1
EXHIBIT 99.7
NOTE PURCHASE AND PARTICIPATION AGREEMENT
Dated as of May 28, 1993
Relating to the Issuance by
KMART CORPORATION
of its
7.05% SERIES A SENIOR SECURED NOTES DUE 2009
7.45% SERIES B SENIOR SECURED NOTES DUE 2013
In the Aggregate Principal Amount of
$42,000,000
------------------------------
Relating to two stores
and a warehouse
Series A: XXXXXXXXXX
Series B: XXXXXXXXXX
2
Page
----
TABLE OF CONTENTS
SECTION 1: Authorization, Sale and Purchase of
the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2: Summary of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3: Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 4: The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 5: Conditions of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Part A: Conditions to Note
Purchasers' Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 5.1 Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5.2 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5.3 Status of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5.4 Loan Policy Title Insurance . . . . . . . . . . . . . . . . . . . . . 6
Section 5.5 Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5.6 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5.8 UCC Searches . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5.9 Confirmation Letter . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5.10 PPN Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.11 Certificate of Cost . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.12 Legal Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Part B: Conditions to Owner's Obligations . . . . . . . . . . . . . . . . . . . . 8
Section 5.13 Certain Note Purchaser Conditions . . . . . . . . . . . . . . . . . . 8
Section 5.14 Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Part C: Proceedings and Documents . . . . . . . . . . . . . . . . . . . . . . . . 9
Part D: Deemed Waiver of Conditions . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 6: Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . 9
Section 6.1 Warranties and Representations of
Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 6.2 Representations of the Note
Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 7: Covenants of the Note Purchaser
and Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7.1 Covenants of the Note Purchaser . . . . . . . . . . . . . . . . . . 16
-i-
3
Page
----
Section 7.2 Covenants of Owner . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 8: Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 8.1 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 8.2 Transmission of the Notes . . . . . . . . . . . . . . . . . . . . . 18
Section 8.3 Brokers' Fees and Stamp Taxes . . . . . . . . . . . . . . . . . . . 18
Section 8.4 Certain Fees and Expenses . . . . . . . . . . . . . . . . . . . . . 18
SECTION 9: Survival of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 10: Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 11: Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 12: Home Office Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 13: Obligation to Record . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 14: Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 15: Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
-------------------------------------
Exhibit A List of Note Purchasers, Commitment Amounts, Wiring and Notice Instructions
Exhibit B Location of Land Parcels
Exhibit C-1 Form of Note Purchasers'
Special Counsel Opinion
Exhibit C-2 Form of Dickinson, Wright, Moon, Van Dusen & ▇▇▇▇▇▇▇ Opinion (regarding formation,
existence of Owner, due authorization, execution and delivery by Owner, etc.)
Exhibit C-3 Form of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Opinion (regarding enforceability of those Loan Document
provisions governed by New York law)
Exhibit D List of Local Counsel
Exhibit E Wire instructions for Payment of Purchase Price of Notes to Owner
-ii-
4
NOTE PURCHASE AND PARTICIPATION AGREEMENT
Dated as of May 28, 1993
To Each of the Addressees
Listed in Exhibit A hereto,
individually and not jointly
Dear Sirs:
KMART CORPORATION, a Michigan corporation ("Owner"), does hereby
agree with you as follows:
SECTION 1. AUTHORIZATION, SALE AND PURCHASE OF THE NOTES. (a) Owner
will issue its 7.05% Series A Senior Secured Notes Due 2009 in the aggregate
original principal amount of TWENTY EIGHT MILLION DOLLARS ($28,000,000), and
its 7.45% Series B Senior Secured Notes Due 2013 in the aggregate original
principal amount of FOURTEEN MILLION DOLLARS ($14,000,000) (herein, together
with any note or notes issued in exchange or substitution therefor in
accordance with the Indenture, called the "Notes").
The Notes shall be issued pursuant to a Trust Indenture, dated as of
the date hereof (herein, together with all amendments and supplements thereto,
the "Indenture"), between Owner, and XXXXXXXXXX, a duly organized
and existing New York banking corporation (the "Trustee"), and XXXXXXXXXX,
an individual (the "Individual Trustee", and together with the Trustee, the
"Trustees").
(b) Subject to the terms and conditions herein set forth, Owner
agrees to sell to you and you agree to purchase from Owner one or more Notes in
an amount and series each as set forth opposite your name in Exhibit A hereto,
at a price equal to 100% of the principal amount thereof to be purchased by
you. Simultaneously with the issuance and sale to you of the Notes, Owner will
issue and sell to the other purchasers listed in Exhibit A hereto (the "Other
Purchasers"), pursuant to Note Purchase Agreements with such Other Purchasers
(the "Other Agreements"), one or more Notes in respective amounts and series as
set forth opposite the name of such Other Purchaser in Exhibit A hereto. Your
obligation under this Agreement and the obligations of the Other Purchasers
under the Other Agreements shall be several
5
and not joint, and no purchaser of Notes shall be liable or responsible for
the acts or omissions of any Other Purchaser.
Capitalized terms not otherwise defined herein have the meanings
specified in Section 3.
SECTION 2. SUMMARY OF TRANSACTION. As of the Closing Date, Owner will
hold fee title to certain land parcels (the "Land Parcels") and condominium
apartments (the "Condominium Apartments"), the location of which is set forth
in Exhibit B hereto and the improvements thereon (such Land Parcels, together
with all easements and appurtenances thereto, and the improvements located
thereon and the Condominium Apartments, the "Properties"). The Properties, and
Owner's rights and interest therein or in connection therewith, will be subject
to the lien and security interest of the Deed of Trust and the Mortgage as
security for the Notes.
SECTION 3. CERTAIN DEFINITIONS. The following terms have the meanings
set forth below or in the section of this Agreement or in the Loan Documents
specified below, such meanings to be applicable equally to the singular and
plural nouns and verbs of any tense:
"Affiliate" means Affiliate as defined in the Indenture.
"Business Day" means Business Day as defined in the Indenture.
"Closing" is defined in Section 4.
"Closing Date" is defined in Section 4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Condominium Apartments" is defined in Section 2.
"Deed of Trust" means the Deed of Trust, Fixture Filing and
Security Agreement dated, executed and delivered as of the date
hereof, and made by owner to the Trustees, as trustees, for the
benefit of the Registered Holders, as beneficiaries, affecting the
Property in California.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
-2-
6
"Event of Default" means any occurrence or act of the character
specified in Section 4.01 of the Deed of Trust and the Mortgage.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Improvements" are defined in the Indenture.
"Indenture" is defined in Section l(a) of this Agreement.
"Individual Trustee" is defined in Section 1(a) of this
Agreement.
"Institutional Investor" means any of the following Persons
existing under the laws of the United States or any state thereof or
of the District of Columbia or of Canada or any province thereof: (i)
any bank, bank holding company, savings institution or trust company,
acting for its own account or in a fiduciary capacity, (ii) any
charitable foundation or other eleemosynary institution, (iii) any
insurance company or fraternal benefit society, (iv) any pension,
retirement or profit sharing fund or trust for which any bank, trust
company or national banking association or investment advisor
registered under the Investment Advisers Act of 1940, as amended, is
acting as trustee or agent, or if self managed, having funds of at
least $50,000,000, (v) any investment company, as defined in the
Investment Company Act of 1940, as amended, (vi) any college or
university, (vii) any government, any public employees' pension or
retirement system, or any other governmental agency supervising the
investment of public funds, (viii) a "real estate investment trust",
as defined in Section 856 of the Internal Revenue Code of 1986, as
amended, (ix) any finance company, or (x) any financial services
corporation.
"Land Parcels" is defined in Section 2 of this Agreement.
"Loan Documents" mean the following:
(a) this Agreement and the Other Agreements;
(b) the Notes;
(c) the Indenture;
(d) the Deed of Trust;
(e) the Mortgage; and
(f) Uniform Commercial Code financing statements by Owner.
-3-
7
"Mortgage" means the Mortgage, Security Agreement and
Financing Statement, dated, executed and delivered as of the date
hereof, made by Owner to the Individual Trustee for the benefit of the
Registered Holders of the Notes, affecting the Property in Hawaii.
"Note Purchasers" mean the Other Purchasers and you.
"Notes" are defined in Section 1(a) of this Agreement.
"Other Agreements" are defined in Section 1(b) of this
Agreement.
"Other Purchasers" are defined in Section 1(b) of this
Agreement.
"Owner" is defined in the first paragraph of this Agreement.
"Permitted Exceptions", with respect to any Property, are
defined in the Deed of Trust or the Mortgage encumbering such
Property.
"Person" means any individual, partnership, corporation, trust,
unincorporated association, joint venture or other organization, or
government or any department or agency thereof or any other entity.
"Placement Agent" means XXXXXXXXXX.
"Properties" is defined in Section 2(a) of this Agreement.
"Registered Holder of Notes" or "Registered Holder" is defined
in the Indenture.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Title Company" shall mean First American Title Insurance
Company, a California corporation.
"Trustee" is defined in Section 1(a) of this Agreement.
"Trustees" is defined in Section 1(a) of this Agreement.
"Trust Estate" is defined in the Indenture.
-4-
8
"Trust Indenture Act" shall mean the Trust Indenture Act of
1939, as amended.
Any term not otherwise defined herein shall have the meaning
set forth in the Indenture.
SECTION 4. THE CLOSING. The closing for the purchase and sale of the
Notes (the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ May 28, 1993 (the "Closing Date"). On
the Closing Date, your payment for the purchase of the Notes to be purchased by
you or your designee shall be made by you, in immediately available federal
funds wired to the account designated by Owner on Exhibit E, and Owner will
execute and deliver to you the Notes, dated the Closing Date, to be purchased
by you or your designee, registered in your name or in the name or names of one
or more other Persons, all as you may designate, for delivery to you or your
designee.
If you or your designee and the Other Purchasers shall fail to pay for
the purchase of one or more of the Notes on the Closing Date, or if prior to
the Closing the conditions to Owner's obligations specified in this Agreement
shall not have been fulfilled to Owner's satisfaction or waived, or if prior to
the Closing the conditions to your obligations specified in this Agreement or
those of any Other Purchaser specified in any Other Agreement shall not have
been fulfilled to your or such Other Purchaser's satisfaction or waived, then
to the extent any documents have been delivered with respect to the Closing,
such documents (other than any commitment letter) shall be returned to the
appropriate parties and to the extent any documents have been recorded, they
shall be released by the appropriate parties, in each case without affecting
any rights or obligations that may exist between or among the parties as a
result of any of the foregoing. This paragraph shall be of no further force
and effect upon the Closing with respect to such matters as are to be performed
or complied with prior to the Closing.
SECTION 5. CONDITIONS OF CLOSING.
Part A: Conditions to Note Purchasers' Obligations. The obligation of
you or your designee and each Other Purchaser to purchase and pay for Notes on
the Closing Date is subject to satisfaction of the conditions set forth in Part
C of this Section 5 and (a) the accuracy and correctness on the Closing Date of
the representations and warranties of Owner contained herein, (b) the
performance by Owner of its agreements contained herein and to be performed by
Owner on or prior to the Closing Date and
-5-
9
(c) the satisfaction of all of the following conditions on or prior to the
Closing Date:
5.1. Loan Documents. Each of the Loan Documents shall have been duly
authorized, executed and delivered by the parties thereto, other than you; no
default shall exist under any of the Loan Documents; and the Note Purchasers
and your special counsel, Day, ▇▇▇▇▇ & ▇▇▇▇▇▇, shall have received a fully
executed copy of this Agreement and each of the other Loan Documents (except
that only you and the other Purchasers shall receive your respective executed
Notes). The Indenture, the Deed of Trust, the Mortgage and any financing
statements under the Uniform Commercial Code included within the definition of
Loan Documents shall have been recorded, registered and filed, if necessary, or
provision therefor shall have been made, in such manner as to enable your
special counsel to render its opinion referred to in Section 5.6.
5.2. Taxes. All taxes, fees and other charges in connection with the
execution, delivery, recording, filing and registration of the Loan Documents
shall have been paid or provisions for such payment shall have been made to the
satisfaction of you and your special counsel.
5.3. Status of Title. You shall be satisfied as to the title to each
Property and the validity and priority of the lien of the Deed of Trust and the
Mortgage as to each Property (subject only to the funding on the Closing Date
of the purchase prices for the Notes by you and the Other Purchasers).
5.4. Loan Policy Title Insurance. The Trustee shall have received a
title insurance loan policy on the ALTA standard loan policy Form 1990 (without
creditors' rights exceptions), with respect to each Property, issued by the
Title Company as of the Closing Date and insuring that the applicable Deed of
Trust or the Mortgage, as the case may be, constitutes a valid first lien on
such Property, without survey exception, subject only to Permitted Exceptions
and otherwise in conformity with the title commitments approved by your special
counsel as of the Closing Date. Each such policy shall include mechanics, lien
coverage or shall insure the Trustees against loss on account of any mechanics'
lien, a zoning endorsement and any and all additional endorsements thereto as
shall be reasonably required by you, the Other Purchasers or your special
counsel; shall be satisfactory in form and substance to you and your special
counsel; and shall insure the Trustees against loss with respect to the
Properties in an amount not less than the face amount of the Notes secured by
the Deed of Trust or Mortgage, as shall be specified and
-6-
10
approved by your special counsel as of the Closing Date and shall be reinsured
pursuant to reinsurance agreements providing for direct access, in form and
substance and with insurers reasonably satisfactory to you and your special
counsel.
5.5. Surveys. Your special counsel shall have received a copy of the
ALTA 1993 "as-built" survey of each Property issued in connection with the
acquisition or construction of such Property by the Owner and certified to the
Title Company by an independent surveyor licensed in the state in which such
Property is located.
5.6. Opinions of Counsel. (a) Your special counsel shall have issued
to you and the Other Purchasers its opinion to the effect and substantially in
the form of Exhibit C-1, and you shall have received the opinions of Dickinson,
Wright, Moon, Van Dusen & ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to owner,
substantially in the forms of Exhibit C-2 and C-3, respectively, each dated the
Closing Date.
(b) Your special counsel shall have retained counsel as set forth in
Exhibit D hereto as counsel to your special counsel. Such counsel shall have
issued to you, your special counsel, the Other Purchasers, Owner, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ (Owner's special counsel) and the Trustees its opinion with respect to
the laws of the State indicated thereon, dated as of the Closing Date and as
approved by your special counsel.
5.7. Litigation. As of the Closing Date, no action or proceeding
shall have been instituted, nor shall any governmental action be threatened,
before any court or governmental agency, nor shall any order, judgment or
decree have been issued or proposed to be issued by any court or governmental
agency, to set aside, restrain, enjoin or prevent the performance of this
Agreement or any transaction contemplated hereby.
5.8. UCC Searches. You shall have received searches of the
appropriate UCC filing offices showing no security interest affecting any of
the Properties, other than Permitted Exceptions.
5.9. Confirmation Letter. Your special counsel shall have received a
letter from the Placement Agent confirming that (i) neither the Placement
Agent, nor any Person authorized or employed by the Placement Agent as agent,
broker, dealer or otherwise in connection with the offering or sale of the
Notes or any similar security, has offered any of the Notes or any similar
securities for sale
-7-
11
to, or solicited offers to buy any thereof from, or otherwise approached or
negotiated with, any prospective purchaser other than you and not more than
forty-nine other Institutional Investors, and (ii) with respect to such
Institutional Investors, each of which was offered a portion of the Notes or
similar security at private sale for investment, the Placement Agent or such
Person had reasonable grounds to believe, and did believe, and as to you, the
Other Purchasers and Owner, after reasonable inquiry, does believe, has such
knowledge and experience in financial and business matters that it is capable
of evaluating the merits and risks of investment in the Notes.
5.10. PPN Number. Standard & Poor's Corporation Cusip Service Bureau
shall have assigned a "private placement number" to each Series of Notes.
5.11. Certificate of Cost. Owner shall have delivered a certificate
showing, separately, the cost to Owner of acquiring and/or constructing each of
the Properties.
5.12 Legal Investments. On the Closing Date you shall have determined
that the Notes to be purchased by you hereunder shall be a legal investment by
you under the laws of the jurisdiction to which you are subject (without regard
to any so-called basket or leeway provision of said laws, such as Section
1405(a)(8) of the New York Insurance Law), and you shall have received such
certificates or other evidence as you may reasonably request demonstrating the
legality of such purchase under such laws.
Part B: Conditions to Owner's Obligations. The obligation of owner to
issue the Notes and execute and deliver the Loan Documents to which it is a
party on the Closing Date is subject to satisfaction of the conditions set
forth in Part C of this Section 5 and (a) the accuracy and correctness on the
Closing Date of the representations and warranties of the other parties hereto
contained herein, (b) the performance by the other parties hereto of their
respective agreements contained herein and to be performed by them on or prior
to the Closing Date and (c) the satisfaction of all of the following conditions
on or prior to the Closing Date:
5.13. Certain Note Purchaser Conditions. The conditions specified in
Sections 5.7 and 5.9 shall have been satisfied.
5.14. Loan Documents. On the Closing Date, each of the Loan Documents
shall have been duly authorized, executed and delivered by the parties thereto,
other than
-8-
12
Owner, and no default by a party other than Owner shall exist
thereunder.
Part C: Proceedings and Documents. All opinions, certificates and
other instruments and all proceedings in connection with the transactions
contemplated by this Agreement shall be reasonably satisfactory in form and
substance to each of the parties hereto and its special counsel. Each of the
parties hereto shall have received all instruments and other evidence as it may
reasonably request, in form and substance satisfactory to it and its special
counsel, with respect to such transactions and the taking of all proceedings in
connection therewith. If any provision of any Loan Document requires the
certification, representation or warranty of the existence or nonexistence of
any particular fact or implies as a condition the existence or nonexistence of
any particular fact, then the party which is the beneficiary thereof shall be
free to require the establishment to its reasonable satisfaction of the
existence or nonexistence of such fact.
Part D: Deemed Waiver of Conditions. With respect to any condition to
Closing set forth in Section 5.1 through 5.14, inclusive, that shall have not
been satisfied at or prior to the Closing, the occurrence of the Closing shall
be deemed for purposes of Section 5 to constitute the waiver of such condition
by the party to be benefitted thereby; provided, however, such deemed waiver
shall in no way constitute a waiver by such party with respect to any
representation, warranty or covenant stated herein or in any other Loan
Document; provided further, however, any right or remedy that might be
available to you by reason of any misrepresentation or breach of warranty or
covenant on the part of Owner hereunder shall be exercised under and subject to
the terms of the Indenture (including the grace periods provided to Owner
therein).
SECTION 6. REPRESENTATIONS AND WARRANTIES.
6.1. Warranties and Representations of Owner. Owner warrants and
represents to you, any Registered Holder of the Notes and the Trustees that, as
of the Closing Date:
(a) Organization of Owner. Owner is a corporation duly formed and
validly existing and in good standing under the laws of the State of
Michigan. Owner has full power, authority and legal right to carry on its
business as now conducted and as presently proposed to be conducted. Owner
is licensed or qualified to do business in each state where failure to be
so licensed or qualified would have a material adverse effect on its
business, and will be qualified or licensed to do business in any state
where such
-9-
13
license or qualification is necessary to engage in the transactions
contemplated hereby or to perform its obligations under the Loan Documents.
Owner has the legal right to own its property and carry on its business and is
in compliance with all material laws affecting its business as now being
conducted.
(b) Agreements Are Legal and Authorized; No Violation. The execution
and delivery of the Loan Documents by Owner and performance by Owner of all of
the provisions thereof: (i) are within its rights, powers and authority; (ii)
have been duly authorized by all necessary action and (iii) do not and will not
violate any law or any order of any court or governmental authority or agency
and do not and will not conflict with, or result in any breach of any of the
terms, conditions or provisions of, or constitute a default under, its
certificate of incorporation and bylaws, or any trust agreement, indenture,
mortgage, conditional sale, loan or credit agreement or other instrument or
agreement to which it is a party or by which it or any of its property
or assets are bound or result in the imposition of any lien, charge or
encumbrance on it or any of its property or assets (other than the liens upon
the Trust Estate as contemplated by the Loan Documents). The Loan Documents
(other than the Notes) have been, or on the Closing Date have been or will be,
duly executed and delivered by Owner and, assuming the due authorization,
execution and delivery thereof by the other parties thereto, such documents
constitute, or on the Closing Date will constitute, the legal, valid and
binding obligations of Owner, enforceable against Owner in accordance with
their respective terms. On the Closing Date, the Notes (i) will be duly
executed and delivered by Owner, (ii) will be entitled to the benefits and
security provided by the Indenture, the Deed of Trust and the Mortgage, and
(iii) will constitute the legal, valid and binding obligations of Owner
enforceable against Owner in accordance with their respective terms.
(c) Pending Litigation. Except as disclosed in the most recent 10-Q,
there are no actions, suits or proceedings pending or, other than a potential
condemnation of a portion of the ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ Property, to the
knowledge of Owner, after due inquiry, threatened against Owner or any of its
subsidiaries or any Property in any court or before any governmental authority
or arbitration board or tribunal which, if adversely determined, would
materially and adversely affect Owner or the Trust Estate or would question the
-10-
14
right, power and authority of Owner to enter into or perform the Loan
Documents to which it is a party or by which it is bound.
(d) Financial Condition. Since Owner's most recent
public financial statements, there has not been any material adverse
change in the financial condition or results of operations of Owner.
(e) Use of Proceeds. The net proceeds from the issuance
and sale of the Notes will be used for general corporate purposes of
Owner. No part of the proceeds of the sale of the Notes are intended
to be used, directly or indirectly, for the purchasing, carrying or
refinancing of any "margin stock" within the meaning of Regulations
G,T,U or X of the Board of Governors of the Federal Reserve System.
(f) Certain Regulatory Exclusions. Owner is not an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended and Owner is not directly or indirectly controlled
by an "investment company." Owner is not a "holding company" or a
"subsidiary company" of a holding company or an "affiliate" of a
"holding company" or a "public utility company" within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
(g) Material Indebtedness Defaults. After reasonable
investigation, Owner is not in default in the payment of principal or
interest on any indebtedness for borrowed money aggregating
$100,000,000 or more (collectively, "Material Indebtedness") and has
no written notice and no actual knowledge that it is in default under
any instrument or instruments or agreements under and subject to which
any Material Indebtedness has been issued.
(h) Title to the Properties. Except for the Permitted
Exceptions, (i) Owner has fee simple and marketable title to the
Properties and (ii) Owner has not granted any lien or other interest
in the General Intangibles (as defined in the Deed of Trust and the
Mortgage).
(i) No Defaults. There is no default or Event of Default
on the part of Owner under any of the Loan Documents.
(j) Governmental Consent. Neither the execution and
delivery by Owner of each of the Loan Documents, nor the consummation
of the transactions contemplated
-11-
15
hereby, requires the consent or approval of, the giving of notice to,
or the registration with, any governmental authority or agency (except
as contemplated in Section 13 hereof).
(k) Manner of offering. Within the preceding six months
neither Owner nor anyone acting on behalf of Owner has offered the
Notes or any part thereof or any similar security for sale to,
solicited offers to buy any thereof from or otherwise approached or
negotiated with anyone other than you and forty-nine other
Institutional Investors (provided that, with respect to actions taken
by the Placement Agent, the foregoing representation is made in
reliance on the letter described in Section 5.9 hereof). Neither
Owner nor to its knowledge any Person acting on its behalf has offered
or sold the Notes by means of any general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities
Act.
(l) Future Offers. Neither Owner nor any Person acting
on its behalf will offer the Notes, or any similar security, for issue
or sale to, or solicit any offer to acquire the Notes, from, or
otherwise approach or negotiate with respect thereto with anyone so as
to subject the offering and sale of the Notes to the provisions of
Section 5 of the Securities Act, or so as to require the qualification
of the Indenture under the Trust Indenture Act, as amended.
(m) Status of the Notes. No securities of Owner of the
same class (within the meaning of Rule 144A under the Securities Act)
as the Notes are listed on any national securities exchange registered
under Section 6 of the Exchange Act or quoted in a U.S. automated
inter-dealer quotation system.
(n) Unregistered Notes. Neither the registration of the
Notes under the Securities Act, nor the qualification of an indenture
under the Trust Indenture Act of 1939, as amended, is required for the
offer and sale of the Notes in the manner contemplated by this
Agreement; provided that in giving this representation, Owner is also
relying on the Note Purchasers' representations in Section 6.2 and the
Placement Agent's representations made to Owner.
6.2. Representations of the Note Purchaser. (a) You
represent that (i) you are an "accredited investor" within the meaning
of Rule 501(a)(1) under the Securities Act.
-12-
16
(b) You represent that you or your designee are acquiring
the Notes for your or its own account for investment and not with a
view to distribution or resale thereof, but subject, nevertheless, to
any requirement of law or regulation that the disposition of your or
its property shall at all times be within your or its control. You
acknowledge that the Notes you or your designee are acquiring have not
been registered under the Securities Act or any state securities laws,
and the Indenture has not been qualified under the Trust Indenture Act
of 1939, as amended, and that Owner does not contemplate filing and is
not legally required to file any such registration; that you and your
designee have been advised that the Notes which you or it are
acquiring may not be sold or disposed of unless such Notes are
subsequently registered under the Securities Act or are resold in
accordance with Section 7.1; that except for any representations and
warranties expressly made by owner herein or in any Loan Document,
neither Owner nor any of its officers, directors, employees,
affiliates, agents or representatives, has made any representations or
warranties to you, either express or implied, in connection with the
sale to you of the Notes or the transactions contemplated by the Loan
Documents; except as contained in the letter described in Section 5.9,
you did not rely on any representations or warranties of BT Securities
Corporation in connection with any aspect of the transactions
contemplated by the Loan Documents; that you have no contract,
undertaking, agreement, understanding, or arrangement with any Person
to sell, transfer, or pledge to any Person any part or all of the
Notes which you are acquiring pursuant to this Agreement or any
interest therein and have no present plans to enter into the same; the
Notes shall not be, and purchasers of the Notes have no rights to
require that the Notes be, registered under the Securities Act; there
shall be no public market for the Notes; and no federal or state
agency has made any finding or determination as to the fairness of the
offering of Notes for investment.
(c) You or your designee acknowledge and confirm the
representations and limitations set forth in the Notes and understand
that the Notes will bear a legend to the following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED OR SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
-13-
17
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. EACH INITIAL
PURCHASER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS TO
AND AGREES WITH THE ISSUER THAT SUCH PURCHASER WILL NOT SELL OR
OTHERWISE TRANSFER THIS SECURITY (WITHOUT CONSENT OF THE ISSUER) PRIOR
TO THREE YEARS FROM MAY 28, 1993 OTHER THAN (I) TO A QUALIFIED
INSTITUTIONAL BUYER, OR TO A PERSON WHO SUCH INITIAL PURCHASER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, IN A
TRANSACTION COMPLYING WITH RULE 144A, (II) TO A NON-U.S. PERSON IN A
TRANSACTION COMPLYING WITH REGULATION S UNDER THE SECURITIES ACT OR
(III) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT, EACH AS CONFIRMED BY AN OPINION OF COUNSEL, AS
REQUIRED UNDER THE INDENTURE. EACH SUBSEQUENT PURCHASER OF THIS
SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS TO AND AGREES WITH THE
ISSUER THAT SUCH PURCHASER WILL NOT SELL OR OTHERWISE TRANSFER THIS
SECURITY (WITHOUT THE CONSENT OF THE ISSUER) PRIOR TO THREE YEARS FROM
MAY 28, 1993 OTHER THAN PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT. EACH PURCHASER BY ITS ACCEPTANCE HEREOF
AGREES THAT IT WILL NOTIFY ANY PURCHASER OF THIS SECURITY OF THE
RESALE RESTRICTIONS DESCRIBED ABOVE.
THE PURCHASER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF,
REPRESENTS ALSO THAT IT IS ACTIVELY AND REGULARLY ENGAGED IN THE
BUSINESS OF LENDING MONEY AS A QUALIFIED PERSON WITHIN THE MEANING OF
SECTION 465(b)(6)(D) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
THIS SECURITY, OR DIRECT OR INDIRECT BENEFICIAL INTERESTS THEREIN, MAY
BE TRANSFERRED ONLY IN ORIGINAL PRINCIPAL AMOUNTS NOT LESS THAN AS
PROVIDED IN AND IN ACCORDANCE WITH THE REGISTRATION PROVISIONS OF,
THAT CERTAIN INDENTURE DATED AS OF MAY 28, 1993 REFERRED TO IN THIS
NOTE, COPIES OF WHICH ARE AVAILABLE FOR INSPECTION AT THE CORPORATE
TRUST OFFICE OF THE TRUSTEE.
(d) You represent that statement (ii) below and at least
one additional other numbered statement set forth below in this clause
(b) concerning each source of funds to be used by you or your designee
to purchase Notes (respectively, the "Source") will be accurate as
-14-
18
of the Closing Date on which you or your designee purchase such Notes:
(i) The Source is not an "employee benefit plan" as defined
in Title I, Section 3(3) of ERISA;
(ii) The Source is not a "governmental plan" as defined in
Title I, Section 3(32) of ERISA;
(iii) The Source is an insurance company pooled separate
account, and the purchase is exempt in accordance with
Prohibited Transaction Exemption (PTE) 90-1 except with
respect to any employee benefit plan which is an
"Identified Plan" (as defined below) because the assets
in the pooled separate account of the Identified Plan
(treating as one all employee benefit plans maintained
by the same employer or employee organization) exceed
10% of the total assets in that account;
(iv) The Source is an "investment fund" (as defined in
Section V(b) of PTE 84-14) managed by a "qualified
professional asset manager" or "QPAM" (as defined in
Section V(a) of PTE 84-14), and the purchase is exempt
under PTE 84-14 except with respect to any employee
benefit plan which is an Identified Plan because at
least one of the conditions to exemption set forth in
the PTE is not satisfied;
(v) The Source is a bank collective investment fund, and
the purchase is exempt in accordance with Prohibited
Transaction Exemption (PTE) 91-38 except with respect
to any employee benefit plan which is an Identified
Plan because the assets in the collective investment
fund of the Identified Plan (treating as one all
employee benefit plans maintained by the same employer
or employee organization) exceed 10 percent of the
total assets in that fund; or
(vi) The Source is an Identified Plan for any other reason.
An "Identified Plan" is any plan referred to as such above and named
by you in writing at least 5 days prior to the Closing (and, if
applicable, any subsequent transfer of an interest in a Note) (with
such additional identifying information as any recipient may
-15-
19
reasonably request) to Owner and Trustee. Owner (and with respect
to each subsequent transfer, each party) shall deliver a certificate
at Closing (or 5 days prior to any subsequent transfer) which shall
state, whether or not, to the best of such party's knowledge and
belief after due inquiry, it is a "party in interest" (as defined in
Section 3(14) of ERISA) or a "disqualified person" (as defined in
Section 4975(e)(2) of the Code), in respect of such Identified Plan
or owner, as applicable, and setting forth the basis for any party
in interest or disqualified person relationship. The Closing (or
subsequent transfer) shall not occur with respect to an Identified
Plan unless all of the certificates which have been returned certify
the absence of such relationships with respect to the Identified
Plan or the parties reasonably agree that purchase of an interest in
any Note by such Identified Plan does not constitute a prohibited
transaction, as defined in ERISA.
(e) You represent that in connection with the sale
to you of the Notes or any of the other transactions contemplated by
the Loan Documents, you have not dealt with any Person or entity
(other than the Placement Agent) who might claim from Owner a
financial advisory fee or other similar compensation.
SECTION 7. COVENANTS OF THE NOTE PURCHASER AND OWNER
7.1. Covenants of the Note Purchaser. You agree that
you will not sell, pledge or otherwise transfer the Notes except (i) to a
person who is, or who you reasonably believe is, a "qualified institutional
buyer" within the meaning of Rule 144A under the Securities Act in transactions
meeting the requirements of such Rule 144A, (ii) to a non-U.S. person in a
transaction complying with Regulation S under the Securities Act or (iii)
pursuant to another exemption under the Securities Act. In connection with any
such transfer, you will provide to the Trustee the certificate required by
Section 208 of the Indenture.
7.2. Covenants of owner. Owner agrees with each
Note Purchaser:
(a) Not to be or become, at any time prior to the
expiration of three years after the date hereof, an open-end
investment trust, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of
the Investment Company Act;
-16-
20
(b) At any time when Owner is not subject to Section
13 or 15(d) of the United States Securities Exchange Act of 1934, as
amended, upon the request of a Registered Holder of any Note, Owner
will promptly furnish or cause to be furnished Rule 144A Information
(as defined below) to such Registered Holder or to a prospective
purchaser of such Note designated by such Registered Holder, as the
case may be, in order to permit compliance by such Registered Holder
with Rule 144A under the Securities Act (or any successor provision
thereto) in connection with the resale of such Note by such
Registered Holder; provided, however, that Owner shall not be
required to furnish such information in connection with any request
made on or after the date which is three years from the later of (i)
the date such Note (or any Predecessor Note, as such term is defined
in the Indenture) was acquired from Owner or (ii) the date such Note
(or any Predecessor Note) was last acquired from an "affiliate" of
owner within the meaning of Rule 144 under the Securities Act (or
any successor provision thereto); and Provided further, that Owner
shall not be required to furnish such information at anytime to a
prospective purchaser located outside the United States who is not a
"U.S. person" within the meaning of Regulation S under the
Securities Act if such Note may then be sold to such prospective
purchaser in accordance with Rule 904 under the Securities Act (or
any successor provision thereto). "Rule 144A Information" shall be
such information as is specified pursuant to Rule 144A(d)(4) under
the Securities Act (or any successor provision thereto).
(c) Not to sell or cause its affiliates to sell, any
Notes acquired by Owner or such affiliate, as the case may be, until
the expiration of three years after the original issuance thereof.
(d) Neither Owner nor anyone acting on behalf of
Owner will offer the Notes for issue or sale to, or solicit any
offer to acquire the Notes from, or otherwise approach or negotiate
with respect thereto with, anyone so as to subject the offering and
sale of the Notes to the provisions of Section 5 of the Securities
Act, as amended, or so as to require the qualification of the
Indenture under the Trust Indenture Act of 1939, as amended.
(e) To file with the Securities and Exchange
Commission (the "Commission"), not later than 15 days after the date
hereof, five copies of a notice on Form D (one of which will be
manually signed by a
-17-
21
person duly authorized by Owner); to otherwise comply with the
requirements of Rule 503 under the Securities Act; and to furnish
promptly to your special counsel evidence of each such required
timely filing (including a copy thereof).
SECTION 8. PAYMENT OF EXPENSES.
Whether or not the Closing shall occur (but provided you or your
designee shall have not defaulted in your obligations hereunder), Owner will:
8.1. Fees and Expenses. Pay or cause to be paid all
reasonable fees, expenses and disbursements of your special counsel and counsel
to your special counsel in each state in which a Property is located in
connection with the negotiation and preparation of the Loan Documents, and
other reasonable costs and expenses incurred in connection therewith, including
title insurance premiums, survey expenses and all fees, taxes and expenses for
the recording, registration and filing of the Loan Documents, but excluding
capital gains, income, franchise or similar taxes.
8.2. Transmission of the Notes. Pay or cause to be paid the
reasonable cost of transmitting the Notes to your principal office (or such
other place as you may direct) upon the issuance thereof.
8.3. Brokers' Fees and Stamp Taxes. Pay or cause to be
paid, or save you and each subsequent Registered Holder of the Notes (and each
nominee of, or payee designated by, you or such subsequent Registered Holder of
the Notes) harmless from and against any and all liability and loss with
respect to or resulting from the nonpayment or delayed payment of any brokers,
fees and any and all stamp taxes (and other taxes, fees and excises similar to
stamp taxes), if any, including any interest and penalties, which are payable
in connection with the transactions contemplated by this Agreement. The
foregoing shall not apply to any claims for fees, taxes or both set forth in
this Section 8.3 which result from any transfer of Notes by you or any Other
Purchaser or any other Person.
8.4. Certain Fees and Expenses. Pay or cause to be paid (i)
the initial and annual Trustee's fee and all expenses of the Trustees and any
necessary co-trustees (including reasonable counsel fees and expenses) or any
successor trustee, for acting as trustee under the Indenture, (ii) the
financial advisor fee of the Placement Agent and (iii) all reasonable
out-of-pocket costs and expenses incurred by the Trustees, you and the Other
Purchasers (including, without limitation, reasonable counsel fees and expenses
and financial advisor fees) in
-18-
22
entering into any future amendments or supplements with respect to any of the
Loan Documents, whether or not such amendments or supplements are ultimately
entered into, or giving or withholding of waivers of consents hereto or
thereto, which have been requested by Owner.
SECTION 9. SURVIVAL OF AGREEMENTS. All agreements,
representations and warranties contained herein (including without limitation
the obligations contained in Section 8) shall survive the execution and
delivery of this Agreement and the Other Agreements, the issuance, sale and
delivery of the Notes and payment therefor, any disposition thereof by the
owners thereof, and any investigation at any time made by such owner or on its
behalf.
SECTION 10. BROKERS. Owner warrants and represents that it has
not retained, authorized or employed any brokers in connection with the
consummation of the transactions contemplated hereby, except that it has
retained, and shall pay compensation owing to, the Placement Agent as Owner's
financial advisor.
SECTION 11. NOTICES. All notices, offers, acceptances,
rejections, consents, requests and other communications hereunder shall be in
writing and shall be deemed to have been given (i) when delivered by hand, (ii)
five Business Days after being sent by first class registered or certified
mail, postage prepaid, return receipt requested, (iii) when sent by telecopier
(provided that such notice is legible and an original copy of such notice is
also subsequently sent by overnight courier in the manner described in the
following clause (iv) within two Business Days thereafter), or (iv) one
Business Day after being sent by Federal Express or any other nationally
recognized overnight courier, in each case addressed as follows:
If to the Trustee: XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Attention: XXXXXXXXXX
Telecopier No.: XXXXXXXXXX
If to Owner: Kmart Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇.▇. ▇▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
-19-
23
with a copy to:
Dickinson, Wright, Moon, Van Dusen & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
P.O. Box 509
Bloomfield Hills, Michigan 48303-0509
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
If to you: At your address set forth in Exhibit A hereto
If to any Other At its address set forth in Exhibit A
Purchaser: hereto
or to such other Person or address as any such party shall furnish to the other
parties in writing.
SECTION 12. HOME OFFICE PAYMENT. So long as you, your Affiliate
or nominee, or any Registered Holder pursuant to Section 208 of the Indenture
which is an Institutional Investor, is a Registered Holder of the Notes, (a)
Owner shall pay or cause to be paid all amounts which become due and payable on
such Note (except a payment of principal which will discharge all indebtedness
evidenced by such Note) in a manner such that, as of 12:00 noon (New York City
time), the Trustee shall be in actual receipt from Owner of immediately
available federal funds, whereupon the Trustee shall make all such payments by
bank wire transfer of immediately available federal funds or, at your option,
the option of your Affiliate or nominee, or at the option of such Registered
Holder of the Notes, by check of the Trustee, which wire transfer shall be duly
transmitted or which check shall be duly mailed on the Business Day such
amounts become due, to you, your Affiliate or nominee, or such Registered
Holder of the Notes, as the case may be, at the account or address appearing on
the Register (as such term is defined in the Indenture), without presentation
of such Note to the Trustee, and (b) you, your Affiliate or nominee and any
such Registered Holder of the Notes shall not sell, transfer or otherwise
dispose of such Note other than as provided in Section 208 of the Indenture.
SECTION 13. OBLIGATION TO RECORD. Owner will, either prior to or
promptly after the Closing Date, cause the Recordable Documents (as defined in
the Deed of Trust and the Mortgage) with respect to the Properties to be filed,
registered and recorded in accordance with the provisions of Section 2.03 of
the Deed of Trust and the Mortgage.
-20-
24
SECTION 14. MISCELLANEOUS. This Agreement cannot be changed,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the same is sought. All the terms of
this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto,
and, in particular, shall inure to the benefit of and be enforceable by any
Registered Holder of the Notes. The Table of Contents preceding this Agreement
and the headings to the various Sections of this Agreement have been inserted
for convenience of reference only and shall not limit or otherwise affect any
of the terms hereof. This Agreement may be executed in any number of
counterparts. All counterparts shall constitute one instrument.
SECTION 15. APPLICABLE LAW. This agreement shall be governed by,
and shall be construed and enforced in accordance with, (i) the internal laws
of the State of New York (without regard to conflicts of laws) as to
interpretation, enforcement, validity, construction, effect and in all other
respects, including, but not limited to, the legality of the interest rate and
other charges, and (ii) the federal laws of the United States of America with
regard to U.S. Federal Securities Law, ERISA and any other applicable matters.
-21-
25
[EXHIBITS INTENTIONALLY OMITTED]