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EXHIBIT 99.1
EXECUTION COPY
FIRST AMENDMENT
TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT,
dated as of September 30, 1998 (this "Amendment"), among HILLS DEPARTMENT STORE
COMPANY, a Delaware corporation (the "Borrower"), HILLS STORES COMPANY, a
Delaware corporation (the "Parent"), the other Loan Parties named herein and
signatories hereto, the financial institutions listed on the signature pages
hereof (collectively, the "Lenders") and BANKAMERICA BUSINESS CREDIT, INC., as
Agent (the "Agent").
WHEREAS, the Borrower, the Parent, the other Loan Parties, the Lenders
and the Agent are parties to that certain Loan and Security Agreement, dated as
of September 30, 1996 and amended and restated as of January 30, 1998 (such
agreement being referred to herein as the "Loan and Security Agreement"); and
WHEREAS, the Borrower has requested certain modifications to the Loan
and Security Agreement, and the Lenders and the Agent are agreeable to making
such modifications, subject to the terms and conditions herein contained.
NOW, THEREFORE, the Borrower, the Parent, the other Loan Parties, the
Lenders and the Agent hereby agree as follows:
SECTION 1. CAPITALIZED TERMS. Capitalized terms used but not
defined herein shall have the respective meanings set forth in the Loan and
Security Agreement.
SECTION 2. AMENDMENTS TO LOAN AND SECURITY AGREEMENT. The Loan and
Security Agreement shall be, and upon the fulfillment of the conditions set
forth in Section 3 hereof is, amended as follows:
(a) Section 1.1 of the Loan and Security Agreement is hereby
amended by:
(i) deleting therefrom the definitions of "Base Rate
Term Loan", "EBITDA Carryforward Amount", "LIBOR Term Loan",
"Term Loan" and "Term Loans", and "Term Loan Note" and "Term
Loan Notes" in their entirety;
(ii) adding the following new definitions in their
appropriate alphabetical order:
"'First Amendment' means the First Amendment hereto,
dated as of September 30, 1998."
"'First Amendment Effective Date' means the date upon
which the First Amendment becomes effective in accordance with
its terms."
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"'Year 2000 Problem' has the meaning specified
in Section 8.32."; and
(iii) deleting therefrom the definitions of
"Applicable Advance Rate Percentage", "Applicable Margin", "Base
Rate Loans", "Borrowing", "Cash Requirements", "Combined
Availability", "Commitment", "Debt Reduction Amount", "EBITDA",
"LIBOR Rate Loans", "Loan Documents", Maximum Revolver Amount",
"Net Capex", "Obligations" and "Stated Termination Date" and
substituting therefor the following respective new definitions:
"'Applicable Advance Rate Percentage' means, for any
period set forth below, the percentage set forth below opposite
such period:
Period Percentage
------ ----------
First day of fiscal month
of December to last day of
fiscal month of May Sixty-five percent (65%)
Last day of fiscal month
of May through last day of
fiscal month of November Seventy percent (70%)"
"'Applicable Margin' means, with respect to any Loan or
Letter of Credit, as appropriate, except as otherwise provided
in the immediately succeeding sentence, the amount set forth
below which corresponds to the Coverage Ratio set forth below
for the twelve (12) fiscal month period of the Parent ended with
the most recent fiscal quarter of the Parent for which the Agent
receives the financial statements and Coverage Ratio Certificate
required below, determined and adjusted as provided herein. On
the First Amendment Effective Date and thereafter until the
first day of the first full calendar month after the delivery to
the Agent of the financial statements of the Parent and its
Subsidiaries as at the end of and for the fiscal month of the
Parent ended October 31, 1998 required pursuant to Section
7.2(b) together with the corresponding Coverage Ratio
Certificate for the twelve (12) fiscal month period ended on
such date, the LIBOR Applicable Margin shall be 2.25%, the Base
Rate Applicable Margin shall be .50% and the Letter of Credit
Applicable Margin shall be 2.00% and each shall thereafter be
adjusted after each delivery to the Agent of the monthly
financial statements of the Parent and its Subsidiaries required
pursuant to Section 7.2(b) for each month which ends on the last
day of each fiscal quarter of the Parent together with the
corresponding Coverage Ratio Certificate for the twelve (12)
fiscal month period ending on the last day of such fiscal
quarter, each such adjustment to be effective on the first day
of the first full calendar month after each such delivery.
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LIBOR Base Rate Letter of Credit
Applicable Applicable Applicable
Coverage Ratio Margin Margin Margin
-------------- ---------- ---------- ----------------
Equal to or greater
than 1.50 to 1.00 1.50% zero (0) 1.50%
Equal to or greater
than 1.30 to 1.00 but
less than 1.50 to 1.00 1.75% zero (0) 1.50%
Equal to or greater
than 1.15 to 1.00 but
less than 1.30 to 1.00 2.00% .25% 1.75%
Equal to or greater
than .95 to 1.00 but
less than 1.15 to 1.00 2.25% .50% 2.00%
Less than .95 to 1.00 2.50% .75% 2.25%
Notwithstanding anything in this definition to the
contrary, (i) in the event that the Agent shall fail to
receive any such financial statements and the related Coverage
Ratio Certificate for the last fiscal month in any fiscal
quarter of the Parent within thirty (30) days following the end
of such fiscal month (within ninety (90) days following the end
of such fiscal month if such fiscal month is the last fiscal
month of any Fiscal Year), then the Applicable Margin shall, at
the end of such thirtieth or ninetieth day, as appropriate,
immediately and without notice or further action be the highest
Applicable Margin provided herein (such Applicable Margin to be
in effect until the first day of the first full calendar month
after the Agent receives the monthly financial statements of the
Parent and its Subsidiaries required under Section 7.2(b) for
the last fiscal month of the most recent fiscal quarter of the
Parent and the related Coverage Ratio Certificate) and (ii) in
the event that, with respect to any twelve (12) fiscal month
period of the Parent which shall be a Fiscal Year, the audited
financial statements of the Parent and its Subsidiaries required
under Section 7.2(a) for such Fiscal Year shall indicate a
Coverage Ratio for such twelve (12) fiscal month period (as
determined by the Agent) less than that reflected in the
Coverage Ratio Certificate delivered to the Agent for such
twelve (12) fiscal month period, the Applicable Margin shall be
adjusted retroactively (to the effective date of the Applicable
Margin which was determined based upon the delivery of such
Coverage Ratio Certificate and the related monthly financial
statements of the Parent and its Subsidiaries delivered pursuant
to Section 7.2(b) for the last month of such twelve (12) fiscal
month period) to reflect an Applicable Margin based upon the
Coverage Ratio determined from the audited financial statements
and the Borrower shall make payments to the Agent on behalf of
the Lenders to reflect such adjustment."
"'Base Rate Loans' means the Base Rate Revolving Loans."
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"'Borrowing' means a borrowing hereunder consisting of
Revolving Loans made on the same day by the Lenders (or by BABC
in the case of a Borrowing funded by BABC Loans or by the Agent
in the case of a Borrowing consisting of an Agent Advance) to
the Borrower."
"'Cash Requirements' means, for any period, the sum of
(a) Net Capex for such period; (b) cash interest paid by the
Parent and its Subsidiaries during such period, net of cash
interest income received by the Parent and its Subsidiaries
during such period; but excluding from this clause (b) in any
event amortization of one-time placement, syndications, work and
similar fees in connection with this Agreement or in connection
with other Debt For Borrowed Money or any other financing issued
by the Parent or any of its Subsidiaries (including the Senior
Notes); (c) cash taxes paid by the Parent and its Subsidiaries
during such period, less cash tax refunds received by the Parent
and its Subsidiaries during such period, but excluding from cash
taxes paid any assessment paid by the Parent or any of its
Subsidiaries as a result of Federal or state income tax audits
with respect to the Parent or any of its Subsidiaries; and (d)
the Debt Reduction Amount for such period."
"'Combined Availability' of the Borrower means, at any
time:
(a) the lesser of (i) the Maximum Revolver
Amount or (ii) the sum of (x) the then Applicable Advance Rate
Percentage of the Book Value of Eligible Inventory of the
Borrower (excluding Inventory referred to in clause (y) below)
plus (y) fifty percent (50%) of the face amount of outstanding
documentary Letters of Credit issued with respect to goods as
to which the Agent is named as consignee, other than those
documentary Letters of Credit issued with respect to goods that
would otherwise be treated as Eligible Inventory, minus
(b) the sum of (i) the aggregate unpaid
balance of all Revolving Loans made to the Borrower at such
time, (ii) the aggregate amount of all Pending Revolving Loans
to be made to the Borrower at such time, (iii) the aggregate
undrawn amount of all outstanding Letters of Credit, (iv) the
aggregate amount of any unpaid reimbursement obligations in
respect of Letters of Credit, (v) reserves for accrued interest
on the Obligations, (vi) reserves for Shipping Release
Indemnities (as defined in Section 2.3(k)) and (vii) all other
reserves which the Agent deems necessary in the exercise of its
reasonable credit judgment to maintain as a result of matters
which the Agent determines, in the exercise of such judgment,
may affect the value of any Eligible Inventory, the priority of
the Lien of the Agent thereon or the ability of the Agent to
realize on any such Inventory, including, without limitation,
reserves for landlords liens with respect to real properties
leased by the Borrower, reserves for shrinkage and markdowns and
reserves for any amounts which the Agent or any Lender is
reasonably expected to be obligated to pay in the future for the
account of the Borrower."
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"'Commitment' means, at any time with respect to a
Lender, the principal amount set forth beside such Lender's name
under the heading 'Commitment' on Schedule I to the First
Amendment or on the signature page of the Assignment and
Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 13.3, as
such Commitment may be adjusted from time to time in accordance
with the provisions of Section 13.3, and 'Commitments' means,
collectively, the aggregate amount of the commitments of all of
the Lenders."
"'Debt Reduction Amount' means for any period that
amount which is the aggregate amount of payments of principal
made during such period on Debt For Borrowed Money (excluding
the Obligations, the Existing Bank Debt and the repayment
pursuant to Section 3(c) of the First Amendment of term loans
made by the Lenders hereunder) of the Parent and its
Subsidiaries, Debt under sale-leaseback arrangements of the
Parent and its Subsidiaries permitted hereunder and other
similar Debt of the Parent and its Subsidiaries permitted
hereunder."
"'EBITDA' means for any period, the sum of:
(a) the net income of the Parent and its
Subsidiaries on a consolidated basis after provision for income
taxes for such period, as determined in accordance with GAAP and
reported on the Financial Statements for such period, excluding
any and all of the following included in such net income: (i)
gain or loss arising from the sale of any capital assets; (ii)
gain arising from any write-up in the book value of any asset;
(iii) earnings or loss of any corporation, substantially all the
assets of which have been acquired by the Parent or any of its
Subsidiaries in any manner, to the extent realized by such other
corporation prior to the date of acquisition; (iv) earnings of
any business entity in which the Parent or any of its
Subsidiaries has an ownership interest unless (and only to the
extent) such earnings shall actually have been received by the
Parent or any of its Subsidiaries in the form of cash
distributions; (v) earnings or loss of any Person to which
assets of the Parent or any of its Subsidiaries shall have been
sold, transferred or disposed of, or into which the Parent or
any of its Subsidiaries shall have been merged, or which has
been a party with the Parent or any of its Subsidiaries to any
consolidation or other form of reorganization, prior to the date
of such transaction; (vi) gain or loss arising from the
acquisition of debt or equity securities of the Parent or any of
its Subsidiaries or from cancellation or forgiveness of Debt;
and (vii) gain (net of losses) arising from extraordinary items,
as determined in accordance with GAAP, or from other
non-recurring transactions; plus
(b) the sum of the provision for income taxes,
interest expense, depreciation and amortization expense, other
non-cash charges, the effect of accounting changes and
extraordinary items, in each case to the extent deducted in
determining such net income for such period, in each of the
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foregoing cases for the Parent and its Subsidiaries on a
consolidated basis in accordance with GAAP. Notwithstanding the
foregoing, EBITDA shall not in any event include any loss
arising directly and solely from store closures by the
Borrower."
"'LIBOR Rate Loans' means the LIBOR Revolving Loans."
"'Loan Documents' means this Agreement, the Pledge
Agreement, the Trademark Agreement, and any other agreements,
instruments, and documents heretofore, now or hereafter
evidencing, securing, guaranteeing or otherwise relating to the
Obligations, the Collateral, or any other aspect of the
transactions contemplated by this Agreement."
"'Maximum Revolver Amount' means $340,000,000."
"'Net Capex' means, for any period, that amount which is
(1) the greater of (a) the product of $1,000,000 and the number
of fiscal months of the Parent (or portion thereof) comprising
such period or (b) the aggregate amount of Capital Expenditures
(including, without limitation, any Capital Expenditures that
would arise from any acquisition described in clause (m) of the
definition Restricted Investment) made by the Parent and its
Subsidiaries during such period, less (2) the aggregate amount
of (i) Net Cash Proceeds received by the Parent or any of its
Subsidiaries during such period from the sale or other
disposition to non-Affiliates of Equipment permitted to be sold
or disposed of hereunder and (ii) Debt For Borrowed Money
incurred by the Parent or any of its Subsidiaries during such
period which is permitted hereunder in connection with the
financing (but not refinancing) of Capital Expenditures made in
such period or made at any time prior to the beginning of such
period."
"'Obligations' means all present and future loans,
advances, liabilities, obligations, covenants, duties, and debts
owing by the Borrower or other Loan Party to the Agent and/or
any Lender, arising under or pursuant to this Agreement or any
of the other Loan Documents, whether or not evidenced by any
note, or other instrument or document, whether arising from an
extension of credit, opening of a letter of credit, acceptance,
loan, guaranty, indemnification or otherwise, whether direct or
indirect (including, without limitation, those acquired by
assignment from others, and any participation by the Agent
and/or any Lender in the Borrower's debts owing to others),
absolute or contingent, due or to become due, primary or
secondary, as principal or guarantor, and including, without
limitation, all principal, interest, charges, expenses, fees,
attorneys' fees, filing fees and any other sums chargeable to
the Borrower hereunder or under any of the other Loan Documents.
'Obligations' includes, without limitation, all Revolving Loans
and all debts, liabilities, and obligations now or hereafter
owing from the Borrower to the Agent and/or any Lender under or
in connection with the Letters of Credit or Credit Support."
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"'Stated Termination Date' means February 5, 2002."
(b) Section 2.1 of the Loan and Security Agreement is hereby
amended by deleting such Section in its entirety and substituting
therefor the following:
"2.1 Total Facility. Subject to all of the terms and
conditions of this Agreement, the Lenders severally agree to
make available a total credit facility of up to $340,000,000
(the 'Total Facility') for the Borrower's use from time to time
during the term of this Agreement. The Total Facility shall be
comprised of a revolving line of credit for the Borrower
consisting of revolving loans and letters of credit up to the
limits of the Combined Availability as described in Sections 2.2
and 2.3."
(c) Section 2.2 of the Loan and Security Agreement is hereby
amended by deleting therefrom paragraph (a) thereof in its entirety and
substituting therefor the following:
"(a) Amounts. Subject to the satisfaction of the
conditions precedent set forth in Article 10, each Lender
severally agrees, upon the Borrower's request from time to time
on any Business Day during the period from the Closing Date to
the Termination Date, to make revolving loans (the 'Revolving
Loans') to the Borrower, in amounts not to exceed (except for
BABC with respect to BABC Loans or Agent Advances) such Lender's
Pro Rata Share of the Combined Availability. The Lenders,
however, in their discretion, may elect to make Revolving Loans
to the Borrower or participate (as provided for in Section
2.3(f)) in the credit support or enhancement provided through
the Agent to the issuers of Letters of Credit in excess of the
Combined Availability on one or more occasions, but if they do
so, neither the Agent nor the Lenders shall be deemed thereby to
have changed the limits of the Maximum Revolver Amount or the
Combined Availability or to be obligated to exceed such limits
on any other occasion. If the sum of (i) the aggregate
outstanding Revolving Loans to the Borrower, (ii) the aggregate
amount of Pending Revolving Loans to the Borrower, (iii) the
aggregate undrawn amount of outstanding Letters of Credit and
(iv) any unpaid reimbursement obligations in respect of Letters
of Credit exceeds the Combined Availability (with Combined
Availability determined as if clauses (b)(i) through (iv) of
such definition were zero), the Lenders may refuse to make or
otherwise restrict the making of Revolving Loans to the Borrower
as the Lenders determine until such excess has been eliminated,
subject to the Agent's authority, in its sole discretion, to
make Agent Advances pursuant to the terms of Section 2.2(i)."
(d) Section 2.2 of the Loan and Security Agreement is hereby
further amended by deleting therefrom clause (iii) of paragraph (g)
thereof in its entirety and substituting therefor the following:
"(iii) The Agent shall not be obligated to transfer to
a Defaulting Lender any payments made by any Borrower to the
Agent for the Defaulting Lender's benefit; nor shall a
Defaulting Lender be entitled to the sharing of any payments
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hereunder. Amounts payable to a Defaulting Lender shall instead
be paid to or retained by the Agent. The Agent may hold and, in
its discretion, re-lend to any Borrower the amount of all such
payments received or retained by it for the account of such
Defaulting Lender. Any amounts so re-lent to any Borrower shall
bear interest at the rate applicable to Base Rate Revolving
Loans and for all other purposes of this Agreement shall be
treated as if they were Revolving Loans, provided, however, that
for purposes of voting or consenting to matters with respect to
the Loan Documents and determining Pro Rata Shares, such
Defaulting Lender shall be deemed not to be a 'Lender' and such
Lender's Commitment shall be deemed to be zero (-0-). Until a
Defaulting Lender cures its failure to fund its Pro Rata Share
of any Borrowing (1) such Defaulting Lender shall not be
entitled to any portion of the Unused Line Fee and (2) the
Unused Line Fee shall accrue in favor of the Lenders which have
funded their respective Pro Rata Shares of such requested
Borrowing, shall be allocated among such performing Lenders
ratably based upon their relative Commitments, and shall be
calculated based upon the average amount by which the aggregate
Commitments of such performing Lenders exceeds the sum of
outstanding Revolving Loans and the undrawn face amount of all
outstanding Letters of Credit. This section shall remain
effective with respect to such Lender until such time as the
Defaulting Lender shall no longer be in default of any of its
obligations under this Agreement. The terms of this Section
shall not be construed to increase or otherwise affect the
Commitment of any Lender, or relieve or excuse the performance
by any Borrower of its duties and obligations hereunder."
(e) Section 2.2 of the Loan and Security Agreement is hereby
still further amended by deleting therefrom clause (i) of paragraph (i)
thereof in its entirety and substituting therefor the following:
(i) Subject to the limitations set forth in the
provisos contained in this Section 2.2(i), the Agent is hereby
authorized by the Borrowers and the Lenders, from time to time
in the Agent's sole discretion, (1) after the occurrence of a
Default or an Event of Default, or (2) at any time that any of
the other applicable conditions precedent set forth in Article
10 have not been satisfied, to make Revolving Loans to any of
the Borrowers on behalf of the Lenders which the Agent, in its
reasonable business judgment, deems necessary or desirable (A)
to preserve or protect the Collateral, or any portion thereof,
(B) to enhance the likelihood of, or maximize the amount of,
repayment of the Loans and other Obligations, or (C) to pay any
other amount chargeable to any Borrower pursuant to the terms of
this Agreement, including, without limitation, costs, fees and
expenses as described in Section 16.7 (any of the advances
described in this Section 2.2(i) being hereinafter referred to
as "Agent Advances"); provided, that (i) the Majority Lenders
may at any time revoke the Agent's authorization contained in
this Section 2.2(i) to make Agent Advances, any such revocation
to be in writing and to become effective prospectively upon the
Agent's receipt thereof, and (ii) immediately after giving
effect to the making of the Agent Advances, the sum of (x) the
aggregate unpaid balance of all Revolving Loans made to the
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Borrower at such time, (y) the aggregate undrawn amount of all
outstanding Letters of Credit and (z) the aggregate amount of
any unpaid reimbursement obligations in respect of Letters of
Credit shall not exceed the Maximum Revolver Amount or
$25,000,000 in excess of clause (a)(ii) of the definition of
Combined Availability at such time."
(f) Section 2.3 of the Loan and Security Agreement is hereby
amended by adding the following sentence at the end of paragraph (a)
thereof:
"In each case in which the Agent is named as consignee with
respect to goods covered by a documentary Letter of Credit, such
Letter of Credit shall specify that originals of such documents
shall be sent to the freight forwarder, the customs broker and
the Borrower."
(g) Section 2.4 of the Loan and Security Agreement is hereby
amended by deleting such Section in its entirety and substituting
therefor the following:
"2.4 Intentionally Omitted"
(h) Section 3.2 of the Loan and Security Agreement is hereby
amended by deleting therefrom clause (iv) of paragraph (b) thereof in
its entirety and substituting therefor the following:
"(iv) the duration of the requested Interest Period."
(i) Section 3.5 of the Loan and Security Agreement is hereby
amended by deleting such Section in its entirety and substituting
therefor the following:
"3.5 Unused Line Fee. Until the Obligations have
been paid in full and this Agreement is terminated, the Borrower
agrees to pay, on the first day of each month and on the
Termination Date, to the Agent, for the ratable account of the
Lenders, an unused line fee equal to three-eighths of one
percent (0.375%) per annum on the average daily amount by which
the Maximum Revolver Amount exceeded the sum of the average
daily outstanding amount of Revolving Loans and the undrawn face
amount of all outstanding Letters of Credit, during the
immediately preceding month or shorter period if calculated on
the Termination Date. The unused line fee shall be computed on
the basis of a 360-day year for the actual number of days
elapsed. All payments received by the Agent as proceeds of
Collateral shall be deemed to be credited to the Borrower's Loan
Account immediately upon receipt for purposes of calculating the
unused line fee pursuant to this Section 3.5."
(j) Section 4.1 of the Loan and Security Agreement is hereby
amended by deleting such Section in its entirety and substituting
therefor the following:
"4.1 Loans. The Borrower shall repay the
outstanding principal balance of the Revolving Loans, plus all
accrued but unpaid interest thereon, on the Termination Date.
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The Borrower may prepay Revolving Loans at any time, and
reborrow subject to the terms of this Agreement; provided,
however, that with respect to any LIBOR Revolving Loans prepaid
by the Borrower prior to the expiration date of the Interest
Period applicable thereto, the Borrower promises to pay to the
Agent for account of the Lenders the amounts described in
Section 5.4. In addition, and without limiting the generality
of the foregoing, upon demand the Borrower promises to pay to
the Agent, for the account of the Lenders, the amount, without
duplication, by which the sum of (i) the aggregate outstanding
Revolving Loans owing by the Borrower, (ii) the aggregate amount
of Pending Revolving Loans to be made to the Borrower, (iii) the
aggregate undrawn amount of all outstanding Letters of Credit
and (iv) the amount of all unpaid reimbursement obligations with
respect to Letters of Credit exceeds the Combined Availability
(with Combined Availability determined as if clauses (b)(i)
through (iv) of such definition were zero). If after repaying
in full the Revolving Loans as provided in the immediately
preceding sentence any portion of such excess still remains,
then the Borrower shall deposit cash in the amount thereof in a
cash collateral account with the Agent to be held in such
account on terms satisfactory to the Agent."
(k) Section 4.2 of the Loan and Security Agreement is hereby
amended by deleting such Section in its entirety and substituting
therefor the following:
"4.2 Termination of Facility. The Borrower may
terminate this Agreement upon at least three (3) Business Days'
joint notice to the Agent and the Lenders, upon (a) the payment
in full of all outstanding Revolving Loans, together with
accrued interest thereon, and the cancellation of all
outstanding Letters of Credit (or delivery to the Agent of cash
collateral therefor as required by Section 2.3(j)), (b) the
payment of the early termination fee set forth in the next
sentence, (c) the payment in full in cash of all other
Obligations together with accrued interest thereon, and (d) with
respect to any LIBOR Rate Loans prepaid in connection with such
termination prior to the expiration date of the Interest Period
applicable thereto, the payment of the amounts described in
Section 5.4. If this Agreement is terminated at any time on or
prior to the fourth Anniversary Date, whether pursuant to this
Section or pursuant to Section 11.2, the Borrower shall pay to
the Agent, for the account of the Lenders, an early termination
fee determined in accordance with the following table:
Period during which
early termination occurs Early Termination Fee
------------------------ ---------------------
On or prior to the first 0.50% of the Total
Anniversary Date Facility
After the first Anniversary
Date but on or prior to the 0.25% of the Total
fourth Anniversary Date Facility
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provided, however, that the early termination fee described in
this Section 4.2 shall not be payable in the event that the
Borrower terminates this Agreement (x) and repays all amounts
required under this Section 4.2 using the proceeds of a loan
facility not secured by any Inventory; (y) in connection with
the acquisition by the Borrower of all the capital stock or all
or a substantial part of the assets of another Person that is
not an Affiliate which requires the refinancing of the Total
Facility and such acquisition is actually consummated; and/or
(z) after ten (10) days prior written notice to the Agent as a
result of mutual dissatisfaction between the Agent or the
Lenders, on the one hand, and the Borrower, on the other hand,
resulting in an inability to agree on executory elements of this
Agreement following good faith negotiation."
(l) Section 4.5 of the Loan and Security Agreement is hereby
amended by deleting such Section in its entirety and substituting
therefor the following:
"4.5 Apportionment, Application and Reversal of
Payments. Aggregate principal and interest payments of the
Borrower shall be apportioned ratably among the Lenders
(according to the unpaid principal balance of the Loans to
which such payments relate held by each Lender) and payments of
the fees shall, as applicable, be apportioned ratably among the
Lenders. All payments shall be remitted to the Agent and all
such payments not relating to principal or interest of specific
Loans, or not constituting payment of specific fees, and all
proceeds of Collateral received by the Agent (including all
payments received by the Agent with respect to Collateral as
loss payee under insurance policies of the Borrower), shall be
applied, ratably, subject to the provisions of this Agreement,
first, to pay any fees, indemnities or expense reimbursements
then due to the Agent from the Borrower; second, to pay any fees
or expense reimbursements then due to the Lenders from the
Borrower; third, to pay interest due in respect of all Revolving
Loans owing by the Borrower, including BABC Loans and Agent
Advances; fourth, to pay or prepay principal of the BABC Loans
and Agent Advances owing by the Borrower; fifth, to pay or
prepay principal of the Revolving Loans (other than BABC Loans
and Agent Advances) and unpaid reimbursement obligations in
respect of Letters of Credit owing by the Borrower; sixth, to
the payment of any other Obligation due to the Agent or any
Lender by any Borrower; seventh, to be paid over to such Person
or Persons as may be required by law (including pursuant to
Section 9-504 of the UCC) or by court order; and eighth, to be
paid to the Borrower by transfer to bank accounts designated by
it in writing. Notwithstanding anything to the contrary
contained in this Agreement, unless so directed by the Borrower,
or unless an Event of Default is outstanding, neither the Agent
nor any Lender shall apply any payments which it receives to any
LIBOR Revolving Loan, except (a) on the expiration date of the
Interest Period applicable to any such LIBOR Rate Loan, or (b)
in the event, and only to the extent, that there are no
outstanding Base Rate Revolving Loans. The Agent shall promptly
distribute to each Lender, pursuant to the applicable wire
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transfer instructions received from each Lender in writing, such
funds as it may be entitled to receive, subject to a Settlement
delay as provided for in Section 2.2(j). The Agent and the
Lenders shall have the continuing and exclusive right to apply
and reverse and reapply any and all such proceeds and payments
to any portion of the Obligations."
(m) Section 7.2 of the Loan and Security Agreement is hereby
amended by deleting therefrom paragraph (k) thereof and substituting
therefor the following:
"(k) Such additional information as the Agent and/or
any Lender may from time to time reasonably request regarding
the financial and business affairs of the Parent or any
Subsidiary thereof, including information with respect to the
status of the program to resolve the Year 2000 Problem."
(n) Section 7.3 of the Loan and Security Agreement is hereby
amended by adding immediately after paragraph (o) thereof a new
paragraph (p) reading in its entirety as follows:
"(p) Promptly, of any aspect of the Year 2000 Problem
that, in the good faith judgment of the applicable Loan Party,
cannot be remedied in a timely fashion and which, if not so
remedied, is then reasonably expected to have a Material Adverse
Effect."
(o) Section 8.29 of the Loan and Security Agreement is
hereby amended by deleting such Section in its entirety and substituting
therefor the following:
"8.29 Senior Debt. All Revolving Loans, interest
owing thereon (both before and after the commencement of a
proceeding in bankruptcy or insolvency with respect to any Loan
Party, whether or not such interest is an allowed claim in any
such proceeding), reimbursement obligations with respect to
Letters of Credit and Credit Support and guarantee obligations
of Subsidiaries of the Parent with respect to the Obligations
(collectively, the foregoing, the 'Senior Debt Obligations')
constitute, and at all times will continue to constitute,
'Senior Debt' (as defined in the Senior Indenture) under the
Senior Indenture, the Senior Notes and the guarantees issued
from time to time pursuant to the Senior Indenture."
(p) Article 8 of the Loan and Security Agreement is hereby
amended by adding immediately after Section 8.31 thereof a new Section
8.32 reading in its entirety as follows:
"8.32 Year 2000. The Loan Parties have developed and
are implementing a comprehensive, detailed program to address on
a timely basis the 'Year 2000 Problem' (that is, the inability
of computers, as well as embedded microchips in non-computing
devices, to perform properly date-sensitive functions with
respect to certain dates prior to and after December 31, 1999),
and reasonably anticipate that they will on timely basis
successfully resolve the Year 2000 Problem for all material
computer applications used by them. In addition, the Loan
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Parties have initiated steps in a program to communicate with
their merchandise and service vendors for purposes of limiting
exposure to vendors who may not remedy the Year 2000 Problem on
a timely basis. In connection with this program, the Loan
Parties expect to undertake contingency plans, if necessary, for
the shifting of merchandise orders to vendors who can
demonstrate resolution of the Year 2000 Problem most clearly, as
well as to find alternative methods of interacting with any key
vendors who may need assistance should they have Year 2000
Problems."
(q) Section 9.24 of the Loan and Security Agreement is
hereby amended by deleting such Section in its entirety and substituting
therefor the following:
"9.24 Cash Flow Test. The Parent will not permit the
ratio of EBITDA to Cash Requirements, in each case for any
period of four consecutive fiscal quarters of the Parent ending
on the last day of any fiscal quarter of the Parent set forth
below (determined as of the last day of such fiscal quarter), to
be less than the ratio set forth below opposite such fiscal
quarter:
Fiscal Quarter(s) Ending Coverage Ratio
------------------------ --------------
October 31, 1998 through
January 29, 2000 .65 to 1.00
April 29, 2000 through
October 28, 2000 .70 to 1.00
February 3, 2001 and
each fiscal quarter thereafter .75 to 1.00
(r) Section 9.25 of the Loan and Security Agreement is
hereby amended by deleting such Section in its entirety and substituting
therefor the following:
"9.25 Intentionally Omitted."
(s) Section 10.2 of the Loan and Security Agreement is
hereby amended by deleting therefrom paragraph (b) thereof in its
entirety and substituting therefor the following:
"(b) the amount of the Combined Availability shall be
sufficient to make such Loan or cause the issuance or provision
of such Letter of Credit or Credit Support without exceeding the
Combined Availability, provided, however, that the foregoing
conditions precedent are not conditions to each Lender's
participating in or reimbursing BABC or the Agent for such
Lenders' Pro Rata Share of any BABC Loan or Agent Advance as
provided in Sections 2.2(h), (i) and (j)."
(t) Section 11.1 of the Loan and Security Agreement is
hereby amended by:
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(i) deleting the period at the end of paragraph (s)
thereof and substituting therefor "; or"; and
(ii) adding immediately after paragraph (s) thereof a
new paragraph (t) reading in its entirety as follows:
"(t) any key financial or operating system of
any Loan Party or of one or more of the Loan Parties'
respective service and/or merchandise vendors fails as a
result of the Year 2000 Problem, which failure is then
reasonably expected to result in a Material Adverse
Effect."
(u) Section 13.3 of the Loan and Security Agreement is
hereby amended by deleting therefrom paragraph (a) thereof in its
entirety and substituting therefor the following:
"(a) Any Lender may, with the written consent of the
Agent (which consent shall not be unreasonably withheld), assign
and delegate to one or more assignees (provided that no written
consent of the Agent shall be required in connection with any
assignment and delegation by a Lender to an Affiliate of such
Lender) (each an 'Assignee') all, or any ratable part of all, of
the Loans, the Commitments and the other rights and obligations
of such Lender hereunder, in a minimum amount of $15,000,000 or
if less the entire amount of such Lender's Commitment (provided,
that, unless an assignor Lender has assigned and delegated all
its Loans and Commitment, no such assignment and/or delegation
shall be permitted unless, after giving effect to such
assignment and/or delegation, such assignor Lender retains a
Commitment in a minimum amount of $15,000,000); provided,
however, that the Loan Parties and the Agent may continue to
deal solely and directly with such Lender in connection with the
interest so assigned to an Assignee until (i) written notice of
such assignment, together with payment instructions, addresses
and related information with respect to the Assignee, shall have
been given to the Loan Parties and the Agent by such Lender and
the Assignee; (ii) such Lender and its Assignee shall have
delivered to the Loan Parties and the Agent an Assignment and
Acceptance in the form of Exhibit E ('Assignment and
Acceptance') and (iii) the assignor Lender or Assignee has paid
to the Agent a processing fee in the amount of $3,000. The
Agent agrees that if, as a result of any assignments or
delegations of its Commitment, the aggregate of the Commitments
of the Agent, in its capacity as a Lender, and its Affiliates
shall fall below $50,000,000, the Agent shall, upon the written
request of the Borrower (but only if there exists no Default or
Event of Default at the time of such request), resign as Agent
in accordance with the provisions set forth in Section 14.9."
(v) Section 13.3 of the Loan and Security Agreement is
hereby further amended by deleting therefrom paragraph (d) thereof in
its entirety and substituting therefor the following:
"(d) Immediately upon each Assignee's or assigning
Lender's making its processing fee payment under the Assignment
and Acceptance, this Agreement shall be deemed to be amended to
the extent, but only to the extent, necessary to reflect the
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addition of the Assignee and the resulting adjustment of the
Commitments arising therefrom. The Commitment allocated to each
Assignee shall reduce such Commitments of the assigning Lender
pro tanto."
(w) Section 13.3 of the Loan and Security Agreement is
hereby still further amended by deleting therefrom paragraph (f) thereof
in its entirety and substituting therefor the following:
"(f) Notwithstanding any other provision in this
Agreement, any Lender may at any time create a security interest
in, or pledge, all or any portion of its rights under and
interest in this Agreement in favor of any Federal Reserve Bank
in accordance with Regulation A of the FRB or U.S. Treasury
Regulation 31 CFR 203.14, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted
under applicable law."
(x) Section 14.15 of the Loan and Security Agreement is
hereby amended by deleting such Section in its entirety and substituting
therefor the following:
"14.15 Payments by Agent to Lenders. All payments to
be made by the Agent to the Lenders shall be made by bank wire
transfer or internal transfer of immediately available funds to
each Lender pursuant to such transfer instructions for such
Lender set forth on Schedule A (or, with respect to a Lender
which was an Assignee, on the applicable Assignment and
Acceptance pursuant to which such Assignee became a Lender) or
pursuant to such other wire transfer instructions as each party
may designate for itself by written notice to the Agent.
Concurrently with each such payment, the Agent shall identify
whether such payment (or any portion thereof) represents
principal, premium or interest on the Revolving Loans or
otherwise."
(y) Article 15 of the Loan and Security Agreement is hereby
amended by deleting therefrom the first paragraph thereof in its
entirety and substituting therefor the following:
"Each Guarantor unconditionally guarantees, as a primary
obligor and not merely as a surety, jointly and severally with
each other Guarantor, the due and punctual payment of the
principal of and interest on the Revolving Loans and of all
other Obligations, when and as due, whether at maturity, by
acceleration, by notice or prepayment or otherwise. Each
Guarantor further agrees that the Obligations may be extended
and renewed, in whole or in part, without notice to or further
assent from it, and that it will remain bound upon its guarantee
notwithstanding any extension or renewal of any Obligations."
SECTION 3. EFFECTIVENESS. This Amendment shall become effective
when:
(a) counterparts hereof have been duly executed and
delivered to the Agent on behalf of the Borrowers, the Parent, the other
Loan Parties, the Lenders and the Agent;
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(b) the Agent shall be satisfied that there exists no
Default or Event of Default;
(c) the Borrower shall have used proceeds of Revolving Loans
to pay the Term Loans in full;
(d) the Agent shall have received for the benefit of the
Lenders an amendment fee in the amount of $680,000 (to be allocated
among the Lenders based upon each Lender's respective Commitment at the
time such fee is received by the Agent); and
(e) the Agent shall have received for its own account a fee
in accordance with a separate letter agreement between the Agent and the
Borrower.
The Agent shall ask each of the Lenders to return to the Agent the Term
Loan Note held by such Lender. Upon receipt of such Term Loan Notes, the Agent
shall xxxx such Notes "Cancelled" and return such Notes to the Borrower.
SECTION 4. COUNTERPARTS. This Amendment may be executed in
counterparts, each of which shall be an original, and all of which, taken
together, shall constitute a single instrument. This Amendment shall be
governed by, and construed in accordance with, the internal laws (as opposed to
the conflicts of laws provisions) of the State of New York. Delivery of an
executed counterpart of a signature page to this Amendment by telecopier shall
be effective as delivery of a manually executed signature page hereto.
SECTION 5. REFERENCES TO LOAN AND SECURITY AGREEMENT. From and
after the effectiveness of this Amendment, all references in the Loan and
Security Agreement to "this Agreement", "hereof", "herein", and similar terms
shall mean and refer to the Loan and Security Agreement, as amended and modified
by this Amendment, and all references in other documents to the Loan and
Security Agreement shall mean such agreement as amended and modified by this
Amendment.
SECTION 6. RATIFICATION AND CONFIRMATION. The Loan and Security
Agreement is hereby ratified and confirmed and, except as herein agreed, remains
in full force and effect. Each of the Loan Parties represents and warrants that
on the date hereof (i) all representations and warranties made by any Loan Party
contained in Articles 6 and 8 of the Loan and Security Agreement, as amended
hereby, are correct in all material respects on and as of the date hereof, other
than any such representation or warranty which relates to a specified prior date
and (ii) there exists no Default or Event of Default.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the day and year
first above written.
"BORROWER"
HILLS DEPARTMENT STORE
COMPANY
By /s/ C. Xxxxx Xxxxxx
---------------------------------
Name: C. Xxxxx Xxxxxx
Title: Executive Vice President-
Chief Financial Officer
"PARENT"
HILLS STORES COMPANY
By /s/ Xxxxxxx X. Friend
---------------------------------
Name: Xxxxxxx X. Friend
Title: Senior Vice President-
Secretary & Corporate Counsel
S-1
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OTHER "LOAN PARTIES"
CANTON ADVERTISING, INC.
By /s/ Xxxxxxx X. Friend
---------------------------------
Name: Xxxxxxx X. Friend
Title: Vice President
HDS TRANSPORT, INC.
By /s/ Xxxxxxx X. Friend
---------------------------------
Name: Xxxxxxx X. Friend
Title: Vice President
CORPORATE VISION INC.
By /s/ Xxxxxxx X. Friend
---------------------------------
Name: Xxxxxxx X. Friend
Title: Vice President
HILLS DISTRIBUTING COMPANY
By /s/ Xxxxxxx X. Friend
---------------------------------
Name: Xxxxxxx X. Friend
Title: Vice President
X-0
00
"XXXXX"
XXXXXXXXXXX BUSINESS CREDIT,
INC., as the Agent
By /s/ Xxxxx Xxxxxxxxx
---------------------------------
Name: Xxxxx Xxxxxxxxx
Title: VP
"LENDERS"
BANKAMERICA BUSINESS CREDIT,
INC., as a Lender
By /s/ Xxxxx Xxxxxxxxx
---------------------------------
Name: Xxxxx Xxxxxxxxx
Title: VP
BANKBOSTON, N.A., as a Lender
By /s/ Xxxxxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxxxxx X. Xxxxx
Title: Vice President
THE CIT GROUP/BUSINESS CREDIT,
INC., as a Lender
By /s/ X. Xxxxxxxx
---------------------------------
Name: X. Xxxxxxxx
Title: SVP
CONGRESS FINANCIAL
CORPORATION, as a Lender
By /s/ Xxxxx X. Last
---------------------------------
Name: Xxxxx X. Last
Title: First Vice President
S-3
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XXXXXX FINANCIAL, INC., as a Lender
By /s/ Xxxxxx X. Xxxxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Sr. Vice Pres.
IBJ XXXXXXXX BUSINESS CREDIT
CORPORATION, as a Lender
By /s/ Xxxxx X. Xxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President
LASALLE BUSINESS CREDIT, INC., as a
Lender
By /s/ Xxxxxx X. Xxxxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: SVP
SANWA BUSINESS CREDIT
CORPORATION, as a Lender
By /s/ Xxxxx X. Xxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President
TRANSAMERICA BUSINESS CREDIT
CORPORATION, as a Lender
By /s/ Xxxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Senior Vice President
S-4
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Schedule I
----------
Lenders and Commitments
-----------------------
Name Commitment
---- ----------
BankAmerica Business Credit, Inc. $93,500,000
The First National Bank of Boston $25,000,000
The CIT Group/Business Credit, Inc. $25,000,000
Congress Financial Corporation $25,000,000
Xxxxxx Financial, Inc. $50,000,000
IBJ Xxxxxxxx Business Credit Corporation $16,500,000
LaSalle Business Credit, Inc. $25,000,000
Sanwa Business Credit Corporation $30,000,000
Transamerica Business Credit Corporation $50,000,000
