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EXHIBIT 10.42
EXECUTION COPY
EXHIBIT F TO
CREDIT AGREEMENT
AMENDED AND RESTATED
GUARANTEE AGREEMENT
BY AND AMONG
BORDERS GROUP, INC.,
BORDERS, INC.,
▇▇▇▇▇▇ BOOK COMPANY, INC.,
BORDERS PROPERTIES, INC.,
WALDENBOOKS PROPERTIES, INC.,
CERTAIN OTHER SUBSIDIARIES OF BORDERS GROUP, INC.
AND
PNC BANK, NATIONAL ASSOCIATION, as Administrative Agent
FOR THE BENEFIT OF CERTAIN LENDERS
DATED AS OF NOVEMBER 22, 1995
AMENDED AND RESTATED AS OF OCTOBER 17, 1997
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TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS.........................................2
1.01. Defined Terms.......................................2
1.02. Accounting Principles...............................2
ARTICLE II. GUARANTEE...........................................2
ARTICLE III. RIGHT OF CONTRIBUTION...............................3
ARTICLE IV. RIGHT OF SET-OFF....................................3
ARTICLE V. NO SUBROGATION......................................4
ARTICLE VI. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS;
WAIVER OF RIGHTS....................................4
ARTICLE VII. GUARANTEE ABSOLUTE AND UNCONDITIONAL................5
ARTICLE VIII. REINSTATEMENT.......................................5
ARTICLE IX. PAYMENTS............................................6
ARTICLE X. REPRESENTATIONS, WARRANTIES AND AGREEMENTS..........6
ARTICLE XI. AFFIRMATIVE COVENANTS...............................6
11.01. Preservation of Existence, etc......................6
11.02. Payment of Liabilities, Including Taxes, etc........6
11.03. Maintenance of Insurance............................7
11.04. Maintenance of Properties...........................7
11.05. Maintenance of Patents, Trademarks, etc.............7
11.06. Visitation Rights...................................7
11.07. Keeping of Records and Books of Account.............7
11.08. Plans and Benefit Arrangements......................8
11.09. Compliance with Laws................................8
11.10. Subsequent Credit Terms.............................8
11.11. [Reserved]..........................................8
11.12. Subsidiary Guarantees...............................8
ARTICLE XII. NEGATIVE COVENANTS..................................8
12.01. Indebtedness........................................9
12.02. Liens..............................................10
12.03. Contingent Obligations.............................10
12.04. Loans and Investments..............................11
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Page
12.05. Dividends and Related Distributions.............13
12.06. Liquidations, Mergers, Consolidations...........14
12.07. Dispositions of Assets or Subsidiaries..........14
12.08. Affiliate Transactions..........................14
12.09. Subsidiaries, Partnerships and Joint Ventures...15
12.10. Continuation of or Change in Business...........15
12.11. Plans and Benefit Arrangements..................15
12.12. Fiscal Year.....................................15
12.13. Issuance of Stock...............................15
12.14. Changes in Organizational Documents.............16
12.15. Minimum Fixed Charge Coverage Ratio.............16
12.16. Maximum Leverage Ratio..........................16
12.17. Minimum Tangible Net Worth......................16
12.18. Modifications of Other Documents................16
12.19. Prepayment of Note Put Agreement Obligations....16
12.20. Foreign Activities..............................16
12.21. Inconsistent Agreements.........................17
ARTICLE XIII. REPORTING REQUIREMENTS..........................17
13.01. Quarterly Financial Statements..................17
13.02. Annual Financial Statements.....................17
13.03. Certificates of the Company.....................17
13.04. Notice of Default...............................18
13.05. Notice of Litigation............................18
13.06. Certain Events..................................18
13.07. Other Reports and Information...................18
13.08. Notices Regarding Benefit Arrangements..........19
13.09. Access to the Company's Auditors................19
13.10. Notices Regarding Corporate Credit Agreement....19
13.11. Notices Regarding Repurchases of Stock..........19
ARTICLE XIV. AUTHORITY OF ADMINISTRATIVE AGENT...............20
ARTICLE XV. NOTICES.........................................20
ARTICLE XVI. COUNTERPARTS....................................20
ARTICLE XVII. SEVERABILITY....................................20
ARTICLE XVIII. INTEGRATION........ ............................21
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ARTICLE XIX. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES............. 21
ARTICLE XX. SECTION HEADINGS.................................................. 21
ARTICLE XXI. SUCCESSORS AND ASSIGNS............................................ 21
ARTICLE XXII. RELEASES OF GUARANTORS, ETC....................................... 21
ARTICLE XXIII. JURY TRIAL; SUBMISSION TO JURISDICTION; WAIVERS................... 21
ARTICLE XXIV. INDEMNITY......................................................... 22
ARTICLE XXV. GOVERNING LAW..................................................... 23
SCHEDULE
Schedule 1 Existing Liens
Schedule 2 Existing Indebtedness
Schedule 5 Employee Benefit Plan Disclosures
EXHIBITS
Exhibit A Form of Compliance Certificate
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AMENDED AND RESTATED GUARANTEE AGREEMENT, dated as of November
22, 1995 and amended and restated as of October 17, 1997, made by BORDERS GROUP,
INC., a Michigan corporation (the "Company"), and each of the corporations that
is a signatory hereto or to a letter agreement acknowledging that it is bound
hereby (collectively, with the Company, the "Guarantors"), in favor of PNC BANK,
NATIONAL ASSOCIATION, as administrative agent (in such capacity, the
"Administrative Agent") for the lenders (the "Lenders") which are parties to
that certain Amended and Restated Credit Agreement, dated as of November 22,
1995 and amended and restated as of the date hereof (as amended, supplemented,
extended or otherwise modified from time to time, the "Credit Agreement"), among
WILMINGTON TRUST COMPANY, not in its individual capacity except as provided in
the Credit Agreement but solely as Owner Trustee (the "Borrower"), the Lenders,
certain other agents and the Administrative Agent.
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make or maintain loans (the "Loans") to the Borrower upon
the terms and subject to the conditions set forth therein, to be evidenced by
the notes issued by the Borrower under the Credit Agreement;
WHEREAS, each Guarantor will derive substantial direct and
indirect benefit from the making and maintenance of the Loans; and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make and maintain their respective Loans to the Borrower under the
Credit Agreement that the Guarantors shall have executed and delivered this
Guarantee to the Administrative Agent for the ratable benefit of the Lenders.
WHEREAS, the Company and certain of the Guarantors entered
into the Guarantee Agreement dated November 22, 1995 in favor of Bankers Trust
Company as agent for the Lenders (as heretofore amended, the "Prior Agreement");
and
WHEREAS, those parties to the Prior Agreement desire to amend
and restate the Prior Agreement to (i) substitute PNC Bank, National Association
for Bankers Trust Company as the agent for the Lenders; (ii) add certain
Guarantors, and (iii) amend certain other terms and conditions of the Prior
Agreement.
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into, and to amend and
restate, the Credit Agreement and to induce the Lenders to make and maintain
their respective Loans to the Borrower under the Credit Agreement, the
Guarantors hereby agree with the Administrative Agent, for the ratable benefit
of the Lenders, as follows:
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ARTICLE I. DEFINITIONS
1.01. Defined Terms. Capitalized terms used but not otherwise
defined in this Agreement shall have the meanings set forth in Appendix A
hereto.
1.02. Accounting Principles. Except as otherwise provided in
this Guarantee, all computations and determinations as to accounting or
financial matters and all financial statements to be delivered pursuant to this
Guarantee shall be made and prepared in accordance with GAAP (including
principles of consolidation where appropriate), and all accounting or financial
terms shall have the meanings ascribed to such terms by GAAP; provided, however,
that if any change in GAAP or the application thereof occurs hereafter, or if
the Company adopts a change to its accounting principles or methods with the
agreement of its independent certified public accountants, and such change
results in a change in the calculation of any financial covenant or restriction
set forth herein, then the parties hereto agree to enter into and diligently
pursue negotiations in order to amend such financial covenant or restriction so
as to equitably reflect such change, with the desired result that the criteria
for evaluating the financial condition and results of operations of the Company
and its Subsidiaries shall be the same after such change as if such change had
not been made. Pending the resolution of any such negotiations, the Guarantors
agree to provide to each of the Lenders such unaudited financial information and
pro forma statements using the accounting methods and principles used in the
preparation of the audited financial statements for the fiscal year ended
January 26, 1997, as are necessary to enable the Lenders to test the financial
covenants contained herein.
ARTICLE II. GUARANTEE. (a) Subject to the provisions of
Section 2(b), each of the Guarantors hereby, jointly and severally,
unconditionally and irrevocably, guarantees to the Administrative Agent, for the
ratable benefit of the Lenders and their respective successors, indorsees,
transferees and assigns, the prompt and complete payment by the Borrower when
due (whether at the stated maturity, by acceleration or otherwise) of the
Obligations.
(b) Anything herein or in any other Credit Document to the
contrary notwithstanding, (i) the Guarantors shall not at any time be required
to make any payment hereunder in respect of the principal of any Tranche B Loans
unless at such time a Lease Event of Default under any Lease has occurred and is
continuing, and (ii) the maximum liability of each Guarantor hereunder shall in
no event exceed the maximum amount which can be validly guaranteed by such
Guarantor under applicable Laws relating to the insolvency of debtors. An
acknowledgment of such limit may be contained in the letter agreement executed
after the Effective Date by any additional Guarantor if required by applicable
Law.
(c) Each Guarantor further agrees, jointly and severally, to
pay any and all reasonable expenses (including, without limitation, all fees and
disbursements of counsel) which may be paid or incurred by any Agent or any
Lender in enforcing, or obtaining advice of counsel in respect of, any rights
with respect to, or collecting, any or all of the Obligations and/or enforcing
any rights with respect to, or collecting against, any Guarantor under this
Guarantee. This Guarantee shall remain in full force and effect until the
Obligations and all amounts owing hereunder are paid in full and the Commitments
are terminated, notwithstanding that from time to time prior thereto the
Borrower may be free from any Obligations.
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(d) Each Guarantor agrees that the Obligations may at any time
and from time to time exceed the amount of the liability of such Guarantor
hereunder without impairing this Guarantee or affecting the rights and remedies
of any Agent or any Lender hereunder.
(e) No payment or payments made by the Borrower, any of the
Guarantors, any other guarantor or any other Person or received or collected by
any Agent or any Lender from the Borrower, any of the Guarantors, any other
guarantor or any other Person by virtue of any action or proceeding or any
set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of any Guarantor hereunder which
shall, notwithstanding any such payment or payments other than payments made by
such Guarantor in respect of the Obligations or payments received or collected
from such Guarantor in respect of the Obligations, remain liable for the
Obligations up to the maximum liability of such Guarantor hereunder until the
Obligations and all amounts owing hereunder are paid in full and the Commitments
are terminated.
(f) Each Guarantor agrees that whenever, at any time, or from
time to time, it shall make any payment to any Agent or any Lender on account of
its liability hereunder, it will notify the Administrative Agent in writing that
such payment is made under this Guarantee for such purpose.
ARTICLE III. RIGHT OF CONTRIBUTION. Each Guarantor hereby
agrees that to the extent that a Guarantor shall have paid more than its
proportionate share of any payment made hereunder, such Guarantor shall be
entitled to seek and receive contribution from and against any other Guarantor
hereunder who has not paid its proportionate share of such payment. Each
Guarantor's right of contribution shall be subject to the terms and conditions
of Article V hereof. The provisions of this Article III shall in no respect
limit the obligations and liabilities of any Guarantor to the Agents and the
Lenders, and each Guarantor shall remain liable to the Agents and the Lenders
for the full amount guaranteed by such Guarantor hereunder.
ARTICLE IV. RIGHT OF SET-OFF. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence of a Lease Event of Default
or an Event of Default under the Credit Agreement, each of the Agents, each
Lender and each Participant is hereby authorized at any time or from time to
time, without presentment, demand, protest or other notice of any kind to any
Guarantor or to any other Person, any such notice being hereby expressly waived,
to set off and to appropriate and apply any and all deposits (general or
special) and any other Indebtedness at any time held or owing by the such Agent,
such Lender or such Participant (including, without limitation, by branches and
agencies of such Agent, such Lender or such Participant wherever located) to or
for the credit or the account of any Guarantor against and on account of the
obligations and liabilities of such Guarantor hereunder or under any of the
other Operative Agreements, and all other claims of any nature or description
arising out of or connected with this Guarantee or any other Operative
Agreement, irrespective of whether or not such Agent, such Lender or such
Participant shall have made any demand hereunder and although said obligations,
liabilities or claims, or any of them, shall be contingent or unmatured.
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ARTICLE V. NO SUBROGATION. Notwithstanding any payment or
payments made by any of the Guarantors hereunder or any set-off or application
of funds of any of the Guarantors by any Agent or any Lender, no Guarantor shall
be entitled to be subrogated to any of the rights of any Agent or any Lender
against the Borrower or any other Person or any collateral security or guarantee
or right of offset held by any Agent or any Lender for the payment of the
Obligations, nor shall any Guarantor seek or be entitled to seek any
contribution or reimbursement from the Borrower or any other Person in respect
of payments made by such Guarantor hereunder, until all amounts owing to the
Agents and the Lenders by the Borrower on account of the Obligations and all
amounts owing hereunder are paid in full and the Commitments are terminated. If
any amount shall be paid to any Guarantor on account of such subrogation rights
at any time when all of the Obligations and all amounts owing hereunder shall
not have been paid in full or the Commitments shall not have been terminated,
such amount shall be held by such Guarantor in trust for the Agents and the
Lenders, segregated from other funds of such Guarantor, and shall, forthwith
upon receipt by such Guarantor, be turned over to the Administrative Agent in
the exact form received by such Guarantor (duly indorsed by such Guarantor to
the Administrative Agent, if required), to be applied against the Obligations,
whether matured or unmatured, in such order as the Administrative Agent may
determine.
ARTICLE VI. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS;
WAIVER OF RIGHTS. Each Guarantor shall remain obligated hereunder
notwithstanding that, without any reservation of rights against any Guarantor
and without notice to or further assent by any Guarantor, any demand for payment
of any of the Obligations made by any Agent or any Lender may be rescinded by
such party and any of the Obligations continued, and the Obligations, or the
liability of any other party upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by any Agent or any
Lender, and the Credit Agreement and the other Operative Agreements and any
other documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Administrative
Agent (or the Required Lenders, as the case may be) may deem advisable from time
to time, and any collateral security, guarantee or right of offset at any time
held by any Agent or any Lender for the payment of the Obligations may be sold,
exchanged, waived, surrendered or released. Neither any Agent nor any Lender
shall have any obligation to protect, secure, perfect or insure any Lien at any
time held by it as security for the Obligations or for this Guarantee or any
property subject thereto. When making any demand hereunder against any of the
Guarantors, any Agent or any Lender may, but shall be under no obligation to,
make a similar demand on the Borrower or any other Guarantor or guarantor, and
any failure by any Agent or any Lender to make any such demand or to collect any
payments from the Borrower or any such other Guarantor or guarantor or any
release of the Borrower or such other Guarantor or guarantor shall not relieve
any of the Guarantors in respect of which a demand or collection is not made or
any of the Guarantors not so released of their several obligations or
liabilities hereunder, and shall not impair or affect the rights and remedies,
express or implied, or as a matter of law, of any Agent or any Lender against
any of the Guarantors. For the purposes hereof "demand" shall include the
commencement and continuance of any legal proceedings.
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ARTICLE VII. GUARANTEE ABSOLUTE AND UNCONDITIONAL.
Each Guarantor waives any and all notice of the creation, renewal, extension or
accrual of any of the Obligations and notice of or proof of reliance by any
Agent or any Lender upon this Guarantee or acceptance of this Guarantee; the
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived, in reliance
upon this Guarantee; and all dealings between the Borrower and any of the
Guarantors, on the one hand, and any Agent and the Lenders, on the other hand,
likewise shall be conclusively presumed to have been had or consummated in
reliance upon this Guarantee. Each Guarantor waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Borrower or any of the Guarantors with respect to the Obligations. Each
Guarantor understands and agrees that this Guarantee shall be construed as a
continuing, absolute and unconditional guarantee of payment without regard to
(a) the validity, regularity or enforceability of the Credit Agreement or any
other Operative Agreement, any of the Obligations or any other collateral
security therefor or guarantee or right of offset with respect thereto at any
time or from time to time held by any Agent or any Lender, (b) any defense,
set-off or counterclaim (other than a defense of payment or performance) which
may at any time be available to or be asserted by the Borrower against any Agent
or any Lender, or (c) any other circumstance whatsoever (with or without notice
to or knowledge of the Borrower or such Guarantor) which constitutes, or might
be construed to constitute, an equitable or legal discharge of the Borrower for
the Obligations, or of such Guarantor under this Guarantee, in bankruptcy or in
any other instance. When pursuing its rights and remedies hereunder against any
Guarantor, any Agent and any Lender may, but shall be under no obligation to,
pursue such rights and remedies as it may have against the Borrower or any other
Person or against any collateral security or guarantee for the Obligations or
any right of offset with respect thereto, and any failure by any Agent or any
Lender to pursue such other rights or remedies or to collect any payments from
the Borrower or any such other Person or to realize upon any such collateral
security or guarantee or to exercise any such right of offset, or any release of
the Borrower or any such other Person or any such collateral security, guarantee
or right of offset, shall not relieve such Guarantor of any liability hereunder,
and shall not impair or affect the rights and remedies, whether express, implied
or available as a matter of law, of the Agents and the Lenders against such
Guarantor. This Guarantee shall remain in full force and effect and be binding
in accordance with and to the extent of its terms upon each Guarantor and the
successors and assigns thereof, and shall inure to the benefit of the Agents and
the Lenders, and their respective successors, indorsees, transferees and
assigns, until all the Obligations and the obligations of each Guarantor under
this Guarantee shall have been satisfied by payment in full and the Commitments
shall be terminated, notwithstanding that from time to time during the term of
the Credit Agreement the Borrower may be free from any Obligations.
ARTICLE VIII. REINSTATEMENT. This Guarantee shall continue to
be effective, or be reinstated, as the case may be, if at any time payment, or
any part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by any Agent or any Lender upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Borrower or any Guarantor, or
upon or as a result of the appointment of a receiver, intervenor or conservator
of, or trustee or similar officer for, the Borrower or any Guarantor or any
substantial part of its property, or otherwise, all as though such payments had
not been made.
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ARTICLE IX. PAYMENTS. Each Guarantor hereby guarantees that payments
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in U.S. Dollars at the Principal Office of the Administrative
Agent.
ARTICLE X. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. In
order to induce the Lenders to enter into, and to amend and restate, the Credit
Agreement and to make and maintain the Loans as provided for therein, each
Guarantor makes the representations and warranties contained in Section 7.03 of
the Participation Agreement to, and agrees with, the Agents and the Lenders, all
of which shall survive the execution and delivery of the Credit Documents and
the making of the Loans (with the occurrence of each borrowing under the Credit
Agreement being deemed to constitute a representation and warranty that the
matters specified in this Article X are true and correct in all material
respects on and as of, and after giving effect to, the Effective Date and as of
the date of each such borrowing unless such representation and warranty
expressly indicates that it is being made as of any specific date in which case
such representation and warranty shall be true and correct in all material
respects as of such specific date).
ARTICLE XI. AFFIRMATIVE COVENANTS. Each Guarantor hereby
covenants and agrees that on the Effective Date and thereafter, for so long as
this Guarantee is in effect and until the Commitments have terminated and the
Obligations and all amounts owing hereunder are paid in full:
11.01. Preservation of Existence, etc. Each Guarantor shall,
and shall cause each of its Subsidiaries to maintain its corporate existence and
its license or qualification and good standing in each jurisdiction in which its
ownership or lease of property or the nature of its business makes such license
or qualification necessary; provided that (a) the Guarantors may engage in
transactions permitted by Section 12.06, and (b) with respect to Subsidiaries of
the Guarantors (other than the Guarantors themselves), such Subsidiaries may
fail to do so to the extent that such failure individually or in the aggregate
could not reasonably be expected to have a Material Adverse Effect.
11.02. Payment of Liabilities, Including Taxes, etc. Each
Guarantor shall, and shall cause each of its Subsidiaries to, duly pay and
discharge all liabilities to which it is subject or which are asserted against
it, promptly as and when the same shall become due and payable, including all
taxes, assessments and governmental charges upon it or any of its Properties,
income or profits, prior to the date on which penalties attach thereto, except
to the extent that such liabilities, including taxes, assessments or charges,
are being contested in good faith and by appropriate and lawful proceedings
diligently conducted and for which such reserve or other appropriate provisions,
if any, as shall be required by GAAP shall have been made, and except to the
extent that failure to discharge any such liabilities individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect;
provided that the Guarantors and their Subsidiaries will pay all such
liabilities forthwith upon the commencement of proceedings to foreclose any Lien
which may have attached as security therefor.
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11.03. Maintenance of Insurance. Each Guarantor shall, and
shall cause each of its Subsidiaries to, insure its Properties against loss or
damage by fire and such other insurable hazards as such assets are commonly
insured (including fire, extended coverage, property damage, worker's
compensation, public liability and business interruption insurance) and against
other risks (including errors and omissions) in such amounts as similar
properties and assets are insured by prudent companies in similar circumstances
carrying on similar businesses, and with reputable and financially sound
insurers, including self-insurance to the extent customary, all as reasonably
determined by the Administrative Agent. At the request of the Administrative
Agent, the Company shall deliver from time to time a summary schedule indicating
all insurance then in force with respect to each of the Guarantors.
11.04. Maintenance of Properties. Each Guarantor shall, and
shall cause each of its Subsidiaries to, maintain in good repair, working order
and condition (ordinary wear and tear excepted) in accordance with the general
practice of other businesses of similar character and size, all Property useful
or necessary to its business, and from time to time, each such Guarantor will
make or cause to be made all appropriate repairs, renewals or replacements
thereof except to the extent that the failure to do so individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
11.05. Maintenance of Patents, Trademarks, etc. Each Guarantor
shall, and shall cause each of its Subsidiaries to, maintain in full force and
effect all patents, trademarks, trade names, copyrights, licenses, franchises,
permits and other authorizations necessary for the ownership and operation of
its properties and business, except to the extent that the failure so to
maintain the same individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect.
11.06. Visitation Rights. Each Guarantor shall, and shall
cause each of its Subsidiaries to, permit any of the officers or authorized
employees or representatives of the Administrative Agent or any of the Lenders
to visit and inspect any of its properties and to examine and make excerpts from
its books and records and discuss its business affairs, finances and accounts
with its officers, all in such detail and at such times and as often as any of
the Lenders may reasonably request. Each Lender shall provide the Company and
the Administrative Agent with reasonable notice prior to any visit or
inspection; provided that no such notice shall be required after the occurrence
and during the continuation of a Lease Default or a Lease Event of Default. In
the event any Lender desires to conduct an audit of any Guarantor, such Lender
shall make a reasonable effort to conduct such audit contemporaneously with any
audit to be performed by the Administrative Agent. At the request of the
Administrative Agent, but not more frequently than once a year, the Guarantors
and their respective Authorized Officers shall hold a meeting of the Lenders, at
which the Guarantors will present an analysis of the financial performance of
the Company and its Subsidiaries during the previous Fiscal Year and a
discussion of the expected results of operations for the then current Fiscal
Year.
11.07. Keeping of Records and Books of Account. The Company
shall, and shall cause each Subsidiary of the Company to, maintain and keep
proper books of record and account which enable the Company and its Subsidiaries
to issue financial statements in accordance with GAAP and as otherwise required
by applicable Laws or any Official Body having jurisdiction over the Company or
any Subsidiary of the Company, and in which full, true and correct entries shall
be made in all material respects of all its dealings and business and financial
affairs.
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11.08. Plans and Benefit Arrangements. The Company shall, and
shall cause each of its Subsidiaries to, comply with ERISA, the Internal Revenue
Code and other applicable Laws applicable to Benefit Arrangements except where
failure to comply individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect. Without limiting the generality of
the foregoing, the Company shall make, and cause each of its Subsidiaries to
make, in a timely manner, all contributions due to Benefit Arrangements.
11.09. Compliance with Laws. Each Guarantor shall, and shall
cause each of its Subsidiaries to, comply with all applicable Laws, including
all Environmental Laws, in all respects, provided that it shall not be deemed to
be a violation of this Section 11.09 if any failure to comply with any Law would
not result in fines, penalties, remediation costs, other similar liabilities or
injunctive relief which individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect.
11.10. Subsequent Credit Terms. The Company shall notify the
Administrative Agent in writing not less than ten (10) Business Days prior to
any Guarantor entering into any credit agreement or any amendment or
modification to any existing credit agreement in either case as otherwise
permitted hereunder, pursuant to which any Guarantor agrees to representations,
warranties or covenants which are more restrictive, as determined in the sole
discretion of the Administrative Agent, than the representations, warranties or
covenants contained herein (the "More Restrictive Provisions"). Upon the
execution of such new credit agreement, amendment or modification, the
corresponding covenants, terms and conditions of this Guarantee shall be and
shall be deemed to be automatically and immediately amended to conform with and
to include the applicable More Restrictive Provisions of such new credit
agreement, amendment or modification; provided, that the foregoing shall not be
applicable to or be deemed to affect any provision of this Guarantee if any new
credit agreement, amendment or modification is less restrictive. Each of the
Guarantors hereby agrees promptly to execute and deliver any and all such
documents and instruments and to take all such further actions as the
Administrative Agent may, in its sole discretion, deem necessary or appropriate
to effectuate the provisions of this Section 11.10.
11.11. [Reserved]
11.12. Subsidiary Guarantees. If (i) any Restricted
Subsidiary's total assets determined in accordance with GAAP at the end of any
Fiscal Quarter constitute more than 10% of Consolidated Tangible Net Worth
determined at the end of such Fiscal Quarter or (ii) any Restricted Subsidiary's
net income determined in accordance with GAAP for any rolling four Fiscal
Quarter period exceeds 10% of Consolidated Net Income for such four Fiscal
Quarters, the Company shall cause such Restricted Subsidiary to execute a letter
agreement in form and substance satisfactory to the Administrative Agent
pursuant to which such Restricted Subsidiary shall become a Guarantor hereunder
and to deliver such legal opinions and other documents and instruments as the
Administrative Agent may request. Such letter agreement may include a limitation
on amount or a limitation on scope of such Guarantor's obligations, in a form
and substance satisfactory to the Administrative Agent to the extent required by
law or tax considerations.
ARTICLE XII. NEGATIVE COVENANTS. The Guarantors, jointly and
severally, covenant and agree that until payment in full of the Loans and
interest thereon,
13
satisfaction of all of the Obligations under the Operative Agreements and
termination of the Commitments, the Guarantors shall comply at all times with
the following negative covenants:
12.01. Indebtedness. Each of the Guarantors shall not, and
shall not permit any of its Subsidiaries to, at any time create, incur, assume
or suffer to exist any Indebtedness, except:
(a) Indebtedness under the Operative Agreements;
(b) Indebtedness existing on the Effective Date as
set forth on Schedule 2, including Indebtedness under the
Corporate Credit Agreement (and any extensions or renewals
thereof provided there is no increase in the amount thereof or
other significant change in the terms thereof unless otherwise
specified on Schedule 2);
(c) Capitalized Lease Obligations;
(d) interest rate swap, cap, collar or floor
agreements or other interest rate management devices with any
Lender, referencing an aggregate notional amount not to
exceed, based on the reasonable business judgment of the
Company, the maximum principal amount outstanding at any time
of all Indebtedness of the Company and its Subsidiaries on a
consolidated basis plus an amount equal to 50% of Capitalized
Rent Expense, with such interest rate management devices to be
entered into for hedging purposes only and not for
speculation;
(e) Indebtedness secured by Purchase Money Security
Interests, so long as the amount of such Indebtedness does not
exceed the purchase price of the property which is subject to
such Purchase Money Security Interests;
(f) Indebtedness of an Unrestricted Subsidiary which
is a Domestic Subsidiary to another Unrestricted Subsidiary
which is a Domestic Subsidiary or to the Company;
(g) Indebtedness of the Company to an Unrestricted
Subsidiary which is a Domestic Subsidiary so long as such
Indebtedness is unsecured;
(h) Contingent Obligations as and to the extent
permitted under Section 12.03;
(i) Indebtedness of the Company and its Domestic
Subsidiaries in addition to Indebtedness otherwise permitted
by clauses (a) to (h) above with an aggregate principal Dollar
Equivalent amount outstanding not to exceed 20% of
Consolidated Tangible Net Worth (determined as of the last day
of the Fiscal Quarter most recently ended);
(j) unsecured Indebtedness of Foreign Subsidiaries
with an aggregate principal Dollar Equivalent amount
outstanding not to exceed $10,000,000 or Indebtedness of one
Foreign Subsidiary to another Foreign Subsidiary;
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(k) Permitted Sutro Refinancing Indebtedness, so long
as (A) the aggregate principal amount of any such Indebtedness
outstanding does not exceed $36,000,000, (B) the aggregate
principal amount of any such Indebtedness incurred, at the
date of incurrence, is at least 85% of the face value of the
amount of "Notes" (as defined in the Note Put Agreements)
purchased by Borders as required by Section 2.2 of the Note
Purchase Agreements, (C) any such Indebtedness is incurred no
sooner than the relevant "Tenant Purchase Date" (as defined in
the Note Put Agreements), (D) the representations, warranties
and covenants contained in the documentation with respect to
any such Indebtedness are no more restrictive, as determined
in the reasonable discretion of the Administrative Agent, than
the representations, warranties or covenants hereof, (E) the
maturity of any such Indebtedness is not less than two years
from the date of incurrence, and (F) on or before the date of
incurrence, the Guarantors shall have delivered to the Lenders
proforma financial statements, in form and substance
satisfactory to the Lenders, showing that, during the term of
such Indebtedness, based on reasonable projections of the
financial performance of the Guarantors, the Guarantors will
not be in violation of any of the financial covenants
contained in this Article XII;
(l) Any refinancing of any or all of the Indebtedness
of the Guarantors under the Guarantee on substantially the
terms described in Section 21.1 of the Form of Lease attached
as Exhibit G to the Participation Agreement.
12.02. Liens. Each of the Guarantors shall not, and shall not
permit any of its Subsidiaries to, at any time create, incur, assume or suffer
to exist any Lien on any of its Property now owned or hereafter acquired, or
agree or become liable to do so, except Permitted Liens.
12.03. Contingent Obligations. Each of the Guarantors shall
not, and shall not permit any of its Subsidiaries to, at any time, directly or
indirectly, become or be liable in respect of any Contingent Obligations, except
for:
(a) Contingent Obligations of the Company or any
Unrestricted Subsidiary which is a Domestic Subsidiary in
respect of obligations of the Company or any Unrestricted
Subsidiary which is a Domestic Subsidiary;
(b) Permitted Lease Contingent Obligations, provided
that the portion of all such Permitted Lease Contingent
Obligations which constitute current liabilities determined
and consolidated in accordance with GAAP (whether such amounts
are fixed or percentage rent, fees, costs, accelerated
payments or otherwise), shall not exceed Fifteen Million
Dollars ($15,000,000) at any one time;
(c) Contingent Obligations arising by operation of
any applicable law which individually or in the aggregate
could not reasonably be expected to have Material Adverse
Effect;
(d) any Contingent Obligations arising under the Note
Put Agreements;
15
(e) any Contingent Obligations arising under any
computer leases with respect to which Kmart is the lessee and
any of the Guarantors is the user of such computer equipment;
(f) any Contingent Obligations arising under any of
the Kmart Agreements;
(g) Contingent Obligations arising under this
Guarantee, provided, however, that the aggregate amount of
Contingent Obligations permitted hereunder shall not exceed
$250,000,000;
(h) Contingent Obligations constituting a Permitted
Joint Venture Activity, provided no Event of Default or
Default has occurred and is continuing or would result
therefrom and subject to Section 12.20;
(i) Contingent Obligations constituting a Permitted
Restricted Subsidiary Activity, provided no Event of Default
or Default has occurred and is continuing or would result
therefrom and subject to Section 12.20;
(j) Contingent Obligations of the Company or any
Unrestricted Subsidiary which is a Domestic Subsidiary in
respect of any obligations (other than operating lease
obligations) of any Unrestricted Subsidiary which is a Foreign
Subsidiary, subject to Section 12.20;
(k) Contingent Obligations of the Company or any
Unrestricted Subsidiary which is a Domestic Subsidiary in
respect of operating lease obligations of any Unrestricted
Subsidiary which is a Foreign Subsidiary; provided that the
portion of all such Contingent Obligations which constitutes
current liabilities determined and consolidated in accordance
with GAAP is limited to lease payments (whether such amounts
are fixed or percentage rent, fees, costs, accelerated payment
requirements or otherwise) not in excess of an aggregate of
$15,000,000 in any Fiscal Year with respect to all
Unrestricted Subsidiaries which are Foreign Subsidiaries; and
(l) Contingent Obligations of any Unrestricted
Subsidiary which is a Foreign Subsidiary in respect of the
obligations of another Unrestricted Subsidiary which is a
Foreign Subsidiary.
12.04. Loans and Investments. Each of the Guarantors shall
not, and shall not permit any of its Subsidiaries to, at any time make or suffer
to remain outstanding any loan or advance to, or purchase, acquire or own any
stock, bonds, notes or securities of, or any partnership interest (whether
general or limited) in, or any other investment or interest in, or make any
capital contribution to, any other Person, or agree, become or remain liable to
do any of the foregoing, (collectively, "Investments"), except:
(a) trade credit extended on usual and customary
terms in the ordinary course of business;
16
(b) advances to employees to meet expenses incurred by such
employees in the ordinary course of business;
(c) Permitted Investments;
(d) Investments by the Company in any Unrestricted Subsidiary
which is a Domestic Subsidiary or by any Unrestricted Subsidiary which
is a Domestic Subsidiary in the Company or an Unrestricted Subsidiary
which is a Domestic Subsidiary, so long as any loans or advances are
unsecured;
(e) Investments by the Company or by any Unrestricted
Subsidiary which is a Domestic Subsidiary in any Unrestricted
Subsidiary which is a Foreign Subsidiary, so long as any loans or
advances are unsecured; provided, however, that any such Investments
permitted by this clause (e) plus any Foreign Purchases pursuant to
clause (h) below may not exceed in the aggregate 15% of Consolidated
Tangible Net Worth (determined as of the last day of the Fiscal Quarter
most recently ended) and subject to Section 12.20;
(f) a Purchase of Books Etc. and its Subsidiaries (including
Books Etc. Properties Limited) corporations organized and existing
under the laws of England for a total purchase price (including
Indebtedness assumed) not to exceed $75,000,000, so long as no Default
or Event of Default has occurred and is continuing or would result
therefrom;
(g) Domestic Purchases (i) so long as no Default or Event of
Default has occurred and is continuing or would result therefrom, (ii)
so long as the assets or business subject to such Domestic Purchase is
in substantially the same or a similar type of business as the Company
and its Subsidiaries, (iii) so long as the Board of Directors of any
Person to be acquired has approved the terms of the Purchase, and (iv)
so long as the Company delivers to the Lenders on or before the date on
which it or any of its Subsidiaries agrees to or consummates any
Domestic Purchase pro forma financial statements, in form and substance
satisfactory to the Administrative Agent, showing that no Default or
Event of Default will occur under Sections 12.15, 12.16 or 12.17 over
the 12 month period following the effective date of the Purchase, based
on reasonable projections of the financial performance of the Company
and its Subsidiaries;
(h) Foreign Purchases (i) so long as no Default or Event of
Default has occurred and is continuing or would result therefrom, (ii)
so long as the assets or business subject to such Foreign Purchase is
in substantially the same or a similar type of business as the Company
and its Subsidiaries, (iii) so long as the Board of Directors of any
Person to be acquired has approved the terms of the Foreign Purchase,
(iv) so long as the aggregate purchase amount payable in cash for all
Foreign Purchases permitted by this clause (h) plus all Investments
pursuant to clause (e) above does not exceed 15% of Consolidated
Tangible Net Worth (determined as of the last day of the Fiscal Quarter
most recently ended) and subject to Section 12.20; and (v) so long as
the Company delivers to the Lenders on or before the date on which it
or any of its Subsidiaries agrees to or consummates any Foreign
Purchase pro forma financial statements, in form and substance
satisfactory to the Administrative Agent, showing that no Default or
Event of Default will occur under Sections 12.15, 12.16 or 12.17 over
the 12 month period following the effective date of
17
the Purchase, based on reasonable projections of the financial
performance of the Company and its Subsidiaries;
(i) loans and advances, in addition to those permitted under
Section 12.04(b), to employees in an aggregate principal amount not to
exceed $10,000,000;
(j) Investments constituting Permitted Joint Venture
Activities, provided no Event of Default or Default has occurred and is
continuing or would result therefrom and subject to Section 12.20;
(k) Investments constituting Permitted Restricted Subsidiary
Activities, provided no Event of Default or Default has occurred and is
continuing or would result therefrom and subject to Section 12.20;
(l) repurchases of the Company's common stock in accordance
with Section 12.05; and
(m) Investments by one Foreign Subsidiary in another Foreign
Subsidiary.
12.05. Dividends and Related Distributions. The Company shall
not, and shall not permit any of its Subsidiaries to, make or pay, or agree to
become or remain liable to make or pay, any dividend or other distribution of
any nature (whether in cash, property, securities or otherwise) on account of or
in respect of its shares of capital stock or partnership interests or on account
of the purchase, redemption, retirement or acquisition of its shares of capital
stock (or warrants, options or rights therefor) (collectively, "Distributions"),
except:
(a) the Company may make open market repurchases of shares of
its common stock, and it may receive shares of its common stock as
payment of the exercise price of options, or as payment of taxes
associated with the exercise of options or the vesting of restricted
shares, which such delivered shares are deemed to be repurchased by the
Company at fair market value (as defined in the Company's stock option
plan) on the date of delivery to the Company, so long as the aggregate
amount paid by the Company with respect to all such repurchases
(including all such deemed repurchases) does not at any time exceed the
Repurchase Amount in effect from time to time and no Event of Default
or Default has occurred and is continuing or would result therefrom;
(b) the Company may engage in stock splits (including reverse
stock splits) or pay dividends in stock;
(c) Wholly-owned Subsidiaries may make Distributions to the
Company or another Wholly-owned Subsidiary;
(d) Subsidiaries other than Wholly-owned Subsidiaries may make
Distributions so long as (i) the aggregate amount of Distributions made
by any such Subsidiary to any Person other than the Company or a
Subsidiary of the Company in any Fiscal Year does not exceed 50% of
such Person's pro rata share (based on the percentage of stock or other
equity interests owned by such Person) of such Subsidiary's net income
for such Fiscal Year as determined in accordance with GAAP and (ii) no
later than ten (10) days prior to
18
any such Distribution, the Company shall have given written notice to
the Lenders and the Agents thereof, together with calculations
demonstrating that such Distribution complies with this clause (d); and
(e) the Company may pay dividends on its preferred stock so
long as the dividend rate on such preferred stock (after taking into
account all other fees and amounts payable on such preferred stock) is
less than the interest rate payable on the Loans.
12.06. Liquidations, Mergers, Consolidations. Each of the
Guarantors shall not, and shall not permit any of its Subsidiaries to, dissolve,
liquidate or wind-up its affairs, or become a party to any merger or
consolidation, provided that any Guarantor (other than the Company) may
consolidate or merge into another Guarantor and any Subsidiary of a Guarantor
may consolidate or merge into any Guarantor or any Wholly-owned Subsidiary of a
Guarantor so long as (i) the Guarantor or a Wholly-owned Subsidiary is the
surviving corporation of such consolidation or merger and (ii) no Event of
Default shall have occurred and be continuing or result therefrom.
12.07. Dispositions of Assets or Subsidiaries. Each of the
Guarantors shall not, and shall not permit any of its Subsidiaries to, sell,
convey, assign, lease, abandon or otherwise transfer or dispose of, voluntarily
or involuntarily, any of its property (including sale, assignment, discount or
other disposition of accounts, contract rights, chattel paper, equipment or
general intangibles with or without recourse or any shares of capital stock,
shares of beneficial interest or partnership interests of a Subsidiary of such
Guarantor), except:
(a) transactions involving the sale of inventory in the
ordinary course of business;
(b) any sale, transfer or lease of property, including without
limitation any store closures, in the ordinary course of business
which are no longer necessary or required in the conduct of the
Guarantor's business;
(c) any sale or transfer of property in order to concurrently
or subsequently lease as lessee such property, so long as such sale and
leaseback occurs in the ordinary course of business;
(d) any sale, transfer or lease of property, by any Subsidiary
of an Unrestricted Subsidiary to such Unrestricted Subsidiary or to
another Unrestricted Subsidiary which is a Domestic Subsidiary;
(e) any sale, transfer or lease of property, in the ordinary
course of business which is replaced by substitute property; and
(f) any transfers to Kmart of "Premises" pursuant to the Kmart
Indemnity (as such term is defined therein) if and to the extent that
any such transfer does not cause an Event of Default under Section
9(i)(i) of the Credit Agreement.
12.08. Affiliate Transactions. Each of the Guarantors shall not, and
shall not permit any of its Subsidiaries to, enter into or carry out any
transaction (including purchasing
19
property or services from or selling property or services to any Affiliate of
any Guarantor (other than another Guarantor) or other Person) unless such
transaction (i) is not otherwise prohibited by this Guarantee, (ii) is entered
into in the ordinary course of business upon fair and reasonable arm's-length
terms and conditions which are fully disclosed to the Administrative Agent and
(iii) is in accordance with all applicable Law.
12.09. Subsidiaries, Partnerships and Joint Ventures. Each of
the Guarantors shall not, and shall not permit any of its Subsidiaries to,
become or agree to become a general or limited partner, joint venturer or member
in any partnership, joint venture or limited liability company, as the case may
be, provided that the Company or any of its wholly-owned Subsidiaries may own or
create (a) any Wholly-owned Subsidiary, (b) any Unrestricted Subsidiary, (c) any
Restricted Subsidiary so long as (1) the aggregate of all Purchases by the
Company and its Subsidiaries of or Investments in or to such Restricted
Subsidiary is otherwise permitted under this Guarantee, and (2) no such
Restricted Subsidiary shall have Indebtedness which is recourse to or guaranteed
by the Company or any of its Subsidiaries except as otherwise permitted by this
Guarantee and (d) any Foreign Joint Venture so long as (1) the aggregate of all
Purchases by the Company and its Subsidiaries of or Investments by the Company
and its Subsidiaries in or to any such Joint Ventures is otherwise permitted by
this Guarantee, and (2) no such Joint Venture shall have Indebtedness which is
recourse to or guaranteed by the Company or any of its Subsidiaries, except as
otherwise permitted by this Guarantee.
12.10. Continuation of or Change in Business. Each of the
Guarantors shall not, and shall not permit any of its Subsidiaries to, engage in
any business other than (a) with respect to the Guarantors, substantially as
conducted and operated by such Guarantor during the Fiscal Year 1997 and (b)
with respect to any Subsidiary of a Guarantor, substantially as conducted and
operated by a Guarantor or in a business reasonably incidental and complementary
thereto or in an education-related retail business.
12.11. Plans and Benefit Arrangements. Each of the Guarantors
shall not, and shall not permit any of its Subsidiaries to:
(a) adopt, sponsor, maintain or make contributions to any
Plan, any Multiemployer Plan, any Multiple Employer Plan or except as
set forth on Schedule 5, any Benefit Arrangement that provides benefits
to retirees; or
(b) engage in a Prohibited Transaction with any Benefit
Arrangement which, alone or in conjunction with any other circumstances
or set of circumstances resulting in liability under ERISA, would have
a Material Adverse Effect.
12.12. Fiscal Year. Each of the Guarantors shall not, and
shall not permit any of its Subsidiaries to, change its Fiscal Quarter or change
its Fiscal Year.
12.13. Issuance of Stock. Each of the Guarantors (other than
the Company and any Unrestricted Subsidiary) shall not, and shall not permit any
of its Subsidiaries (other than Unrestricted Subsidiaries) to, issue any
additional shares of its capital stock or any options, warrants or other rights
in respect thereof, except to the Company or any Wholly-owned Subsidiary,
provided, however, that the Company shall not issue any preferred stock unless
the dividend rate thereon is permitted by Section 12.05(e).
20
12.14. Changes in Organizational Documents. Each of the
Guarantors shall not, and shall not permit any of its Subsidiaries to, amend in
any respect its certificate of incorporation (including any provisions or
resolutions relating to capital stock), by-laws or other organizational
documents in the event such change would be adverse to the Lenders.
12.15. Minimum Fixed Charge Coverage Ratio. The Guarantors
shall not permit the Fixed Charge Coverage Ratio, calculated as of the end of
each Fiscal Quarter for the previous four Fiscal Quarters then ended, to be less
than 1.50 to 1.0.
12.16. Maximum Leverage Ratio. The Guarantors shall not permit
the Leverage Ratio (i) calculated as of the end of the third and fourth Fiscal
Quarters of Fiscal Year 1997 to exceed 60%, (ii) calculated as of the end of
each Fiscal Quarter of the Fiscal Year 1998 to exceed 60%, (iii) calculated as
of the end of each Fiscal Quarter of the Fiscal Year 1999 to exceed 55%, or (iv)
calculated as of the end of each Fiscal Quarter thereafter to exceed 50%.
12.17. Minimum Tangible Net Worth. The Guarantors shall not at
any time permit Consolidated Tangible Net Worth to be less than the sum of (i)
$430,000,000 plus (ii) 50% of the Consolidated Net Income for each Fiscal
Quarter in which net income was earned (with no deduction for a net loss) during
the period from July 28, 1997 through the last day of the Fiscal Quarter
immediately preceding the date of determination, plus (iii) 100% of the net cash
proceeds to the Company of any public or private issuance of equity securities,
minus (iv) the aggregate amount paid by the Company with respect to any
repurchase of its common stock and (v) in any event, without deduction of the
intangible assets arising from the Purchase permitted by Section 12.04(f).
12.18. Modifications of Other Documents. The Guarantors shall
not permit or otherwise consent to any amendment to or modification of any of
the Kmart Agreements or any of the Note Put Agreements which could reasonably be
expected to have a Material Adverse Effect, which would have the effect of
materially increasing the obligations of or burdens on the Guarantors or any of
their Subsidiaries thereunder or which would have the effect of shortening or
deleting any notice or cure period provided for therein.
12.19. Prepayment of Note Put Agreement Obligations. Each of
the Guarantors shall not, and shall not permit any of its Subsidiaries to, make
any payment or prepayment in respect of Border's obligations under any of the
Note Put Agreements at any time before a "Tenant Purchase Date" as defined in
the Note Put Agreements.
12.20. Foreign Activities. Notwithstanding anything in this
Article XII, the Company shall not, and shall not permit any of its Subsidiaries
to (i) incur any Contingent Obligation permitted under Section 12.03(j), or (ii)
make any Investment permitted under Section 12.04(e) [Foreign Investments],
Section 12.04(h) [Foreign Purchases], Section 12.04(j) in respect of a Foreign
Joint Venture [Foreign Joint Venture Activities], or Section 12.04(k) in respect
of a Foreign Restricted Subsidiary [Foreign Restricted Subsidiary Activities] if
immediately after incurring such Contingent Obligation or making such
Investment, the aggregate amount of all such Contingent Obligations and
Investments would exceed 25% of Consolidated Tangible Net Worth, determined as
of the last day of the Fiscal Quarter most recently ended.
21
12.21. Inconsistent Agreements. Each of the Guarantors shall
not, and shall not permit any of its Subsidiaries to, become or remain subject
to any dividend restriction either in its organizational documents or in any
agreement or contract to which it is a party (other than restrictions in Section
12.05 hereof and in the Corporate Credit Agreement) nor shall any of them enter
into any indenture, agreement, instrument or other arrangement which, (a)
directly or indirectly prohibits or restrains, or has the effect of prohibiting
or restraining, or could reasonably be expected to impose materially adverse
conditions upon, the performance of the Obligations under the Operative
Agreements, any provisions of this Guarantee or the amending of any of the
Operative Agreements or (b) contains any provision which would be violated or
breached by the performance by any Guarantor or any of its Subsidiaries of any
of its obligations under any Operative Agreement.
ARTICLE XIII. REPORTING REQUIREMENTS. The Guarantors, jointly
and severally, covenant and agree that until payment in full of the Loans and
interest thereon, satisfaction of all of the Obligations and termination of the
Commitments, the Guarantors will furnish or cause to be furnished to the Agents
and each of the Lenders:
13.01. Quarterly Financial Statements. As soon as available
and in any event within forty-five (45) calendar days after the end of each of
the first three Fiscal Quarters in each Fiscal Year, consolidated financial
statements of the Company and its Subsidiaries, consisting of a consolidated
balance sheet as of the end of such Fiscal Quarter and related consolidated
statements of income, stockholders' equity and cash flows for the Fiscal Quarter
then ended and the Fiscal Year through that date, all in reasonable detail and
certified (subject to normal year-end audit adjustments) by an Authorized
Officer of the Company as having been prepared in accordance with GAAP,
consistently applied, and setting forth in comparative form the respective
financial statements for the corresponding date and period in the previous
Fiscal Year. As soon as available and in any event within forty-five (45)
calendar days after the end of each Fiscal Year of the Company, a certificate of
the Company signed by an Authorized Officer of the Company setting forth the
calculation of the Fixed Charge Coverage Ratio as of the end of such Fiscal
Year.
13.02. Annual Financial Statements. As soon as available and
in any event within ninety (90) days after the end of each Fiscal Year of the
Company, consolidated financial statements of the Company and its Subsidiaries
consisting of a consolidated balance sheet as of the end of such Fiscal Year,
and related consolidated statements of income, stockholders' equity and cash
flows for the Fiscal Year then ended, all in reasonable detail and setting forth
in comparative form the financial statements as of the end of and for the
preceding Fiscal Year, and certified by independent certified public accountants
of nationally recognized standing satisfactory to the Administrative Agent. The
certificate or report of accountants shall be free of qualifications (other than
any consistency qualification that may result from a change in the method used
to prepare the financial statements as to which such accountants concur) and
shall not indicate the occurrence or existence of any event, condition or
contingency which would materially impair the prospect of payment or performance
of any covenant, agreement or duty of any of the Guarantors under any of the
Operative Agreements.
13.03. Certificates of the Company. Concurrently with the
financial statements of the Company furnished to the Agents and to the Lenders
pursuant to Sections 13.01 and 13.02, a certificate of the Company signed by an
Authorized Officer of the Company, in the form of
22
Exhibit A, (i) to the effect that, the representations and warranties of the
Guarantors contained in Section 7.03 of the Participation Agreement are true on
and as of the date of such certificate with the same effect as though such
representations and warranties had been made on and as of such date (except
representations and warranties which expressly relate solely to an earlier date
or time), the Guarantors have performed and complied with all covenants and
conditions hereof, and no Event of Default or Default exists and is continuing
on the date of such certificate and (ii) containing calculations in sufficient
detail to demonstrate compliance as of the date of the financial statements with
all financial covenants contained in Article XII, and (iii) describing any
Permitted Joint Venture Activity or Permitted Restricted Subsidiary Activity
engaged in, or any Purchase made, during the period covered by such financial
statements.
13.04. Notice of Default. Promptly after any officer of any
Guarantor has learned of the occurrence of an Event of Default or Default, a
certificate signed by an Authorized Officer of the Company setting forth the
details of such Event of Default or Default and the action which the Guarantors
propose to take with respect thereto.
13.05. Notice of Litigation. Promptly after the commencement
thereof, notice of all actions, suits, proceedings or investigations before or
by any Official Body, arbitrator or any other Person against any Guarantor or
Subsidiary of any Guarantor which involve a claim or series of claims in excess
of $10,000,000 or which if adversely determined could reasonably be expected to
have a Material Adverse Effect.
13.06. Certain Events. Written notice of:
(a) promptly after the adoption thereof, any amendment to the
organizational documents of any Guarantor;
(b) promptly, the enactment or adoption of any Law which could
reasonably be expected to have a Material Adverse Effect;
(c) promptly, and in any event within two (2) Business Days
after any Guarantor's receipt thereof, a copy of any notice received by
the Guarantors that a default (whether matured or unmatured) has
occurred under the Kmart Indemnity (as distinct from a request for
reimbursement under Section 2(a) thereof); and
(d) promptly, and in any event within two (2) Business Days
after any Guarantor's receipt thereof, a copy of any notice received by
the Guarantors under any of the Note Put Agreements.
13.07. Other Reports and Information. Promptly upon their
becoming available to the Company:
(a) any reports, including management letters, submitted to
the Company by independent accountants in connection with any annual,
interim or special audit;
(b) any reports, notices or proxy statements generally
distributed by the Company to its stockholders on a date no later than
the date supplied to the stockholders;
23
(c) regular or periodic reports, including Forms 10-K, 10-Q
and 8-K, registration statements and prospectuses, filed by the Company
with the Securities and Exchange Commission; and
(d) such other reports and information as the Lenders may from
time to time reasonably request.
13.08. Notices Regarding Benefit Arrangements. Promptly upon
becoming aware of the occurrence thereof, notice (including the nature of the
event and, when known, any action taken or threatened by the Internal Revenue
Service or the PBGC with respect thereto) of:
(a) any Reportable Event with respect to the Company or any of
its Subsidiaries (regardless of whether the obligation to report said
Reportable Event to the PBGC has been waived),
(b) any Prohibited Transaction that could subject the Company
or any of its Subsidiaries to a civil penalty assessed pursuant to
Section 502(i) of ERISA or a tax imposed by Section 4975 of the
Internal Revenue Code in connection with any Benefit Arrangement or any
trust created thereunder,
(c) any change in the coverage or terms of any Benefit
Arrangement, where the effect of such change is to materially increase
the unfunded liability of any of the Guarantors or any of their
Subsidiaries under such Benefit Arrangement, or
(d) any claim or lawsuit is commenced or, to the knowledge of
any of the Guarantors, threatened with respect to any Plan,
Multiemployer Plan or Benefit Arrangement, which, if successful, could
result in a material liability of the Company or any of its
Subsidiaries.
13.09. Access to the Company's Auditors. The Company hereby
irrevocably authorizes all accountants and third parties to disclose and deliver
to the Lenders, upon the reasonable request of the Administrative Agent, and at
the Company's expense, all financial information, books and records, work
papers, management reports and other information in their possession relating to
the financial condition of the Company and its Subsidiaries (other than those
subject to attorney-client privilege or written confidentiality agreements
furnished to the Administrative Agent).
13.10. Notices Regarding Corporate Credit Agreement.
(a) promptly, and in any event within five (5) days after the
execution thereof, a copy of any amendment or modification to or waiver in
respect to the Corporate Credit Agreement; and
(b) promptly, and in any event within five (5) days after the
occurrence thereof, written notice of any matured or unmatured default under the
Corporate Credit Agreement.
13.11. Notices Regarding Repurchases of Stock. Promptly, and
in any event within five (5) Business Days, after the repurchase by the Company
of any of its common stock, written
24
notice thereof (including the number of shares repurchased, the amount paid by
the Company with respect to such repurchase and the date of such repurchase).
ARTICLE XIV. AUTHORITY OF ADMINISTRATIVE AGENT. Each Guarantor
acknowledges that the rights and responsibilities of the Administrative Agent
under this Guarantee with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Administrative Agent of any option,
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Guarantee shall, as between the Administrative
Agent and the Lenders, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Administrative Agent and such Guarantor, the Administrative Agent
shall be conclusively presumed to be acting as Administrative Agent for the
Lenders with full and valid authority so to act or refrain from acting, and no
Guarantor shall be under any obligation, or entitlement, to make any inquiry
respecting such authority.
ARTICLE XV. NOTICES. All notices, requests and demands to or
upon any Agent, any Lender or any Guarantor shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered, or three (3) Business Days after
being deposited in the mail, postage prepaid, or, in the case of telecopy
notice, when received, addressed as follows:
(a) if to any Agent or any Lender, at its address or
transmission number for notices provided in Section 12.02 of the
Credit Agreement; and
(b) if to any Guarantor, at its address or transmission number
for notices set forth opposite its signature below.
Each Agent, each Lender and each Guarantor may change its
address and transmission numbers for notices by notice in the manner provided in
this Article XV.
ARTICLE XVI. COUNTERPARTS. This Guarantee may be executed by
one or more of the Guarantors on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the counterparts of this Guarantee signed by all the
Guarantors shall be lodged with the Administrative Agent.
ARTICLE XVII. SEVERABILITY. Any provision of this Guarantee
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
25
ARTICLE XVIII. INTEGRATION. This Guarantee represents the
agreement of each Guarantor with respect to the subject matter hereof and there
are no promises or representations by any Agent or any Lender relative to the
subject matter hereof not reflected herein.
ARTICLE XIX. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE
REMEDIES. (a) None of the terms or provisions of this Guarantee may be waived,
amended, supplemented or otherwise modified except as provided in Section 12.01
of the Credit Agreement.
(b) Neither any Agent nor any Lender shall by any act (except
by a written instrument pursuant to Section XIX(a) hereof), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Default or Event of Default or in any breach of any of
the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of any Agent or any Lender, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by any Agent or any Lender of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which such Agent
or such Lender would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
ARTICLE XX. SECTION HEADINGS. The section headings used in
this Guarantee are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
ARTICLE XXI. SUCCESSORS AND ASSIGNS. This Guarantee shall be
binding upon the successors and assigns of each Guarantor and shall inure to the
benefit of the Agents and the Lenders and their successors and assigns.
ARTICLE XXII. RELEASES OF GUARANTORS, ETC. Any Guarantor may
be released from its obligations hereunder with the consent of the Required
Lenders or all the Lenders, as the case may be, as provided in Section 12.01 of
the Credit Agreement. At the time of any such sale or disposition or release,
the respective Guarantor shall cease to be a Guarantor hereunder and shall have
no further liability or obligations arising from this Guarantee.
ARTICLE XXIII. JURY TRIAL; SUBMISSION TO JURISDICTION;
WAIVERS.
(a) EACH GUARANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
26
PROCEEDING RELATING TO THIS GUARANTEE OR ANY OTHER OPERATIVE
AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
(B) Each Guarantor hereby irrevocably and unconditionally:
(I) submits for itself and its property in all legal
action or proceeding relating to this guarantee or any other operative
agreement to which it is a party, or for recognition and enforcement of
any judgment in respect thereof, to the non-exclusive general
jurisdiction of the courts of the State of New York, the courts of the
United States for the Southern District of New York, and appellate
courts from any thereof;
(II) consents that any such action or proceeding may be
brought in such courts and waives trial by jury and any objection that
it may now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or proceeding was
brought in any inconvenient court and agrees not to plead or claim the
same;
(III) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to it at its address set forth herein or at such other address
of which the administrative agent shall have been notified pursuant
thereto;
(IV) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to ▇▇▇ in any other jurisdiction; and
(V) waives, to the maximum extent not prohibited by law,
any right it may have to claim or recover in any legal action or
proceeding referred to in this Article XXIII any special, exemplary,
punitive or consequential damages.
ARTICLE XXIV. INDEMNITY. The Guarantors jointly and severally
agree to (a) indemnify the Administrative Agent, each Lender, and their
respective officers, directors, employees, representatives and agents from and
hold each of them harmless against any and all losses, liabilities, claims,
damages or expenses incurred by any of them as a result of, or arising out of,
or in any way related to, or by reason of, any investigation, litigation or
other proceeding (whether or not any Agent or any Lender is a party thereto)
related to the entering into and/or performance of any Operative Agreement or
the use of the proceeds of any Loans or the consummation of any other
transactions contemplated in any Operative Agreement, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding (but
excluding any such losses, liabilities, claims, damages or expenses to the
extent incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified) and (b) reimburse each Lender for any payments
required to be made by such Lender to the Administrative Agent in accordance
with Section 10.07 of the Credit Agreement. The agreements in this Article XXIV
shall survive repayment of the Notes and all other amounts payable hereunder or
under the other Credit Documents.
27
ARTICLE XXV. GOVERNING LAW. This Guarantee shall be governed
by, and construed and interpreted in accordance with, the law of the State of
New York.
28
IN WITNESS WHEREOF, each of the undersigned has caused this
Guarantee to be duly executed and delivered by its duly authorized officer as of
the day and year first above written.
Address for any Guarantor:
-------------------------
c/o Borders Group, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
BORDERS GROUP, INC.
BORDERS, INC.
▇▇▇▇▇▇ BOOK COMPANY, INC.
BORDERS PROPERTIES, INC.
WALDENBOOKS PROPERTIES, INC.
PLANET MUSIC, INC.
BORDERS ONLINE, INC.
BORDERS OUTLET, INC.
THE LIBRARY, LTD.
By
-------------------------
Title:
------------------
BORDERS FULFILLMENT, INC.
By
-------------------------
Title:
------------------
BGP (UK) LIMITED
By
-------------------------
Title:
------------------
29
Exhibit A
to the Guarantee
----------------
FORM OF COMPLIANCE CERTIFICATE
[For the quarter ended ____________]
Reference is made to that certain Amended and Restated
Guarantee Agreement (as amended, the "Guarantee") dated as of November 22, 1997
and amended and restated October ____, 1997 by and among Borders Group, Inc.
(the "Company"), Borders, Inc., ▇▇▇▇▇▇ Book Company, Inc. and certain other
subsidiaries of Borders Group, Inc., as Guarantors, the Lenders, as defined
therein, and PNC Bank, National Association, as Administrative Agent.
Capitalized terms used but not defined herein shall have the
meanings given to them in the Guarantee. This certificate is being delivered
pursuant to the requirements of Section 13.03 of the Guarantee.
The undersigned, an Authorized Officer of the Company, hereby
certifies that:
1. The undersigned has reviewed the terms of the Guarantee and
the other Operative Agreements and has made, or caused to be made under
his supervision, a review of the transactions and conditions of the
Guarantors during the accounting period covered by the financial
statements being delivered simultaneously herewith;
2. Such review has not disclosed the existence during such
accounting period, and the undersigned does not have knowledge of the
existence as of the date hereof, of any Event of Default or any
Default; and
3. The representations and warranties contained in Article X
of the Guarantee are true on and as of the date hereof (except
representations and warranties that expressly relate solely to an
earlier date or time, which representations and warranties were true on
and as of the specific date referred to therein).
The undersigned hereby further certifies that the following calculations
demonstrate for the Fiscal Quarter ending ____________, _____ (the "Period"),
which is the [First] [Second] [Third] [Fourth] Fiscal Quarter, compliance by the
Guarantors with the financial covenants contained in Article XII of the
Guarantee.
30
1. Indebtedness
a. Aggregate outstanding principal amount of
all Indebtedness $__________
b. Capitalized Rent Expense
(i) Rent Expense $__________
(ii) Lease Financing Rent Expense $__________
(iii) 4 x ((I) + (ii)) $__________
c. Maximum aggregate notional amount of all interest rate
management devices permitted
byss.12.01(b) [a + (b x 50%)] $__________
d. Actual aggregate notional amount of all
interest rate management devices. $__________
e. Consolidated Tangible Net Worth (see
8(b)(iii) below $__________
f. Maximum aggregate amount of additional Indebtedness of the
Company and its Domestic Subsidiaries permitted by
ss. 12.01(i) [e x 20%] $__________
g. Actual aggregate amount of additional
Indebtedness of the Company and its Domestic
Subsidiaries $__________
h. Maximum aggregate amount of Indebtedness of
Foreign Subsidiaries to third parties permitted byss.12.01(j) $10,000,000
i. Actual aggregate amount of Indebtedness of
Foreign Subsidiaries to third parties $__________
2. Permitted Liens
a. Consolidated Tangible Net Worth (See 8(b)(iii) below) $__________
31
b. Maximum aggregate fair market value of all property secured by
Liens permitted under clause (xi) of the definition
of "Permitted Liens" [a x 10%] $__________
c. Actual aggregate fair market value of all property secured by
Liens permitted under clause (xi) of the definition
of "Permitted Liens" $__________
3. Contingent Obligations
a. Maximum aggregate amount of current portion
of Permitted Lease Contingent Obligations
permitted byss.12.03(b) $15,000,000
b. Actual aggregate amount of current portion of
Permitted Lease Contingent Obligations $__________
c. Maximum aggregate amount of Contingent obligations of the
Company or any Unrestricted Subsidiary which is a Domestic
Subsidiary in respect of operating lease obligations of any
Unrestricted Subsidiary
which is a Foreign Subsidiary $15,000,000
d. Actual aggregate amount of Contingent Obligations of the
Company or any Unrestricted Subsidiary which is a Domestic
Subsidiary in respect of operating lease obligations of any
Unrestricted Subsidiary which
is a Foreign Subsidiary $__________
4. Loans and Investments
a. Consolidated Tangible Net Worth (see 8(b)(iii) below) $__________
b. Maximum aggregate amount of all Investments by Company and
Domestic Subsidiaries in Foreign Unrestricted Subsidiaries
permitted by ss. 12.04(e)
plus Foreign Purchases [a x 15%] $__________
c. Actual aggregate amount of all Investments permitted by ss.
12.04(e) by Company and Domestic
Subsidiaries in Foreign Unrestricted Subsidiaries $__________
32
d. Actual aggregate amount of all Foreign Purchases
by Company and Domestic Subsidiaries $__________
e. c + d $__________
f. Maximum aggregate principal amount of all
loans to employees $10,000,000
g. Actual aggregate principal amount of all
loans to employees $__________
5. Dividends and Distributions
a. Maximum permitted aggregate amount of repurchases
of the Company's stock
i. aggregate amount paid by
officers, employees, and
directors in connection with the
exercise of options $__________
ii. realized tax benefit $__________
iii. ($100,000 + i + ii ) $__________
b. Actual aggregate amounts paid for repurchases of
the Company's stock $__________
c. See Schedule 1 hereto
6. Minimum Fixed Charge Coverage Ratio
a. Minimum Fixed Charge Coverage Ratio 1.50 to 1.0
b. Actual Fixed Charge Coverage Ratio:
(i) Consolidated Cash Flow from Operations:
(A) Consolidated Net income
for the preceding four
Fiscal Quarters $_________
33
(B) Less Extraordinary gains ($________)
(C) Plus Income (minus loss)
of minority investments $_________
(D) Plus Depreciation and
amortization $_________
(E) Plus Interest expense $_________
(F) Plus Rent Expense $_________
(G) Plus Lease Financing
Rent Expense $_________
(H) Plus Income Tax expense $_________
(I) Exclude Losses
attributable to use of
fair value
methodology for
recognition and
measurement of
impairment of goodwill
in accordance with
Accounting Principles
Board Opinion No. 17 $_________
(J) Consolidated Cash Flow
from Operations [A-B-C+
D+E+F+G+H-I] $_________
(ii) Fixed Charges:
(A) Interest Expense $_________
(B) Rent Expense $_________
(C) Lease Financing
Rent Expense $_________
(D) Scheduled principal
installments on
Indebtedness $_________
34
(E) Fixed charges
[A+B+C+D] $_________
c. Ratio of (i)(J) to (ii)(E) ______ to 1.0
7. Maximum Leverage Ratio (expressed as a percentage)
a. Required Leverage Ratio
I. third and fourth Fiscal Quarter in
Fiscal Year 1997 60%
ii. each Fiscal Quarter in
Fiscal Year 1998 60%
iii. each Fiscal Quarter in
Fiscal Year 1999 55%
iv. each Fiscal Quarter after
Fiscal Year 1999 50%
b. Actual Leverage Ratio:
(i) Consolidated Funded
Indebtedness (Indebtedness
for borrowed money, including
Capitalized Lease Obligations
($__________) plus Contingent
Obligations in respect of
borrowed money or Capitalized
Lease Obligations ($__________)
plus Contingent Obligations arising under
----
the Lease Financing Guarantee ($__________) $__________
(ii) Consolidated Total Capital:
(A) Total stockholders equity $__________
(B) Consolidated Funded
Indebtedness (see (I)
above) $__________
(C) (A) + (B) $__________
35
(iii) Ratio of (i) to (ii)(C) ____%
8. Minimum Tangible Net Worth
a. Required Consolidated Tangible Net Worth:
(i) $430,000,000
(ii)(A) Consolidated Net Income for
the period from July 28,
1997 through the end of the
Fiscal Quarter immediately
preceding the date hereof $_________
(B) 50% x (A) $_________
(iii) Net cash proceeds of any
issuance of equity
securities $_________
(iv) the aggregate amount paid
to repurchase stock $_________
(v) (i) + (ii)(B) + (iii) - (iv) $__________
b. Actual Consolidated Tangible Net Worth:
(i) Total stockholders' equity
as of the end of the Period $_________
(ii) Intangible assets of the Company and its
Subsidiaries on a consolidated basis as of the end
of the Period (excluding intangible assets from
the Books Etc. Limited Purchase permitted by ss.
12.04(f)) $_________
(iii) (i) - (ii) $__________
9. Foreign Activities
a. Consolidated Tangible Net Worth
(See 8(b)(iii)above) $__________
36
b. Maximum permitted aggregate amount of Contingent Obligations
permitted under ss. 12.03(j) and Investments permitted under
▇▇.▇▇. 12.04(e), 12.04(h), 12.04(j) in respect of a Foreign
Joint Venture, and ss. 12.04(k) in respect of a Foreign
Restricted
Subsidiary [a x 25%] $__________
c. Actual aggregate amount of Contingent Obligations permitted
under ss. 12.03(j) and Investments permitted under ▇▇.▇▇.
12.04(e), 12.04(h), 12.04(j) in respect of a Foreign Joint
Venture, and ss. 12.04(k) in respect of a Foreign Restricted
Subsidiary $__________
10. Permitted Joint Venture Activity
a. Consolidated Tangible Net Worth
(See 8(b)(iii) above) $__________
b. Maximum permitted aggregate amount of all Investments in Joint
Ventures and Contingent Obligations of the Company or any
Unrestricted Subsidiary which is a Domestic Subsidiary in
respect of Indebtedness of Joint Ventures
[a x 15%] $__________
c. Actual aggregate amount of all Investments in Joint Ventures
($________) and Contingent Obligations of the Company or any
Unrestricted Subsidiary which is a Domestic Subsidiary in
respect of Indebtedness of
Joint Ventures($________) $__________
d. Maximum permitted aggregate amount of Contingent Obligations
of the Company or any Unrestricted Subsidiary which is a
Domestic Subsidiary relating to Leases of Joint Ventures $15,000,000
37
e. Actual aggregate amount of Contingent Obligations of the
Company or any Unrestricted Subsidiary which is a
Domestic Subsidiary relating to Leases of Joint Ventures $__________
11. Permitted Restricted Subsidiary Activity
a. Consolidated Tangible Net Worth
(See 8(b)(iii) above) $__________
b. Maximum permitted aggregate amount of all Investments by the
Company or Unrestricted Domestic Subsidiary in Restricted
Subsidiaries and Contingent Obligations of the Company or any
Unrestricted Subsidiary which is a Domestic Subsidiary in
respect of Indebtedness of Restricted
Subsidiaries [a x 20%] $__________
c. Actual aggregate amount of all Investments by the Company or
Unrestricted Domestic Subsidiary in Restricted Subsidiaries
($_________) and Contingent Obligations of the Company or any
Unrestricted Subsidiary which is a Domestic Subsidiary in
respect of Indebtedness of Restricted
Subsidiaries ($________) $__________
d. Maximum permitted aggregate amount of all Investments by the
Company or Unrestricted Domestic Subsidiary and Contingent
Obligations of the Company or any Unrestricted Subsidiary
which is a Domestic Subsidiary in respect of Indebtedness of
Restricted Subsidiaries which are Foreign
Subsidiaries [a x 15%] $__________
e. Actual aggregate amount of
all Investments by the Company or Unrestricted Domestic
Subsidiary and Contingent Obligations of the Company or any
Unrestricted Subsidiary which is a Domestic Subsidiary in
respect of Indebtedness of Restricted Subsidiaries which are
Foreign
Subsidiaries $__________
38
f. Maximum permitted aggregate amount of Contingent Obligations
of the Company or any Unrestricted Subsidiary which is a
Domestic
Subsidiary relating to Leases of Restricted Subsidiaries $15,000,000
g. Actual aggregate amount of Contingent Obligations of the
Company or any Unrestricted Subsidiary which is a Domestic
Subsidiary relating
to Leases of Restricted Subsidiaries $__________
11. Description of any Permitted Joint Venture Activity
or Permitted Restricted Subsidiary Activity engaged
in, or any Purchase Made, During the Period
[Describe transactions, including amounts involved]
IN WITNESS WHEREOF, the undersigned has caused this Compliance
Certificate to be executed and delivered this _____ day of _____________, _____.
BORDERS GROUP, INC.
By:
Title:
[Authorized Officer]
39
Schedule 1
Maximum
Distribution
Minority to Minority Actual Distributions
Shareholders pro Shareholders Made to Minority
Minority Net Income rata Share of Net (50% of pro Shareholders
Subsidiary Shareholders Percent Ownership Year to Date Income rata share) During Fiscal Year
---------- ------------ ----------------- ------------ --------------------- ----------- ------------------