve System, as determined by Administrative Agent in
its sole discretion, which determination shall be final, binding and conclusive
(absent manifest error).
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System.
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"Fee Letter" means that certain letter, dated as of January 13,
2003, between the Commitment Letter Parties and Borrower with respect to certain
Fees to be paid from time to time by Borrower to GE Capital, FRFI and BofA.
"Fees" means any and all fees payable to Administrative Agent or any
Lender pursuant to the Agreement, the Fee Letter or any of the other Loan
Documents.
"Financial Covenants" means the financial covenants set forth in
Annex G.
"Financial Officer" means, individually, the Chief Financial
Officer, the Controller or the Treasurer of Borrower.
"Financial Statements" means the consolidated income statements,
statements of cash flows and balance sheets of Borrower delivered in accordance
with Section 3.4(a) and paragraphs (a), (b) and (d) of Annex E.
"Fiscal Month" means any of the monthly accounting periods of
Borrower.
"Fiscal Quarter" means any of the quarterly accounting periods of
Borrower, ending on or about April 30, July 31, October 31 and January 31 of
each year.
"Fiscal Year" means any of the annual accounting periods of Borrower
ending on or about January 31 of each year.
"Fixtures" means all "fixtures" as such term is defined in the Code,
now owned or hereafter acquired by any Credit Party.
"Xxxxxxx Contract" means that certain supply agreement between the
Xxxxxxx Companies, Inc. ("Xxxxxxx") and Borrower, pursuant to which Xxxxxxx
provided food, consumables, and core pantry products for Borrower and certain of
its Subsidiaries, which contract was rejected in the Chapter 11 Cases in
February 2003.
"Foreign Lender" has the meaning ascribed to it in Section 1.15(e).
"FRFI" means Fleet Retail Finance, Inc., a Delaware corporation.
"Funded Debt" means, with respect to any Person, without
duplication, all Indebtedness for borrowed money evidenced by notes, bonds,
debentures, or similar evidences of Indebtedness and that by its terms matures
more than one (1) year from, or is directly or indirectly renewable or
extendible at such Person's option under a revolving credit or similar agreement
obligating the lender or lenders to extend credit over a period of more than one
year from the date of creation thereof, and specifically including Capital Lease
Obligations, current maturities of long-term debt, revolving credit and
short-term debt extendible beyond one (1) year at the option of the debtor, and
also including, in the case of Borrower, the Loans and, without duplication,
payments actually made in respect of Guaranteed Indebtedness consisting of
guaranties of Funded Debt of Persons other than Holdings and its Subsidiaries.
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"GAAP" means generally accepted accounting principles in the United
States of America, consistently applied, as such term is further defined in
Annex G.
"GE Capital" means General Electric Capital Corporation, a Delaware
corporation.
"General Intangibles" means all "general intangibles," as such term
is defined in the Code, now owned or hereafter acquired by any Credit Party,
including all right, title and interest that such Credit Party may now or
hereafter have in or under any Contract, all payment intangibles, customer
lists, interests in partnerships, joint ventures and other business licenses,
permits, trade secrets, proprietary or confidential information, inventions
(whether or not patented or patentable), technical information, procedures,
designs, knowledge, know-how, Software, data bases, data, skill, expertise,
experience, processes, models, drawings, materials and records, goodwill, all
rights and claims in or under insurance policies (including insurance for fire,
damage, loss and casualty, whether covering personal property, real property,
tangible rights or intangible rights, all liability, life, key man and business
interruption insurance, and all unearned premiums), choses in action, rights to
receive tax refunds and other payments, rights to receive dividends,
distributions, cash, Instruments and other property in respect of or in exchange
for pledged Stock and Investment Property, rights of indemnification, all books
and records, correspondence, credit files, invoices and other papers, including
without limitation all tapes, cards, computer runs and other papers and
documents in the possession or under the control of such Credit Party or any
computer bureau or service company from time to time acting for such Credit
Party.
"Going Concern Sale" has the meaning ascribed to it in Section
6.8(i).
"Goods" means all "goods" as defined in the Code, now owned or
hereafter acquired by any Credit Party, wherever located.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof, and any agency, department or other
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Granting Lender" has the meaning ascribed to in Section 9.1(g).
"Gross Available Inventory Amount" means an amount equal to (a) the
Adjusted Eligible Inventory Amount multiplied by (b) the advance rate of
sixty-five percent (65%), as such advance rate may be modified from time to time
in accordance with Section 1.7.
"Gross Available L/C Inventory Amount" means an amount equal to (a)
Eligible L/C Inventory Amount multiplied by (b) the advance rate of fifty
percent (50%), as such advance rate may be modified from time to time in
accordance with Section 1.7.
"Gross Inventory Value" means, at the end of any period for
calculation of the Borrowing Base, the Inventory Value of Inventory (other than
L/C Inventory) for Stores and DCs per the Approved Credit Parties' stockledger.
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"Gross L/C Inventory Value" means, at the end of any period for
calculation of the Borrowing Base, the Inventory Value of L/C Inventory for
Stores and DCs per the Approved Credit Parties' stockledger as in-transit
inventory.
"Guaranteed Indebtedness" means, as to any Person, any obligation of
such Person guaranteeing or otherwise supporting any Indebtedness, lease,
dividend, or other obligation ("primary obligation") of any other Person (the
"primary obligor") in any manner, including any obligation or arrangement of
such Person to (a) purchase or repurchase any such primary obligation, (b)
advance or supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
condition of the primary obligor, (c) purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, (d) protect the beneficiary of such primary obligation from loss
(other than product warranties given in the ordinary course of business) or (e)
indemnify the owner of such primary obligation against loss in respect thereof.
The amount of any Guaranteed Indebtedness at any time shall be deemed to be an
amount equal to the lesser at such time of (A) the stated or determinable amount
of the primary obligation in respect of which such Guaranteed Indebtedness is
incurred and (B) the maximum amount for which such Person may be liable pursuant
to the terms of the instrument embodying such Guaranteed Indebtedness, or, if
not stated or determinable, the maximum reasonably anticipated liability
(assuming full performance) in respect thereof as determined by such Person in
good faith.
"Guaranties" means, collectively, the Affiliate Guaranty, the
Subsidiary Guaranty and any other guaranty executed by any Subsidiary of
Holdings (other than Borrower) in favor of Administrative Agent, on its behalf
and on behalf of the Secured Parties, in respect of the Obligations, but
notwithstanding anything in such a guaranty to the contrary, no entity that is a
controlled foreign corporation under Section 956 of the IRC shall guaranty or
support any Obligation under the Loan Documents.
"Hazardous Material" means any substance, material or waste that is
regulated by, or forms the basis of liability now or hereafter under, any
Environmental Laws, including any material or substance that is (a) defined as a
"solid waste," "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste," "restricted hazardous waste," "pollutant,"
"contaminant," "hazardous constituent," "special waste," "toxic substance" or
other similar term or phrase under any Environmental Laws, or (b) petroleum or
any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB's),
or any radioactive substance.
"Hedging Obligations" means all obligations of any Person under any
foreign exchange contract, currency swap agreement, interest rate swap, cap or
collar agreement or other similar agreement or arrangement designed to alter the
risks of that Person arising from fluctuations in currency values or interest
rates, in each case whether contingent or matured.
"Holdings" means Kmart Holding Corporation, a Delaware corporation.
"Incentive Stock" has the meaning ascribed to it in Section 6.13(h).
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"Indebtedness" means, with respect to any Person, without
duplication (a) all indebtedness of such Person for borrowed money or for the
purchase price of property payment for which is deferred six (6) months or more,
but excluding obligations to trade creditors incurred in the ordinary course of
business that are unsecured and not overdue by more than six (6) months unless
being contested in good faith, (b) all reimbursement and other obligations with
respect to letters of credit, bankers' acceptances and surety, appeal and
performance bonds, whether or not matured, (c) all obligations evidenced by
notes, bonds, debentures or similar instruments, (d) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), (e) all Capital Lease Obligations and
the present value of future rental payments under all synthetic leases, (f) all
obligations of such Person under commodity purchase or option agreements or
other commodity price hedging arrangements, in each case whether contingent or
matured, (g) all Hedging Obligations, (h) all preferred Stock of such Person
which is mandatorily redeemable prior to the first anniversary after the Stated
Maturity Date (i) all Indebtedness referred to above (or Guaranteed
Indebtedness) secured by (or for which the holder of such Indebtedness or
Guaranteed Indebtedness (or Guaranteed Indebtedness) has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property or other
assets (including accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Indebtedness (or Guaranteed Indebtedness) and (j) the Loans and Letters of
Credit.
"Indemnified Liabilities" has the meaning ascribed to it in Section
1.13(a).
"Indemnified Person" has the meaning ascribed to it in Section
1.13(a).
"Index Rate" means, for any day, a floating rate equal to the higher
of (a) the rate per annum publicly quoted from time to time by The Wall Street
Journal as the "prime rate" (or, if The Wall Street Journal ceases quoting a
prime rate, the highest per annum rate of interest published by the Federal
Reserve Board in Federal Reserve statistical release H.15 (519) entitled
"Selected Interest Rates" as the bank prime loan rate or its equivalent) and (b)
the Federal Funds Rate plus 50 basis points per annum. Each change in any
interest rate provided for in the Agreement based upon the Index Rate shall take
effect at the time of such change in the Index Rate.
"Index Rate Loan" means a Loan or portion thereof bearing interest
by reference to the Index Rate.
"Initial Failure" has the meaning ascribed to it in Annex K.
"Initial Period" has the meaning ascribed to in Annex G.
"Instruments" means all "instruments," as such term is defined in
the Code, now owned or hereafter acquired by any Credit Party, wherever located,
and, in any event, including all certificates of deposit (to the extent the same
constitute "instruments" under the Code), and all promissory notes and other
evidences of indebtedness, other than instruments that constitute, or are a part
of a group of writings that constitute, Chattel Paper.
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"Intellectual Property" means any and all Patents, Copyrights,
Trademarks and all Licenses.
"Interest Expense" means, with respect to Holdings for any fiscal
period, consolidated interest expense (whether cash or non-cash) of Holdings and
its Subsidiaries determined in accordance with GAAP for the relevant period
ended on such date, including interest expense with respect to any Funded Debt
of Holdings and its Subsidiaries and interest expense for the relevant period
that has been capitalized on the balance sheet of Holdings and its Subsidiaries.
"Interest Payment Date" means (a) as to any Index Rate Loan, the
first Business Day of each month to occur while such Loan is outstanding, and
(b) as to any LIBOR Loan, the last day of the applicable LIBOR Period; provided
that in the case of any LIBOR Period greater than three (3) months in duration,
interest shall be payable at (3) three month intervals and on the last day of
such LIBOR Period; and provided further that, in addition to the foregoing, each
of (i) the date upon which all of the Commitments have been terminated and the
Loans have been paid in full and (ii) the Commitment Termination Date shall be
deemed to be an "Interest Payment Date" with respect to any interest that has
then accrued under the Agreement.
"Inventory" means all "inventory," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, wherever located, and
in any event including inventory, merchandise, goods and other personal property
that are held by or on behalf of any Credit Party for sale or are furnished or
are to be furnished under a contract of service, or that constitute work in
process, finished goods, returned goods, supplies or materials of any kind,
nature or description used or consumed or to be used or consumed in such Credit
Party's business or in the processing, production, packaging, promotion,
delivery or shipping of the same, including all supplies and embedded software.
"Inventory Reserves" shall mean the following:
(a) a Reserve for shrink, or discrepancies that arise between
Inventory quantities on hand per the Approved Credit Parties' financial book
inventory balance, and physical counts of the Inventory which will be equal to
the greater of (i) the weighted average of the shrink results from the past
three year's physical inventories calculated consistent with past practice
expressed as a percent of sales, multiplied by sales for the relevant
year-to-date period and adjusted for the cost complement for the relevant
year-to-date period; but only to the extent such amount exceeds reserves already
netted out of the Gross Inventory Value per the stockledger or (ii) an amount
established by Administrative Agent in accordance with Annex K (such Reserve for
shrink to be recalculated by the tenth (10th) day after each month end and
reflected on each Borrowing Base Certificate delivered by Borrower after such
date until the amount of such Reserve is recalculated pursuant hereto); and
(b) a Reserve for intracompany profit, equal to the most recent
three (3) fiscal months of capitalized cost of the foreign buying offices owned
and operated by any Approved Credit Party, with the time frame subject to change
based on Inventory performance or otherwise in accordance with Annex K (such
Reserve for intercompany profit to be recalculated by the tenth (10th) day after
each month end and reflected on each Borrowing Base Certificate
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delivered by Borrower after such date until the amount of such Reserve is
recalculated pursuant hereto); and
(c) a Reserve of Inventory returned to either the return goods
center ("RGC"), the vendor, given to charity, or otherwise considered
non-saleable, whether defective or non-defective. This Reserve is to be
calculated as the monthly average for the most recent rolling twelve (12) Fiscal
Month period of return (other than as a result of reclamations) activity to the
vendors, the RGC, given to charity, or otherwise considered non-saleable,
whether defective or non-defective, both from the Stores and DCs, and is subject
to change by Administrative Agent in accordance with Annex K (such Reserve to be
recalculated by the tenth (10th) day after each month-end and to be reflected on
each Borrowing Base Certificate delivered by Borrower after such date until the
amount of such Reserve is recalculated pursuant hereto).
"Inventory Value" shall mean, with respect to any Inventory of the
Approved Credit Parties, the value of such Inventory valued at cost on a basis
consistent with Borrower's current and historical accounting practice per the
stockledger (without giving effect to general ledger reserves for discontinued
inventory, markdowns, intercompany profit, rebates and discounts, any cut off
adjustments, revaluation adjustments, purchase price adjustments or adjustments
with respect to the capitalization of buying, occupancy, distribution and other
overhead costs reflected on the balance sheet of the Approved Credit Parties in
respect of Inventory). The value of the Inventory as set forth above will,
without duplication for any Inventory Reserves, be calculated net of the reserve
established by the Approved Credit Parties on a basis consistent with Borrower's
current and historical practice in respect of lost, misplaced or stolen
Inventory at such time.
"Investment" has the meaning ascribed to it in Section 6.2.
"Investment Account" means a securities or other investment account
in which Marketable Securities are maintained from time-to-time and over which
Administrative Agent has a first priority perfected Lien pursuant to an
Investment Account Control Agreement.
"Investment Account Control Agreement" means any control agreement
entered into by or among any Credit Party, Administrative Agent and any
Securities Intermediary in respect of any Investment Account, substantially in
the form of Exhibit C-2 or otherwise in form and substance satisfactory to
Administrative Agent.
"Investment Agreement" means that certain Investment Agreement,
dated as of January 24, 2003, and amended on February 21, 2003 among ESL, Third
Avenue and Borrower, as the same may be amended, modified or supplemented from
time to time in accordance with the terms of the Agreement.
"Investment Property" means all "investment property" as such term
is defined in the Code now owned or hereafter acquired by any Credit Party.
"IRC" means the Internal Revenue Code of 1986, as amended, and all
regulations promulgated thereunder.
"IRS" means the Internal Revenue Service.
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"January Business Plan" means that certain five-year business plan
dated as of January 13, 2003 and delivered to GE Capital on January 10, 2003.
"Kmart Gift Card Liability Reserve" shall mean, at any fiscal week
end or Fiscal Month end, as the case may be, a Reserve equal to the total value
of all gift cards and cash cards outstanding (such Reserve to be reported on the
same basis as is required for the delivery of the Borrowing Base Certificate).
"Kmart HQ" means Kmart Management Corporation, a Michigan
corporation.
"Kmart Services" means Kmart Services Corporation, an Ohio
corporation.
"L/C Issuer" has the meaning ascribed to it in Annex B.
"L/C Inventory" has the meaning ascribed to it in the definition of
Eligible L/C Inventory Amount.
"L/C Sublimit" has the meaning ascribed to in it Annex B.
"Leasehold Subordination Arrangement" means the arrangement set
forth in Section 7.13 of the Plan of Reorganization pursuant to which each
Credit Party, each Person acquiring property under the Plan of Reorganization
and any creditor and/or Stockholder of any Credit Party (other than Lenders, the
L/C Issuer and the Plan Investors (as defined in the Vendor Intercreditor
Agreement)) are deemed to have contractually subordinated any present or future
claim, right or other interest such Person may have in and to any Proceeds
received from the disposition, release or liquidation of any real properties
leased by the Credit Parties to the Qualified Trade Credit Obligations (as
defined in the Vendor Intercreditor Agreement) on the terms and conditions set
forth in Section 7.13 of the Plan of Reorganization.
"Lenders" means GE Capital, the other Lenders named on the signature
pages of the Agreement, and, if any such Lender shall decide to assign all or
any portion of the Obligations, such term shall include any assignee of such
Lender executing and delivering an Assignment Agreement, in each case, only for
so long as such Lender has outstanding Obligations.
"Letter of Credit Fee" has the meaning ascribed to it in Annex B.
"Letter of Credit Obligations" means all outstanding obligations
incurred by Administrative Agent and Lenders at the request of Borrower, whether
direct or indirect, contingent or otherwise, due or not due, in connection with
the issuance of Letters of Credit by Administrative Agent or another L/C Issuer
or the purchase of a participation as set forth in Annex B with respect to any
Letter of Credit. The amount of such Letter of Credit Obligations with respect
to any Letter of Credit at any time shall equal the maximum amount that may be
payable at such time or thereafter by Administrative Agent or Lenders thereupon
or pursuant thereto.
"Letters of Credit" means documentary or standby letters of credit
issued at the request of Borrower for the account of Borrower and the other
Credit Parties by any L/C Issuer,
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and bankers' acceptances issued by Borrower pursuant to this Agreement, for
which Administrative Agent and Lenders have incurred Letter of Credit
Obligations.
"Letter of Direction" has the meaning ascribed to it in Annex C.
"LIBOR Business Day" means a Business Day on which banks in London,
England are generally open for interbank or foreign exchange transactions.
"LIBOR Loan" means a Loan or any portion thereof bearing interest by
reference to the LIBOR Rate.
"LIBOR Period" means, with respect to any LIBOR Loan, each period
commencing on a LIBOR Business Day selected by Borrower pursuant to the
Agreement and ending one, two, three or six months thereafter, as selected by
Borrower's irrevocable notice to Administrative Agent as set forth in Section
1.5(e); provided, that the foregoing provision relating to LIBOR Periods is
subject to the following:
(a) if any LIBOR Period would otherwise end on a day that is not a
LIBOR Business Day, such LIBOR Period shall be extended to the next succeeding
LIBOR Business Day unless the result of such extension would be to carry such
LIBOR Period into another calendar month in which event such LIBOR Period shall
end on the immediately preceding LIBOR Business Day;
(b) any LIBOR Period that would otherwise extend beyond the
Commitment Termination Date shall end two (2) LIBOR Business Days prior to such
date;
(c) any LIBOR Period that begins on the last LIBOR Business Day of
a calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such LIBOR Period) shall end on the last
LIBOR Business Day of a calendar month; and
(d) Borrower shall select LIBOR Periods so that there shall be no
more than fifteen (15) separate LIBOR Loans in existence at any one time.
"LIBOR Rate" means for each LIBOR Period, a rate of interest
determined by Administrative Agent equal to:
(a) the offered rate for deposits in United States Dollars for the
applicable LIBOR Period that appears on Telerate Page 3750 as of 11:00 a.m.
(London time), on the second full LIBOR Business Day next preceding the first
day of such LIBOR Period (unless such date is not a Business Day, in which event
the next succeeding Business Day will be used); divided by
(b) a number equal to 1.0 minus the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day that is two (2) LIBOR Business Days prior to
the beginning of such LIBOR Period (including basic, supplemental, marginal and
emergency reserves under any regulations of the Federal Reserve Board or other
Governmental Authority having jurisdiction with respect thereto, as now and from
time to time in effect) for Eurocurrency funding (currently referred to as
"Eurocurrency
A-25
Liabilities" in Regulation D of the Federal Reserve Board) that are required to
be maintained by a member bank of the Federal Reserve System.
If such interest rates shall cease to be available from Telerate
News Service, the LIBOR Rate shall be determined from such financial reporting
service or other information as shall be mutually acceptable to Administrative
Agent and Borrower.
"License" means any Copyright License, Patent License or Trademark
License.
"Lien" means any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, security interest, easement or
encumbrance, or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any lease or title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement
authorized by the debtor thereof perfecting a security interest under the Code
or comparable law of any jurisdiction or the giving of any authorization in
respect thereof).
"Liquidity" means, for any Fiscal Month, that the sum of Excess
Availability and Cash on Hand on the last day of such Fiscal Month as reflected
in an Acquisition Business Plan is equal to or greater than eighty percent (80%)
of the sum of Excess Availability and Cash on Hand as reflected in the Business
Plan on such day.
"Liquidity Threshold" means, on any date of determination, the sum
of Excess Availability on such date plus Cash on Hand (exclusive of Store Cash)
on such date.
"Litigation" has the meaning ascribed to it in Section 3.13.
"Loan Account" has the meaning ascribed to it in Section 1.12.
"Loan Documents" means a collective reference to each Ancillary Loan
Document and each Credit Loan Document. Any reference in the Agreement or any
other Loan Document to a Loan Document shall include all appendices, exhibits or
schedules thereto, and all amendments, restatements, supplements or other
modifications thereto, and shall refer to the Agreement or such Loan Document as
the same may be in effect at any and all times such reference becomes operative.
"Loan Proceeds Account" has the meaning ascribed to it in Annex C.
"Loan Proceeds Account Bank" has the meaning ascribed to it in Annex
C.
"Loans" means the Revolving Loan and the Swing Line Loan.
"LTM EBITDA" means, with respect to any date of determination, (a)
for the first twelve (12) months occurring after the Closing Date, EBITDA for
the Fiscal Month or Fiscal Months then ended since the Closing Date, and (b)
thereafter, EBITDA for the period of twelve (12) Fiscal Months then ended.
"LTM EBITDA Certificate" has the meaning ascribed to it in Section
1.5(a).
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"Majority Lenders" means Lenders having (a) Revolving Loan
Commitments representing in the aggregate more than 50% of the Commitments or
(b) if the Revolving Loan Commitments have terminated, Revolving Credit Advances
and Letter of Credit Obligations representing in the aggregate more than 50% of
the aggregate principal amount of such Revolving Credit Advances and Letter of
Credit Obligations.
"Margin Stock" has the meaning ascribed to it in Section 3.10.
"Market Value" means, as of any date of determination, (a) with
respect to any common Stock of Holdings, the fair market value of such Stock on
a xxxx-to-market basis for such date and (b) with respect to any preferred Stock
of Holdings, the liquidation preference of such Stock for such date.
"Marketable Instruments" means (i) bonds issued by a corporation and
freely traded on a national securities exchange, (ii) securities traded on the
New York Stock Exchange, AMEX, or the NASDAQ Market System and (iii) claims in
the nature of Indebtedness against any Person with assets in excess of
$350,000,000.
"Marketable Securities" means (i) bonds issued by a corporation with
a rating of Aa2 Moody's or AA by S&P, which are unrestricted and freely traded
on a national securities exchange and (ii) securities of Qualified Persons
traded on the New York Stock Exchange, AMEX, or the NASDAQ Market System which
are not subject to any transfer restrictions.
"Xxxxxx Xxxxxxx Reserve" means, as of any date of determination, a
reserve equal to the current accrued and unpaid royalty in excess of $25,000,000
earned for Xxxxxx Xxxxxxx merchandise sold as reflected on the most recent
Borrowing Base Certificate.
"Master Documentary Agreement" means the Master Agreement for
Documentary Letters of Credit dated as of the Closing Date between Borrower, as
applicant, and GE Capital, as issuer.
"Master Standby Agreement" means the Master Agreement for Standby
Letters of Credit dated as of the Closing Date between Borrower, as applicant,
and GE Capital, as issuer.
"Material Adverse Effect" means any event, circumstance or condition
which, individually or in the aggregate, has or could reasonably be expected to
have, as the case may be, a material adverse effect on (a) the business,
operations, prospects or financial or other condition of the Credit Parties,
taken as a whole, (b) the Credit Parties' ability, taken as a whole, to pay any
of the Loans or otherwise perform any of the other Obligations under and in
accordance with the terms of the Agreement and the other Credit Loan Documents,
(c) the Collateral or Administrative Agent's Liens, on behalf of itself and the
Secured Parties, on the Collateral or the priority of such Liens or (d)
Administrative Agent's or any Lender's rights and remedies under the Agreement
and the other Credit Loan Documents.
"Maximum Amount" means, as of any date of determination, an amount
equal to the Commitment of all Lenders as of that date.
"Maximum Available Amount" has the meaning ascribed to it in Annex
B.
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"Maximum Lawful Rate" has the meaning ascribed to it in Section
1.5(f).
"Moody's" means Xxxxx'x Investor Service, Inc.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, and to which any Credit Party or ERISA Affiliate is
making, is obligated to make or has made or been obligated to make,
contributions on behalf of participants who are or were employed by any of them.
"Net Available Inventory Amount" means an amount equal to (a) the
Gross Available Inventory Amount less (b) the sum of the Secondary Reserves.
"Net Available L/C Inventory Amount" means an amount equal to (a)
the Gross Available L/C Inventory Amount less (b) the sum of any Reserves
designated in accordance with Annex K to be included as a Reserve pursuant to
this definition.
"Net Insurance Proceeds" has the meaning ascribed to it in Section
5.4(e).
"New Depository Account" has the meaning ascribed to it in Annex C.
"New Depository Bank" has the meaning ascribed to it in Annex C.
"Non-Consenting Lender" has the meaning ascribed to it in Section
11.2(d)(i).
"Non-Corporate Domestic Lender" shall have the meaning ascribed to
it in Section 1.15(e).
"Non-Corporate Domestic Person" shall have the meaning ascribed to
it in Section 1.15(e).
"Non-Funding Lender" has the meaning ascribed to it in Section
9.9(a)(ii).
"Non-GOB Inventory" means Inventory of the Approved Credit Parties
which is not located at a Store that is the subject of a Store Closure Sale.
"Notes" means, collectively, the Revolving Notes and the Swing Line
Note.
"Notice of Conversion/Continuation" has the meaning ascribed to it
in Section 1.5(e).
"Notice of Revolving Credit Advance" has the meaning ascribed to it
in Section 1.1(a).
"Obligations" means (a) all loans, advances, debts, liabilities and
obligations, for the performance of covenants, tasks or duties or for payment of
monetary amounts (whether or not such performance is then required or
contingent, or such amounts are liquidated or determinable) owing by any Credit
Party to Administrative Agent, the L/C Issuer or any Lender (or in the case of
Specified Hedge Agreements or Bank Product Agreements, any Affiliate of any
Lender), and all covenants and duties regarding such amounts, of any kind or
nature, present or
A-28
future, whether or not evidenced by any note, agreement, letter of credit
agreement or other instrument, in each case, arising under the Agreement, any of
the other Loan Documents, (b) the Pari Passu Cash Management Obligations and (c)
solely to the extent there is sufficient Collateral following satisfaction of
the loans, advances, debts, liabilities and obligations set forth in clauses (a)
and (b), the Subordinated Cash Management Obligations owing by any Subsidiary of
Holdings to the Cash Management Banks. This term includes all principal,
interest (including all interest that accrues after the commencement of any case
or proceeding by or against any Credit Party in bankruptcy, whether or not
allowed in such case or proceeding), Fees, obligations under the Ancillary Loan
Documents, expenses, attorneys' fees and any other sum chargeable to any Credit
Party under the Agreement or any of the other Loan Documents.
"Other Lender" has the meaning ascribed to it in Section 9.9(d).
"Other Taxes" has the meaning ascribed to it in Section 1.15(b).
"Overadvance" has the meaning ascribed to it in Section 1.1(a)(iii).
"Overage" has the meaning ascribed to it in Section 1.3(b).
"PACA" means the Perishable Agricultural Commodities Act of 1930, as
amended, 7 U.S.C. Sections 499a et. seq.
"Pari Passu Cash Management Obligations" means, at any time of
determination, the first $25,000,000 of Cash Management Obligations owing to The
Bank of New York.
"PASA" means the Packers and Stockyard Act of 1921, as amended, 7
U.S.C. Sections 181 et seq.
"Patent License" means, as to any Person, rights under any written
agreement now or hereafter acquired granting any Credit Party the right with
respect to any invention on which a patent is in existence.
"Patents" means all of the following whether now owned or hereafter
acquired by any Credit Party and which are reasonably necessary to enable
Administrative Agent and Lenders to exercise their rights and remedies under the
Credit Loan Documents with respect to the Collateral: (a) all letters patent of
the United States or any other country, all registrations and recordings
thereof, and all applications for letters patent of the United States or of any
other country, including registrations, recordings and applications in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any State or any other country and (b) all reissues,
continuations, continuations-in-part or extensions thereof.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" means a Plan described in Section 3(2) of ERISA.
"Permitted Acquisitions" means any Acquisition for which each of the
following conditions has been satisfied: (i) the assets, business or division
acquired are for use, or the Person acquired is engaged, in the businesses
engaged in by Borrower and its Subsidiaries on the
A-29
Closing Date (or businesses reasonably related, ancillary or complementary
thereto), (ii) in the case of the Acquisition of any Person, the Board of
Directors of such Person (or similar governing body) and, if required, the
stockholders (or similar equity owners) of such Person has approved such
Acquisition, (iii) after giving effect to such Acquisition, Borrower and its
Subsidiaries are (and will be) in pro forma compliance with the covenants set
forth on Annex G as of the date of such Acquisition as reflected in a Compliance
Certificate delivered to Administrative Agent at least ten (10) Business Days
prior to the consummation of such Acquisition, (iv) immediately prior, and after
giving effect, to such Acquisition Borrower and its Subsidiaries shall be
Solvent on a consolidated basis, (v) Borrower shall have provided Administrative
Agent with such documentation reasonably requested by Administrative Agent in
connection with such Acquisition (including, without limitation, any acquisition
documents, opinions of counsel, corporate documentation, etc.) at least ten (10)
Business Days prior to the consummation of such Acquisition, (vi) no
Indebtedness may be assumed in connection with such Acquisition unless it is
Acquisition Indebtedness, (vii) no Liens (other than Permitted Encumbrances
under clauses (b), (c), (e), (f), (i) and (j) of the definition thereof) may
exist on any Inventory acquired in connection with such Acquisition, (viii)
Borrower takes such actions as may be required or reasonably requested to ensure
that all action required to be taken by Section 5.10(b) has been taken and
Administrative Agent, for the benefit of the Secured Parties, has a perfected,
first priority security interest in any assets required to be secured pursuant
to Section 5.10(b) or any other Credit Loan Document and (ix) Borrower shall
have delivered a revised Business Plan (together with the Compliance Certificate
required pursuant to clause (iii) above), in form and substance reasonably
satisfactory to Administrative Agent and Co-Syndication Agents, giving pro forma
effect to such Acquisition (each, an "Acquisition Business Plan"), and
demonstrating that for each of the first six (6) Fiscal Months following the
consummation of such Acquisition Borrower and its Subsidiaries will have
Liquidity.
"Permitted Encumbrances" means the following Liens: (a) Liens for
taxes or assessments or other governmental Charges not yet due and payable, that
are priority tax claims pursuant to section 507 of the Bankruptcy Code and that
are to be treated pursuant to the Plan of Reorganization, as implemented by the
Confirmation Order, (b) carriers', warehousemen's, or other similar possessory
Liens arising by operation of law in the ordinary course of business and
securing liabilities not yet due and payable or which are being contested in
good faith in accordance with Section 5.2(b) and for which Reserves have been
established in accordance with Annex K if deemed necessary by Administrative
Agent, (c) landlords' Liens arising in the ordinary course of business securing
(i) rents not yet due and payable, (ii) rent for Stores in an amount not to
exceed five percent (5%) of the monthly base rent due for the immediately
preceding calendar month then ended in respect of Stores, which amounts shall
not be more than thirty (30) days overdue unless contested in accordance with
Section 5.2(b) or as otherwise agreed by Administrative Agent and (iii) rents
for Stores in excess of the amount set forth in the preceding clause (ii) so
long as such amounts are being contested in accordance with Section 5.2(b) and
for which Reserves have been established in accordance with Annex K, (d) any
attachment or judgment lien not constituting an Event of Default under Section
8.1(k), (e) presently existing or hereafter created Liens in favor of
Administrative Agent, on behalf of the Secured Parties, (f) Liens and rights of
set-off in favor of any cash management institutions in respect of overdrafts
and related liabilities arising from treasury, depository and cash management
services or in connection with any automated clearing house transfers of funds
permitted by Section 6.3(a)(vi), (g) consignments and claims under PACA and
PASA, (h) claims
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in favor of the appropriate Governmental Authorities on the proceeds from sales
or services relating to hunting and fishing licenses and/or the sale of lottery
tickets, (i) claims in favor of Western Union in respect of proceeds from sales
or services with respect to money transfers through Western Union, (j) Liens
encumbering assets of any Acquired Entity acquired in connection with a
Permitted Acquisition so long as such Liens existed at the time of such
Permitted Acquisition and were not created in contemplation thereof; provided
that if any Lien described in this clause (j) secures Acquisition Indebtedness,
such Lien may exist only on the property or assets of a Restricted Entity, (k)
Liens for Taxes not yet due and payable and (l) Liens for Taxes that relate to a
tax period (or portion thereof) ending on or before the commencement of the
Chapter 11 Cases that are not priority tax claims pursuant to Section 507 of the
Bankruptcy Code and are addressed in the Plan of Reorganization and which are
not past due on any scheduled payment in respect thereof.
"Permitted Liens" means each Permitted Encumbrance together with the
following other Liens: (a) zoning restrictions, easements, licenses, or other
restrictions on the use of any Real Estate or other minor irregularities in
title (including leasehold title) thereto, so long as the same do not materially
and adversely impair the use or value of such Real Estate, (b) Liens incurred or
deposits (including, without limitation, surety bonds and appeal bonds) in
connection with workers' compensation, unemployment insurance and other types of
social security benefits or to secure the performance of tenders, bids, leases,
contracts, statutory obligations and other similar obligations or arising as a
result of progress payments under government contracts, (c) Liens on Real Estate
securing Qualified Trade Credit Obligations (as defined in the Vendor
Intercreditor Agreement), (d) Liens existing as of the Closing Date and listed
on Schedule 6.7, (e) Liens securing purchase money Indebtedness and Capitalized
Lease Obligations to the extent such Indebtedness is permitted to be incurred
pursuant to Section 6.3(a)(i), (f) materialmen's and mechanics' Liens arising in
the ordinary course of business and securing liabilities not yet due and payable
or which are being contested in good faith in compliance with Section 5.2(b), or
which otherwise do not constitute a violation of Section 5.2(a), (g) licenses,
sublicenses , leases or subleases granted to other Persons in the ordinary
course of business and not interfering in any material respect with the business
of Borrower and its Subsidiaries, (h) Liens securing Indebtedness permitted by
Section 6.3(a)(v) and (i) other Liens not prohibited under this Agreement.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, public benefit corporation, other entity
or government (whether federal, state, county, city, municipal, local, foreign,
or otherwise, including any instrumentality, division, agency, body or
department thereof).
"Plan" means, at any time, an "employee benefit plan," as defined in
Section 3(3) of ERISA, that any Credit Party or ERISA Affiliate maintains,
contributes to or has an obligation to contribute to or has maintained,
contributed to or had an obligation to contribute to at any time during the past
seven (7) years on behalf of participants who are or were employed by any Credit
Party or an ERISA Affiliate.
"Plan Effective Date" has the meaning ascribed to it in the Plan of
Reorganization.
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"Plan of Reorganization" means that certain Joint Plan of
Reorganization of Kmart Corporation and its Affiliated Debtors and
Debtors-in-Possession, filed on January 24, 2003, in the Bankruptcy Court,
together with all schedules and exhibits thereto, and all amendments,
modifications or supplements filed with the Bankruptcy Court after such date as
the same is in effect on the Closing Date.
"Post-Closing Contribution" has the meaning ascribed to it in
Section 6.13(e).
"Primary Reserves" means any Reserve designated as a Primary Reserve
pursuant to Annex K.
"Pro Rata Share" means with respect to all matters relating to any
Lender (a) with respect to the Revolving Loan, the percentage obtained by
dividing (i) the Revolving Loan Commitment of that Lender by (ii) the aggregate
Revolving Loan Commitments of all Lenders or, in the event all Revolving Loan
Commitments have been reduced to $0, such percentage in effect immediately prior
to such reduction, as any such percentages may be adjusted by assignments
permitted pursuant to Section 9.1, (b) with respect to all Loans, the percentage
obtained by dividing (i) the aggregate Commitments of that Lender by (ii) the
aggregate Commitments of all Lenders, and (c) with respect to all Loans on and
after the Commitment Termination Date, the percentage obtained by dividing (i)
the aggregate outstanding principal balance of the Loans held by that Lender, by
(ii) the outstanding principal balance of the Loans held by all Lenders.
"Proceeds" means "proceeds," as such term is defined in the Code,
including (a) any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to any Credit Party from time to time with respect to any of
the Collateral, (b) any and all payments (in any form whatsoever) made or due
and payable to any Credit Party from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any Governmental Authority (or any Person acting under
color of governmental authority), (c) any recoveries by any Credit Party against
third parties with respect to any Litigation or dispute concerning any of the
Collateral, including claims arising out of the loss or nonconformity of,
interference with the use of, defects in, or infringement of rights in, or
damage to, Collateral, (d) all amounts collected on, or distributed on account
of, other Collateral and (e) any and all other amounts, rights to payment or
other property acquired upon the sale, lease, license, exchange or other
disposition of Collateral and all rights arising out of Collateral.
"Projections" means, (a) as of the Closing Date, a collective
reference to the Business Plan and the January Business Plan and (b) thereafter,
upon delivery of the same in accordance with the Agreement, Borrower's
forecasted: (i) balance sheets, (ii) profit and loss statements, (iii) cash flow
statements and (iv) capitalization statements, all prepared on a consolidated
basis, if applicable, and otherwise consistent with the historical Financial
Statements of Borrower, together with appropriate supporting details and a
statement of underlying assumptions.
"Proposed Change" has the meaning ascribed to it in Section 11.2(e).
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"Qualified Assignee" means (a) any Lender, any Affiliate of any
Lender and, with respect to any Lender that is an investment fund that invests
in commercial loans, any other investment fund that invests in commercial loans
and that is managed or advised by the same investment advisor as such Lender or
by an Affiliate of such investment advisor and (b) any commercial bank, savings
and loan association or savings bank or any other entity which is an "accredited
investor" (as defined in Regulation D under the Securities Act) which extends
credit or buys loans as one of its businesses, including insurance companies,
mutual funds, lease financing companies and commercial finance companies, in
each case, which has a rating of BBB or higher from S&P and a rating of Baa2 or
higher from Xxxxx'x at the date that it becomes a Lender and which, through its
applicable lending office, is capable of lending to Borrower without the
imposition of any withholding or similar taxes; provided that no Person proposed
to become a Lender after the Closing Date and determined by Administrative Agent
to be acting in the capacity of a vulture fund or distressed debt purchaser
shall be a Qualified Assignee, and no Person or Affiliate of such Person
proposed to become a Lender after the Closing Date and that holds Subordinated
Debt or Stock issued by any Credit Party shall be a Qualified Assignee.
"Qualified Person" means a Person with a market capitalization of at
least $500,000,000 and, if such Person has Indebtedness for borrowed money
outstanding, whose long-term unsecured indebtedness is rated at least Aa2 by
Xxxxx'x and AA by S&P (or whose commercial paper is rated at least P-1 by
Xxxxx'x and A-1 by S&P).
"Qualified Plan" means a Pension Plan that is intended to be
tax-qualified under Section 401(a) of the IRC.
"Qualified Trade Credit Documents" has the meaning ascribed to it in
the Vendor Intercreditor Agreement.
"Real Estate" has the meaning ascribed to it in Section 3.6.
"Recovery Rate" means, as at any date of determination, a percentage
equal to, as the case may be, (a) from the Closing Date through the date on
which any subsequent appraisal obtained pursuant to Section 4.3 is delivered to
Administrative Agent, the (i) estimated net retail recovery stated in Dollars as
determined on a net orderly liquidation basis by the Closing Date Appraisal
(including only Non-GOB Inventory as reflected therein) divided by (ii)
Appraisal Inventory Value as of the date of the Closing Date Appraisal and (b)
thereafter, the (i) estimated net retail recovery stated in Dollars as
determined on a net orderly liquidation basis by the most recently completed
appraisal pursuant to Section 4.3 (including only Non-GOB Inventory as reflected
therein) divided by (ii) Appraisal Inventory Value as of the date of such
appraisal (in each case, calculated in a manner consistent with the Closing Date
Appraisal).
"Refunded Swing Line Loan" has the meaning ascribed to it in Section
1.1(c)(iii).
"Related Person" has the meaning ascribed to it in Annex C.
"Related Transactions" means the initial borrowing under the
Revolving Loan and the Synthetic Loan on the Closing Date, the consummation of
the Plan of Reorganization, the consummation of the transactions contemplated by
the Investment Agreement, the payment of all
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fees, costs and expenses associated with all of the foregoing and the execution
and delivery of all of the Related Transaction Documents.
"Related Transactions Documents" means the Loan Documents, the Plan
of Reorganization, the Disclosure Statement, the ESL Notes, if any, the
Investment Agreement, and all other agreements or instruments executed in
connection with the Related Transactions.
"Release" means any release, spill, emission, leaking, pumping,
pouring, emitting, emptying, escape, injection, deposit, disposal, discharge,
dispersal, dumping, leaching or migration of Hazardous Material in the indoor or
outdoor environment, including the movement of Hazardous Material through or in
the air, soil, surface water, ground water or property.
"Reorganized Debtors" has the meaning ascribed to it in the Plan of
Reorganization.
"Replacement Lender" has the meaning ascribed to it in Section
1.16(d).
"Requisite Lenders" means Lenders having (a) Revolving Loan
Commitments representing in the aggregate more than sixty-six and two-thirds
percent (66-2/3%) of the Commitments or (b) if the Revolving Loan Commitments
have terminated, Revolving Credit Advances and Letter of Credit Obligations
representing in the aggregate more than sixty-six and two-thirds percent
(66-2/3%) of the aggregate outstanding principal amount of such Revolving Credit
Advances and Letter of Credit Obligations.
"Reserves" means, with respect to any component of the Borrowing
Base, the Inventory Reserves, the Primary Reserves, the Secondary Reserves and
any other reserves established by Administrative Agent from time to time
pursuant to Annex K against any such component, in each case, as the same may be
modified in accordance with Annex K.
"Restricted Entity" means any Acquired Entity having Acquisition
Indebtedness at any time outstanding (and any direct and indirect Subsidiaries
of such Person).
"Restricted Payment" means, with respect to any Person: (a) the
declaration or payment of any dividend or the incurrence of any liability to
make any other payment or distribution of cash or other property or assets in
respect of Stock, (b) any payment on account of the purchase, redemption,
defeasance, sinking fund or other retirement of such Person's Stock or any other
payment or distribution made in respect thereof, either directly or indirectly,
(c) any payment or prepayment of principal of, premium, if any, or interest,
fees or other charges on or with respect to, and any redemption, purchase,
retirement, defeasance, sinking fund or similar payment and any claim for
rescission with respect to, any Subordinated Debt, (d) any payment made to
redeem, purchase, repurchase or retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire Stock of such Person
now or hereafter outstanding, (e) any payment of a claim for the rescission of
the purchase or sale of, or for material damages arising from the purchase or
sale of, any shares of such Person's Stock or of a claim for reimbursement,
indemnification or contribution arising out of or related to any such claim for
damages or rescission, (f) any payment, loan, contribution, or other transfer,
transfers of funds or other property to any Significant Stockholder of such
Person other than (i) payment of compensation in the ordinary course of business
to Significant Stockholders who are employees
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of such Person and (ii) payments pursuant to contractual arrangements with such
Significant Stockholder which are on fair and reasonable terms that are no less
favorable to such referent Person than would be obtained in a comparable
arm's-length transaction with a Person who is not a Significant Stockholder of
such referent Person and (g) any payment of management fees (or other fees of a
similar nature) by such Person to any Significant Stockholder of such Person or
its Affiliates other than payments pursuant to contractual arrangements with
such Significant Stockholder which are on fair and reasonable terms that are no
less favorable to such referent Person than would be obtained in a comparable
arm's-length transaction with a Person who is not a Significant Stockholder of
such referent Person, except to the extent prohibited in Section 6.4(c).
"Retiree Welfare Plan" means, at any time, a Welfare Plan that
provides for continuing coverage or benefits for any participant or any
beneficiary of a participant after such participant's termination of employment,
other than continuation coverage provided pursuant to Section 4980B of the IRC
and at the sole expense of the participant or the beneficiary of the
participant.
"Revolving Credit Advance" has the meaning ascribed to it in Section
1.1(a)(i).
"Revolving Lenders" means, as of any date of determination, Lenders
having a Revolving Loan Commitment.
"Revolving Loan" means, at any time, the sum of (a) the aggregate
amount of Revolving Credit Advances outstanding to Borrower plus (b) the
aggregate Letter of Credit Obligations incurred on behalf of Borrower and the
other Credit Parties. Unless the context otherwise requires, references to the
outstanding principal amount of the Revolving Loan shall include the outstanding
amount of Letter of Credit Obligations.
"Revolving Loan Commitment" means (a) as to any Lender, the
aggregate commitment of such Lender to make Revolving Credit Advances or incur
Letter of Credit Obligations as set forth on Annex J to the Agreement or in the
most recent Assignment Agreement executed by such Revolving Lender and (b) as to
all Revolving Lenders, the aggregate commitment of all Revolving Lenders to make
Revolving Credit Advances or incur Letter of Credit Obligations, which aggregate
commitment shall be One Billion Eight Hundred Million Dollars ($1,800,000,000)
on the Closing Date, as such amount may be adjusted, if at all, from time to
time in accordance with the Agreement.
"Revolving Maximum Amount" means, as of any date of determination,
an amount equal to the Revolving Loan Commitment of all Lenders as of that date.
"Revolving Note" has the meaning ascribed to it in Section
1.1(a)(ii).
"RGC" has the meaning ascribed to it in the definition of Inventory
Reserve.
"S&P" means Standard & Poor's Rating Services, a division of The
XxXxxx-Xxxx Companies, Inc.
"Second Amendment Effective Date" means December 22, 2003.
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"Secondary Reserves" means the (a) Xxxxxx Xxxxxxx Reserve, (b) the
Kmart Gift Card Liability Reserve, (c) reserves in respect of royalties for
other licensed Inventory and (d) any other Reserve established in accordance
with Annex K and specified to be a Secondary Reserve.
"Secured Parties" means Administrative Agent, Lenders, the Cash
Management Banks and any other Person to whom Obligations are owed from time to
time pursuant to the Loan Documents.
"Security Agreement" means the Security Agreement of even date
herewith entered into by and among Administrative Agent, on behalf of itself and
Lenders, and each Credit Party that is a signatory thereto.
"Settlement Date" has the meaning ascribed to it in Section
9.9(a)(ii).
"Significant Stockholder" means any person within the meaning of
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 which, directly
or indirectly, has beneficial ownership of five percent (5%) or more of the
Voting Stock of Holdings or any Subsidiary thereof (other than Holdings and its
Subsidiaries).
"Software" means all "software" as such term is defined in the Code,
now owned or hereafter acquired by any Credit Party used by any Credit Party to
process, assemble, prepare for sale, market for sale, sell or otherwise dispose
of the Collateral, other than software embedded in any category of Goods,
including all computer programs and all supporting information provided in
connection with a transaction related to any program.
"Solvent" means, with respect to any Person on a particular date,
that on such date (a) the fair value of the property of such Person is greater
than the total amount of liabilities, including contingent liabilities, of such
Person, (b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay as such debts and liabilities mature and (d)
such Person is not engaged in a business or transaction, and is not about to
engage in a business or transaction, for which such Person's property would
constitute an unreasonably small capital. The amount of contingent liabilities
(such as litigation, guaranties and pension plan liabilities) at any time shall
be computed by such Person as the amount that, in light of all the facts and
circumstances existing at the time and known to such Person, represents the
amount that such Person determines in good faith can be reasonably be expected
to become an actual or matured liability.
"SPC" has the meaning ascribed to it in Section 9.1(g).
"Specified Hedging Agreement" means any Hedging Agreement entered
into by Borrower and any Lender or an Affiliate of any Lender.
"Specified Percentage" has the meaning ascribed to it in Annex B.
"Stated Maturity Date" means May 6, 2006.
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"Stock" means all shares, options, warrants, general or limited
partnership interests, membership interests or other equivalents (regardless of
how designated) of or in a corporation, partnership, limited liability company
or equivalent entity whether voting or nonvoting, including common stock,
preferred stock or any other "equity security" (as such term is defined in Rule
3a11-1 of the General Rules and Regulations promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934).
"Stock Acquisition Subsidiary" means any entity or Person acquired
or formed to acquire the assets, business, division or stock of another Person,
the consideration for which acquisition consists of Stock Consideration.
"Stock Consideration" has the meaning ascribed to it in Section
6.2(k).
"Stock Consideration Basket" has the meaning ascribed to it in
Section 6.2(k).
"Stockholder" means, with respect to any Person, each holder of
Stock of such Person.
"Store" means any store owned or leased or rented and operated by
any Credit Party.
"Store Cash" means, at any date of determination, cash used to
supply Stores with cash for the cash registers.
"Store Closure Sale" shall mean a store closure sale that is
conducted in a manner consistent with past practices and the store closure sales
conducted during the pendency of the Chapter 11 Cases.
"Store Depository Accounts" means those deposit accounts identified
in Part D of Disclosure Schedule (3.19), as the same may be updated from time to
time pursuant to paragraph (n) of Annex E.
"Subordinated Cash Management Obligations" means, at any time of
determination, Cash Management Obligations in excess of the Pari Passu Cash
Management Obligations at such time.
"Subordinated Debt" means the Indebtedness of Borrower evidenced by
the ESL Note Documentation and any other Indebtedness of any Credit Party
subordinated to the Obligations in a manner and form satisfactory to
Administrative Agent in its sole discretion, as to right and time of payment and
as to any other rights and remedies thereunder.
"Subordination Agreement" means, with respect to any Subordinated
Debt (i) a subordination agreement setting forth the terms and conditions upon
which the Subordinated Debt is subordinated to the Obligations and executed and
delivered by the holder of such Subordinated Debt, the relevant Credit Party and
Administrative Agent and/or (ii) subordination provisions contained in the
governing or underlying documents of such Subordinated Debt, in each case the
terms of which are acceptable to Administrative Agent.
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"Subsidiary" means, with respect to any Person, (a) any corporation
of which an aggregate of more than 50% of the outstanding Stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, Stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person or one or more Subsidiaries of such
Person, or with respect to which any such Person has the right to vote or
designate the vote of more than 50% of such Stock whether by proxy, agreement,
operation of law or otherwise and (b) any partnership or limited liability
company in which such Person and/or one or more Subsidiaries of such Person
shall have an interest (whether in the form of voting or participation in
profits or capital contribution) of more than 50% or of which any such Person is
a general partner or may exercise the powers of a general partner.
"Subsidiary Credit Parties" means any Reorganized Debtor (including
Borrower) as of the Closing Date, together with any other Subsidiary of Kmart HQ
formed or acquired after the Closing Date (other than an entity that is a
controlled foreign corporation under Section 956 of the IRC).
"Subsidiary Guaranty" means the Subsidiary Guaranty of even date
herewith executed by each Subsidiary Credit Party of Borrower in favor of
Administrative Agent, on behalf of itself and Lenders.
"Supermajority Lenders" means Lenders having (a) Revolving Loan
Commitments representing in the aggregate more than eighty percent (80%) of the
Commitments or (b) if the Revolving Loan Commitments have terminated, Revolving
Credit Advances, Swing Line Advances and Letter of Credit Obligations
representing in the aggregate more than eighty percent (80%) of the aggregate
outstanding principal amount of such Revolving Credit Advances, Swingline
Advances and Letter of Credit Obligations.
"Supporting Obligations" means all "supporting obligations" as such
term is defined in the Code, including letters of credit and guaranties issued
in support of Accounts, Documents, General Intangibles or Instruments.
"Suppressed Availability" means the positive difference of the
Borrowing Base less the Maximum Amount.
"Surplus Cash" means, with respect to any Fiscal Quarter, an amount
equal to the positive difference between (a) the amount of Average Cash on Hand
and (b) the amount of Average Projected Cash on Hand; provided that to the
extent Average Cash on Hand for such Fiscal Quarter reflects any (x) Surplus
Cash from the previous Fiscal Quarter or (y) cash proceeds of any issuance of
Stock by Holdings, Administrative Agent shall retroactively deduct from such
calculation an amount equal to such Surplus Cash to the extent utilized pursuant
to Section 6.2(j), (k) or (l) during the Fiscal Quarter being tested; provided,
further, notwithstanding anything to the contrary contained in this Agreement,
no payments received by Borrower and its Subsidiaries from their vendors as a
result of the Capital Factors Ruling may be considered Surplus Cash under this
Agreement until such time as a court of competent jurisdiction issues a judgment
which becomes a final, non-appealable judgment affirming the Capital Factors
Ruling.
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"Swing Line Advance" has the meaning ascribed to it in Section
1.1(c)(i).
"Swing Line Availability" has the meaning ascribed to it in Section
1.1(c)(i).
"Swing Line Commitment" means, as to the Swing Line Lender, the
commitment of the Swing Line Lender to make Swing Line Advances as set forth on
Annex J, which commitment constitutes a subfacility of the Revolving Loan
Commitment of the Swing Line Lender.
"Swing Line Lender" means GE Capital and its successors and
permitted assigns.
"Swing Line Loan" means at any time, the aggregate amount of Swing
Line Advances outstanding to Borrower.
"Swing Line Note" has the meaning ascribed to it in Section
1.1(c)(ii).
"Syndication Agent" means FRFI and its successors and permitted
assigns.
"Synthetic Loan" has the meaning ascribed to it in the Existing
Credit Agreement.
"Synthetic Loan Commitment" has the meaning ascribed to it in the
Existing Credit Agreement.
"Taxes" means any and all federal, state, provincial, local,
territorial, foreign (or other political subdivision thereof), income, profits,
franchise, license, capital, transfer, ad valorem, wage, severance, occupation,
import, custom, gross receipts, payroll, environmental, unemployment,
disability, production, occupancy, sales, employment, use, property, real
estate, excise, value added, estimated, stamp, alternative or add-on minimum,
withholding, and any other taxes, duties, levies, assessments or governmental
charges of any kind whatsoever, together with all interest, penalties and
additions imposed with respect thereto, excluding income or franchise taxes
imposed on or measured by the net income of Administrative Agent, L/C Issuer or
a Lender by the jurisdictions under the laws of which Administrative Agent, L/C
Issuer or Lenders, as the case may be, is resident, organized, operate a lending
office or otherwise conduct business or any political subdivision thereof.
"Termination Date" means the date on which (a) the Loans have been
repaid in full, (b) all other Obligations (other than contingent indemnity
obligations) under the Agreement and the other Loan Documents have been
completely discharged (or otherwise collateralized to the satisfaction of
Administrative Agent), (c) all Letter of Credit Obligations have been cash
collateralized, cancelled or backed by standby letters of credit in accordance
with Annex B and (d) Borrower shall not have any further right to borrow any
monies under the Agreement.
"Third Avenue" means Third Avenue Trust, on behalf of certain of its
investment series.
"Third Party Funds" has the meaning ascribed to it in Annex C.
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"Title IV Plan" means a Pension Plan (other than a Multiemployer
Plan), that is covered by Title IV of ERISA, and that any Credit Party or ERISA
Affiliate maintains, contributes to or has an obligation to contribute to on
behalf of participants who are or were employed by any of them.
"Total Consideration" has the meaning ascribed to it in Section
6.2(k).
"Total Consideration Basket" has the meaning ascribed to it in
Section 6.2(k).
"Trademark License" means, as to any Person, rights under any
written agreement now or hereafter acquired granting any Credit Party the right
to use any trademark.
"Trademarks" means all of the following now owned or hereafter
adopted or acquired by any Credit Party and which are reasonably necessary to
enable Administrative Agent and Lenders to exercise their rights and remedies
under the Credit Loan Documents with respect to the Collateral: (a) all
trademarks, trade names, corporate names, business names, trade styles, service
marks, logos, other source or business identifiers, prints and labels on which
any of the foregoing have appeared or appear, designs and general intangibles of
like nature (whether registered or unregistered), all registrations and
recordings thereof, and all applications in connection therewith, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
state or territory thereof, or any other country or any political subdivision
thereof, (b) all reissues, extensions or renewals thereof and (c) all goodwill
associated with or symbolized by any of the foregoing.
"Trigger Event" has the meaning ascribed to it in Annex K.
"Trust Agreement" has the meaning ascribed to it in the Vendor
Intercreditor Agreement.
"Unfunded Pension Liability" means, at any time, the aggregate
amount, if any, of the sum of (a) the amount by which the present value of all
accrued benefits under each Title IV Plan exceeds the fair market value of all
assets of such Title IV Plan allocable to such benefits in accordance with Title
IV of ERISA, all determined as of the most recent valuation date for each such
Title IV Plan using the actuarial assumptions for funding purposes in effect
under such Title IV Plan and (b) for a period of five (5) years following a
transaction which might reasonably be expected to be covered by Section 4069 of
ERISA, the liabilities (whether or not accrued) that could be avoided by any
Credit Party or any ERISA Affiliate as a result of such transaction.
"Unused Line Fee" has the meaning ascribed to it in Section 1.9(b).
"Vendor Intercreditor Agreement" means that certain Intercreditor
Agreement dated as of the Closing Date by and among Administrative Agent, on its
own behalf and on behalf of the Secured Parties and Xx. Xxxxxxx Xxxx, as
collateral trustee for the benefit of the Qualified Trade Creditors (as defined
therein).
"Weekly Cash on Hand" means, for each calendar week occurring during
any Fiscal Quarter, the positive difference between (a) Cash on Hand for the
last Business Day of
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such calendar week (the "Test Date") minus (b) the sum (without duplication) of
the outstanding amount of Revolving Credit Advances and Swing Line Advances on
the Test Date.
"Welfare Plan" means a Plan described in Section 3(i) of ERISA.
"Wholly Owned" means, with respect to any Person, a Subsidiary all
of the Stock (other than directors' qualifying shares that are required under
applicable law) of which is owned by such Person or another Wholly Owned
Subsidiary of such Person.
Rules of construction with respect to accounting terms used in the
Agreement or the other Credit Loan Documents shall be as set forth in Annex G.
All other undefined terms contained in any of the Credit Loan Documents shall,
unless the context indicates otherwise, have the meanings provided for by the
Code to the extent the same are used or defined therein; provided that in the
event that any term is defined differently in different Articles or Divisions of
the Code, the definition contained in Article or Division 9 shall control.
Unless otherwise specified, references in the Agreement or any of the Appendices
to a Section, subsection or clause refer to such Section, subsection or clause
as contained in the Agreement. The words "herein," "hereof" and "hereunder" and
other words of similar import refer to the Agreement as a whole, including all
Annexes, Exhibits and Schedules, as the same may from time to time be amended,
restated, modified or supplemented, and not to any particular section,
subsection or clause contained in the Agreement or any such Annex, Exhibit or
Schedule.
Wherever from the context it appears appropriate, each term stated
in either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, feminine and neuter genders. The words "including", "includes" and
"include" shall be deemed to be followed by the words "without limitation." The
word "or" is not exclusive. References to Persons include their respective
successors and assigns (to the extent and only to the extent permitted by the
Credit Loan Documents) or, in the case of governmental Persons, Persons
succeeding to the relevant functions of such Persons. All references to statutes
and related regulations shall include any amendments of the same and any
successor statutes and regulations. Whenever any provision in any Credit Loan
Document refers to the knowledge (or an analogous phrase) of any Credit Party,
such words are intended to signify that such Credit Party has actual knowledge
of a particular fact or circumstance.
X-00
XXXXX X (SECTION 1.2)
TO
CREDIT AGREEMENT
LETTERS OF CREDIT
(a) Issuance. Subject to and in accordance with the terms and
conditions of the Agreement, Administrative Agent and Lenders agree to incur,
from time to time prior to the Commitment Termination Date, upon the request of
Borrower and for Borrower's or a Subsidiary Credit Party's account, Letter of
Credit Obligations by causing Letters of Credit to be issued by Administrative
Agent or Co-Syndication Agents, a Subsidiary, agent or sub-agent thereof (each,
an "L/C Issuer") for Borrower's or a Subsidiary Credit Party's account and each
Revolving Lender shall, subject to the terms and conditions hereinafter set
forth, purchase (or be deemed to have purchased) risk participations in all
Letters of Credit, as more fully described in paragraph (b)(ii) below. Borrower,
on behalf of itself and the other Credit Parties, acknowledges and confirms that
the L/C Issuers have issued, and that there are outstanding as of the Closing
Date, certain letters of credit under the DIP Credit Agreement (as defined in
the Plan of Reorganization) as set forth on Schedule 1.2 (the "Existing Letters
of Credit"). Such Existing Letters of Credit shall, as of the Closing Date, be
deemed to be outstanding pursuant to the Agreement, and Borrower, on behalf of
itself and the other Credit Parties hereby represents, warrants, agrees,
covenants and reaffirms that (i) it has no (and it permanently and irrevocably
waives, and releases each L/C Issuer from any, to the extent arising on or prior
to the Closing Date) defense, setoff, claim or counterclaim against each L/C
Issuer in regard to any obligation in respect of the Existing Letters of Credit
and (ii) reaffirms its obligations in respect of the Existing Letters of Credit
in accordance with the terms and provisions of the Agreement and the other
Credit Loan Documents. The aggregate amount of all such Letter of Credit
Obligations shall not at any time exceed the least of (i) Eight Hundred Million
Dollars ($800,000,000) (the "L/C Sublimit"), (ii) the Maximum Amount less the
aggregate outstanding principal balance of the Loans and (iii) the Borrowing
Base less the aggregate outstanding principal balance of the Loans. No such
Letter of Credit shall have an expiry date that is the earlier to occur of (A)
more than one year following the date of issuance thereof or (B) more than two
(2) Business Days prior to the Stated Maturity Date, unless otherwise determined
by the applicable L/C Issuer and Administrative Agent, each in its sole
discretion (including with respect to customary evergreen provisions), and
neither Administrative Agent nor Lenders shall be under any obligation to incur
Letter of Credit Obligations in respect of, or purchase risk participations in,
any Letter of Credit having an expiry date that does not meet the foregoing
criteria. Upon the termination of the BofA L/C Facility, any letters of credit
issued by any L/C Issuer which is also a Lender and outstanding under the BofA
L/C Facility on such date (the "BofA Letters of Credit"), may, upon the request
of Borrower as of such date and at the option of Administrative Agent, be deemed
to be outstanding pursuant to the Agreement; so long as (i) Borrower complies
with paragraph (f) below as if such BofA Letters of Credit were to be issued on
the termination date of the BofA Facility, (ii) the conditions set forth in
Section 2.2 are satisfied on the date of and after giving effect to such BofA
Letters of Credit as if such BofA Letters of Credit were being issued on the
termination date of the BofA L/C Facility and (iii) on the termination date of
the BofA L/C Facility, Administrative Agent receives from Borrower a certificate
of Borrower, on behalf of itself and the other Credit Parties, dated as of the
date of the termination of the BofA L/C Facility certifying such matters as
Administrative Agent may request, including that it represents,
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warrants, agrees, covenants and reaffirms that (A) it has no (and it permanently
and irrevocably waives, and releases each L/C Issuer from any, to the extent
arising on or prior to such date) defense, setoff, claim or counterclaim against
each L/C Issuer in regard to any obligation in respect of the BofA Letters of
Credit and (B) reaffirms its obligations in respect of the BofA Letters of
Credit in accordance with the terms and provisions of the Agreement and the
other Credit Loan Documents.
(b) (i) Advances Automatic; Participations. In the event that
any L/C Issuer shall make any payment on or pursuant to any Letter of Credit
Obligation, such payment shall then be deemed automatically to constitute a
Revolving Credit Advance to Borrower under Section 1.1(a) regardless of whether
a Default or Event of Default has occurred and is continuing and notwithstanding
Borrower's failure to satisfy the conditions precedent set forth in Section 2,
and each Revolving Lender shall be obligated to pay its Pro Rata Share thereof
in accordance with the Agreement. The failure of any Revolving Lender to make
available to Administrative Agent for Administrative Agent's own account its Pro
Rata Share of any such Revolving Credit Advance or payment by Administrative
Agent under or in respect of a Letter of Credit shall not relieve any other
Revolving Lender of its obligation hereunder to make available to Administrative
Agent its Pro Rata Share thereof, but no Revolving Lender shall be responsible
for the failure of any other Revolving Lender to make available such other
Revolving Lender's Pro Rata Share of any such payment.
(ii) If it shall be illegal or unlawful for Borrower to incur
Revolving Credit Advances as contemplated by paragraph (b)(i) above because of
an Event of Default described in Sections 8.1(h) or (i) or otherwise or if it
shall be illegal or unlawful for any Revolving Lender to be deemed to have
assumed a ratable share of the reimbursement obligations owed to an L/C Issuer,
or if the L/C Issuer is a Revolving Lender, then (A) immediately and without
further action whatsoever, each Revolving Lender shall be deemed to have
irrevocably and unconditionally purchased from the relevant L/C Issuer an
undivided interest and participation equal to such Revolving Lender's Pro Rata
Share (based on the Revolving Loan Commitments) of the Letter of Credit
Obligations in respect of all Letters of Credit then outstanding and (B)
thereafter, immediately upon issuance of any Letter of Credit, each Revolving
Lender shall be deemed to have irrevocably and unconditionally purchased from
the relevant L/C Issuer an undivided interest and participation in such
Revolving Lender's Pro Rata Share (based on the Revolving Loan Commitments) of
the Letter of Credit Obligations with respect to such Letter of Credit on the
date of such issuance. Each Revolving Lender shall fund its participation in all
payments or disbursements made under the Letters of Credit in the same manner as
provided in the Agreement with respect to Revolving Credit Advances.
(c) Cash Collateral.
(i) If Borrower is required to provide cash collateral for
any Letter of Credit Obligations prior to the Commitment Termination Date
pursuant to:
(A) Section 1.3(a), Section 1.11, Section 8.2, this
Annex B or the definition of "Commitment Termination Date,"
then Borrower will, or will cause the relevant Subsidiary
Credit Party to, pay to Administrative Agent, for the ratable
benefit of itself, Lenders and the L/C Issuers, cash or
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Cash Equivalents in an amount equal to one hundred and five
percent (105%) (the "Specified Percentage") of the maximum
amount available to be drawn under each applicable Letter of
Credit outstanding for the benefit of Borrower or such
Subsidiary Credit Party (such aggregate amount, the "Maximum
Available Amount"); provided that, so long as no Default or
Event of Default has occurred, such Maximum Available Amount
shall be adjusted on the first Business Day of each month cash
collateral is required to reflect the current calculated
Maximum Available Amount and any difference shall be promptly
remitted to Administrative Agent or refunded to Borrower, as
applicable; and
(B) Section 1.3(b), then Borrower will, or will cause
the relevant Subsidiary Credit Party to, pay to Administrative
Agent, for the ratable benefit of itself, the Revolving
Lenders and the L/C Issuers, cash or Cash Equivalents in an
amount equal to the Overage (after giving effect to any
repayment of the Swing Line Advances and the Revolving Credit
Advances required by Section 1.3(b), if applicable).
Such cash or Cash Equivalents shall be held by Administrative Agent in a cash
collateral account (the "Cash Collateral Account") maintained at a bank or
financial institution acceptable to Administrative Agent. The Cash Collateral
Account shall be in the name of Borrower and shall be pledged to, and subject to
the control of, Administrative Agent, for the benefit of Administrative Agent,
Lenders and the L/C Issuers, in a manner satisfactory to Administrative Agent.
Borrower hereby pledges and grants to Administrative Agent, on behalf of itself
and the Secured Parties, a security interest in the Cash Collateral Account and
all cash and Cash Equivalents held in the Cash Collateral Account from time to
time and all proceeds thereof, as security for the payment of all amounts due in
respect of the Letter of Credit Obligations and other Obligations, whether or
not then due. The Agreement, including this Annex B, shall constitute a security
agreement under applicable law.
(ii) If any Letter of Credit Obligations, whether or not then
due and payable, shall for any reason be outstanding on the Commitment
Termination Date, Borrower shall, or shall cause the relevant Subsidiary Credit
Party to, either (A) provide cash collateral therefor in the manner described in
paragraph(c)(i)(A) above, or (B) cause all such Letters of Credit and guaranties
thereof, if any, to be canceled and returned, or (C) deliver a stand-by letter
(or letters) of credit in guarantee of such Letter of Credit Obligations, which
stand-by letter (or letters) of credit shall be of like duration (plus thirty
(30) additional days) of, and in an amount equal to the Specified Percentage of
the Maximum Available Amount in respect of, such Letters of Credit and shall be
issued by a Person, and shall be subject to such terms and conditions, as shall
be satisfactory to the applicable L/C Issuer in its sole discretion.
(iii) From time to time after funds are deposited in the Cash
Collateral Account by Borrower, whether before or after the Commitment
Termination Date, Administrative Agent may apply such cash or Cash Equivalents
then held in the Cash Collateral Account to the payment of any amounts, as shall
be or shall become due and payable by Borrower or any Subsidiary Credit Party to
Administrative Agent and Lenders with respect to such Letter of Credit
Obligations of Borrower or such Subsidiary Credit Party and, upon the
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satisfaction in full of all Letter of Credit Obligations, to any other
Obligations then due and payable, and upon payment in full in cash of such
Obligations, any excess shall be returned to Borrower or the relevant Subsidiary
Credit Party or as otherwise required by law.
(iv) Neither Borrower, any Credit Party nor any Person
claiming on behalf of or through Borrower or such Credit Party shall have any
right to withdraw any of the funds or Cash Equivalents held in the Cash
Collateral Account, except that upon the termination of all Letter of Credit
Obligations and the payment of all amounts payable by Borrower or such Credit
Party to Administrative Agent and Lenders in respect thereof, any funds
remaining in the Cash Collateral Account shall be applied to other Obligations
then due and owing and upon payment in full in cash of such Obligations any
remaining amount shall be paid to Borrower or such Credit Party or as otherwise
required by law or pursuant to paragraph (c)(i)(A). Interest earned on deposits
in the Cash Collateral Account shall be held as additional collateral.
(d) Fees and Expenses. Borrower agrees to pay to Administrative
Agent, for its benefit and/or the benefit of Revolving Lenders, as applicable,
as compensation to such Lenders for Letter of Credit Obligations incurred
hereunder, for each month during which any Letter of Credit Obligation shall
remain outstanding, a fee (the "Letter of Credit Fee") in an amount equal to the
Applicable Revolving Documentary L/C Margin or the Applicable Revolving Standby
L/C Margin, as applicable, from time to time in effect multiplied by the average
daily Maximum Available Amount under the applicable Letter of Credit. The Letter
of Credit Fee shall be paid to Administrative Agent for the benefit of the
Revolving Lenders, in arrears, on the first Business Day of each month and on
the Commitment Termination Date.
(e) L/C Issuer Fees and Expenses. Borrower shall pay, for each
Letter of Credit that is outstanding, a fronting fee in an amount equal to
0.125% per annum multiplied by the average daily Maximum Available Amount under
the applicable Letter of Credit during such month. Such fronting fee shall be
paid to the relevant L/C Issuer, in arrears on the first Business Day of each
month and on the Commitment Termination Date. Additionally, Borrower shall pay,
on demand, such other customary fees, charges and expenses of each L/C Issuer in
respect of the issuance, negotiation, acceptance, amendment, transfer and
payment of the Letters of Credit or otherwise payable pursuant to the
application and related documentation under which such Letters of Credit are
issued.
(f) Request for Incurrence of Letter of Credit Obligations.
Borrower shall give Administrative Agent and the applicable L/C Issuer at least
two (2) Business Days' prior written notice requesting the incurrence of any
Letter of Credit Obligation. The notice shall be accompanied by the form of the
Letter of Credit (which shall be acceptable to the relevant L/C Issuer) and a
completed Application for Standby Letter of Credit or Application for
Documentary Letter of Credit, as applicable, in the form of Exhibit B-1 or B-2
if the L/C Issuer is Administrative Agent, or for any other L/C Issuer, in the
form prescribed by such L/C Issuer. Notwithstanding anything contained herein to
the contrary, Letter of Credit applications by Borrower and the other Credit
Parties and approvals by Administrative Agent and the relevant L/C Issuer may be
made and transmitted pursuant to electronic codes and security measures mutually
agreed upon and established by and among Borrower, Administrative Agent and the
relevant L/C Issuer.
B-4
(g) Obligation Absolute. The obligation of Borrower or any other
Credit Party on whose account a Letter of Credit has been issued (an "Account
Party") to reimburse Administrative Agent and Lenders for payments made with
respect to any Letter of Credit Obligation shall be absolute, unconditional and
irrevocable, without necessity of presentment, demand, protest or other
formalities, and the obligations of each Lender to make payments to
Administrative Agent with respect to Letters of Credit shall be unconditional
and irrevocable. Such obligations of Borrower, such Account Party and Lenders
shall be paid strictly in accordance with the terms hereof under all
circumstances including the following:
(i) any lack of validity or enforceability of any Letter of
Credit or the Agreement or the other Loan Documents or any other agreement;
(ii) the existence of any claim, setoff, defense or other
right that Borrower or any of its Affiliates or any Lender may at any time have
against a beneficiary or any transferee of any Letter of Credit (or any Persons
or entities for whom any such transferee may be acting), Administrative Agent,
any Lender, or any other Person, whether in connection with the Agreement, the
Letter of Credit, the transactions contemplated herein or therein or any
unrelated transaction (including any underlying transaction between Borrower,
any Credit Party or any of its Affiliates and the beneficiary for which the
Letter of Credit was procured);
(iii) any draft, demand, certificate or any other document
presented under any Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) payment by Administrative Agent (except as otherwise
expressly provided in paragraph (h)(ii)(C) below) or any L/C Issuer under any
Letter of Credit or guaranty thereof against presentation of a demand, draft or
certificate or other document that does not comply with the terms of such Letter
of Credit or such guaranty;
(v) any other circumstance or event whatsoever, that is
similar to any of the foregoing; or
(vi) the fact that a Default or an Event of Default has
occurred and is continuing.
(h) Indemnification; Nature of Lenders' Duties.
(i) In addition to amounts payable as elsewhere provided in
the Agreement, Borrower and each Account Party hereby agrees to pay and to
protect, indemnify, and save harmless Administrative Agent, each Lender and each
L/C Issuer from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and reasonable out-of-pocket expenses (including
reasonable attorneys' fees) that Administrative Agent, any Lender or any L/C
Issuer may incur or be subject to as a consequence, direct or indirect, of (A)
the issuance of any Letter of Credit or guaranty thereof, or (B) the failure of
Administrative Agent or any Lender seeking indemnification or of any L/C Issuer
to honor a demand for payment under any Letter of Credit or guaranty thereof as
a result of any act or omission, whether rightful or wrongful, of any present or
future de jure or de facto government or Governmental Authority, in each case
other than to the extent solely as a result of the gross negligence or willful
misconduct of
B-5
Administrative Agent or such Lender (as finally determined by a court of
competent jurisdiction); provided that in the case of reimbursement of counsel
for Lenders other than Administrative Agent (in its capacity as such),
Co-Syndication Agents (in their capacity as such) and the applicable L/C Issuer
(in its capacity as such), such reimbursement shall be limited to one counsel
for all such Lenders.
(ii) As between any L/C Issuer, Administrative Agent and any
Lender, on the one hand and Borrower and any Account Party, on the other hand,
Borrower or such Account Party, as applicable, assumes all risks of the acts and
omissions of any beneficiary, or misuse of any Letter of Credit by any
beneficiary of any Letter of Credit. In furtherance and not in limitation of the
foregoing, to the fullest extent permitted by law, neither Administrative Agent
nor any Lender shall be responsible for: (A) the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document issued by any party in
connection with the application for and issuance of any Letter of Credit, even
if it should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged, (B) the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, that may prove to be invalid or ineffective for any reason,
(C) failure of the beneficiary of any Letter of Credit to comply fully with
conditions required in order to demand payment under such Letter of Credit;
provided that in the case of any payment by any L/C Issuer or Administrative
Agent under any Letter of Credit or guaranty thereof, as applicable, such L/C
Issuer or Administrative Agent, as applicable, shall be liable to the extent
such payment was made solely as a result of its gross negligence or willful
misconduct (as finally determined by a court of competent jurisdiction) in
determining that the demand for payment under such Letter of Credit or guaranty
thereof complies on its face with any applicable requirements for a demand for
payment under such Letter of Credit or guaranty thereof, (D) errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex or otherwise, whether or not they may be in cipher, (E)
errors in interpretation of technical terms, (F) any loss or delay in the
transmission or otherwise of any document required in order to make a payment
under any Letter of Credit or guaranty thereof or of the proceeds thereof, (G)
the credit of the proceeds of any drawing under any Letter of Credit or guaranty
thereof, and (H) any consequences arising from causes beyond the control of any
L/C Issuer, Administrative Agent or any Lender. None of the above shall affect,
impair, or prevent the vesting of any of Administrative Agent's or any Lender's
rights or powers hereunder or under the Agreement.
(iii) Nothing contained herein shall be deemed to limit or to
expand any waivers, covenants or indemnities made by Borrower in favor of any
L/C Issuer in any letter of credit application, reimbursement agreement or
similar document, instrument or agreement between Borrower and such L/C Issuer,
including the Master Documentary Agreement and the Master Standby Agreement
entered into with Administrative Agent.
(i) Guaranty by Borrower.
(i) Borrower hereby absolutely, unconditionally and
irrevocably guarantees the full and punctual payment when due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or
otherwise, of all Letter of Credit Obligations now or hereafter existing, of
each of its Subsidiaries that is an Account Party which arise out of,
B-6
or are incurred in connection with, such Letters of Credit, whether for
principal, interest, fees, expenses or otherwise, and indemnifies and holds
harmless each L/C Issuer, Administrative Agent and each Lender for any and all
claims, demands, liabilities, damages, losses, costs, charges and reasonable
out-of-pocket costs and expenses (including reasonable attorney's fees and
expenses) incurred by such L/C Issuer, Administrative Agent or such Lender, as
the case may be, in enforcing any rights under the guaranty contained in this
paragraph (i); provided that in the case of reimbursement of counsel for Lenders
other than Administrative Agent (in its capacity as such), Co-Syndication Agents
(in their capacity as such) and the applicable L/C Issuer (in its capacity as
such), such reimbursement shall be limited to one counsel for all such Lenders.
(ii) The guaranty contained in this paragraph (i) constitutes
a guaranty of payment when due and not of collection, and Borrower specifically
agrees that it shall not be necessary or required that any L/C Issuer,
Administrative Agent or any Lender exercise any right, assert any claim or
demand or enforce any remedy whatsoever against Borrower, any Account Party or
any other Credit Party (or any other Person) before or as a condition to the
obligations of Borrower under the guaranty contained in this paragraph (i) (such
obligations hereinafter referred to as the "Borrower Guaranteed Obligations").
(iii) Guaranty Absolute, etc. The guaranty contained in this
paragraph (i) shall in all respects be a continuing, absolute, unconditional and
irrevocable guaranty of payment, and shall remain in full force and effect until
the Termination Date. Borrower guarantees that Borrower Guaranteed Obligations
will be paid strictly in accordance with the terms of the Agreement, this Annex
B and each other Loan Document under which they arise, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights of any L/C Issuer, Administrative Agent or any
Lender with respect thereto. The liability of Borrower under the guaranty
contained in this paragraph (i) shall be absolute, unconditional and irrevocable
irrespective of:
(A) any lack of validity, legality or enforceability
of the Agreement or any other Loan Document;
(B) the failure of any L/C Issuer, Administrative
Agent or any Lender to assert any claim or demand or to
enforce any right or remedy against any Account Party, any
other Credit Party or any other Person (including any other
guarantor (including Borrower)) under the provisions of the
Agreement, any other Loan Document or otherwise, or to
exercise any right or remedy against any other guarantor
(including Borrower) of, or collateral securing, any Borrower
Guaranteed Obligations;
(C) any change in the time, manner or place of payment
of, or in any other term of, all or any of Borrower Guaranteed
Obligations, or any other extension, compromise or renewal of
any Borrower Guaranteed Obligations;
(D) any reduction, limitation, impairment or
termination of any Borrower Guaranteed Obligations for any
reason, including any claim of
B-7
waiver, release, surrender, alteration or compromise, and
shall not be subject to (and Borrower hereby waives any right
to or claim of) any defense or setoff, counterclaim,
recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity,
compromise, unenforceability of, or any other event or
occurrence affecting, any Borrower Guaranteed Obligations or
otherwise;
(E) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the
terms of the Agreement or any other Loan Document;
(F) any addition, exchange, release, surrender or
non-perfection of any collateral, or any amendment to or
waiver or release or addition of, or consent to departure
from, any other guaranty, held by any L/C Issuer,
Administrative Agent or any Lender securing any of Borrower
Guaranteed Obligations; or
(G) any other circumstance which might otherwise
constitute a defense available to, or a legal or equitable
discharge of, any Account Party any surety or any guarantor.
(iv) Reinstatement, etc. Borrower agrees that the guaranty
contained in this paragraph (i) shall continue to be effective or be reinstated,
as the case may be, if at any time any payment (in whole or in part) of any of
Borrower Guaranteed Obligations is rescinded or must otherwise be restored by
any L/C Issuer, Administrative Agent or any Lender, upon the insolvency,
bankruptcy or reorganization of Borrower or any Account Party or otherwise, all
as though such payment had not been made.
(v) Waiver, etc. Borrower hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of
Borrower Guaranteed Obligations and the guaranty contained in this paragraph (i)
and any requirement that any L/C Issuer, Administrative Agent or any Lender
protect, secure, perfect or insure any security interest or Lien, or any
property subject thereto, or exhaust any right or take any action against any
Account Party, any other Credit Party or any other Person (including any other
guarantor) or entity or any collateral securing Borrower Guaranteed Obligations.
(vi) Postponement of Subrogation, etc. Borrower agrees that
it will not exercise any rights which it may acquire by way of rights of
subrogation under the guaranty contained in this paragraph (i), by any payment
made under the guaranty contained in this paragraph (i) or otherwise, until the
Termination Date. Any amount paid to Borrower on account of any such subrogation
rights prior to the Termination Date shall be held in trust for the benefit of
each L/C Issuer, Administrative Agent and Lenders and shall immediately be paid
to Administrative Agent for the benefit of such L/C Issuer, Administrative Agent
and Lenders and credited and applied against Borrower Guaranteed Obligations,
whether matured or unmatured, in accordance with the terms of the Agreement and
this Annex B; provided, however, that if
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(A) Borrower has made payment to any L/C Issuer,
Administrative Agent or any Lender of all or any part of
Borrower Guaranteed Obligations, and
(B) the Termination Date has occurred,
each of such L/C Issuer, Administrative Agent and each Lender agrees that, at
Borrower's request, Agent, on behalf of such L/C Issuer, itself and Lenders,
will execute and deliver to Borrower appropriate documents (without recourse and
without representation or warranty) necessary to evidence the transfer by
subrogation to Borrower of an interest in Borrower Guaranteed Obligations
resulting from such payment by Borrower. In furtherance of the foregoing, until
the Termination Date, Borrower shall refrain from taking any action or
commencing any proceeding against any Account Party (or its successors or
assigns, whether in connection with a bankruptcy proceeding or otherwise) to
recover any amounts in the respect of payments made under the guaranty contained
in this paragraph (i) to such L/C Issuer, Administrative Agent or any Revolving
Lender.
(vii) Successors, Transferees and Assigns; etc. The guaranty
contained in this paragraph (i) shall:
(A) be binding upon Borrower, and its successors,
transferees and assigns; and
(B) inure to the benefit of and be enforceable by each
L/C Issuer, Administrative Agent and each Lender.
Without limiting the generality of the foregoing clause (B), but subject to
Section 9.1, any Lender may assign or otherwise transfer (in whole or in part)
any Obligation held by it to any other Person or entity, and such other Person
or entity shall thereupon become vested with all rights and benefits in respect
thereof granted to such Lender under any Loan Document (including the guaranty
contained in this paragraph (i)) or otherwise, subject, however, to any contrary
provisions in such assignment or transfer, and to the provisions of the
Agreement.
(j) L/C Issuer Reports. Each L/C Issuer shall deliver to
Administrative Agent each Friday a report setting forth a complete list of all
Letters of Credit issued by such L/C Issuer, together with the undrawn face
amount and expiration date in respect of each such Letter of Credit. On the
first Business Day following Administrative Agent's receipt of such reports,
Administrative Agent shall deliver a copy thereof to Borrower.
B-9
ANNEX C (SECTION 1.8)
TO
CREDIT AGREEMENT
CASH MANAGEMENT SYSTEM
Borrower and each Subsidiary Credit Party shall establish and
maintain the Cash Management Systems described below:
(a) Existing Depository Accounts. Each Credit Party shall be
entitled to maintain the local deposit accounts set forth in Part A of
Disclosure Schedule (3.19) as of the Closing Date (each, an "Existing Depository
Account") with the financial institution(s) identified therein (each, an
"Existing Depository Bank"); provided that on or prior to the Closing Date, the
relevant Credit Party shall deliver to Administrative Agent evidence
satisfactory to Administrative Agent that such Credit Party has delivered to
each of its Existing Depository Banks a letter in substantially the form of
Exhibit 3.19 (a "Letter of Direction"), with appropriate blanks completed.
(b) New Depository Accounts. From and after the Closing Date, each
Credit Party may establish and maintain deposit accounts in addition to those
set forth in Part A of Disclosure Schedule (3.19) (each (other than Excluded
Accounts), a "New Depository Account"; and any such New Depository Account or
any Existing Depository Account being referred to herein as a "Depository
Account") with an Existing Depository Bank or a financial institution which is
not an Existing Depository Bank (each, a "New Depository Bank"; and any such New
Depository Bank or any Existing Depository Bank being referred to herein as a
"Depository Bank"), but only to the extent that simultaneously with the opening
of any such New Depository Account, Borrower shall have obtained a Letter of
Direction with respect to each such New Depository Account which has been duly
executed and delivered by the relevant Depository Bank and Borrower shall
deliver such executed Letter of Direction to Administrative Agent within five
(5) Business Days following the opening of any such account. The Credit Parties
may from time to time terminate any Depository Account so long as any
replacement account is established in accordance with the terms of this clause
(b).
(c) Concentration Accounts. Until the Termination Date, Borrower
shall establish the accounts set forth in Part B of Disclosure Schedule (3.19)
(together with any other accounts established in accordance with the last
sentence of this clause (c), each, a "Concentration Account", and collectively,
the "Concentration Accounts") with The Bank of New York and Bank of America,
N.A. (together with any other financial institution (having total assets of more
than $1,000,000,000 at the time any Concentration Account is established) at
which such accounts are maintained, each, a "Concentration Account Bank", and
collectively, the "Concentration Account Banks"). Borrower will cause to be
delivered to Administrative Agent a Control Agreement (in form and substance
satisfactory to Administrative Agent) duly executed by each Concentration
Account Bank and Borrower (the "Closing Date Control Agreements") within the
timeframes set forth in Section 5.15(c). Borrower shall not (nor shall it permit
any other Credit Party or any of their respective Subsidiaries to) (i) terminate
any Concentration Account unless prior to doing so (w) such Person has
established a replacement Concentration Account (which replacement may be any
then-existing Concentration Account)
C-1
and (x) in the case of any replacement Concentration Account for which there
does not exist a Control Agreement in form and substance reasonably acceptable
to Administrative Agent (an "Existing Control Agreement"), such Person shall
have delivered to Administrative Agent a Control Agreement substantially in the
form of the Closing Date Control Agreement or otherwise in form and substance
reasonably acceptable to it and executed by such replacement Concentration
Account Bank and such Person or (ii) open new or additional Concentration
Accounts (or accounts having a similar functions) without (y) giving prior
written notice thereof to Administrative Agent (it being acknowledged that no
consent of Administrative Agent to the opening of such new or additional account
shall be required so long as the total assets of such financial institution are
more than $1,000,000,000 at the time such account is opened) and (z) in the case
of any new or additional Concentration Account, having delivered to
Administrative Agent prior to the establishment of any such account, a Control
Agreement (in form and substance substantially similar to the Closing Date
Control Agreement or otherwise reasonably satisfactory to Administrative Agent)
duly executed by the Concentration Account Bank and such Person. Except as set
forth in paragraph (d) below, Administrative Agent shall, from time to time,
deposit proceeds of Advances and Overadvances made to Borrower pursuant to
Section 1.1 into the Concentration Account for use by Borrower solely in
accordance with the provisions of Section 1.4.
(d) Loan Proceeds Account. Until the Termination Date, Borrower
shall establish and maintain a zero balance disbursement account under account
number 6301373498 (the "Loan Proceeds Account") with The Bank of New York (the
"Loan Proceeds Account Bank") or such other financial institution as approved by
Agent and the Majority Lenders in writing. On or prior to the Closing Date,
Borrower will cause to be delivered to Administrative Agent a Control Agreement
(in form and substance satisfactory to Administrative Agent) duly executed by
the Loan Proceeds Account Bank and Borrower. If a Cash Dominion Event has
occurred (and no corresponding Cash Dominion Termination Event has theretofore
occurred), Administrative Agent shall, from time to time, deposit proceeds of
Advances and Overadvances made to Borrower pursuant to Section 1.1 into the Loan
Proceeds Account for use by Borrower solely in accordance with the provisions of
Section 1.4.
(e) Transfers of Funds in Depository Accounts. Funds on deposit in
a Depository Account in excess of the "peg balance" for such account identified
in Part A of Disclosure Schedule (3.19) (as Part A of such Schedule may be
updated from time to time as provided in paragraph (n) of Annex E) shall be wire
transferred or so long as no Event of Default has occurred or is continuing,
transferred by means of an Automated Clearing House transaction to the
Concentration Account specified in the related Letter of Direction for such
Depository Account on a daily or, subject to the prior written approval of
Administrative Agent, weekly basis in respect of immaterial Depository Accounts;
provided that if a Cash Dominion Event has occurred and is continuing, all funds
on deposit in a Depository Account shall be wire transferred to such
Concentration Account on a daily basis or, in the discretion of Administrative
Agent, weekly in respect of immaterial Depository Accounts.
(f) Cash Dominion over Concentration Account; Loan Proceeds
Account. Upon the occurrence of a Cash Dominion Event and until the occurrence
of a Cash Dominion Termination Event, if any, Administrative Agent shall have
sole dominion and control over the funds on deposit in the Concentration
Accounts and the Loan Proceeds Account, and funds on
C-2
deposit in the Concentration Accounts and any undisbursed proceeds in the Loan
Proceeds Account shall be wire transferred to the Collection Account as provided
in the related Control Agreement.
(g) Termination of Accounts. Each Credit Party shall close a
Concentration Account or Loan Proceeds Account (and establish replacement
accounts in accordance with the terms of this Annex C) promptly and in any event
within ninety (90) days unless otherwise approved by Administrative Agent
following notice from Administrative Agent if the total assets of such
Concentration Account Bank or Loan Proceeds Account Bank, as applicable, are
less than $1,000,000,000.
(h) Cash Collateral. Each Depository Account, Concentration
Account and the Loan Proceeds Account shall be cash collateral accounts, with
all cash, checks and other similar items of payment in such accounts securing
payment of the Loans and all other Obligations, and in which each Credit Party
shall have granted a Lien to Agent, on behalf of itself and the Secured Parties,
pursuant to the Security Agreement other than funds on deposit therein in
respect of (i) the purchase of hunting and fishing licenses, (ii) the purchase
of lottery tickets and (iii) Western Union transfers (collectively, the "Third
Party Funds").
(i) Deemed Receipt of Funds. All amounts deposited in the
Collection Account shall be deemed received by Administrative Agent in
accordance with Section 1.10 and shall be applied (and allocated) by
Administrative Agent in accordance with Section 1.11. In no event shall any
amount be so applied unless and until such amount shall have been credited in
immediately available funds to the Collection Account.
(j) Collateral Held in Trust. Each Credit Party shall, and shall
cause its Affiliates, officers, employees, agents, directors or other Persons
acting for or in concert with Borrower (each a "Related Person"), to (i) hold in
trust for Administrative Agent, for the benefit of itself and the Secured
Parties, all checks, cash and other items of payment received by such Credit
Party or any such Related Person with respect to the Collateral and (ii) within
three (3) Business Days after receipt by such Credit Party or any such Related
Person of any checks, cash or other items of payment then constituting good
funds (other than cash constituting Store Cash) with respect to the Collateral,
deposit the same into a Depository Account or Concentration Account of such
Credit Party. Each Credit Party and each Related Person acknowledges and agrees
that all cash, checks or other items of payment constituting proceeds of
Collateral are part of the Collateral. All proceeds of the sale or other
disposition of any Collateral (other than cash constituting Store Cash), shall
be deposited directly into a Depository Account or Concentration Account, as
applicable.
(k) Release of Cash Management on Termination Date. On the
Termination Date, so long as no suits, actions, proceedings or claims are
pending against any Indemnified Person asserting any damages, losses or
liabilities that are Indemnified Liabilities, Administrative Agent shall take
all reasonable action to release the Collateral subject to the Cash Management
System that is reasonably requested by Borrower or any Credit Party (and at the
sole expense of Borrower or such Credit Party), including, but not limited to,
Administrative Agent sending revocation letters to each Depository Bank,
Concentration Account Bank and/or Loan Proceeds Account Bank; provided that
under no circumstances will Administrative Agent
C-3
be liable to Borrower or any Subsidiary Credit Party for the failure of any
Concentration Account Bank or Loan Proceeds Account Bank to comply with the
actions or directives given by Administrative Agent pursuant to this paragraph
(k). Furthermore, Borrower and each Subsidiary Credit Party shall provide
Administrative Agent with such assistance in connection with its actions under
this paragraph (k) as Administrative Agent shall reasonably request.
(l) Release of Cash Management upon a Cash Dominion Termination
Event. Upon the occurrence of a Cash Dominion Event and until the occurrence of
a corresponding Cash Dominion Termination Event, Administrative Agent may
exercise exclusive dominion and control over the Concentration Accounts and the
Loan Proceeds Account. Upon the occurrence of a Cash Dominion Termination Event
(or, prior to the occurrence of any Cash Dominion Event), Administrative Agent
shall revoke instructions given to any Concentration Bank and the Loan Proceeds
Account Bank and permit Borrower and the Subsidiary Credit Parties to give
instructions with respect to the Concentration Accounts and the Loan Proceeds
Account and to such end, Administrative Agent shall take such reasonable action
as is reasonably requested by Borrower or the Subsidiary Credit Parties (at the
expense of Borrower or such Subsidiary Credit Party) to permit Borrower or such
Subsidiary Credit Parties to give instructions with regards to the funds on
deposit in such accounts; provided that under no circumstances will
Administrative Agent be liable to Borrower or any Subsidiary Credit Party for
the failure of any Concentration Account Bank or Loan Proceeds Account Bank to
comply with the actions or directives given by Administrative Agent pursuant to
this paragraph (l). Furthermore, Borrower and each Subsidiary Credit Party shall
provide Administrative Agent with such assistance in connection with its actions
under this paragraph (l) as Administrative Agent shall reasonably request. In no
event shall any action taken by Administrative Agent pursuant to this paragraph
(l) be deemed to negate the dominion and control granted to Administrative Agent
pursuant to the Control Agreements.
C-4
ANNEX D (SECTION 2.1(a))
TO
CREDIT AGREEMENT
CLOSING CHECKLIST
In addition to, and not in limitation of, the conditions described
in Section 2.1 of the Agreement, pursuant to Section 2.1(a), the following items
must be received by Administrative Agent in form and substance satisfactory to
Administrative Agent on or prior to the Effective Date (each capitalized term
used but not otherwise defined herein shall have the meaning ascribed thereto in
Annex A to the Agreement):
(a) Appendices. All Appendices to the Agreement, in form and
substance satisfactory to Administrative Agent.
(b) Security Interests and Code Filings.
Evidence satisfactory to Administrative Agent that Administrative
Agent (for the benefit of itself and the Secured Parties) has a valid and
perfected (other than as to the Existing Depository Accounts and monies credited
thereto) first priority security interest in the Collateral, subject to
Permitted Encumbrances, including such documents duly executed by each Credit
Party (including applicable documents under the laws of any jurisdiction with
respect to the perfection of Liens) as Administrative Agent may reasonably
request in order to perfect its security interests in the Collateral.
(c) Bylaws and Resolutions. For each Credit Party, in form and
substance reasonably acceptable to Administrative Agent, (i) such Person's
bylaws, to the extent the same has been amended, restated or otherwise modified
since the Closing Date, together with all amendments thereto since the closing
Date (if any) and (ii) resolutions of such Person's Board of Directors and
stockholders, if required, approving and authorizing the execution, delivery and
performance of the Credit Loan Documents to which such Person is a party and the
transactions to be consummated in connection therewith, each certified as of the
Effective Date by such Person's corporate secretary or an assistant secretary as
being in full force and effect without any modification or amendment.
(d) Incumbency Certificates. For each Credit Party, in form and
substance reasonably acceptable to Administrative Agent, signature and
incumbency certificates of the officers of each such Person executing any of the
Credit Loan Documents, certified as of the Closing Date by such Person's
corporate secretary or an assistant secretary as being true, accurate, correct
and complete.
(e) Other Documents. Such other certificates, documents and
agreements respecting any Credit Party as Administrative Agent or any Lender may
reasonably request.
D-1
ANNEX E (SECTION 4.1(a))
TO
CREDIT AGREEMENT
FINANCIAL STATEMENTS AND PROJECTIONS -- REPORTING
Borrower shall deliver or cause to be delivered to Administrative
Agent or to Administrative Agent and Lenders, as indicated, the following (it
being understood that such deliveries may be made in electronic format):
(a) Monthly Financials. To Administrative Agent and Lenders,
within thirty (30) days after the end of each Fiscal Month, financial
information regarding Borrower and its Subsidiaries, certified by a Financial
Officer, consisting of (i) consolidated (A) unaudited balance sheets as of the
close of such Fiscal Month and the related statements of income and cash flows
for that portion of the Fiscal Year ending as of the close of such Fiscal Month
and (B) unaudited statements of income and cash flows for such Fiscal Month,
setting forth in comparative form the monthly figures, if any, for the
corresponding period in the prior year and the figures contained in the
Projections for such Fiscal Year, all prepared in accordance with GAAP (subject
to normal year-end adjustments) and (ii) the consolidated Cash on Hand for the
last Business Day of each calendar week occurring during such Fiscal Month and
the Business Plan Cash on Hand for such Fiscal Month. Such financial information
shall be accompanied by (A) a statement in reasonable detail (each, a
"Compliance Certificate") showing the calculations used in determining
compliance with each of the Financial Covenants that is tested on a monthly
basis and (B) the certification of a Financial Officer that (1) such financial
information presents fairly in accordance with GAAP (subject to normal year-end
adjustments) the financial position and results of operations of Borrower and
its Subsidiaries, on a consolidated basis, in each case as at the end of such
Fiscal Month and for that portion of the Fiscal Year then ended and (2) any
other information presented is true, correct and complete in all material
respects and that there was no Default or Event of Default in existence as of
such time or, if a Default or Event of Default shall have occurred and be
continuing, describing the nature thereof and all efforts undertaken to cure
such Default or Event of Default.
(b) Quarterly Financials. To Administrative Agent and Lenders,
within forty-five (45) days after the end of each of the first three (3) Fiscal
Quarters, consolidated financial information regarding Borrower and its
Subsidiaries, certified by a Financial Officer, including (i) unaudited balance
sheets as of the close of such Fiscal Quarter and the related statements of
income and cash flow for that portion of the Fiscal Year ending as of the close
of such Fiscal Quarter and (ii) unaudited statements of income and cash flows
for such Fiscal Quarter, in each case setting forth in comparative form the
figures for the corresponding period in the prior year and the quarterly
figures, if any, contained in the Projections for such Fiscal Year, all prepared
in accordance with GAAP (subject to normal year-end adjustments). Such financial
information shall be accompanied by (A) a Compliance Certificate showing the
calculations used in determining compliance with each of the Financial Covenants
that is tested on a quarterly basis and (B) the certification of a Financial
Officer of Borrower that (1) such financial information presents fairly in
accordance with GAAP (subject to normal year-end adjustments) the financial
position, results of operations and statements of cash flows of Borrower and its
Subsidiaries, on a consolidated basis, as at the end of such Fiscal Quarter and
for that portion of the Fiscal Year
E-1
then ended, (2) any other information presented is true, correct and complete in
all material respects and that there was no Default or Event of Default in
existence as of such time or, if a Default or Event of Default has occurred and
is continuing, describing the nature thereof and all efforts undertaken to cure
such Default or Event of Default. In addition, Borrower shall deliver to
Administrative Agent and Lenders, within forty-five (45) days after the end of
each of the first three (3) Fiscal Quarters of each Fiscal Year, a management
discussion and analysis that includes a comparison to budget for that Fiscal
Quarter and a comparison of performance for that Fiscal Quarter to the
corresponding period in the prior year.
(c) Operating Plan. To Administrative Agent and Lenders, as soon
as available, but not later than forty-five (45) days after the end of each
Fiscal Year, an annual operating plan for Holdings and its Subsidiaries,
approved by the Board of Directors of Borrower, for the following Fiscal Year,
which (i) includes a statement of all of the material assumptions on which such
plan is based, (ii) includes monthly balance sheets and a monthly budget for the
following year and (iii) integrates sales, gross profits, operating expenses,
operating profit, cash flow projections and Borrowing Availability projections,
and representing Borrower's estimates (which were made in good faith and
believed to be reasonable at the time made) of the future financial performance
of Borrower and its Subsidiaries for the period(s) set forth therein, and
including plans for personnel, Capital Expenditures and facilities.
(d) Annual Audited Financials. To Administrative Agent and
Lenders, within ninety (90) days after the end of each Fiscal Year, audited
Financial Statements for Borrower and its Subsidiaries on a consolidated basis,
consisting of balance sheets and statements of income and retained earnings and
cash flows, setting forth in comparative form in each case the figures for the
previous Fiscal Year, which Financial Statements shall be prepared in accordance
with GAAP and certified without qualification, by one of the "big four" public
accounting firms or a firm otherwise reasonably acceptable to Administrative
Agent. Such Financial Statements shall be accompanied by (i) a Compliance
Certificate showing the calculations used in determining compliance with each of
the Financial Covenants, (ii) a report from such accounting firm to the effect
that, in connection with their audit examination, nothing has come to their
attention to cause them to believe that a Default or Event of Default has
occurred with respect to the Financial Covenants (or specifying those Defaults
and Events of Default that they became aware of), it being understood that such
audit examination extended only to accounting matters and that no special
investigation was made with respect to the existence of Defaults or Events of
Default, (iii) the annual letters to such accountants in connection with their
audit examination detailing contingent liabilities and material litigation
matters, (iv) the certification of the Chief Executive Officer or a Financial
Officer that all such Financial Statements present fairly in accordance with
GAAP the financial position, results of operations and statements of cash flows
of Borrower and its Subsidiaries on a consolidated and consolidating basis, as
at the end of such Fiscal Year and for the period then ended, and that there was
no Default or Event of Default in existence as of such time or, if a Default or
Event of Default has occurred and is continuing, describing the nature thereof
and all efforts undertaken to cure such Default or Event of Default and (v) a
management discussion and analysis that includes a comparison to budget for that
Fiscal Year and a comparison of performance for that Fiscal Year to the
corresponding period in the prior year.
E-2
(e) Management Letters. To Administrative Agent and Lenders,
promptly after receipt thereof by any of Holdings or any of its Subsidiaries,
copies of all management letters, exception reports or similar letters or
reports received by such Person from its independent certified public
accountants.
(f) Default Notices. To Administrative Agent and Lenders, as soon
as practicable, and in any event within five (5) Business Days after an
executive officer of Borrower has actual knowledge of the existence of (i) any
Default, and (ii) Event of Default or other event that has had a Material
Adverse Effect, telephonic or telecopied notice specifying the nature of such
Default or Event of Default or other event, including the anticipated effect
thereof, which notice, if given telephonically, shall be promptly confirmed in
writing on the next Business Day.
(g) SEC Filings and Press Releases. To Administrative Agent and
Lenders, promptly upon their becoming available, copies of: (i) all Financial
Statements, reports, notices and proxy statements made publicly available by any
of Holdings or any of its Subsidiaries to its security Secured Parties; (ii) all
regular and periodic reports and all registration statements and prospectuses,
if any, filed by any of Holdings or any of its Subsidiaries with any securities
exchange or with the Securities and Exchange Commission; and (iii) all press
releases and other statements made available by any of Holdings or any of its
Subsidiaries to the public concerning material changes or developments in the
business of any such Person.
(h) Subordinated Debt and Equity Notices. To Administrative Agent,
as soon as practicable, copies of all material written notices given or received
by any of Holdings or any of its Subsidiaries with respect to any Subordinated
Debt of such Person or Stock of Holdings, and, within five (5) Business Days
after any such Person obtains knowledge of any matured or unmatured event of
default with respect to any Subordinated Debt, notice of such event of default.
(i) Supplemental Schedules. To Administrative Agent, supplemental
disclosures, if any, required by Section 5.6.
(j) Litigation. To Administrative Agent in writing, promptly upon
learning thereof, notice of any Litigation commenced or threatened against any
of Holdings or any of its Subsidiaries that (i) seeks damages in excess of
$50,000,000, (ii) seeks injunctive relief with respect to any portion of the
Collateral having a value in excess of $50,000,000, (iii) is asserted or
instituted against any Plan, its fiduciaries or its assets or against any of
Holdings or any of its Subsidiaries or their respective ERISA Affiliates in
connection with any Plan involving claims in excess of $25,000,000, (iv) alleges
criminal misconduct (other than misdemeanors at the Store level) by any of
Holdings or any of its Subsidiaries, (v) alleges the violation of any law
regarding, or could reasonably be expected to result in the exercise of remedies
in connection with, any Environmental Liabilities in excess of $50,000,000; or
(vi) involves any product recall with respect to Inventory with a value in
excess of $50,000,000 then being held for sale in Stores.
(k) Lease Default Notices. To Administrative Agent, (i) within ten
(10) days after receipt thereof, copies of any and all default notices received
under or with respect to any
E-3
leased DCs and (ii) such other notices or documents as Administrative Agent may
reasonably request.
(l) Lease Amendments. To Administrative Agent, within ten (10)
Business Days after receipt thereof, copies of all material amendments to real
estate leases pertaining to the DCs.
(m) ERISA Notices. To Administrative Agent promptly, and in any
event within ten (10) days, after:
(i) such party knows, or has reason to know, of the
occurrence of any Reportable Event (as defined in Section 4043 of ERISA) with
respect to any Pension Plan subject to Title IV of ERISA (a "Reportable Event"),
a copy of the materials that are filed by the applicable plan administrator with
the PBGC, or the materials that would have been filed if the PBGC had not waived
the notice requirements;
(ii) the receipt of notice by a Credit Party or any ERISA
Affiliate or any administrator of any Pension Plan who is an employee of a
Credit Party or any ERISA Affiliate from the PBGC of the PBGC's intention to
terminate any such Pension Plan or to appoint a trustee to administer any such
Pension Plan, a copy of such notice;
(iii) the filing thereof with the IRS, copies of each annual
report that is filed on Treasury Form 5500 with respect to any Pension Plan
subject to Title IV, together with any actuarial statements on Schedule B to
such Form 5500;
(iv) a Credit Party or any ERISA Affiliate knows or has
reason to know of any event or condition which might constitute grounds under
the provisions of Section 4042 of ERISA for the termination of (or the
appointment of a trustee to administer) any Pension Plan, an explanation of such
event or condition;
(v) an application has been made to the Secretary of the
Treasury for a waiver of the minimum funding standard under the provisions of
Section 412 of the Code with respect to any Pension Plan, a copy of such
application; and
(vi) the receipt by any Credit Party or any ERISA Affiliate
of an assessment of withdrawal liability under Section 4201 of ERISA from a
Multiemployer Plan, a copy of such assessment;
in each case, together with a statement signed by an appropriate officer of such
Credit Party or ERISA Affiliate setting forth details as to such Reportable
Event, filing, notice, event or condition, assessment or application and the
action that will be taken with respect thereto.
(n) Other Notices. To Administrative Agent, together with each
Compliance Certificate, notice that, since the date of the last Compliance
Certificate, (i) any Credit Party has changed the location of its chief
executive office, principal place of business, other corporate offices,
warehouses or other locations at which Collateral is held or stored, or the
location of its records concerning the Collateral from the locations set forth
on Disclosure Schedule (3.2) or otherwise previously disclosed in a prior
Compliance Certificate and the address of such new
E-4
locations and the name of the Credit Party using or occupying such new location,
(ii) the "peg balances" set forth in Part A of Disclosure Schedule (3.19) have
been increased beyond the amounts set forth in such Schedule and setting forth
such new "peg balances" as of such date (it being understood that such "peg
balances" may be increased (or decreased) from time to time without the prior
written consent of Administrative Agent so long as no Cash Dominion Event has
occurred for which a corresponding Cash Dominion Termination Event has not
occurred, and that the aggregate of such balances may not be increased by more
than twenty percent (20%) from those amounts set forth on Part A of Disclosure
Schedule (3.19) as of the Closing Date without the prior written consent of
Administrative Agent, (iii) an update to Part A of Disclosure Schedule (3.19)
setting forth any new Store Depository Account established by Borrower or any
Subsidiary Credit Party, the name and address of the financial institution at
which such account is maintained and the "peg balance" with respect thereto,
(iv) the occurrence of any event which would have a material adverse effect on
the aggregate value of the Collateral (other than as a result of a disposition
permitted hereunder) or on the Liens created under the Loan Documents and (v)
the aggregate of any Lien (other than Permitted Encumbrances) or claim made or
asserted against any Collateral with a value in excess of $50,000,000.
(o) Reconciliation of Third Party Funds. If a Cash Dominion Event
has occurred (and no corresponding Cash Dominion Termination Event has
occurred), Borrower shall, on the third (3rd) Business Day of each calendar
week, deliver to Administrative Agent a report reconciling the amount of Third
Party Funds received by Borrower and its Subsidiaries during the previous
calendar week and the amount of Third Party Funds disbursed to the Persons
entitled thereto during such week.
(p) Surplus Cash Investments. Promptly (but in any event within
five (5) days) after the making of any Investment pursuant to Section 6.2(j),
(k) or (l) a notice to Administrative Agent setting forth the amount of Surplus
Cash invested in respect thereof.
(q) Good Standing Certificates. On or before June 15 and December
15 of each Fiscal Year, Borrower and each other Grantor which owns at least five
percent (5%) of the Collateral shall, unless Administrative Agent shall
otherwise consent, provide to Administrative Agent a certificate of good
standing from its state of incorporation or organization.
(r) Liens. To Administrative Agent, notice of any carriers',
warehousemen's or other similar possessory Liens arising by operation of law
which are past due for more than fifteen (15) days the nonpayment of which would
result in a Lien on the Collateral.
(s) Other Documents. To Administrative Agent and Lenders, such
other financial and other information respecting any Credit Party's business or
financial condition as Administrative Agent or any Lender (through
Administrative Agent) shall, from time to time, reasonably request.
Notwithstanding anything in clauses (b) or (d) of this Annex E to
the contrary, in the event the Securities and Exchange Commission shortens at
any time the periods within which annual and quarterly reports must be publicly
filed, the periods set forth in such clauses shall be correspondingly shortened.
E-5
Any of the foregoing items delivered to Administrative Agent only
will be made available to Lenders in electronic format unless such item was not
delivered to Administrative Agent in electronic format in which case, such items
will be delivered to Lenders by Administrative Agent upon request.
E-6
ANNEX F (SECTION 4.1(b))
TO
CREDIT AGREEMENT
COLLATERAL REPORTS
Borrower shall deliver or cause to be delivered the following (it
being understood that such deliveries may be made in electronic format):
(a) to Administrative Agent, on or prior to the fifth Business Day
following the end of each Fiscal Month, a certificate signed by a Financial
Officer setting forth the Liquidity Threshold for such Fiscal Month (the
"Availability Certificate").
(b) to Administrative Agent and Lenders (i) if the Liquidity
Threshold as reflected on the Availability Certificate for the immediately
preceding fiscal week is less than $750,000,000, on or before the fifth Business
Day (with supporting documentation to be furnished no later than the sixth
Business Day) following the end of each fiscal week, a weekly Borrowing Base
Certificate as of the last day of the immediately preceding week, (ii) if the
Liquidity Threshold as reflected on the Availability Certificate for the
immediately preceding fiscal week is greater than or equal to $750,000,000 but
less than $1,000,000,000, on or before the fifth Business Day (with supporting
documentation to be furnished no later than the sixth Business Day) following
the end of every other fiscal week, a bi-weekly Borrowing Base Certificate as of
the last day of the second immediately preceding fiscal week or (iii) if the
Liquidity Threshold is greater than or equal to $1,000,000,000 on or before the
fifth Business Day (with supporting documentation to be furnished no later than
the sixth Business Day) following the end of each Fiscal Month, a monthly
Borrowing Base Certificate as of the last day of the immediately preceding
month. Such Borrowing Base Certificate shall include the following:
(i) with each weekly, bi-weekly or monthly Borrowing Base
Certificate, as applicable:
(A) Makoro Key Inventory Statistics report from
stockledger by division, and reconciliation from stockledger
to Makoro (containing the information available on such report
as of the Closing Date, and, if such Key Inventory Statistics
reports are not available or no longer contain such
information, other reports containing such information) for
total company and by division, detailing sales, ending
inventory at retail, ending inventory at cost, xxxx on %, POS
and hard (permanent) markdowns, gross margin in dollars and as
a percent of sales both before and after shrink and
allowances, and inventory turns;
(B) Reconciliation between the prior period's ending
inventory balance per the prior period's Borrowing Base
Certificate and the current period's beginning inventory
balance per the stockledger;
F-1
(C) Total page per ILR report; reconciliation between
the ILR report and the stockledger;
(D) Inventory by location per stockledger - in
aggregate for stores, DC's and geographic region;
(E) Supporting documentation and analysis for accrued
invoices;
(F) Inventory by division (at cost and retail);
(G) Inventory balance at cost and retail for Xxxxxx
Xxxxxxx inventory on hand;
(H) Inventory balance at cost and retail for any other
licensed inventory;
(I) Import 2000 in-transit inventory report at cost;
(J) Discontinued inventory report at retail; and
(K) Seasonal apparel aging inventory report at retail.
(ii) with each monthly Borrowing Base Certificate:
(A) Reconciliation of inventory balance at cost per
stockledger to general ledger and monthly Financial Statements
delivered pursuant to Annex E;
(B) Inventory by location per stockledger - detailed
by store, distribution center and geographic region;
(C) an aging of accounts payable and a reconciliation
of that accounts payable aging to Borrower's general ledger
and monthly Financial Statements delivered pursuant to Annex
E;
(D) a reconciliation of the outstanding Loans as set
forth in the monthly Loan Account statement provided by
Administrative Agent to Borrower's general ledger and monthly
Financial Statements delivered pursuant to Annex E;
(E) Consigned inventory at cost and retail by vendor;
(F) Return to vendor and RGC from stores and DCs at
cost and retail;
(G) Physical test count results and comparison to
accruals; and
(H) Plan to actual results by merchandising division.
F-2
(c) to Administrative Agent the results of each physical
verification, if any, that Borrower or any of the Credit Parties may in their
discretion have made, or caused any other Person to have made on their behalf,
of all or any portion of their Inventory (and, if a Default or an Event of
Default has occurred and be continuing, Borrower shall, upon the request of
Administrative Agent, conduct, and deliver the results of, such physical
verifications as Administrative Agent may require).
(d) if requested by Administrative Agent at any time when
Administrative Agent reasonably believes that the then existing Borrowing Base
Certificate is materially inaccurate, or at any time following the occurrence
and continuance of an Event of Default, as soon as reasonably available, but in
no event later than three (3) Business Days after such request, a Borrowing Base
Certificate showing the Borrowing Base as of the last Business Day of the prior
fiscal week (or as of the date of the most recent Borrowing Base Certificate in
the case of any inaccuracy), in each case with supporting documentation required
by paragraph f of this Annex F and (iii) such other supporting documentation and
additional reports with respect to the Borrowing Base as Administrative Agent
shall reasonably request.
(e) if requested by Administrative Agent, use its commercially
reasonable efforts to cause its Cash Management Banks to provide promptly, but
in any event within three (3) Business Days, an exposure report of each Cash
Management Bank detailing its exposure in respect of Cash Management
Obligations.
(f) Such other reports, statements and reconciliations with
respect to the Borrowing Base or Collateral or Obligations of any or all Credit
Parties as Administrative Agent shall from time to time request in its
reasonable discretion.
Any of the foregoing items delivered to Administrative Agent only
will be made available to Lenders in electronic format unless such item was not
delivered to Administrative Agent in electronic format in which case, such items
will be delivered to Lenders by Administrative Agent upon request.
F-3
ANNEX G (SECTION 6.10)
TO
CREDIT AGREEMENT
FINANCIAL COVENANTS
Neither Holdings nor its Subsidiaries shall breach or fail to comply
with any of the following financial covenants, each of which shall be calculated
in accordance with GAAP consistently applied:
(a) Maximum Capital Expenditures. Borrower and its Subsidiaries,
on a consolidated basis, shall not make Capital Expenditures during the
following periods that exceed in the aggregate the amounts set forth opposite
each of such periods:
Period Maximum Capital Expenditures per Period
------ ---------------------------------------
2003 $385,000,000
2004 $550,000,000
2005 $600,000,000
; provided, however, that the amount of permitted Capital Expenditures
referenced above will be increased in any period by (i) the positive amount
equal to the lesser of (A) 20% of the amount of permitted Capital Expenditures
for the immediately prior period, and (B) the amount (if any), equal to the
difference obtained by taking the Capital Expenditures limit specified above for
the immediately prior period minus the actual amount of any Capital Expenditures
expended during such prior period (the "Carry Over Amount") and (ii) Capital
Expenditures incurred in connection with Capital Leases resulting from sale
leasebacks permitted under Section 6.12. In addition to the foregoing, Borrower
and its Subsidiaries, on a consolidated basis, may make Capital Expenditures
with Surplus Cash as provided in Section 6.2(l).
(b) Minimum EBITDA. During the period from and after the Fiscal
Month immediately prior to an EBITDA Trigger Date and continuing until an EBITDA
Release Date, if any, has occurred, Holdings and its Subsidiaries, on a
consolidated basis, shall have at the end of each Fiscal Month set forth below,
LTM EBITDA of not less than the following:
Period LTM EBITDA (in millions)
-------- ------------------------
5/31/03 -23
6/30/03 -46
7/31/03 -66
8/31/03 -155
9/30/03 -274
10/31/03 -248
11/31/03 -266
12/31/03 49
1/31/04 -10
2/28/04 -127
3/31/04 -169
G-1
4/30/04 -70
5/31/04 8
6/30/04 47
7/31/04 85
8/31/04 148
9/30/04 230
10/31/04 218
11/31/04 187
12/31/04 289
1/31/05 274
2/28/05 284
3/31/05 304
4/30/05 349
5/31/05 372
6/30/05 391
7/31/05 413
8/31/05 432
9/30/05 442
10/31/05 455
11/31/05 477
12/31/05 533
1/31/06 550
2/28/06 551
3/31/06 552
4/30/06 576
Notwithstanding the foregoing or anything to the contrary contained
in this Agreement, in no event shall there be more than two EBITDA Release Dates
during the term of this Agreement.
(c) Minimum Excess Availability. Borrower shall maintain Excess
Availability of not less than $100,000,000 at all times.
Unless otherwise specifically provided herein, any accounting term
used in the Agreement shall have the meaning customarily given such term in
accordance with GAAP, and all financial computations hereunder shall be computed
in accordance with GAAP consistently applied. That certain items or computations
are explicitly modified by the phrase "in accordance with GAAP" shall in no way
be construed to limit the foregoing. If any "Accounting Changes" (as defined
below) occur and such changes result in a change in the calculation of the
financial covenants, standards or terms used in the Agreement or any other
Credit Loan Document, then at the request of Borrower, Administrative Agent or
any Lender, the parties to this Agreement shall enter into negotiations in order
to amend such provisions of the Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating
Holding's and its Subsidiaries' financial condition shall be the same after such
Accounting Changes as if such Accounting Changes had not been made; provided,
however, that the agreement of the
G-2
Majority Lenders to any required amendments of such provisions shall be
sufficient to bind all Lenders. "Accounting Changes" means (i) changes in
accounting principles required by the promulgation of any rule, regulation,
pronouncement or opinion by the Financial Accounting Standards Board of the
American Institute of Certified Public Accountants (or successor thereto or any
agency with similar functions), (ii) changes in accounting principles concurred
in by Borrower's certified public accountants, (iii) purchase accounting
adjustments under A.P.B. 16 or 17 and EITF 88-16, and the application of the
accounting principles set forth in FASB 109, including the establishment of
reserves pursuant thereto and any subsequent reversal (in whole or in part) of
such reserves and (iv) the reversal of any reserves established as a result of
purchase accounting adjustments. All such adjustments resulting from
expenditures made subsequent to the Closing Date (including capitalization of
costs and expenses or payment of pre-Closing Date liabilities) shall be treated
as expenses in the period the expenditures are made and deducted as part of the
calculation of EBITDA in such period. If Administrative Agent, Borrower and the
Majority Lenders agree upon the required amendments, then after appropriate
amendments have been executed and the underlying Accounting Change with respect
thereto has been implemented, any reference to GAAP contained in the Agreement
or in any other Credit Loan Document shall, only to the extent of such
Accounting Change, refer to GAAP, consistently applied after giving effect to
the implementation of such Accounting Change. If Administrative Agent, Borrower
and the Majority Lenders cannot agree upon the required amendments within thirty
(30) days following the date of implementation of any Accounting Change, then
all Financial Statements and Projections delivered and all calculations of
financial covenants and other standards and terms in accordance with the
Agreement and the other Credit Loan Documents shall be prepared, delivered and
made without regard to the underlying Accounting Change. Notwithstanding
anything to the contrary contained in any Loan Document, GAAP, consistently
applied, shall include the effect of "fresh-start" accounting, and the
application of "fresh-start" accounting shall not constitute an Accounting
Change for the purposes hereof and thereof. For purposes of Section 8.1, a
breach of a Financial Covenant contained in this Annex G shall be deemed to have
occurred as of the last day of any specified measurement period, regardless of
when the Financial Statements reflecting such breach are delivered to
Administrative Agent.
G-3
ANNEX H (SECTION 1.1(d))
TO
CREDIT AGREEMENT
LENDERS' WIRE TRANSFER INFORMATION
GE CAPITAL:
Name: General Electric Capital Corporation
Bank: Deutsche Bank Trust Company Americas
New York, New York
ABA#: 000000000
Account #: 00000000
Account Name: GECC/CAF Depository
Reference: CFN5033, Kmart POR
FLEET:
Name: Fleet Retail Finance, Inc.
Bank: FleetBoston Bank
ABA#: 000000000
Account #: Kmart
Account Name: [UPS CAPITAL, DISTRIBUTION FINANCE]
Reference: Kmart
OTHER LENDERS:
Name: AmSouth Bank
Bank: AmSouth Bank
ABA#: 000000000
Account #: 00000000
Account Name: Corporate Clearing.
Reference: Kmart; Attn: Xxxx x-5896
Name: Bank One, N.A.
Bank: Bank One, N.A.
ABA#: 000000000
Account #: 103103007
Account Name: Syndications service
Reference: Syndications servicing - K Mart
Name: The CIT Group
Bank: JPMorgan Chase Bank
ABA#: 000000000
Account #: 000-0-00000
Account Name: The CIT Group/Business Credit, Inc.
Reference: Kmart
H-1
Name: Congress Financial Corporation (Central)
Bank: Wachovia Bank, N.A.
ABA#: 000000000
Account #: 5000000030266
Account Name: Congress Financial Corporation (Central)
Reference: KMART
Name: Xxxxx Fargo Foothill, LLC, f/k/a Foothill Capital Corp.
Bank: JPMorgan Chase Bank
ABA#: 000000000
Account #: 323-266193
Account Name: Foothill Capital Corporation
Reference: Kmart
Name: The Foothill Group, Inc.
Bank: JPMorgan Chase Bank
ABA#: 000000000
Account #: 323-266185
Account Name: The Foothill Group, Inc.
Reference: AIM/FGI/K-Mart
Name: GMAC Commercial Finance LLC
Bank: Bank One, Michigan
ABA#: 000000000
Account #: 0000000-84
Account Name: GMAC Commercial Finance LLC
Reference: Kmart Corporation
Name: Xxxxxxx Xxxxx Capital, a division of Xxxxxxx Xxxxx Business
Financial Services, Inc.
Bank: LaSalle Bank, NA
ABA#: 000000000
Account #: 5800393182
Account Name: MLBFS - Corporate Finance
Reference: Kmart (Exit)
Name: National City Commercial Finance, Inc.
Bank: National City Bank
ABA#: 000000000
Account #: 0000000
Account Name: National City Commercial Finance
Reference: KMART Corporation
H-2
Name: PB Capital Corporation
Bank: The Bank of New York
ABA#: 000000000
Account #: 000-0000-000
Account Name: PB Capital Corporation
Reference: Kmart
Name: The Provident Bank
Bank: The Provident Bank
ABA#: 000000000
Account #: 11320
Account Name: Commercial Loans / CC-213
Reference: Kmart
Name: RZB Finance LLC
Bank: Citibank, N.A.
ABA#: 000000000
Account #: 00000000
Account Name: RZB Finance
Reference: Kmart Exit
Name: Textron Financial Corporation
Bank: Bank One, N.A.
ABA#: 000000000
Account #: 0000000
Account Name: Textron Financial Corporation
Reference: Kmart
Name: Transamerica Business Capital Corporation
Bank: Bank One
ABA#: 000000000
Account #: 52-97184
Account Name: Transamerica
Reference: Kmart
Name: UBS AG, Stamford Branch
Bank: UBS AG, Stamford Branch
ABA#: 000000000
Account #: 101-WA-894001-001
Account Name: BPS House Account
Reference: Kmart Corporation
H-3
Name: UPS Capital Corporation
Bank: Bank of America, N.A.
ABA#: 000000000
Account #: 0000000000
Account Name: UPS Capital, Distribution Finance
Reference: Kmart Corporation
Name: Whitehall Business Credit Corporation
Bank: Xxxxxxx Bank
ABA#: 00000000
Account #: GL$ 1516001480
Account Name: Kmart Emergence
Reference: Kmart Corporation
H-4
ANNEX I (SECTION 11.10)
TO
CREDIT AGREEMENT
NOTICE ADDRESSES
(A) If to Administrative Agent or GE Capital, at
General Electric Capital Corporation
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: K-Mart, Account Manager
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
with copies to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
and
General Electric Capital Corporation
201 Xxxxxx 7
Norwalk, Connecticut 06851-1056
Attention: Corporate Counsel-Commercial Finance
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
(B) If to Borrower, at
Kmart Corporation
0000 Xxxx Xxx Xxxxxx Xxxx
Xxxx, Xxxxxxxx 00000
Attention: General Counsel
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
I-1
With copies to:
Kmart Corporation
0000 Xxxx Xxx Xxxxxx Xxxx
Xxxx, Xxxxxxxx 00000
Attention: Chief Financial Officer
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
and
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
(C) If to Lenders, at:
Fleet Retail Finance, Inc.
00 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx Xxxx
Telecopier No.: (671) 000- 0000
Telephone No.: (000) 000-0000
AmSouth Bank
c/o AmSouth Capital Corp.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Bank One, N.A.
000 X. XxXxxxx Xxxxxx, 0xx Xxxxx
Mail Code IL1 -1454
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
X-0
Xxx XXX Xxxxx
0000 Xxxxxx of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx
Telecopier No,: (000) 000-0000
Telephone No.: (000) 000-0000
Congress Financial Corporation (Central)
000 X. Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Xxxxx Fargo Foothill, LLC
f/k/a Foothill Capital Corp.
0000 Xxxxxxxx Xxxxxx
Xxxxx 0000 Xxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxx Xxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
The Foothill Group, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxx 0000 Xxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxxxx, Senior Vice President
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
GMAC Commercial Finance LLC
1290 Avenue of the Xxxxxxxx, 0xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Xxxxxxx Xxxxx Capital, a division of
Xxxxxxx Xxxxx Business Financial Services, Inc.
2 World Financial Center
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
I-3
National City Commercial Finance, Inc.
0000 X. 0xx Xxxxxx, Xxxxx 000
Xxxxxxx #0000
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxxxx Xxxxxx, Vice President
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
PB Capital Corporation
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. XxXxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
The Provident Bank
000 Xxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxx Xxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
RZB Finance LLC
00 Xxxxxx Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx Xxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Textron Financial Corporation
00000 Xxxxx Xxxx Xxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Xx.
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Transamerica Business Capital Corporation
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Attention: Kmart, Account Manager
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
I-4
UBS AG, Stamford Branch
000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
UPS Capital Corporation
00 Xxxxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxx XxXxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Whitehall Business Credit Corporation
00 Xxxxxxxxx Xxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
I-5
ANNEX J (FROM ANNEX A - COMMITMENTS DEFINITION)
TO
CREDIT AGREEMENT
REVOLVING LOAN
LENDER(1) COMMITMENT
------------------------------------------------------- ---------------
General Electric Capital Corporation $219,180,000(2)
Fleet Retail Finance Inc. $160,821,000
AmSouth Bank $ 8,888,800
Bank One, NA $ 48,888,800
The CIT Group/Business Credit, Inc. $ 55,555,200
Congress Financial Corporation (Central) $ 54,666,400
Xxxxx Fargo Foothill, LLC, f/k/a Foothill Capital Corp. $ 36,888,800
The Foothill Group, Inc. $ 18,666,400
GMAC Commercial Finance LLC $ 55,555,200
Xxxxxxx Xxxxx Capital $ 22,222,400
National City Commercial Finance, Inc. $ 44,444,800
PB Capital Corporation $ 11,111,200
The Provident Bank $ 4,444,800
RZB Finance LLC, Connecticut Office $ 6,666,400
Textron Financial Corporation $ 11,111,200
Transamerica Business Capital Corporation $ 11,111,200
UBS AG, Stamford Branch $ 14,222,200
--------
(1) Update.
(2) Includes a Swing Line Commitment of $75,000,000.
J-1
REVOLVING LOAN
LENDER(1) COMMITMENT
------------------------------------------------------- ---------------
UPS Capital $ 8,888,800
Whitehall Business Credit Corporation $ 6,666,400
TOTAL $800,000,000
J-2
ANNEX K (SECTION 1.7)
TO
CREDIT AGREEMENT
ESTABLISHMENT OF RESERVES; OTHER CHANGES TO BORROWING BASE
(a) Except as provided in clause (e) below, Administrative Agent
may from time to time (and, if required by Section 11.2, with the consent of
Lenders required thereunder) establish new Reserves or modify existing Reserves
against the Borrowing Base in Administrative Agent's reasonable and customary
credit judgment upon ten (10) Business Days' notice to Borrower.
(b) Notwithstanding clause (a) above, Administrative Agent may
(and, if required by Section 11.2, with the consent of Lenders required
thereunder) establish new Reserves or modify existing Reserves against the
Borrowing Base in its reasonable and customary credit judgment without notice to
Borrower at any time if (i) an Event of Default has occurred and is continuing
or (ii) as of any date of determination by Administrative Agent, Excess
Availability has been less than the Applicable Trigger for the immediately
preceding five (5) consecutive days (an "Initial Failure") and thereafter Excess
Availability is less than the Applicable Trigger at any time within three (3)
months of such Initial Failure (regardless of whether Excess Availability
thereafter exceeds the Applicable Trigger) (each such event set forth in clauses
(i) and (ii) of this clause (b), a "Trigger Event").
(c) Notwithstanding anything to the contrary contained herein, no
Reserve shall be established with respect to creating a "holdback" equal to a
specified percentage of the Revolving Commitment or the Borrowing Base.
(d) (i) The following Reserves shall constitute Primary Reserves:
(A) a Reserve in respect of any Concentration Account
if (A) any Concentration Account Bank requires Administrative
Agent to guaranty or backstop any claims that such bank may
have against the Collateral or (B) such Concentration Account
Bank otherwise asserts a claim against the Collateral which is
not permitted by the Control Agreement with respect to such
Concentration Account;
(B) a Reserve in respect of the Pari Passu Cash
Management Obligations in an amount not to exceed the Pari
Passu Cash Management Obligations;
(C) a Reserve in respect of any New Depository Account
unless Borrower provides Administrative Agent with a Letter of
Direction (in the form of Exhibit 3.19 or otherwise reasonably
acceptable to Administrative Agent) duly executed by the
related Depository Bank and the relevant Credit Party;
(D) a Reserve in respect (i) of Stores for which rent
is overdue and which are located in states in which the
landlord would have a
K-1
priming lien by operation of law and (ii) DCs for which rent
is overdue, unless Borrower has delivered a certificate, duly
executed by a Financial Officer and dated as of the date of
the most recent Borrowing Base Certificate which was delivered
nearest to the last day of the preceding calendar month, that
the rental expenses that are due and payable for at least
ninety-five percent (95%) of all Stores and one-hundred
percent (100%) of all DCs have been paid current as of the
immediately preceding calendar month; provided that, to the
extent such certification cannot be made by Borrower,
Administrative Agent shall not establish a Reserve for any
such Store or DC for which it has received a landlord's lien
waiver in form and substance reasonably satisfactory to it
signed by such landlord;
(E) a Reserve for Specified Hedging Agreements and
Bank Product Agreements to the extent the Obligations
thereunder are secured by a pari passu Lien on the Collateral;
and
(F) without duplication of clause (D) above, a Reserve
for the failure to deliver any consent or waiver required
pursuant to Section 5.9.
(ii) The following Reserves shall constitute Secondary
Reserves:
(A) the Xxxxxx Xxxxxxx Reserve, if applicable;
(B) Reserves for royalties payable in respect of
licensed merchandise (other than Xxxxxx Xxxxxxx merchandise);
and
(C) the Kmart Gift Card Liability Reserve.
(e) Without limiting clauses (a) and (b) of this Annex K, changes
in the amount of (based on arithmetic and not on the modification of, or
establishment of new, criteria with respect to) the Reserves set forth in clause
(d) above or any new Reserve established in accordance with the terms of this
Annex K may be made from time to time by Administrative Agent without notice to
Borrower.
(f) With respect to any Reserves established or modified pursuant
to paragraphs (a) or (b) of this Annex K, Administrative Agent shall notify
Borrower of the manner in which such Reserves are to be deducted from Borrowing
Availability (e.g., whether as an "Inventory Reserve", a "Primary Reserve" or a
"Secondary Reserve".).
(g) Notwithstanding anything to the contrary contained herein, (i)
no Reserve shall be established with respect to cash management-related
obligations or statutory landlord Liens except as expressly provided in
paragraphs (d)(i)(A), (d)(i)(B), (d)(i)(C) and (d)(i)(D) above and (ii) any
Reserves taken in any appraisal shall be without duplication of any Reserve
taken herein.
K-2
