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EXHIBIT 10(e)
CONFORMED COPY
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CREDIT AGREEMENT
dated as of
December 31, 1998,
among
HECHINGER INVESTMENT COMPANY OF DELAWARE, INC.,
as Borrower,
CENTERS HOLDINGS, INC.,
BSQ ACQUISITION, INC.,
BSQ TRANSFEREE CORP.,
HECHINGER COMPANY,
HECHINGER STORES COMPANY,
HECHINGER STORES EAST COAST COMPANY,
The LENDERS Party Hereto
and
THE CHASE MANHATTAN BANK,
as Administrative Agent, Collateral Agent, Borrowing Base Audit Agent,
Issuing Bank and Swingline Lender,
---------------------------
CHASE SECURITIES INC.,
as Arranger and Sole Book Manager
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TABLE OF CONTENTS
Page
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ARTICLE I Definitions.............................................1
SECTION 1.01. Defined Terms........................................................................1
SECTION 1.02. Classification of Loans and Borrowings..............................................18
SECTION 1.03. Terms Generally.....................................................................18
SECTION 1.04. Accounting Terms; GAAP..............................................................18
ARTICLE II The Credits...........................................18
SECTION 2.01. Commitments.........................................................................18
SECTION 2.02. Loans and Borrowings................................................................18
SECTION 2.03. Requests for Borrowings.............................................................19
SECTION 2.04. Swingline Loans.....................................................................19
SECTION 2.05. Letters of Credit...................................................................20
SECTION 2.06. Funding of Borrowings...............................................................23
SECTION 2.07. Interest Elections..................................................................23
SECTION 2.08. Termination and Reduction of Commitments............................................24
SECTION 2.09. Repayment of Loans; Evidence of Debt................................................24
SECTION 2.10. Prepayment of Loans.................................................................25
SECTION 2.11. Fees................................................................................27
SECTION 2.12. Interest............................................................................27
SECTION 2.13. Alternate Rate of Interest..........................................................28
SECTION 2.14. Increased Costs.....................................................................28
SECTION 2.15. Break Funding Payments..............................................................29
SECTION 2.16. Taxes...............................................................................29
SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of Setoffs..........................30
SECTION 2.18. Mitigation Obligations; Replacement of Lenders......................................31
ARTICLE III Representations and Warranties.......................32
SECTION 3.01. Organization; Powers................................................................32
SECTION 3.02. Authorization; Enforceability.......................................................32
SECTION 3.03. Governmental Approvals; No Conflicts................................................32
SECTION 3.04. Financial Condition; No Material Adverse Change.....................................32
SECTION 3.05. Properties..........................................................................33
SECTION 3.06. Litigation and Environmental Matters................................................33
SECTION 3.07. Compliance with Laws and Agreements.................................................34
SECTION 3.08. Investment and Holding Company Status...............................................34
SECTION 3.09. Taxes...............................................................................34
SECTION 3.10. ERISA...............................................................................34
SECTION 3.11. Disclosure..........................................................................34
SECTION 3.12. Subsidiaries........................................................................34
SECTION 3.13. Insurance...........................................................................34
SECTION 3.14. Labor Matters.......................................................................35
SECTION 3.15. Solvency............................................................................35
SECTION 3.16. Security Documents..................................................................35
SECTION 3.17. Federal Reserve Regulations..........................................................35
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ARTICLE IV Conditions............................................36
SECTION 4.01. Effective Date.......................................................................36
SECTION 4.02. Each Credit Event...................................................................38
ARTICLE V Affirmative Covenants.................................39
SECTION 5.01. Financial Statements and Other Information..........................................39
SECTION 5.02. Notices of Material Events..........................................................40
SECTION 5.03. Information Regarding Collateral....................................................40
SECTION 5.04. Existence; Conduct of Business......................................................41
SECTION 5.05. Payment of Obligations..............................................................41
SECTION 5.06. Maintenance of Properties...........................................................41
SECTION 5.07. Insurance...........................................................................41
SECTION 5.08. Casualty and Condemnation...........................................................42
SECTION 5.09. Books and Records; Inspection and Audit Rights......................................42
SECTION 5.10. Compliance with Laws................................................................42
SECTION 5.11. Use of Proceeds and Letters of Credit...............................................42
SECTION 5.12. Additional Borrower Subsidiaries....................................................43
SECTION 5.13. Further Assurances..................................................................43
SECTION 5.14. Cash Management Procedures..........................................................43
SECTION 5.15. Delivery of Business Plan...........................................................43
SECTION 5.16. Independent Financial Advisor.......................................................43
ARTICLE VI Negative Covenants....................................44
SECTION 6.01. Indebtedness; Certain Equity Securities.............................................44
SECTION 6.02. Liens...............................................................................45
SECTION 6.03. Fundamental Changes.................................................................46
SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions...........................47
SECTION 6.05. Asset Sales.........................................................................48
SECTION 6.06. Hedging Agreements..................................................................49
SECTION 6.07. Restricted Payments; Certain Payments of Indebtedness...............................49
SECTION 6.08. Transactions with Affiliates........................................................49
SECTION 6.09. Restrictive Agreements..............................................................50
SECTION 6.10. Amendment of Material Documents.....................................................50
SECTION 6.11. Capital Expenditures................................................................50
SECTION 6.12. Minimum Consolidated EBITDA.........................................................50
SECTION 6.13. Additional Subsidiaries.............................................................51
ARTICLE VII Events of Default....................................51
ARTICLE VIII The Administrative Agent, the Collateral Agent and the Borrowing Base Audit Agent...53
ARTICLE IX Miscellaneous.........................................54
SECTION 9.01. Notices.............................................................................54
SECTION 9.02. Waivers; Amendments.................................................................55
SECTION 9.03. Expenses; Indemnity; Damage Waiver..................................................56
SECTION 9.04. Successors and Assigns..............................................................57
SECTION 9.05. Survival............................................................................58
SECTION 9.06. Counterparts; Integration; Effectiveness............................................58
SECTION 9.07. Severability........................................................................58
SECTION 9.08. Right of Setoff.....................................................................58
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SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process..........................59
SECTION 9.10. WAIVER OF JURY TRIAL................................................................59
SECTION 9.11. Headings............................................................................59
SECTION 9.12. Confidentiality.....................................................................59
SECTION 9.13. Interest Rate Limitation............................................................60
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Contents, p.5
SCHEDULES:
Schedule 2.01 -- Commitments
Schedule 3.03(c) -- Defaults
Schedule 3.04(c) -- Material Adverse Change (Hechinger and Hechinger Entities)
Schedule 3.04(f)-- Material Adverse Change (Builders Square)
Schedule 3.05 -- Properties
Schedule 3.06 -- Disclosed Matters
Schedule 3.12 -- Subsidiaries
Schedule 3.13 -- Insurance
Schedule 6.01 -- Existing Indebtedness
Schedule 6.02 -- Existing Liens
Schedule 6.03(e) -- Real and Personal Property (BSQ Newco)
Schedule 6.03(f) -- Real and Personal Property (Hechinger)
Schedule 6.03(g) -- Real and Personal Property (Hechinger Stores)
Schedule 6.03(h) -- Real and Personal Property (Hechinger East Coast)
Schedule 6.04 -- Investments
Schedule 6.05 -- Asset Sales
Schedule 6.08 -- Affiliate Transactions
Schedule 6.09 -- Existing Restrictions
Schedule 6.13 -- Non-recurring Costs
EXHIBITS:
Exhibit A -- Form of Assignment and Acceptance
Exhibit B -- Form of Opinion of Counsel for the Transaction Parties and
GEI II
Exhibit C-1 -- Form of Opinion of New York Counsel for the Transaction Parties
Exhibit C-2 -- Form of Opinion of Counsel for Kmart
Exhibit D -- Form of Parent Guarantee Agreement
Exhibit E -- Form of Subsidiary Guarantee Agreement
Exhibit F -- Form of Indemnity, Subrogation and Contribution Agreement
Exhibit G -- Form of Pledge Agreement
Exhibit H -- Form of Security Agreement
Exhibit I -- Form of Borrowing Base Certificate
Exhibit J -- Form of Intercreditor Agreement
Exhibit K-- Form of GEI II Credit Enhancement Agreement
Exhibit L-- Form of Kmart Credit Enhancement Agreement
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CREDIT AGREEMENT dated as of
December 31, 1998, among HECHINGER
INVESTMENT COMPANY OF DELAWARE, INC., as
Borrower, CENTERS HOLDINGS, INC., BSQ
ACQUISITION, INC., BSQ TRANSFEREE CORP.,
HECHINGER COMPANY, HECHINGER STORES COMPANY,
HECHINGER STORES EAST COAST COMPANY, the
LENDERS party hereto and THE CHASE MANHATTAN
BANK, as Administrative Agent, Collateral
Agent, Borrowing Base Audit Agent, Issuing
Bank and Swingline Lender.
The Borrower, Centers Holdings, Inc., BSQ Acquisition, Inc., BSQ
Transferee Corp., Hechinger Company, Hechinger Stores Company, Hechinger Stores
East Coast Company, the lenders party thereto (the "Existing Lenders"), The
Chase Manhattan Bank, BankAmerica Business Credit, Inc. and Citicorp USA, Inc.
are parties to a Credit Agreement dated as of September 26, 1997 (the "Existing
Credit Agreement"), as amended and restated as of December 31, 1998 (as amended,
supplemented or otherwise modified from time to time, the "Amended Existing
Credit Agreement"), pursuant to which the Existing Lenders have committed to
make revolving loans to the Borrower and to participate in letters of credit
issued on behalf of the Borrower, at any time and from time to time prior to
September 26, 2002 (the "Existing Facility Maturity Date"), in an aggregate
principal amount at any time outstanding not in excess of $600,000,000 (the
"Existing Facility").
The Borrower has requested that, in addition to the Existing
Facility, the Lenders party hereto make available to the Borrower, pursuant to
this Agreement and subject to the conditions set forth herein, Revolving Loans,
Swingline Loans and Letters of Credit, at any time and from time to time prior
to June 30, 1999, in an aggregate amount at any time outstanding not in excess
of $50,000,000 (including the amount of accrued and unpaid interest thereon and
related fees and expenses). The Letters of Credit and the proceeds of the
Revolving Loans and Swingline Loans shall be used solely for the purposes set
forth in Section 5.11.
The Lenders and the Swingline Lender are willing to extend credit to
the Borrower and the Issuing Bank is willing to issue Letters of Credit for the
account of the Borrower, in each case on the terms and subject to the conditions
set forth herein. Accordingly, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.
"Account" shall mean any right to payment for goods sold or leased
or for services rendered, whether or not earned by performance.
"Account Debtor" shall mean, with respect to any Account, the
obligor with respect to such Account.
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"Additional Financing Transactions" means (a) the execution,
delivery and performance by each Loan Party of the Loan Documents to which it is
to be a party, the borrowing of Loans, the use of the proceeds thereof and the
issuance of Letters of Credit hereunder and (b) the execution, delivery and
performance by each Loan Party of the Existing Loan Documents to which it is to
be a party.
"Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest
Period multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means Chase, in its capacity as
administrative agent for the Lenders hereunder.
"Administrative Questionnaire" means an Administrative Questionnaire
in a form supplied by the Administrative Agent.
"Advance Rate Percentage" means (a) 75.0% during the period from and
including the Effective Date to and including ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇) 73.5% during
the period from and including April 30, 1999, to and including May 30, 1999, (c)
72.0% during the period from and including May 31, 1999, to and including ▇▇▇▇
▇▇, ▇▇▇▇, (▇) 70.0% during the period from and including June 21, 1999, to and
including June 29, 1999, and (e) 0.0% from and after June 30, 1999.
"Advance Rate Reduction Amount" means, with respect to an Advance
Rate Reduction Date, the amount by which the aggregate "Total Exposures" exceeds
the "Borrowing Base" after giving effect to the reduction in the "Borrowing
Base" resulting from the reduction in the "Advance Rate Percentage" on such date
(as such terms are defined in the Amended Existing Credit Agreement).
"Advance Rate Reduction Dates" shall mean April 30, 1999, May 31,
1999, and June 21, 1999.
"Advance Rate Reduction Event" means the obligation of the Borrower
on an Advance Rate Reduction Date to make a mandatory prepayment of the Existing
Facility equal to the applicable Advance Rate Reduction Amount as required by
Section 2.10(c) of the Existing Credit Agreement.
"Affiliate" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
"Agents" has the meaning assigned to such term in Article VIII.
"Alternate Base Rate" means, for any day, a rate per annum equal to
the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate
in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect
on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a
change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate
shall be effective from and including the effective date of such change in the
Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively.
"Amended Existing Credit Agreement" has the meaning assigned to such
term in the introductory paragraphs of this Agreement.
"Applicable Percentage" means, with respect to any Lender, the
percentage of the total Revolving Commitments represented by such Lender's
Revolving Commitment. If the Revolving Commitments have terminated or expired,
the Applicable Percentages shall be determined based upon the Revolving
Commitments most recently in effect, giving effect to any assignments.
"Applicable Rate" means, for any day with respect to any ABR Loan,
1.25%, or any Eurodollar Loan, 2.75%.
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"Assessment Rate" means, for any day, the annual assessment rate in
effect on such day that is payable by a member of the Bank Insurance Fund
classified as "well-capitalized" and within supervisory subgroup "B" (or a
comparable successor risk classification) within the meaning of 12 C.F.R. Part
327 (or any successor provision) to the Federal Deposit Insurance Corporation
for insurance by such Corporation of time deposits made in dollars at the
offices of such member in the United States, provided that if, as a result of
any change in any law, rule or regulation, it is no longer possible to determine
the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual
rate as shall be determined by the Administrative Agent to be representative of
the cost of such insurance to the Lenders.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 9.04), and accepted by the Administrative Agent,
in the form of Exhibit A or any other form approved by the Administrative Agent.
"BABC" means BankAmerica Business Credit, Inc., a Delaware
corporation.
"Base CD Rate" means the sum of (a) the Three-Month Secondary CD
Rate multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.
"Board" means the Board of Governors of the Federal Reserve System
of the United States of America.
"Borrower" means Hechinger Investment Company of Delaware, Inc., a
Delaware corporation and a direct wholly owned subsidiary of Hechinger Stores.
"Borrower Subsidiary" means any subsidiary of the Borrower.
"Borrowing" means (a) Loans of the same Class and Type, made,
converted or continued on the same date and, in the case of Eurodollar Loans, as
to which a single Interest Period is in effect or (b) a Swingline Loan.
"Borrowing Base" means, at any time, (a) an amount equal to the
Advance Rate Percentage of Eligible Inventory Minus Reserves minus the sum of
(i) Gift Certificate Liability and (ii) Special Order Deposit Liability, in each
case as in effect at such time, minus (b) the aggregate "Total Exposure" of the
Existing Lenders (as such term is defined in the Amended Existing Credit
Agreement) in effect at such time. The Borrowing Base shall be calculated weekly
in accordance with Section 5.01(g). The Borrowing Base at any time in effect
shall be determined at such time in the Borrowing Base Audit Agent's and the
Collateral Agent's reasonable judgment by reference to the Borrowing Base
Certificate most recently delivered hereunder, it being understood that the
information contained in such Borrowing Base Certificate shall not be conclusive
in calculating the Borrowing Base and, after consultation with the Borrower, the
Collateral Agent shall be entitled to adjust the amounts and other criteria
contained therein to the extent that the Borrowing Base Audit Agent and the
Collateral Agent believe in their reasonable judgment that such adjustment is
appropriate to cause the Borrowing Base to reflect the standards set forth in
the definitions of the terms "Eligible Inventory" and "Eligible Inventory Minus
Reserves".
"Borrowing Base Audit Agent" means Chase, in its capacity as
borrowing base audit agent under this Agreement.
"Borrowing Base Certificate" has the meaning assigned to such term
in Section 5.01(g).
"Borrowing Request" means a request by the Borrower for a Borrowing
in accordance with Section 2.03.
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"BSQ Acqco" means BSQ Acquisition, Inc., a Delaware corporation and
a wholly owned subsidiary of Holdings.
"BSQ Acqco/Holdings Note" means the promissory note issued on
September 25, 1997, by BSQ Acqco to Holdings in the principal amount of
$8,000,000.
"BSQ Newco/Builders Square Note" means the promissory note issued on
September 25, 1997, by BSQ Newco to Builders Square in the principal amount of
$10,700,000.
"BSQ Newco" means BSQ Transferee Corp., a Delaware corporation and a
wholly owned subsidiary of BSQ Acqco.
"BSQ Newco Asset Acquisition" means the acquisition by the Borrower
on September 26, 1997, of the Acquired BSQ Newco Assets (as such term is defined
in the Existing Credit Agreement) in exchange for (a) the payment by the
Borrower to BSQ Newco of $243,000,000 in cash, (b) the assumption of the
existing Indebtedness of BSQ Newco and (c) the issuance by the Borrower to BSQ
Newco of the BSQ Newco Note.
"BSQ Newco Note" means the promissory note issued on September 26,
1997, by the Borrower to BSQ Newco in the principal amount of $0 in connection
with the BSQ Newco Asset Acquisition.
"Builders Square" means Builders Square, Inc., a Delaware
corporation.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to remain closed, provided that, when used in connection with a Eurodollar Loan,
the term "Business Day" shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.
"Capital Expenditures" means, for any period, (a) the additions to
property, plant and equipment and other capital expenditures of the Holdings
Group that are (or would be) set forth in a consolidated statement of cash flows
of the Holdings Group for such period prepared in accordance with GAAP and (b)
Capital Lease Obligations incurred by the Holdings Group during such period;
provided, however, the term "Capital Expenditures" shall not include (i) any
such expenditure made with (or in the amount of) the proceeds of insurance,
condemnation awards (or payment in lieu thereof) or indemnity payments received
from third parties for purposes of replacing or repairing the assets in respect
of which such proceeds, awards or payments were received, so long as such
expenditures are made within 18 months of the occurrence of the damage to or
loss of the assets being repaired or replaced and (ii) any such expenditures
made during such period for the acquisition of real estate (and fixtures
relating to such real estate) through a tax-free exchange pursuant to Section
1031 of the Internal Revenue Code.
"Capital Lease Obligations" of any Person means the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq.
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"Change in Control" means, at any time, (a) the failure by GEI II to
own, directly or indirectly, beneficially or of record, shares representing in
excess of 50% of the aggregate ordinary voting power represented by the issued
and outstanding capital stock of Holdings; (b) the failure of LG&P (or any
Affiliate thereof) to act as the sole general partner of GEI II; (c) occupation
of a majority of the seats (other than vacant seats) on the board of directors
of Holdings by Persons who were neither (i) nominated by the board of directors
of Holdings nor (ii) appointed by directors so nominated; (d) the acquisition of
direct or indirect Control of Holdings by any Person or group other than LG&P
(or another limited partnership fund for which LG&P or any Affiliate thereof
acts as the sole general partner) provided that such Control by LG&P may be
subject to the rights of Builders Square under the Securityholders Agreement
dated September 25, 1997, by and among GEI II, Builders Square and Holdings; (e)
failure by Holdings to own directly or indirectly 100% of the outstanding
capital stock of BSQ Acqco free and clear of all Liens (other than Liens under
the Loan Documents); (f) failure by BSQ Acqco to own directly or indirectly 100%
of the outstanding stock of BSQ Newco and Hechinger free and clear of all Liens
(other than Liens under the Loan Documents); (g) failure by Hechinger to own
directly or indirectly 100% of the outstanding capital stock of Hechinger Stores
free and clear of all Liens (other than Liens under the Loan Documents); (h)
failure by Hechinger Stores to own directly or indirectly 100% of the
outstanding capital stock of the Borrower free and clear of all Liens (other
than Liens under the Loan Documents); or (i) the occurrence of any change of
control (or similar event, however denominated) with respect to any Transaction
Party under any indenture or agreement in respect of Indebtedness with respect
to which any member of the Holdings Group is an obligor.
"Change in Law" means (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the date of this Agreement or (c) compliance by any Lender or
the Issuing Bank (or, for purposes of Section 2.14(b), by any lending office of
such Lender or by such Lender's or the Issuing Bank's holding company, if any)
with any request, guideline or directive (whether or not having the force of
law) of any Governmental Authority made or issued after the date of this
Agreement.
"Chase" means The Chase Manhattan Bank, a New York banking
corporation.
"Citicorp USA" means Citicorp USA, Inc., a Delaware corporation.
"Class", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Collateral" means any and all "Collateral", as defined in any
applicable Security Document.
"Collateral Agent" means Chase, in its capacity as collateral agent
under the Security Documents.
"Commitments" means the Revolving Commitments.
"Company Owned Life Insurance Program" means (a) the Confederation
Life Insurance Company whole life insurance policies (as assigned to Pacific
Mutual Life Insurance Company) naming Hechinger as beneficiary and certain
employees of Hechinger as insureds and (b) the General American Life Insurance
Company whole life insurance policies naming Hechinger as beneficiary and
certain employees of Hechinger as insureds.
"Commercial Letter of Credit" means any Letter of Credit issued for
the purpose of providing the primary payment mechanism in connection with the
purchase of any materials, goods or
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services by the Borrower or any Borrower Subsidiary in the ordinary course of
business of the Borrower or such Borrower Subsidiary.
"Consolidated EBITDA" means, for any period, Consolidated Net Income
for such period, plus, without duplication and to the extent deducted from
revenues in determining Consolidated Net Income, the sum of (a) the aggregate
amount of Consolidated Interest Expense for such period, (b) the aggregate
amount of letter of credit fees paid during such period, (c) the aggregate
amount of income tax expense for such period, (d) all amounts attributable to
depreciation and amortization (including the amortization of the write-up of
assets effected in connection with the Transactions) for such period and (e) all
extraordinary and non-cash charges (including the amount of any deduction to net
income as a result of any grant to, or repurchase from, directors, officers or
employees of Holdings, BSQ Newco, the Borrower or any Borrower Subsidiary, of
stock, stock equivalents or stock options of Holdings, and all non-cash losses)
during such period and (f) any non-recurring costs specified on Schedule 6.13,
and minus, without duplication and to the extent added to revenues in
determining Consolidated Net Income for such period, all extraordinary and
non-cash gains during such period, all as determined on a consolidated basis
with respect to the Holdings Group in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the interest
expense, both expensed and capitalized (including amortization of debt issuance
costs, original issue discount, interest paid in kind and the interest component
in respect of Capital Lease Obligations), accrued or paid by the Holdings Group
during such period, determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, for any period, net income or loss
of the Holdings Group for such period determined on a consolidated basis in
accordance with GAAP, provided that there shall be excluded (a) the income of
any Person in which any other Person (other than any member of the Holdings
Group or any director holding qualifying shares in compliance with applicable
law) has a joint interest, except to the extent of the amount of dividends or
other distributions actually paid to any member of the Holdings Group by such
Person during such period and (b) the income (or loss) of any Person accrued
prior to the date it becomes a Subsidiary or is merged into or consolidated with
any member of the Holdings Group or the date that Person's assets are acquired
by any member of the Holdings Group.
"Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise.
The terms "Controlling" and "Controlled" have meanings correlative thereto.
"Credit Enhancement Agreements" means collectively the GEI II Credit
Enhancement Agreement and the Kmart Credit Enhancement Agreement.
"December 1998 Bank Presentation" means the confidential written
presentation regarding the Holdings Group, dated December 23, 1998, prepared by
Holdings for the Lenders.
"Default" means any event or condition that constitutes an Event of
Default or that upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Disclosed Matters" means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 3.06.
"Discontinued Inventory and Aged Goods Reserve" means, at any time,
with respect to Inventory recorded on the Borrower's SMO Report, (a) an amount
equal to the value of all such Inventory purchased prior to August 20, 1994,
plus (b) an amount equal to 25% of Eligible Inventory purchased on or after
August 20, 1994, that has been designated as "discontinued" or that will be
removed from the Borrower's current merchandise assortment by the Borrower on a
basis consistent with the current and
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historical accounting practice of the Borrower and of Hechinger under the
perpetual weighted average cost ledger system associated with such SMO Report.
"dollars" or "$" refers to lawful money of the United States of
America.
"Effective Date" means the date on which the conditions specified in
Section 4.01 are satisfied (or waived in accordance with Section 9.02).
"Eligible Inventory Minus Reserves" means, at any time, (a) Eligible
Inventory at such time minus (b) the sum of (i) the Shrink Reserve at such time,
(ii) Discontinued Inventory and Aged Goods Reserve at such time, (iii) the
Excess Inventory, Slow-moving and Markdown Reserve at such time and (iv) any
modifications to the reserves specified in clause (i), (ii) or (iii) above or
any additional reserves deemed necessary at such time by the Borrowing Base
Audit Agent and the Collateral Agent based upon the results of periodic audits
or appraisals of the Inventory, provided that such reserves are
consistent with the customary practices of lenders in similar transactions.
"Eligible Inventory" means, at any time, an amount equal to the
aggregate Inventory Value at such time of all Inventory of the Borrower that
consists of finished goods available for sale to customers and is not ineligible
for inclusion in the calculation of the Borrowing Base pursuant to any of
clauses (a) through (i) below or otherwise deemed by the Borrowing Base Audit
Agent in good faith to be ineligible for inclusion in the calculation of the
Borrowing Base. Without limiting the foregoing, in order for Inventory to
qualify as Eligible Inventory, no person other than the Borrower shall have any
direct or indirect ownership interest or title to such Inventory. Standards of
eligibility may be fixed from time to time solely by the Borrowing Base Audit
Agent and the Collateral Agent in the exercise of their reasonable judgment.
Unless otherwise from time to time approved in writing by the Borrowing Base
Audit Agent and the Collateral Agent, Inventory shall be deemed not to
constitute Eligible Inventory if:
(a) such Inventory is not owned solely by the Borrower, or is leased
or on consignment or the Borrower does not have good and valid title
thereto;
(b) such Inventory (including any portion thereof in transit from
vendors) is not located at property that is owned or leased by the
Borrower and is therefore not in the possession or under the control of
the Borrower (including timber reload facilities, flow-through centers or
publicly held warehouses) unless a landlord waiver, satisfactory to the
Borrowing Base Audit Agent, is in effect with respect to such property;
(c) such Inventory is located at pool points operated by third
parties;
(d) such Inventory (exclusive of Inventory that has been designated
as "discontinued" or that will be removed from the Borrower's current
merchandise assortment pursuant to the standards described in
"Discontinued Inventory and Aged Goods Reserve") represents (i) goods
damaged, defective or otherwise unmerchantable, (ii) goods that do not
conform in all material respects to the representations and warranties
contained in this Agreement or any of the Security Documents, (iii) goods
that were returned or rejected by the Borrower's customers or (iv) goods
to be returned to the vendor;
(e) such Inventory is subject to a layaway purchase by any customer;
(f) such Inventory (i) is not located in the United States of
America (excluding territories and possessions thereof) or (ii) is located
in Puerto Rico;
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(g) such Inventory is not subject to a perfected second-priority
security interest in favor of the Collateral Agent for the benefit of the
Secured Parties;
(h) such Inventory consists of perishable items, including live
plants but excluding bulbs, seeds and artificial plants; or
(i) such Inventory is located at a store at which the Borrower has
been conducting a going-out-of-business or similar sale for 60 days or
title has transferred to a third party for the purpose of conducting a
going-out-of-business or similar sale.
"Environmental Laws" means all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by or with any Governmental
Authority, relating in any way to the environment, preservation or reclamation
of natural resources, handling, treatment, storage, disposal, Release or
threatened Release of any Hazardous Material or to health and safety matters.
"Environmental Liability" means any liability, contingent or
otherwise (including any liability for damages, natural resource damage, costs
of environmental remediation, administrative oversight costs, fines, penalties
or indemnities), of any member of the Holdings Group directly or indirectly
resulting from or based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment or disposal of any
Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the environment or (e) any
contract, agreement or other consensual arrangement pursuant to which liability
is assumed or imposed with respect to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer
under Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate
from the PBGC or a plan administrator of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f)
the incurrence by the Borrower or any of its ERISA Affiliates of any liability
with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of
any notice, or the receipt by any Multiemployer Plan from the Borrower or any
ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability
or a determination that a Multiemployer Plan is, or is expected to be, insolvent
or in reorganization, within the meaning of Title IV of ERISA.
"Eurodollar", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
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"Event of Default" has the meaning assigned to such term in Article
VII.
"Excess Inventory, Slow-moving and Markdown Reserve" means, at any
time, a reserve established pursuant to GAAP to reflect the difference between
the weighted average cost of the Borrower's Eligible Inventory, determined on a
basis consistent with the Borrower's historical accounting practices, and the
net realizable value of the Borrower's Eligible Inventory, assuming for purposes
of establishing such reserve that the Borrower uses a first-in, first-out method
of accounting for its Inventory, provided that such reserve shall not be less
than $10,000,000 or such other greater or lesser amount determined in the
Borrowing Base Audit Agent's and the Collateral Agent's reasonable discretion to
reflect excess, slow-moving or "marked-down" inventory.
"Excluded Taxes" means, with respect to the Agents, any Lender, the
Issuing Bank or any other recipient of any payment to be made by or on account
of any obligation of the Borrower hereunder, (a) income or franchise taxes
imposed on (or measured by) its net income by the United States of America, or
by the jurisdiction under the laws of which such recipient is organized or in
which its principal office is located or, in the case of any Lender, in which
its applicable lending office is located, (b) any branch profits taxes imposed
by the United States of America or any similar tax imposed by any other
jurisdiction in which the Borrower is located and (c) in the case of a Foreign
Lender (other than an assignee pursuant to a request by the Borrower under
Section 2.18(b)), any withholding tax that is imposed on amounts payable to such
Foreign Lender at the time such Foreign Lender becomes a party to this Agreement
(or designates a new lending office) or is attributable to such Foreign Lender's
failure to comply with Section 2.16(e), except to the extent that such Foreign
Lender (or its assignor, if any) was entitled, at the time of designation of a
new lending office (or assignment), to receive additional amounts from the
Borrower with respect to such withholding tax pursuant to Section 2.16(a).
"Existing Credit Agreement" has the meaning assigned to such term in
the introductory paragraphs of this Agreement.
"Existing Facility" has the meaning assigned to such term in the
introductory paragraphs of this Agreement.
"Existing Facility Maturity Date" has the meaning assigned to such
term in the introductory paragraphs of this Agreement.
"Existing Hechinger Public Debt" means, collectively, (a) the 9.45%
Senior Debentures Due 2012 of Hechinger in an aggregate principal amount of
$100,000,000, issued under the Indenture dated as of October 1, 1992, between
Hechinger and First Union National Bank of North Carolina, as trustee, (b) the
6.95% Senior Notes Due 2003 of Hechinger in an aggregate principal amount of
$100,000,000, issued under the Indenture dated as of October 1, 1992, between
Hechinger and First Union National Bank of North Carolina, as trustee, and (c)
the 5.5% Convertible Subordinated Debentures Due 2012 of Hechinger in an
aggregate principal amount of $132,000,000, issued under the Indenture dated as
of March 15, 1987, between Hechinger and First Union National Bank of North
Carolina, as trustee.
"Existing Lenders" has the meaning assigned to such term in the
introductory paragraphs of this Agreement.
"Existing Loan Documents" means the Amended Existing Credit
Agreement and the related "Loan Documents" (as such term is defined in the
Amended Existing Credit Agreement).
"Existing Revolving Borrowings" means a "Revolving Borrowing" (as
such term is defined in the Amended Existing Credit Agreement).
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"Existing Revolving Commitments" means "Revolving Commitments" (as
such term is defined in the Amended Existing Credit Agreement).
"Existing Revolving Loans" means a "Revolving Loan" (as such term is
defined in the Amended Existing Credit Agreement).
"Existing Swingline Loans" means "Swingline Loans" (as such term is
defined in the Amended Existing Credit Agreement).
"Federal Funds Effective Rate" means, for any day, the weighted
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Financial Officer" means, with respect to any Transaction Party,
the chief financial officer or treasurer of such Transaction Party.
"Foreign Lender" means any Lender that is organized under the laws
of a jurisdiction other than that in which the Borrower is located. For purposes
of this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"Foreign Subsidiary" means any Subsidiary that is organized under
the laws of a jurisdiction other than the United States of America or any State
thereof or the District of Columbia.
"Fronting Fee" has the meaning assigned to such term in Section
2.11(b).
"GAAP" means generally accepted accounting principles in the United
States of America.
"GEI II" means Green Equity Investors II, L.P., an investment fund
controlled by an Affiliate of LG&P.
"GEI II Credit Enhancement Agreement" means the Loan Purchase
Agreement, substantially in the form of Exhibit K, among GEI II, the Borrower,
the Lenders and the Administrative Agent, on behalf of the Lenders.
"Gift Certificate Liability" means, at any time, the aggregate face
value at such time of outstanding gift certificates of the Borrower entitling
the holder thereof to use all or a portion of the certificate to pay all or a
portion of the purchase price for any Inventory.
"GOB Prepayment Event" means any Prepayment Event resulting from the
sale, transfer or other disposition of inventory located at any store where the
Borrower is conducting a going-out-of-business or similar sale in connection
with the closing of such store.
"Governmental Authority" means the government of the United States
of America, any other nation or any political subdivision thereof, whether state
or local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
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"Guarantee" of or by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation, provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business.
"Guarantee Agreements" means, collectively, the Parent Guarantee
Agreement and the Subsidiary Guarantee Agreement.
"Hazardous Materials" means all explosive or radioactive substances
or wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law, including any material listed as a hazardous substance under
Section 101(14) of CERCLA.
"Hechinger" means Hechinger Company, a Delaware corporation and a
wholly owned subsidiary of BSQ Acqco.
"Hechinger Acqco" means Hechinger Acquisition, Inc., a Delaware
corporation and a wholly owned subsidiary of BSQ Acqco, which merged with and
into Hechinger pursuant to the Hechinger Merger on the "Effective Date" (as such
term is defined in the Hechinger Stores Credit Agreement), with Hechinger as the
surviving corporation.
"Hechinger Asset Acquisition" means the acquisition by the Borrower
on October 3, 1997, of the Acquired Hechinger Assets (as such term is defined in
the Existing Credit Agreement) in exchange for (i) the assumption of existing
Indebtedness of Hechinger Stores and Hechinger East Coast, (ii) the assumption
by the Borrower of reimbursement obligations in respect of Existing Letters of
Credit (as such term is defined in the Amended Existing Credit Agreement) issued
under the Hechinger Stores Credit Agreement, (iii) the satisfaction of certain
intercompany Indebtedness of Hechinger Stores and Hechinger East Coast to the
Borrower in the principal amounts of $150,000,000 and $2,500,000, respectively,
and (iv) the issuance by the Borrower to Hechinger East Coast of the Hechinger
East Coast Note.
"Hechinger East Coast" means Hechinger Stores East Coast Company, a
Delaware corporation and a wholly owned subsidiary of Hechinger Stores.
"Hechinger/East Coast Note" means the promissory note issued on
September 29, 1997, by the Borrower to Hechinger East Coast in the principal
amount of $47,500,000.
"Hechinger Entities" means Hechinger Stores and Hechinger East
Coast.
"Hechinger Merger Agreement" means the Agreement and Plan of Merger
dated as of July 17, 1997, among Hechinger Acqco, BSQ Acqco and Hechinger.
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"Hechinger Stores" means Hechinger Stores Company, a Delaware
corporation and a wholly owned subsidiary of Hechinger.
"Hechinger Stores Credit Agreement" means the credit agreement dated
as of September 25, 1997, among Hechinger Stores, Holdings, BSQ Acqco,
Hechinger, Hechinger East Coast, the lenders party thereto, Chase, as
administrative agent and collateral agent, BABC, as documentation agent and
borrowing base audit agent, and Citicorp USA, as syndication agent.
"Hedging Agreement" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Holdings" means Centers Holdings, Inc., a Delaware corporation.
"Holdings Group" means, collectively, Holdings and the Subsidiaries,
including BSQ Acqco, BSQ Newco, Hechinger, Hechinger Stores and the Borrower.
"Indebtedness" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty and (j) all obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances. The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Indemnity, Subrogation and Contribution Agreement" means the
Indemnity, Subrogation and Contribution Agreement, substantially in the form of
Exhibit F, among the Borrower, the Subsidiary Loan Parties and the Agents.
"Information Memorandum" means the Confidential Information
Memorandum dated August 1997, relating to the Borrower and the Transactions
(other than the Additional Financing Transactions).
"Intercreditor Agreement" means the Intercreditor Agreement,
substantially in the form of Exhibit J, among the Borrower, Holdings, the other
Subsidiary Loan Parties, GEI II, Kmart, the Administrative Agent, Chase, as
administrative agent and as collateral agent on behalf of the Existing Lenders,
and BABC and Citicorp USA, each solely in its capacity as an agent under the
Existing Credit Agreement.
"Interest Coverage Ratio" means, for any period, the ratio of
Consolidated EBITDA for such period to Consolidated Interest Expense for such
period.
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"Interest Election Request" means a request by the Borrower to
convert or continue a Borrowing in accordance with Section 2.07.
"Interest Payment Date" means (a) with respect to any ABR Loan
(other than a Swingline Loan), the last day of each calendar month, (b) with
respect to any Eurodollar Loan, the last day of the Interest Period applicable
to the Borrowing of which such Loan is a part and, in the case of a Eurodollar
Borrowing with an Interest Period of more than one month's duration, each day
prior to the last day of such Interest Period that occurs at intervals of one
month's duration after the first day of such Interest Period, and (c) with
respect to any Swingline Loan, the day that such Loan is required to be repaid.
"Interest Period" means, with respect to any Eurodollar Borrowing,
the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the calendar month that is one, two or three
months thereafter, as the Borrower may elect, provided that (a) if any Interest
Period would end on a day other than a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (b) any Interest Period
that commences on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the last calendar month of
such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period. For purposes hereof, the date of a Borrowing
initially shall be the date on which such Borrowing is made and thereafter shall
be the effective date of the most recent conversion or continuation of such
Borrowing.
"Inventory" has the meaning assigned to such term in the Security
Agreement.
"Inventory Value" means, at any time, with respect to Inventory
recorded on the Borrower's SMO Report, the recorded inventory value of such
Inventory on such Report at such time.
"Issuing Bank" means Chase, in its capacity as the issuer of Letters
of Credit hereunder, and its successors in such capacity as provided in Section
2.05(i). The Issuing Bank may, in its discretion, arrange for one or more
Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case
the term "Issuing Bank" shall include any such Affiliate with respect to Letters
of Credit issued by such Affiliate.
"Kmart" means Kmart Corporation, a Michigan corporation.
"Kmart Credit Enhancement Agreement" means the Loan Purchase
Agreement, substantially in the form of Exhibit L, among Kmart, the Borrower,
the Lenders and the Administrative Agent, on behalf of the Lenders.
"LC Availability Period" means the period from and including the
Effective Date to but excluding the earlier of (a) the date that is five
Business Days prior to the Maturity Date and (b) the date of termination of the
Revolving Commitments.
"LC Disbursement" means a payment made by the Issuing Bank pursuant
to a Letter of Credit.
"LC Exposure" means, at any time, the sum of (a) the aggregate
undrawn amount of all outstanding Letters of Credit at such time plus (b) the
aggregate amount of all LC Disbursements that have not yet been reimbursed by or
on behalf of the Borrower at such time. The LC Exposure of any Revolving Lender
at any time shall be its Applicable Percentage of the total LC Exposure at such
time.
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"Lenders" means the Revolving Lenders.
"Letter of Credit" means any letter of credit issued pursuant to
this Agreement.
"LG&P" means ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Partners, L.P., a Delaware limited
partnership.
"LIBO Rate" means, with respect to any Eurodollar Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Dow ▇▇▇▇▇ Markets
service (or on any successor or substitute page of such service, or any
successor to or substitute for such service, providing rate quotations
comparable to those currently provided on such page of such service, as
determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to dollar deposits in the
London interbank market) at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period, as the rate for dollar
deposits with a maturity comparable to such Interest Period. In the event that
such rate is not available at such time for any reason, then the "LIBO Rate"
with respect to such Eurodollar Borrowing for such Interest Period shall be the
rate at which dollar deposits of $5,000,000 and for a maturity comparable to
such Interest Period are offered by the principal London office of the
Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"Loan Documents" means this Agreement, the Letters of Credit, the
Guarantee Agreements, the Indemnity, Subrogation and Contribution Agreement, the
Security Documents and the Credit Enhancement Agreements.
"Loan Parties" means the Transaction Parties and the Subsidiary Loan
Parties.
"Loans" means the Revolving Loans.
"Management Agreement" means the Management Services Agreement dated
September 25, 1997, between LG&P, the Borrower and the Subsidiaries.
"Margin Stock" has the meaning assigned to such term in Regulation
U.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, property, assets, prospects or condition, financial or
otherwise, of Holdings, the Borrower and the Subsidiaries taken as a whole or
(b) the validity or enforceability of this Agreement or any of the other Loan
Documents or any of the material rights or remedies of the Administrative Agent,
the Collateral Agent or the Lenders hereunder or thereunder.
"Material Indebtedness" means Indebtedness (other than the Loans and
Letters of Credit), or obligations in respect of one or more Hedging Agreements,
of any one or more of Holdings, the Borrower and the Subsidiaries in an
aggregate principal amount exceeding $5,000,000. For purposes of determining the
amount of Material Indebtedness at any time, the "principal amount" of the
obligations of Holdings, the Borrower or any Subsidiary in respect of any
Hedging Agreement at such time shall be the
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maximum aggregate amount (giving effect to any netting agreements) that
Holdings, the Borrower or such Subsidiary would be required to pay if such
Hedging Agreement were terminated at such time.
"Maturity Date" means June 30, 1999.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Net Proceeds" means, with respect to any event, (a) the cash
proceeds received in respect of such event, including (i) any cash received in
respect of any non-cash proceeds, but only as and when received, (ii) in the
case of a casualty, insurance proceeds, and (iii) in the case of a condemnation
or similar event, condemnation awards and similar payments, in each case net of
(b) the sum of (i) all reasonable fees and out-of-pocket expenses (including
appraisals, and legal, title and recording tax expenses and commissions) paid by
any Transaction Party or Subsidiary to third parties (other than Affiliates) in
connection with such event, (ii) in the case of a sale or other disposition of
an asset (including pursuant to a casualty or condemnation), the amount of all
payments required to be made by the Transaction Parties and the Subsidiaries as
a result of such event to repay Indebtedness (other than Loans and Existing
Revolving Loans) secured by such asset or otherwise subject to mandatory
prepayment as a result of such event, and (iii) the amount of all taxes
(including sales and value added taxes and including taxes payable in connection
with the transfer of funds to the Borrower or any of its Subsidiaries in
connection with a prepayment pursuant to this Agreement) paid (or reasonably
estimated to be payable) by the Transaction Parties and the Subsidiaries, and
the amount of any reserves (whether or not contained in an escrow or other
similar arrangements) established by the Transaction Parties and the
Subsidiaries to fund contingent liabilities reasonably estimated to be payable,
in each case during the year that such event occurred or the next succeeding
year and that are directly attributable to such event (as determined reasonably
and in good faith by the chief financial officer of Holdings).
"Obligations" has the meaning assigned to such term in the Security
Agreement.
"Other Taxes" means any and all current or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made under any Loan Document or from the
execution, delivery or enforcement of, or otherwise with respect to, any Loan
Document.
"Parent Guarantee Agreement" means the Guarantee Agreement,
substantially in the form of Exhibit D, made by the Transaction Parties (other
than the Borrower) and each of the Subsidiaries of Hechinger listed on Schedule
I thereto in favor of the Agents for the benefit of the Secured Parties.
"PBGC" means the Pension Benefit Guaranty Corporation referred to
and defined in ERISA and any successor entity performing similar functions.
"Perfection Certificate" means a certificate in the form of Annex 1
to the Security Agreement or any other form approved by the Collateral Agent.
"Permitted Acquisition" means any acquisition of assets from, or
shares or other equity interests in, any Person if (a) immediately after giving
effect thereto, no Default or Event of Default shall have occurred and be
continuing or would result therefrom, (b) such acquisition shall not have been
preceded by an unsolicited tender offer for such Person by the Borrower or any
of its Affiliates, (c) all transactions related thereto shall be consummated in
accordance with applicable laws, (d) in the case of any acquisition of shares or
other equity interests in any Person, such acquisition is an acquisition of 100%
of the shares or other equity interests of such Person (or is an acquisition of
at least 90% of the outstanding
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shares of each class of the stock of such Person, provided that such person
shall be merged with the acquiror pursuant to Section 253 of the Delaware
General Corporation Law (or an analogous short-form merger provision of another
state of the United States) within 30 days of such acquisition), (e) all actions
required to be taken, if any, with respect to any acquired or newly formed
Subsidiary under subsection 5.12 shall have been taken, (f) such assets, shares
or other equity interests pertain to a line of business related to the
businesses of the Borrower and its Subsidiaries as of the Effective Date, (g)
after giving effect to such acquisition, the Borrower shall be in compliance, on
a pro forma basis, with all the covenants set forth in this Agreement and (h)
neither the Borrower nor any of its subsidiaries shall assume or otherwise
become liable for any Indebtedness in connection with such acquisition (except
for Indebtedness permitted by Section 6.01).
"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes that are not yet due or are being
contested in compliance with Section 5.05;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the ordinary
course of business and securing obligations that are not overdue by more
than 60 days or are being contested in compliance with Section 5.05;
(c) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other
social security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature, in each case in the ordinary
course of business;
(e) judgment liens in respect of judgments that do not constitute an
Event of Default under clause (k) of Article VII; and
(f) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do not
materially detract from the value of the affected property or interfere
with the ordinary conduct of business of the Borrower or any Borrower
Subsidiary,
provided that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.
"Permitted Investments" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America), in
each case maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from
the date of acquisition thereof and having, at such date of acquisition,
the highest credit rating obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 180 days from the date of acquisition
thereof issued or guaranteed by or placed with, and money market deposit
accounts issued or offered by, any domestic office of any commercial bank
organized under the laws of the United States of America or any State
thereof that has a combined capital and surplus and undivided profits of
not less than $500,000,000; and
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(d) fully collateralized repurchase agreements with a term of not
more than 30 days for securities described in clause (a) above (without
regard to the limitation on maturity contained in such clause) and entered
into with a financial institution satisfying the criteria described in
clause (c) above.
"Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Pledge Agreement" means the Pledge Agreement, substantially in the
form of Exhibit G, among the Transaction Parties, the other Subsidiaries party
thereto and the Collateral Agent for the benefit of the Secured Parties.
"Prepayment Event" means any of the following events so long as such
event occurs prior to the Maturity Date:
(a) any sale, transfer or other disposition (including pursuant to a
sale and leaseback transaction) of any property or asset of a Transaction
Party or any Subsidiary, other than any sale, transfer or other
disposition permitted by Section 6.05(a), (c), or (f);
(b) any casualty or other insured damage to, or any taking under
power of eminent domain or by condemnation or similar proceeding of, any
property or asset of a Transaction Party or any Subsidiary;
(c) the issuance by a Transaction Party or any Subsidiary of any
equity securities, other than any such issuance of equity securities to
the Borrower or a Subsidiary; or
(d) the incurrence by a Transaction Party or any Subsidiary of any
Indebtedness of the type described in clause (a), (b) or (c) of the
definition of the term "Indebtedness", other than Indebtedness permitted
by Section 6.01(a)(i) through (x) and Section 6.01(a)(xii).
"Prime Rate" means the rate of interest per annum publicly announced
from time to time by Chase as its prime rate in effect at its principal office
in New York City; each change in the Prime Rate shall be effective from and
including the date such change is publicly announced as being effective.
"Real Estate Prepayment Event" means any Prepayment Event resulting
from the sale, transfer or other disposition (including due to casualty or
condemnation) of real estate and fixtures relating to such real estate.
"Receivables Purchase Agreements" means (a) the Business Revolving
Charge Program Agreement dated April 3, 1992, as amended, by and among
Hechinger, Home Quarters Warehouse, Inc. and General Electric Capital
Corporation and (b) the GE Capital Program Agreement, dated April 12, 1996, by
and between General Electric Capital Corporation and Builders Square.
"Register" has the meaning set forth in Section 9.04(c).
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"Regulation U" means Regulation U of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Regulation X" means Regulation X of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"Release" has the meaning set forth in Section 101(22) of CERCLA.
"Required Lenders" means, at any time, Lenders having Total
Exposures and unused Revolving Commitments representing more than 50% of the sum
of the Total Exposures and unused Revolving Commitments at such time.
"Restricted Payment" means any dividend or other distribution
(whether in cash, securities or other property) with respect to any shares of
any class of capital stock of any Transaction Party or any Subsidiary, or any
payment (whether in cash, securities or other property), including any sinking
fund or similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancelation or termination of any such shares of capital stock of a
member of any Transaction Party or any Subsidiary or any option, warrant or
other right to acquire any such shares of capital stock of any Transaction Party
or any Subsidiary.
"Revolving Availability Period" means the period from and including
the Effective Date to but excluding the earlier of the Maturity Date and the
date of termination of the Revolving Commitments.
"Revolving Commitment" means, with respect to each Lender, the
commitment of such Lender to make Revolving Loans and to acquire participations
in Letters of Credit and Swingline Loans hereunder, expressed as an amount
representing the maximum aggregate amount of such Lender's Total Exposure
hereunder, as such commitment may be (a) reduced from time to time pursuant to
Section 2.08 and (b) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 9.04. The initial amount of
each Lender's Revolving Commitment is set forth on Schedule 2.01, or in the
Assignment and Acceptance pursuant to which such Lender shall have assumed its
Revolving Commitment, as applicable (and the initial aggregate amount of the
Lenders' Revolving Commitments is $50,000,000).
"Revolving Lenders" means the Persons listed on Schedule 2.01 as
having Revolving Commitments and any other Person that shall have become a party
hereto and have Revolving Commitments pursuant to an Assignment and Acceptance,
other than any such Person that ceases to have a Revolving Commitment pursuant
to an Assignment and Acceptance. Unless the context otherwise requires, the term
"Revolving Lenders" includes the Swingline Lender.
"Revolving Loans" means Loans made by the Lenders to the Borrower
pursuant to Section 2.01.
"S&P" means Standard & Poor's.
"Secured Parties" has the meaning assigned to such term in the
Security Agreement.
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"Security Agreement" means the Security Agreement, substantially in
the form of Exhibit H, among the Transaction Parties, the other Subsidiary Loan
Parties and the Collateral Agent for the benefit of the Secured Parties.
"Security Documents" means the Security Agreement, the Pledge
Agreement and each other security agreement or other instrument or document
executed and delivered pursuant to Section 5.12 or 5.13 to secure any of the
Obligations.
"Shrink" means Inventory identified by the Borrower as lost,
misplaced or stolen Inventory.
"Shrink Reserve" means, at any time, an amount equal to accruals for
Shrink recorded by the Borrower at such time, which accruals have been
determined on a basis consistent with the current and historical accounting
practice of the Borrower of accruing for Shrink as a percentage of Inventory
Value (which percentage will equal the average of the percentage that Shrink
represents of total Inventory Value based on the results of the two most recent
semi-annual physical inventories conducted with respect to such Inventory),
provided that such reserve shall not be less than 4% of the Inventory Value
recorded on the Borrower's SMO Report or such other greater or lesser amount
determined in the Borrowing Base Audit Agent's and the Collateral Agent's
reasonable discretion to reflect Shrink.
"SMO Report" means the Statement of Merchandising Operations Report
issued in connection with the Borrower's perpetual weighted average cost ledger
system.
"Special Order Deposit Liability" (a) means, at any time, with
respect to Inventory recorded on the Borrower's SMO Report, the excess at such
time of (i) the aggregate amount of deposits with respect to special order
merchandise over (ii) the corresponding decrease recorded in Eligible Inventory
and (b) shall be calculated in accordance with Schedule A to Exhibit I.
"Specified Event of Default" means (a) any Event of Default
described in paragraph (a), (b), (h) or (i) of Article VII, (b) pursuant to
Article VII, the termination by the Administrative Agent of the Commitments and
the declaration by the Administrative Agent that the Loans then outstanding are
immediately due and payable in whole, (c) any "Event of Default" described in
paragraph (a), (b), (h) or (i) of Article VII of the Amended Existing Credit
Agreement or (d) pursuant to Article VII of the Amended Existing Credit
Agreement, the termination of the Existing Facility and the declaration that the
Existing Revolving Loans then outstanding are immediately due and payable in
whole.
"Standby Letter of Credit" means any Letter of Credit other than a
Commercial Letter of Credit.
"Statutory Reserve Rate" means a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject (a) with
respect to the Base CD Rate, for new negotiable nonpersonal time deposits in
dollars of over $100,000 with maturities approximately equal to three months and
(b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such
reserve percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve Rate
shall be adjusted automatically on and as of the effective date of any change in
any reserve percentage.
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"subsidiary" means, with respect to any Person (the "parent") at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, or (b) that is, as of such date,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.
"Subsidiary" means any subsidiary of Holdings.
"Subsidiary Guarantee Agreement" means the Guarantee Agreement,
substantially in the form of Exhibit E, made by the Borrower Subsidiaries in
favor of the Agents for the benefit of the Secured Parties.
"Subsidiary Loan Party" means any Subsidiary that is not a Foreign
Subsidiary.
"Swingline Exposure" means, at any time, the aggregate principal
amount of all Swingline Loans outstanding at such time. The Swingline Exposure
of any Revolving Lender at any time shall be its Applicable Percentage of the
total Swingline Exposure at such time.
"Swingline Lender" means Chase, in its capacity as lender of
Swingline Loans hereunder.
"Swingline Loan" means a Loan made pursuant to Section 2.04.
"Taxes" means any and all current or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Three-Month Secondary CD Rate" means, for any day, the secondary
market rate for three-month certificates of deposit reported as being in effect
on such day (or, if such day is not a Business Day, the next preceding Business
Day) by the Board through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day) or, if such rate is not so reported on such day or such
next preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York City
received at approximately 10:00 a.m., New York City time, on such day (or, if
such day is not a Business Day, on the next preceding Business Day) by the
Administrative Agent from three negotiable certificate of deposit dealers of
recognized standing selected by it.
"Total Exposure" means, with respect to any Lender at any time, the
sum of (a) the outstanding principal amount of such Lender's Revolving Loans at
such time, (b) its LC Exposure and Swingline Exposure at such time and (c) the
aggregate amount of accrued and unpaid interest and fees and expenses due
pursuant to this Agreement in respect of such Revolving Loans, LC Exposure and
Swingline Exposure at such time.
"Transaction Parties" means Holdings, BSQ Acqco, BSQ Newco,
Hechinger, Hechinger Stores, Hechinger East Coast and the Borrower.
"Transactions" means the Acquisitions (as such term is defined in
the Existing Credit Agreement), the Financing Transactions (as such term is
defined in the Existing Credit Agreement) and the Additional Financing
Transactions.
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"Type", when used in reference to any Loan or Borrowing, refers to
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate
Base Rate.
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Classification of Loans and Borrowings. For purposes
of this Agreement, Loans may be classified and referred to by Class (e.g., a
"Revolving Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type
(e.g., a "Eurodollar Revolving Loan"). Borrowings also may be classified and
referred to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a
"Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar Revolving
Borrowing").
SECTION 1.03. Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time, provided
that, if the Borrower notifies the Administrative Agent that the Borrower
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
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ARTICLE II
The Credits
SECTION 2.01. Commitments. Subject to the terms and conditions set
forth herein, each Lender agrees to make Revolving Loans to the Borrower from
time to time during the Revolving Availability Period in an aggregate principal
amount that will not result in such Lender's Total Exposure exceeding the lesser
of (a) such Lender's Revolving Commitment and (b) such Lender's Applicable
Percentage of the Borrowing Base in effect at such time. Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrower
may borrow, prepay and reborrow Revolving Loans.
SECTION 2.02. Loans and Borrowings. (a) Each Loan (other than a
Swingline Loan) shall be made as part of a Borrowing consisting of Loans of the
same Class and Type made by the Lenders ratably in accordance with their
respective Commitments of the applicable Class. The failure of any Lender to
make any Loan required to be made by it shall not relieve any other Lender of
its obligations hereunder, provided that the Commitments of the Lenders are
several and no Lender shall be responsible for any other Lender's failure to
make Loans as required.
(b) Subject to Section 2.13, each Revolving Borrowing shall be
comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request
in accordance herewith. Each Swingline Loan shall be an ABR Loan. Each Lender at
its option may make any Eurodollar Loan by causing any domestic or foreign
branch or Affiliate of such Lender to make such Loan, provided that any exercise
of such option shall not affect the obligation of the Borrower to repay such
Loan in accordance with the terms of this Agreement.
(c) At the commencement of each Interest Period for any Eurodollar
Borrowing, such Borrowing shall be in an aggregate amount that is an integral
multiple of $1,000,000 and not less than $5,000,000. At the time that each ABR
Borrowing is made, such Borrowing shall be in an aggregate amount that is an
integral multiple of $1,000,000 and not less than $5,000,000, provided that an
ABR Borrowing may be in an aggregate amount that is equal to the entire unused
balance of the total Revolving Commitments or that is required to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.05(e). Each
Swingline Loan shall be in an amount that is an integral multiple of $100,000
and not less than $1,000,000. Borrowings of more than one Type and Class may be
outstanding at the same time, provided that there shall not at any time be more
than a total of 12 Eurodollar Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Borrowing if the Interest Period requested with respect thereto would end
after the Maturity Date.
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SECTION 2.03. Requests for Borrowings. To request a Revolving
Borrowing, the Borrower shall notify the Administrative Agent of such request by
telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m.,
New York City time, three Business Days before the date of the proposed
Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00 a.m., New
York City time, one Business Day before the date of the proposed Borrowing,
provided that any such notice of an ABR Revolving Borrowing to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.05(e) may be
given not later than 10:00 a.m., New York City time, on the date of the proposed
Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall
be confirmed promptly by hand delivery or telecopy to the Administrative Agent
of a written Borrowing Request in a form approved by the Administrative Agent
and signed by the Borrower. Each such telephonic and written Borrowing Request
shall specify the following information in compliance with Section 2.02:
(i) the aggregate amount of such Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) subject to the second sentence of Section 2.02(b), whether
such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;
(iv) in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by
the definition of the term "Interest Period"; and
(v) the location and number of the Borrower's account to which funds
are to be disbursed, which shall comply with the requirements of Section
2.06.
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of one month's duration. Promptly following
receipt of a Borrowing Request in accordance with this Section or Section
2.10(j), the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender's Loan to be made as part of the
requested Borrowing.
SECTION 2.04. Swingline Loans. (a) Subject to the terms and
conditions set forth herein, the Swingline Lender agrees to make Swingline Loans
to the Borrower from time to time during the Revolving Availability Period, in
an aggregate principal amount at any time outstanding that will not result in
(i) the aggregate principal amount of outstanding Swingline Loans exceeding
$10,000,000 or (ii) the sum of the Total Exposures exceeding the lesser of (A)
the total Revolving Commitments and (B) the Borrowing Base in effect at such
time, provided that the Swingline Lender shall not be required to make a
Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrower
may borrow, prepay and reborrow Swingline Loans.
(b) To request a Swingline Loan, the Borrower shall notify the
Administrative Agent of such request by telephone (confirmed by telecopy), not
later than 12:00 noon, New York City time, on the day of a proposed Swingline
Loan. Each such notice shall be irrevocable and shall specify the requested date
(which shall be a Business Day) and amount of the requested Swingline Loan. The
Administrative Agent will promptly advise the Swingline Lender of any such
notice received from the Borrower. The Swingline Lender shall make each
Swingline Loan available to the Borrower by means of a credit to the general
deposit account of the Borrower with the Swingline Lender (or, in the case of a
Swingline Loan made to finance the reimbursement of an LC Disbursement as
provided in Section 2.05(e), by remittance to the Issuing Bank) by 3:00 p.m.,
New York City time, on the requested date of such Swingline Loan.
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(c) The Swingline Lender may by written notice given to the
Administrative Agent not later than 10:00 a.m., New York City time, on any
Business Day require the Revolving Lenders to acquire participations on such
Business Day in all or a portion of the Swingline Loans outstanding. Such notice
shall specify the aggregate amount of Swingline Loans in which Revolving Lenders
will participate. Promptly upon receipt of such notice, the Administrative Agent
will give notice thereof to each Revolving Lender, specifying in such notice
such Revolving Lender's Applicable Percentage of such Swingline Loan or Loans.
Each Revolving Lender hereby absolutely and unconditionally agrees, upon receipt
of notice as provided above, to pay to the Administrative Agent, for the account
of the Swingline Lender, such Revolving Lender's Applicable Percentage of such
Swingline Loan or Loans. Each Revolving Lender acknowledges and agrees that its
obligation to acquire participations in Swingline Loans pursuant to this
paragraph is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including the occurrence and continuance of a Default
or reduction or termination of the Commitments, and that each such payment shall
be made without any offset, abatement, withholding or reduction whatsoever. Each
Revolving Lender shall comply with its obligation under this paragraph by wire
transfer of immediately available funds, in the same manner as provided in
Section 2.06 with respect to Loans made by such Revolving Lender (and Section
2.06 shall apply, mutatis mutandis, to the payment obligations of the Revolving
Lenders), and the Administrative Agent shall promptly pay to the Swingline
Lender the amounts so received by it from the Revolving Lenders. The
Administrative Agent shall notify the Borrower of any participations in any
Swingline Loan acquired pursuant to this paragraph, and thereafter payments in
respect of such Swingline Loan shall be made to the Administrative Agent and not
to the Swingline Lender. Any amounts received by the Swingline Lender from the
Borrower (or other party on behalf of the Borrower) in respect of a Swingline
Loan after receipt by the Swingline Lender of the proceeds of a sale of
participations therein shall be promptly remitted to the Administrative Agent;
any such amounts received by the Administrative Agent shall be promptly remitted
by the Administrative Agent to the Revolving Lenders that shall have made their
payments pursuant to this paragraph and to the Swingline Lender, as their
interests may appear. The purchase of participations in a Swingline Loan
pursuant to this paragraph shall not relieve the Borrower of any default in the
payment thereof.
SECTION 2.05. Letters of Credit. (a) General. Subject to the terms
and conditions set forth herein, the Borrower may request the issuance of
Letters of Credit for its own account, in a form reasonably acceptable to the
Administrative Agent and the Issuing Bank, at any time and from time to time
during the LC Availability Period. In the event of any inconsistency between the
terms and conditions of this Agreement and the terms and conditions of any form
of letter of credit application or other agreement submitted by the Borrower to,
or entered into by the Borrower with, the Issuing Bank relating to any Letter of
Credit, the terms and conditions of this Agreement shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the Issuing
Bank and the Administrative Agent (reasonably in advance of the requested date
of issuance, amendment, renewal or extension) a notice requesting the issuance
of a Letter of Credit, or identifying the Letter of Credit to be amended,
renewed or extended, and specifying the date of issuance, amendment, renewal or
extension (which shall be a Business Day), the date on which such Letter of
Credit is to expire (which shall comply with paragraph (c) of this Section), the
amount of such Letter of Credit, the name and address of the beneficiary thereof
and such other information as shall be necessary to prepare, amend, renew or
extend such Letter of Credit. If requested by the Issuing Bank, the Borrower
also shall submit a letter of credit application on the Issuing Bank's standard
form in connection with any request for a Letter of Credit. A Letter of Credit
shall be issued, amended, renewed or extended only if (and upon issuance,
amendment, renewal or extension of each Letter of Credit the Borrower shall be
deemed to represent and warrant that),
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after giving effect to such issuance, amendment, renewal or extension (i) the LC
Exposure shall not exceed $0 and (ii) the aggregate Total Exposures shall not
exceed the lesser of (A) the aggregate Revolving Commitments and (B) the
Borrowing Base in effect at such time.
(c) Expiration Date. Each Letter of Credit shall expire at or prior
to the close of business on the earlier of (i) the date one year after the date
of the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the Maturity Date, provided that each Letter
of Credit may, upon the request of the Borrower, include a provision whereby
such Letter of Credit shall be renewed automatically for additional consecutive
periods of 12 months or less (but not beyond the date that is five Business Days
prior to the Maturity Date) unless the Issuing Bank notifies the beneficiary
thereof at least 30 days prior to the then-applicable expiration date that such
Letter of Credit will not be renewed.
(d) Participations. By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Bank or the Lenders, the Issuing Bank
hereby grants to each Revolving Lender, and each Revolving Lender hereby
acquires from the Issuing Bank, a participation in such Letter of Credit equal
to such Revolving Lender's Applicable Percentage of the aggregate amount
available to be drawn under such Letter of Credit. In consideration and in
furtherance of the foregoing, each Revolving Lender hereby absolutely and
unconditionally agrees to pay to the Administrative Agent, for the account of
the Issuing Bank, such Revolving Lender's Applicable Percentage of each LC
Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the
date due as provided in paragraph (e) of this Section, or of any reimbursement
payment required to be refunded to the Borrower for any reason. Each Revolving
Lender acknowledges and agrees that its obligation to acquire participations
pursuant to this paragraph in respect of Letters of Credit is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including any amendment, renewal or extension of any Letter of Credit or the
occurrence and continuance of a Default or reduction or termination of the
Commitments, and that each such payment shall be made without any offset,
abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any LC
Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such
LC Disbursement by paying to the Administrative Agent an amount equal to such LC
Disbursement not later than 12:00 noon, New York City time, on the date that
such LC Disbursement is made, if the Borrower shall have received notice of such
LC Disbursement prior to 10:00 a.m., New York City time, on such date, or, if
such notice has not been received by the Borrower prior to such time on such
date, then not later than 12:00 noon, New York City time, on (i) the Business
Day that the Borrower receives such notice, if such notice is received prior to
10:00 a.m., New York City time, on the day of receipt, or (ii) the Business Day
immediately following the day that the Borrower receives such notice, if such
notice is not received prior to such time on the day of receipt, provided that
the Borrower may, subject to the conditions to borrowing set forth herein,
request in accordance with Section 2.03 or 2.04 that such payment be financed
with an ABR Revolving Borrowing or Swingline Loan in an equivalent amount and,
to the extent so financed, the Borrower's obligation to make such payment shall
be discharged and replaced by the resulting ABR Revolving Borrowing or Swingline
Loan. If the Borrower fails to make such payment when due, the Administrative
Agent shall notify each Revolving Lender of the applicable LC Disbursement, the
payment then due from the Borrower in respect thereof and such Revolving
Lender's Applicable Percentage thereof. Promptly following receipt of such
notice, each Revolving Lender shall pay to the Administrative Agent its
Applicable Percentage of the payment then due from the Borrower, in the same
manner as provided in Section 2.06 with respect to Loans made by such Revolving
Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment
obligations of the Revolving Lenders), and the Administrative Agent shall
promptly pay to the Issuing Bank the amounts so received by it from the
Revolving Lenders. Promptly following receipt by the Administrative Agent of any
payment from the Borrower pursuant to this paragraph, the Administrative Agent
shall distribute such payment to the Issuing Bank or, to the extent that
Revolving Lenders have
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made payments pursuant to this paragraph to reimburse the Issuing Bank, then to
such Revolving Lenders and the Issuing Bank as their interests may appear. Any
payment made by a Revolving Lender pursuant to this paragraph to reimburse the
Issuing Bank for any LC Disbursement (other than the funding of ABR Revolving
Loans or a Swingline Loan as contemplated above) shall not constitute a Loan and
shall not relieve the Borrower of its obligation to reimburse such LC
Disbursement.
(f) Obligations Absolute. The Borrower's obligation to reimburse LC
Disbursements as provided in paragraph (e) of this Section shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit or this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrower's obligations hereunder. None of
the Administrative Agent, the Lenders, the Issuing Bank or any of their Related
Parties shall have any liability or responsibility by reason of or in connection
with the issuance or transfer of any Letter of Credit or any payment or failure
to make any payment thereunder (irrespective of any of the circumstances
referred to in the preceding sentence), or any error, omission, interruption,
loss or delay in transmission or delivery of any draft, notice or other
communication under or relating to any Letter of Credit (including any document
required to make a drawing thereunder), any error in interpretation of technical
terms or any consequence arising from causes beyond the control of the Issuing
Bank, provided that the foregoing shall not be construed to excuse the Issuing
Bank from liability to the Borrower to the extent of any direct damages (as
opposed to consequential damages, claims in respect of which are hereby waived
by the Borrower to the extent permitted by applicable law) suffered by the
Borrower that are caused by the Issuing Bank's failure to exercise care when
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof. The parties hereto expressly agree that,
in the absence of gross negligence or wilful misconduct on the part of the
Issuing Bank (as finally determined by a court of competent jurisdiction), the
Issuing Bank shall be deemed to have exercised care in each such determination.
In furtherance of the foregoing and without limiting the generality thereof, the
parties agree that, with respect to documents presented that appear on their
face to be in compliance with the terms of a Letter of Credit, the Issuing Bank
may, in its sole discretion, either accept and make payment upon such documents
without responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.
(g) Disbursement Procedures. The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall promptly
notify the Administrative Agent and the Borrower by telephone (confirmed by
telecopy) of such demand for payment and whether the Issuing Bank has made or
will make an LC Disbursement thereunder, provided that any failure to give or
delay in giving such notice shall not relieve the Borrower of its obligation to
reimburse the Issuing Bank and the Lenders with respect to any such LC
Disbursement.
(h) Interim Interest. If the Issuing Bank shall make any LC
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that the Borrower reimburses such LC
Disbursement, at the rate per annum then applicable to ABR Revolving Loans,
provided that, if the Borrower fails to reimburse such LC Disbursement when due
pursuant to paragraph (e) of this Section, then Section 2.12(c) shall apply.
Interest accrued pursuant to this paragraph shall be for the account of the
Issuing Bank, except that interest accrued
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on and after the date of payment by any Revolving Lender pursuant to paragraph
(e) of this Section to reimburse the Issuing Bank shall be for the account of
such Revolving Lender to the extent of such payment.
(i) Replacement of the Issuing Bank. The Issuing Bank may be
replaced at any time by written agreement among the Borrower, the Administrative
Agent, the replaced Issuing Bank and the successor Issuing Bank. The
Administrative Agent shall notify the Lenders of any such replacement of the
Issuing Bank. At the time any such replacement shall become effective, the
Borrower shall pay all unpaid fees accrued for the account of the replaced
Issuing Bank pursuant to Section 2.11(b). From and after the effective date of
any such replacement, (i) the successor Issuing Bank shall have all the rights
and obligations of the Issuing Bank under this Agreement with respect to Letters
of Credit to be issued thereafter and (ii) references herein to the term
"Issuing Bank" shall be deemed to refer to such successor or to any previous
Issuing Bank, or to such successor and all previous Issuing Banks, as the
context shall require. After the replacement of an Issuing Bank hereunder, the
replaced Issuing Bank shall remain a party hereto and shall continue to have all
the rights and obligations of an Issuing Bank under this Agreement with respect
to Letters of Credit issued by it prior to such replacement, but shall not be
required to issue additional Letters of Credit.
(j) Cash Collateralization. If any Event of Default shall occur and
be continuing, on the Business Day that the Borrower receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Revolving Lenders with LC Exposure representing greater
than 50% of the total LC Exposure) demanding the deposit of cash collateral
pursuant to this paragraph, the Borrower shall deposit in an account with the
Collateral Agent, in the name of the Collateral Agent and for the benefit of the
Revolving Lenders, an amount in cash equal to 105% of the LC Exposure as of such
date plus any accrued and unpaid interest thereon, provided that the obligation
to deposit such cash collateral shall become effective immediately, and such
deposit shall become immediately due and payable, without demand or other notice
of any kind, upon the occurrence of any Event of Default with respect to the
Borrower described in clause (h) or (i) of Article VII. Each such deposit shall
be held by the Collateral Agent as collateral for the payment and performance of
the obligations of the Borrower under this Agreement. The Collateral Agent shall
have exclusive dominion and control, including the exclusive right of
withdrawal, over such account. Other than any interest earned on the investment
of such deposits, which investments shall be made at the option and sole
discretion of the Collateral Agent at the request of the Borrower and at the
Borrower's risk and expense, such deposits shall not bear interest. Interest or
profits, if any, on such investments shall accumulate in such account. Moneys in
such account shall be applied by the Collateral Agent to reimburse the Issuing
Bank for LC Disbursements for which it has not been reimbursed and, to the
extent not so applied, shall be held for the satisfaction of the reimbursement
obligations of the Borrower for the LC Exposure at such time or, if the maturity
of the Loans has been accelerated (but subject to the consent of Revolving
Lenders with LC Exposure representing greater than 50% of the total LC
Exposure), be applied to satisfy other obligations of the Borrower under this
Agreement. If the Borrower is required to provide an amount of cash collateral
hereunder as a result of the occurrence of an Event of Default, such amount (to
the extent not applied as aforesaid) shall be returned to the Borrower within
three Business Days after all Events of Default have been cured or waived.
SECTION 2.06. Funding of Borrowings. (a) Each Lender shall make each
Loan to be made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds by 12:00 noon, New York City time, to the account of
the Administrative Agent most recently designated by the Administrative Agent
for such purpose by notice to the Lenders, provided that Swingline Loans shall
be made as provided in Section 2.04. The Administrative Agent will make such
Loans available to the Borrower by promptly crediting the amounts so received,
in like funds, to an account of the Borrower maintained with the Administrative
Agent in New York City and designated by the Borrower in the applicable
Borrowing Request, provided that (i) ABR Revolving Loans made to finance the
reimbursement of an LC Disbursement as provided in Section 2.05(e) shall be
remitted
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by the Administrative Agent to the Issuing Bank and (ii) ABR Revolving Loans
made on an Advance Rate Reduction Date to finance the mandatory prepayment of
any applicable Advance Rate Reduction Amount as required by Section 2.10(j)
shall be remitted by the Administrative Agent to the "Administrative Agent" for
the Existing Facility (as such term is defined in the Amended Existing Credit
Agreement).
(b) Unless the Administrative Agent shall have received notice from
a Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and the Borrower severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount with interest thereon, for
each day from and including the date such amount is made available to the
Borrower to but excluding the date of payment to the Administrative Agent, at
(i) in the case of such Lender, the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation or (ii) in the case of the Borrower,
the interest rate applicable to ABR Loans. If such Lender pays such amount to
the Administrative Agent, then such amount shall constitute such Lender's Loan
included in such Borrowing.
SECTION 2.07. Interest Elections. (a) Each Revolving Borrowing
initially shall be of the Type specified in the applicable Borrowing Request
and, in the case of a Eurodollar Borrowing, shall have an initial Interest
Period as specified in such Borrowing Request. Thereafter, the Borrower may
elect to convert such Borrowing to a different Type or to continue such
Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods
therefor, all as provided in this Section. The Borrower may elect different
options with respect to different portions of the affected Borrowing, in which
case each such portion shall be allocated ratably among the Lenders holding the
Loans comprising such Borrowing, and the Loans comprising each such portion
shall be considered a separate Borrowing. This Section shall not apply to
Swingline Borrowings, which may not be converted or continued.
(b) To make an election pursuant to this Section, the Borrower shall
notify the Administrative Agent of such election by telephone by the time that a
Borrowing Request would be required under Section 2.03 if the Borrower were
requesting a Revolving Borrowing of the Type resulting from such election to be
made on the effective date of such election. Each such telephonic Interest
Election Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Interest Election
Request in a form approved by the Administrative Agent and signed by the
Borrower.
(c) Each telephonic and written Interest Election Request shall
specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request applies
and, if different options are being elected with respect to different
portions thereof, the portions thereof to be allocated to each resulting
Borrowing (in which case the information to be specified pursuant to
clauses (iii) and (iv) below shall be specified for each resulting
Borrowing);
(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing; and
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(iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election
Request with respect to a Eurodollar Borrowing prior to the end of the Interest
Period applicable thereto, then, unless such Borrowing is repaid as provided
herein, at the end of such Interest Period such Borrowing shall be converted to
an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of
Default has occurred and is continuing and the Administrative Agent, at the
request of the Required Lenders, so notifies the Borrower, then, so long as an
Event of Default is continuing (i) no outstanding Borrowing may be converted to
or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar
Borrowing shall be converted to an ABR Borrowing at the end of the Interest
Period applicable thereto.
SECTION 2.08. Termination and Reduction of Commitments. (a) Unless
previously terminated, the Revolving Commitments shall terminate on the Maturity
Date.
(b) The Borrower may at any time terminate, or from time to time
reduce, the Revolving Commitments, provided that (i) each reduction of the
Revolving Commitments shall be in an amount that is an integral multiple of
$1,000,000 and not less than $5,000,000 and (ii) the Borrower shall not
terminate or reduce the Revolving Commitments if and to the extent that, after
giving effect to any concurrent prepayment of the Revolving Loans in accordance
with Section 2.10, the sum of the Total Exposures would exceed the total
Revolving Commitments, provided that the Borrower may not terminate or reduce
pursuant to this Section 2.08(b) the Revolving Commitments prior to the date on
which the Existing Revolving Commitments terminate in their entirety.
(c) The Borrower shall notify the Administrative Agent of any
election to terminate or reduce the Commitments under paragraph (b) of this
Section at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section shall be irrevocable, provided that a notice
of termination of the Revolving Commitments delivered by the Borrower may state
that such notice is conditioned upon the effectiveness of other credit
facilities, in which case such notice may be revoked by the Borrower (by notice
to the Administrative Agent on or prior to the specified effective date) if such
condition is not satisfied. Any termination or reduction of the Commitments of
any Class shall be permanent. Each reduction of the Revolving Commitments shall
be made ratably among the Lenders in accordance with their respective Revolving
Commitments.
SECTION 2.09. Repayment of Loans; Evidence of Debt. (a) The Borrower
hereby unconditionally promises to pay (i) to the Administrative Agent for the
account of each Lender the then unpaid principal amount of each Revolving Loan
of such Lender on the Maturity Date and (ii) to the Swingline Lender the then
unpaid principal amount of each Swingline Loan on the earlier of the Maturity
Date and the first date after such Swingline Loan is made that is the 15th or
last day of a calendar month and is at least two Business Days after such
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Swingline Loan is made, provided that on each date that a Revolving Borrowing is
made, the Borrower shall repay all Swingline Loans then outstanding.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Borrower to such
Lender resulting from each Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent shall maintain accounts in which it
shall record (i) the amount of each Loan made hereunder, the Class and Type
thereof and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraph (b) or (c) of this Section shall be prima facie evidence of the
existence and amounts of the obligations recorded therein, provided that the
failure of any Lender or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation of the Borrower
to repay the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans of any Class made by it be
evidenced by a promissory note. In such event, the Borrower shall prepare,
execute and deliver to such Lender a promissory note payable to the order of
such Lender (or, if requested by such Lender, to such Lender and its registered
assigns) and in a form approved by the Administrative Agent. Thereafter, the
Loans evidenced by such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 9.04) be represented by one or
more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a registered note, to such payee and its
registered assigns).
SECTION 2.10. Prepayment of Loans. (a) The Borrower shall have the
right at any time and from time to time to prepay any Borrowing in whole or in
part, subject to the requirements of this Section.
(b) Subject to Section 2.10(g), in the event of any termination of
all the Revolving Commitments, the Borrower shall repay or prepay all
outstanding Revolving Borrowings and all outstanding Swingline Loans on the date
of such termination. In the event of any partial reduction of the Revolving
Commitments, then (i) at or prior to the effective date of such reduction or
termination, the Administrative Agent shall notify the Borrower and the Lenders
of (A) the amount of any reduction in the Revolving Commitments and (B) the
aggregate Total Exposure after giving effect to such reduction and (ii) if the
aggregate Total Exposure would exceed the aggregate Revolving Commitments after
giving effect to such reduction or termination, then the Borrower shall, on the
date of such reduction or termination, prepay Revolving Borrowings or Swingline
Loans (or a combination thereof) in an amount sufficient to eliminate such
excess.
(c) Subject to Section 2.10(g), if on any date the aggregate Total
Exposure exceeds the Borrowing Base in effect on such date, the Borrower shall
on such date apply an amount equal to such excess, first, to prepay the
then-outstanding Revolving Borrowings (if any) and Swingline Loans (if any) and,
second, to the extent of any remaining excess (after the prepayment of Revolving
Borrowings and Swingline Loans), to cash-collateralize outstanding Letters of
Credit by depositing, in an account with the Collateral Agent, in the name of
the Collateral Agent and for the benefit of the Lenders, an amount in cash equal
to such remaining excess. The provisions of the second, third, fourth and fifth
sentences of Section 2.05(j) shall be applicable to any amounts so deposited.
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(d) Subject to Section 2.10(g), prior to any optional or mandatory
prepayment of Borrowings hereunder, the Borrower shall select the Borrowing or
Borrowings to be prepaid and shall specify such selection in the notice of such
prepayment pursuant to paragraph (e) of this Section, provided that each
prepayment of Borrowings shall be applied to prepay ABR Borrowings before any
other Borrowings.
(e) The Borrower shall notify the Administrative Agent (and, in the
case of prepayment of a Swingline Loan, the Swingline Lender) by telephone
(confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City
time, three Business Days before the date of prepayment, (ii) in the case of
prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time,
one Business Day before the date of prepayment or (iii) in the case of
prepayment of a Swingline Loan, not later than 12:00 noon, New York City time,
on the date of prepayment. Each such notice shall be irrevocable and shall
specify the prepayment date, the principal amount of each Borrowing or portion
thereof to be prepaid and, in the case of a mandatory prepayment, a reasonably
detailed calculation of the amount of such prepayment, provided that, if a
notice of optional prepayment is given in connection with a conditional notice
of termination of the Revolving Commitments as contemplated by Section 2.08,
then such notice of prepayment may be revoked if such notice of termination is
revoked in accordance with Section 2.08. Promptly following receipt of any such
notice (other than a notice relating solely to Swingline Loans), the
Administrative Agent shall advise the Lenders of the contents thereof. Each
partial prepayment of any Borrowing shall be in an amount that would be
permitted in the case of an advance of a Borrowing of the same Type as provided
in Section 2.02, except as necessary to apply fully the required amount of a
mandatory prepayment. Subject to Section 2.10(g), each prepayment of a Borrowing
shall be applied ratably to the Loans included in the prepaid Borrowing.
Prepayments shall be accompanied by accrued interest to the extent required by
Section 2.12.
(f) In the event and on each occasion that any Net Proceeds are
received by or on behalf of a Transaction Party or any Subsidiary in respect of
any Prepayment Event on or prior to the Maturity Date, the Borrower shall,
immediately after such Net Proceeds are received, prepay Revolving Borrowings
and Swingline Loans and Existing Revolving Borrowings and Existing Swingline
Loans in an aggregate principal amount equal to such Net Proceeds and in the
priority provided for in Section 2.10(g), provided that if a Specified Event of
Default has occurred and is continuing under this Agreement or the Amended
Existing Credit Agreement, such Net Proceeds shall be applied first to prepay
Existing Revolving Borrowings and Existing Swingline Loans until the aggregate
"Total Exposures" of the Existing Lenders (as such term is defined in the
Amended Existing Credit Agreement) is zero and then to prepay Revolving
Borrowings and Swingline Loans.
(g) Notwithstanding any provisions to the contrary in the Loan
Documents or the Existing Loan Documents (and unless the "Specified Lenders" (as
such term is defined in the Intercreditor Agreement) shall otherwise agree), (i)
on or prior to the Maturity Date and (ii) so long as no Specified Event of
Default has occurred and is continuing under this Agreement or under the Amended
Existing Credit Agreement, any amount to be applied by the Borrower to the
voluntary or mandatory prepayment of Revolving Borrowings and Swingline Loans,
or to the voluntary or mandatory prepayment of Existing Revolving Borrowings and
Existing Swingline Loans, instead shall be applied to the prepayment of
Revolving Borrowings, Swingline Loans, Existing Revolving Borrowings and
Existing Swingline Loans in the following order of priority:
(A) first, to prepay any outstanding Existing Revolving Borrowings
and Existing Swingline Loans, ratably among the Existing Lenders entitled
thereto, until the "Borrowing Base" is not less than the aggregate "Total
Exposure" of the Existing Lenders (as such terms are defined in the
Amended Existing Credit Agreement),
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(B) second, to prepay any outstanding Revolving Borrowings and
Swingline Loans, ratably among the Lenders entitled thereto, and
(C) third, to prepay any outstanding Existing Revolving Borrowings
and Existing Swingline Loans, ratably among the Existing Lenders entitled
thereto.
(h) Any Net Proceeds from a Prepayment Event available to be applied
pursuant to Section 2.10(f) or (g) to prepay Revolving Borrowings and Swingline
Loans, whether or not any Revolving Borrowings or Swingline Loans are actually
outstanding and prepaid, shall result in the permanent reduction of the
Revolving Commitments in the amount of such Net Proceeds, provided that (i) all
Net Proceeds from GOB Prepayment Events and (ii) up to an aggregate amount of
$25,000,000 of Net Proceeds from Real Estate Prepayment Events, in each case
available to be applied pursuant to Section 2.10(f) and (g) during the term of
this Agreement to prepay Revolving Borrowings and Swingline Loans, (i) shall not
result in corresponding permanent reductions of the Revolving Commitments and
(ii) to the extent any such prepayments are actually made, may be reborrowed by
the Borrower, subject to the terms and conditions hereof.
(i) This Section 2.10 shall be subject to the terms and conditions
of the Intercreditor Agreement.
(j) Unless the Specified Lenders shall otherwise agree, in the event
of an Advance Rate Reduction Event, the Borrower shall be deemed to deliver to
the Administrative Agent a Borrowing Request for an ABR Borrowing on the
applicable Advance Rate Reduction Date in the aggregate amount of the applicable
Advance Rate Reduction Amount. Such Borrowing Notice shall be deemed delivered
prior to 11:00 a.m. on the Business Day immediately preceding the applicable
Advance Rate Reduction Date and otherwise shall be deemed to comply with the
requirements of Section 2.03. The parties hereto hereby agree that any Loans
made by the Lenders in response to such Borrowing Request shall be subject to
the other terms and conditions of this Agreement and shall be used by the
Borrower on the applicable Advance Rate Reduction Date to fund the mandatory
prepayment of Existing Revolving Loans and Existing Swingline Loans in an
aggregate amount equal to the Advance Rate Reduction Amount as required by
Section 2.10(g)(ii)(A) hereof and Section 2.10(c) and 2.10(g)(ii)(A) of the
Amended Existing Credit Agreement.
SECTION 2.11. Fees. (a) The Borrower agrees to pay to the
Administrative Agent for the account of each Lender a commitment fee, which
shall accrue at the rate of 0.50% per annum on the average daily unused amount
of the Revolving Commitment of such Lender during the period from and including
the date of this Agreement to but excluding the date on which such Commitment
terminates. Accrued commitment fees shall be payable in arrears on the last day
of March, June, September and December of each year and on the date on which the
Revolving Commitments, terminate, commencing on the first such date to occur
after the date hereof. All commitment fees shall be computed on the basis of a
year of 360 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). For purposes of computing
commitment fees with respect to Revolving Commitments, a Revolving Commitment of
a Lender shall be deemed to be used to the extent of the outstanding Revolving
Loans and LC Exposure of such Lender (and the Swingline Exposure of such Lender
shall be disregarded for such purpose).
(b) The Borrower agrees to pay to the Administrative Agent for the
account of each Lender a participation fee with respect to its participations in
Letters of Credit, which shall accrue at a rate equal to (i) in the case of the
portion of such Lender's LC Exposure that is attributable to Standby Letters of
Credit, the excess of (A) the same Applicable Rate as interest on Eurodollar
Revolving Loans on the average daily amount of such portion of such Lender's LC
Exposure (excluding any portion thereof
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attributable to unreimbursed LC Disbursements) over (B) the Fronting Fee, in
each case during the period from and including the date of this Agreement to but
excluding the later of the date on which such Lender's Revolving Commitment
terminates and the date on which such Lender ceases to have any such LC
Exposure, and (ii) in the case of the portion of such Lender's LC Exposure that
is attributable to Commercial Letters of Credit, the excess of (A) one-half of
the same Applicable Rate as interest on Eurodollar Revolving Loans on the
average daily amount of such portion of such Lender's LC Exposure (excluding any
portion thereof attributable to unreimbursed LC Disbursements) over (B) the
Fronting Fee, in each case during the period from and including the date of this
Agreement to but excluding the later of the date on which such Lender's
Revolving Commitment terminates and the date on which such Lender ceases to have
any such LC Exposure. The Borrower also agrees to pay to the Issuing Bank a
fronting fee (the "Fronting Fee"), which shall accrue at the rate of 1/4 of 1%
per annum on the average daily amount of the LC Exposure (excluding any portion
thereof attributable to unreimbursed LC Disbursements) during the period from
and including the date of this Agreement to but excluding the later of the date
of termination of the Revolving Commitments and the date on which there ceases
to be any LC Exposure, as well as the Issuing Bank's standard fees with respect
to the issuance, amendment, renewal or extension of any Letter of Credit or
processing of drawings thereunder. Participation fees and fronting fees accrued
through and including the last day of March, June, September and December of
each year shall be payable on the third Business Day following such last day,
commencing on the first such date to occur after the Effective Date, provided
that all such fees shall be payable on the date on which the Revolving
Commitments terminate and any such fees accruing after the date on which the
Revolving Commitments terminate shall be payable on demand. Any other fees
payable to the Issuing Bank pursuant to this paragraph shall be payable within
10 days after demand. All participation fees and fronting fees shall be computed
on the basis of a year of 360 days and shall be payable for the actual number of
days elapsed (including the first day but excluding the last day).
(c) The Borrower agrees to pay to the Administrative Agent, for its
own account, fees payable in the amounts and at the times separately agreed upon
between the Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent (or to the Issuing
Bank, in the case of fees payable to it) for distribution, in the case of
commitment fees and participation fees, to the Lenders entitled thereto. Fees
paid shall not be refundable under any circumstances.
SECTION 2.12. Interest. (a) The Loans comprising each ABR Borrowing
(including each Swingline Loan) shall bear interest at the Alternate Base Rate
plus the Applicable Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear
interest at the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Rate.
(c) Notwithstanding the foregoing, if any principal of or interest
on any Loan or any fee or other amount payable by the Borrower hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate (including margin) otherwise applicable to such Loan as provided in the
preceding paragraphs of this Section or (ii) in the case of any other amount, 2%
plus the rate (including margin) applicable to ABR Revolving Loans as provided
in paragraph (a) of this Section.
(d) Accrued interest on each Loan shall be payable in arrears on
each Interest Payment Date for such Loan and, in the case of Revolving Loans,
upon termination of the Revolving Commitments, provided that (A) interest
accrued pursuant to paragraph (c) of this Section shall be payable on demand,
(B) in the event of any repayment or prepayment of any Loan (other than a
prepayment of an ABR
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Revolving Loan prior to the end of the Revolving Availability Period), accrued
interest on the principal amount repaid or prepaid shall be payable on the date
of such repayment or prepayment and (C) in the event of any conversion of any
Eurodollar Loan prior to the end of the current Interest Period therefor,
accrued interest on such Loan shall be payable on the effective date of such
conversion.
(e) All interest hereunder shall be computed on the basis of a year
of 360 days, except that interest computed by reference to the Alternate Base
Rate at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day). The applicable Alternate Base Rate or
Adjusted LIBO Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error.
SECTION 2.13. Alternate Rate of Interest. If prior to the
commencement of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination shall
be conclusive absent manifest error) that adequate and reasonable means do
not exist for ascertaining the Adjusted LIBO Rate for such Interest
Period; or
(b) the Administrative Agent is advised by the Required Lenders that
the Adjusted LIBO Rate for such Interest Period will not adequately and
fairly reflect the cost to such Lenders (or Lender) of making or
maintaining their Loans (or its Loan) included in such Borrowing for such
Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.
SECTION 2.14. Increased Costs. (a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit
or similar requirement against assets of, deposits with or for the account
of, or credit extended by, any Lender or any holding company of any Lender
(except any such reserve requirement reflected in the Adjusted LIBO Rate)
or the Issuing Bank; or
(ii) impose on any Lender or the Issuing Bank or the London
interbank market any other condition affecting this Agreement or
Eurodollar Loans made by such Lender or any Letter of Credit or
participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank,
as the case may be, for such additional costs incurred or reduction suffered.
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(b) If any Lender or the Issuing Bank determines that any Change in
Law regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender's or the Issuing Bank's capital or on the capital
of such Lender's or the Issuing Bank's holding company, if any, as a consequence
of this Agreement or the Loans made by, or participations in Letters of Credit
held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a
level below that which such Lender or the Issuing Bank or such Lender's or the
Issuing Bank's holding company could have achieved but for such Change in Law
(taking into consideration such Lender's or the Issuing Bank's policies and the
policies of such Lender's or the Issuing Bank's holding company with respect to
capital adequacy), then from time to time the Borrower will pay to such Lender
or the Issuing Bank, as the case may be, such additional amount or amounts as
will compensate such Lender or the Issuing Bank or such Lender's or the Issuing
Bank's holding company for any such reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth the
amount or amounts necessary to compensate such Lender or the Issuing Bank or its
holding company, as the case may be, as specified in paragraph (a) or (b) of
this Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender or the Issuing Bank, as the
case may be, the amount shown as due on any such certificate within 10 days
after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing Bank
to demand compensation pursuant to this Section shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation, provided
that the Borrower shall not be required to compensate a Lender or the Issuing
Bank pursuant to this Section for any increased costs or reductions incurred
more than 90 days prior to the date that such Lender or the Issuing Bank, as the
case may be, notifies the Borrower of the Change in Law giving rise to such
increased costs or reductions and of such Lender's or the Issuing Bank's
intention to claim compensation therefor, and provided further that, if the
Change in Law giving rise to such increased costs or reductions is retroactive,
then the 90-day period referred to above shall be extended to include the period
of retroactive effect thereof.
SECTION 2.15. Break Funding Payments. In the event of (a) the
payment of any principal of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan other than on the last day
of the Interest Period applicable thereto, (c) the failure to borrow, convert,
continue or prepay any Revolving Loan on the date specified in any notice
delivered pursuant hereto (regardless of whether such notice may be revoked
under Section 2.10(e) and is revoked in accordance therewith), or (d) the
assignment of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto as a result of a request by the Borrower pursuant to
Section 2.18, then, in any such event, the Borrower shall compensate each Lender
for the loss, cost and expense attributable to such event. In the case of a
Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to
include an amount determined by such Lender to be the excess, if any, of (i) the
amount of interest that would have accrued on the principal amount of such Loan
had such event not occurred, at the Adjusted LIBO Rate that would have been
applicable to such Loan, for the period from the date of such event to the last
day of the then current Interest Period therefor (or, in the case of a failure
to borrow, convert or continue, for the period that would have been the Interest
Period for such Loan), over (ii) the amount of interest that would accrue on
such principal amount for such period at the interest rate that such Lender
would bid were it to bid, at the commencement of such period, for dollar
deposits of a comparable amount and period from other banks in the Eurodollar
market. A certificate of any Lender setting forth any amount or amounts that
such Lender is entitled to receive pursuant to this Section shall be delivered
to the Borrower and shall be conclusive absent manifest error. The Borrower
shall pay such Lender the amount shown as due on any such certificate within 10
days after receipt thereof.
SECTION 2.16. Taxes. (a) Any and all payments by or on account of
any obligation of the Borrower hereunder or under any other Loan Document shall
be made free
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and clear of and without deduction for any Indemnified Taxes or Other Taxes,
provided that if the Borrower shall be required to deduct any Indemnified Taxes
or Other Taxes from such payments, then (i) the sum payable shall be increased
as necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) the Administrative
Agent, Lender or Issuing Bank (as the case may be) receives an amount equal to
the sum it would have received had no such deductions been made, (ii) the
Borrower shall make such deductions and (iii) the Borrower shall pay the full
amount deducted to the relevant Governmental Authority in accordance with
applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent, each
Lender and the Issuing Bank, within 10 days after written demand therefor, for
the full amount of any Indemnified Taxes or Other Taxes paid by the
Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or
with respect to any payment by or on account of any obligation of the Borrower
hereunder or under any other Loan Document (including Indemnified Taxes or Other
Taxes imposed or asserted on or attributable to amounts payable under this
Section) and any penalties, interest and reasonable expenses arising therefrom
or with respect thereto, whether or not such Indemnified Taxes or Other Taxes
were correctly or legally imposed or asserted by the relevant Governmental
Authority. A certificate as to the amount of such payment or liability delivered
to the Borrower by a Lender or the Issuing Bank, or by the Administrative Agent
on its own behalf or on behalf of a Lender or the Issuing Bank, shall be
conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
(e) Any Foreign Lender shall deliver to the Borrower and the
Administrative Agent two copies of either United States Internal Revenue Service
Form 1001 or Form 4224, or, in the case of a Foreign Lender's claiming exemption
from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code
with respect to payments of "portfolio interest", a Form W-8, or any subsequent
versions thereof or successors thereto (and, if such Foreign Lender delivers a
Form W-8, a certificate representing that such Foreign Lender is not a bank for
purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within
the meaning of Section 871(h)(3)(B) of the Code) of the Borrower and is not a
controlled foreign corporation related to the Borrower (within the meaning of
Section 864(d)(4) of the Code)), properly completed and duly executed by such
Foreign Lender claiming complete exemption from or reduced rate of, U.S. Federal
withholding tax on payments by the Borrower under this Agreement and the other
Loan Documents. Such forms shall be delivered by each Foreign Lender on or
before the date it becomes a party to this Agreement (or, in the case of a
Transferee that is a participation holder, on or before the date such
participation holder becomes a Transferee hereunder) and on or before the date,
if any, such Foreign Lender changes its applicable lending office by designating
a different lending office (a "New Lending Office"). In addition, each Foreign
Lender shall deliver such forms promptly upon the obsolescence or invalidity of
any form previously delivered by such Foreign Lender. Notwithstanding any other
provision of this Section 2.16(e), a Foreign Lender shall not be required to
deliver any form pursuant to this 2.16(e) that such Foreign Lender is not
legally able to deliver.
(f) The Borrower shall not be required to indemnify any Foreign
Lender or to pay any additional amounts to any Foreign Lender in respect of U.S.
Federal withholding tax pursuant to paragraph (a) or (c) above to the extent
that the obligation to pay such additional amounts would not have arisen but for
a failure by such Foreign Lender to comply with the provisions of paragraph (e)
above. Should a
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Lender become subject to Taxes because of its failure to deliver a form required
hereunder, Borrower shall, at Lender's expense, take such steps as such Lender
shall reasonably request to assist such Lender to recover such Taxes.
SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of
Setoffs. (a) The Borrower shall make each payment required to be made by it
hereunder or under any other Loan Document (whether of principal, interest, fees
or reimbursement of LC Disbursements, or of amounts payable under Section 2.14,
2.15 or 2.16, or otherwise) prior to 12:00 noon, New York City time, on the date
when due, in immediately available funds, without setoff or counterclaim. Any
amounts received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its offices at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇, except payments to be made directly to the Issuing Bank or
Swingline Lender as expressly provided herein and except that payments pursuant
to Sections 2.14, 2.15, 2.16 and 9.03 shall be made directly to the Persons
entitled thereto and payments pursuant to other Loan Documents shall be made to
the Persons specified therein. The Administrative Agent shall distribute any
such payments received by it for the account of any other Person to the
appropriate recipient promptly following receipt thereof. If any payment under
any Loan Document shall be due on a day that is not a Business Day, the date for
payment shall be extended to the next succeeding Business Day, and, in the case
of any payment accruing interest, interest thereon shall be payable for the
period of such extension. All payments under each Loan Document shall be made in
dollars.
(b) If at any time insufficient funds are received by and available
to the Administrative Agent to pay fully all amounts of principal, unreimbursed
LC Disbursements, interest and fees then due hereunder, such funds shall be
applied (i) first, towards payment of interest and fees then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
interest and fees then due to such parties, and (ii) second, towards payment of
principal and unreimbursed LC Disbursements then due hereunder, ratably among
the parties entitled thereto in accordance with the amounts of principal and
unreimbursed LC Disbursements then due to such parties.
(c) If any Lender shall, by exercising any right of setoff or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Revolving Loans or participations in LC Disbursements or
Swingline Loans resulting in such Lender receiving payment of a greater
proportion of the aggregate amount of its Revolving Loans and participations in
LC Disbursements and Swingline Loans and accrued interest thereon than the
proportion received by any other Lender, then the Lender receiving such greater
proportion shall purchase (for cash at face value) participations in the
Revolving Loans and participations in LC Disbursements and Swingline Loans of
other Lenders to the extent necessary so that the benefit of all such payments
shall be shared by the Lenders ratably in accordance with the aggregate amount
of principal of and accrued interest on their respective Revolving Loans and
participations in LC Disbursements and Swingline Loans, provided that (i) if any
such participations are purchased and all or any portion of the payment giving
rise thereto is recovered, such participations shall be rescinded and the
purchase price restored to the extent of such recovery, without interest, and
(ii) the provisions of this paragraph shall not be construed to apply to any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Loans or
participations in LC Disbursements to any assignee or participant, other than to
the Borrower or any Borrower Subsidiary or Affiliate thereof (as to which the
provisions of this paragraph shall apply). The Borrower consents to the
foregoing and agrees, to the extent it may effectively do so under applicable
law, that any Lender acquiring a participation pursuant to the foregoing
arrangements may exercise against the Borrower rights of setoff and counterclaim
with respect to such participation as fully as if such Lender were a direct
creditor of the Borrower in the amount of such participation.
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(d) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders or the Issuing Bank hereunder that the
Borrower will not make such payment, the Administrative Agent may assume that
the Borrower has made such payment on such date in accordance herewith and may,
in reliance upon such assumption, distribute to the Lenders or the Issuing Bank,
as the case may be, the amount due. In such event, if the Borrower has not in
fact made such payment, then each of the Lenders or the Issuing Bank, as the
case may be, severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender or Issuing Bank with interest
thereon, for each day from and including the date such amount is distributed to
it to but excluding the date of payment to the Administrative Agent, at the
greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation.
(e) If any Lender shall fail to make any payment required to be made
by it pursuant to Section 2.04(c), 2.05(d) or (e), 2.06(b), 2.17(d) or 9.03(c),
then the Administrative Agent may, in its discretion (notwithstanding any
contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such Lender's
obligations under such Sections until all such unsatisfied obligations are fully
paid.
SECTION 2.18. Mitigation Obligations; Replacement of Lenders. (a) If
any Lender requests compensation under Section 2.14, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.16, then such
Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 2.14 or 2.16, as the case may be, in the
future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrower
hereby agrees to pay all reasonable and documented costs and expenses incurred
by any Lender in connection with any such designation or assignment; provided,
however, that the Borrower shall not be liable for such costs and expenses of a
Lender requesting compensation if (i) such Lender becomes a party to this
Agreement on a date after the Effective Date and (ii) the relevant Change in Law
occurs on a date prior to the date such Lender becomes a party hereto.
(b) If any Lender requests compensation under Section 2.14, or if
the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.16,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 9.04), all its interests, rights and obligations under this Agreement to
an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment), provided that (i) the Borrower
shall have received the prior written consent of the Administrative Agent, the
Issuing Bank and Swingline Lender, which consent shall not unreasonably be
withheld, (ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Revolving Loans and participations in LC
Disbursements and Swingline Loans, accrued interest thereon, accrued fees and
all other amounts payable to it hereunder, from the assignee (to the extent of
such outstanding principal and accrued interest and fees) or the Borrower (in
the case of all other amounts) and (iii) in the case of any such assignment
resulting from a claim for compensation under Section 2.14 or payments required
to be made pursuant to Section 2.16, such assignment will result in a reduction
in such compensation or payments. A Lender shall not be required to make any
such assignment and delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling the Borrower to require
such assignment and delegation cease to apply.
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ARTICLE III
Representations and Warranties
Each Transaction Party represents and warrants to the Lenders that:
SECTION 3.01. Organization; Powers. Each member of the Holdings
Group is duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization, has all requisite power and authority to
carry on its business as now conducted and, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect, is qualified to do business in, and is in good
standing in, every jurisdiction where such qualification is required.
SECTION 3.02. Authorization; Enforceability. The Transactions to be
entered into by each Loan Party are within such Loan Party's corporate powers
and have been duly authorized by all necessary corporate and, if required,
stockholder action. This Agreement has been duly executed and delivered by each
Loan Party that is a party hereto and constitutes, and each other Loan Document
to which any Loan Party is to be a party, when executed and delivered by such
Loan Party, will constitute, a legal, valid and binding obligation of such Loan
Party (as the case may be), enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at law.
SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions
(a) do not require any consent or approval of, registration or filing with, or
any other action by, any Governmental Authority, except such as have been
obtained or made and are in full force and effect and except filings necessary
to perfect Liens created under the Loan Documents, (b) will not violate any
applicable law or regulation or the charter, by-laws or other organizational
documents of any member of the Holdings Group or any order of any Governmental
Authority, (c) except as set forth in Schedule 3.03(c), will not violate or
result in a default under any indenture, agreement or other instrument binding
upon any member of the Holdings Group or its assets, or give rise to a right
thereunder to require any payment to be made by any member of the Holdings
Group, and (d) will not result in the creation or imposition of any Lien on any
asset of any member of the Holdings Group, except Liens created under the Loan
Documents.
SECTION 3.04. Financial Condition; No Material Adverse Change. (a)
Hechinger has heretofore furnished to the Lenders its consolidated balance sheet
and statements of income, stockholders' equity and cash flows (i) as of and for
each of the fiscal years in the three year period ended February 1, 1997,
reported on by Ernst & Young LLP, independent public accountants, and (ii) as of
and for the two fiscal quarters and the portion of the fiscal year ended August
2, 1997, certified by its chief financial officer. Such financial statements
present fairly, in all material respects, the financial position and results of
operations and cash flows of Hechinger and its consolidated subsidiaries as of
such dates and for such periods in accordance with GAAP, subject to year-end
audit adjustments and the absence of footnotes in the case of the statements
referred to in clause (ii) above.
(b) Holdings has heretofore furnished to the Lenders its
consolidated balance sheet and statements of income, stockholders' equity and
cash flows as of and for each of the fiscal years in the three year period ended
October 3, 1998, certified by its chief financial officer. Such financial
statements present fairly, in all material respects, the financial position and
results of operations and cash flows of
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Holdings and its consolidated subsidiaries as of such dates and for such periods
in accordance with GAAP, subject to year-end audit adjustments and the absence
of footnotes.
(c) Except as disclosed in Schedule 3.04(c) or in the December 1998
Bank Presentation, since February 1, 1997, there has been no material adverse
change in the business, assets, operations, material agreements, prospects or
condition, financial or otherwise, of Hechinger and the Hechinger Entities,
taken as a whole.
(d) The Borrower has heretofore furnished to the Lenders Builders
Square's unaudited balance sheet and statements of income, stockholders' equity
and cash flows (i) as of and for each of the fiscal years in the three year
period ended January 26, 1997, and (ii) as of and for the two fiscal quarters
and the portion of the fiscal year ended July 26, 1997. Such financial
statements present fairly, in all material respects, the financial position and
results of operations and cash flows of Builders Square as of such dates and for
such periods in accordance with GAAP, subject to year-end audit adjustments.
(e) Each of Holdings and the Borrower has heretofore furnished to
the Lenders its pro forma consolidated balance sheet as of the Effective Date,
prepared giving effect to the Additional Financing Transactions as if the
Additional Financing Transactions had occurred on such date. Each such pro forma
consolidated balance sheet (i) was prepared in good faith based on assumptions
that were, at the time of preparation of such pro forma financial statements,
and are, as of the date hereof, believed by Holdings and the Borrower to be
reasonable), (ii) was based on the best information available to Holdings and
the Borrower after due inquiry at the date thereof, (iii) accurately reflects
all adjustments necessary to give effect to the Additional Financing
Transactions and (iv) presents fairly, in all material respects, the pro forma
financial position of each of Holdings and its consolidated subsidiaries and of
the Borrower and its consolidated subsidiaries as of the Effective Date, as if
the Additional Financing Transactions had occurred on such date.
(f) Except as disclosed in Schedule 3.04(f) or in the December 1998
Bank Presentation, since January 26, 1997, there has been no material adverse
change in the business, assets, operations, material agreements, prospects or
condition, financial or otherwise, of Builders Square.
(g) Except as disclosed in the financial statements referred to
above or the notes thereto or in the Information Memorandum or the December 1998
Bank Presentation and except for the Disclosed Matters, after giving effect to
the Transactions, no member of the Holdings Group has, as of the Effective Date,
any material contingent liabilities, unusual long-term commitments or unrealized
losses.
(h) Except as disclosed in the December 1998 Bank Presentation,
since October 3, 1998, there has been no material adverse change in the
business, assets, operations, material agreements, prospects or condition,
financial or otherwise, of the Holdings Group, taken as a whole, or of the
Borrower and the Borrower Subsidiaries, taken as a whole.
SECTION 3.05. Properties. (a) Except as disclosed in Schedule 3.05,
each member of the Holdings Group has good title to, or valid leasehold
interests in, all its real and personal property material to its business,
except for minor defects in title that do not interfere with its ability to
conduct its business as currently conducted or to utilize such properties for
their intended purposes.
(b) Each member of the Holdings Group owns, or is licensed to use,
all trademarks, trade names, copyrights, patents and other intellectual property
material to its business, and the use thereof by the Holdings Group does not
infringe upon the rights of any other Person, except for any such infringements
that, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.
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(c) Schedule 3.05 sets forth the address (including county) of each
real property that is owned or leased by the Holdings Group as of the Effective
Date.
SECTION 3.06. Litigation and Environmental Matters. (a) There are no
actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of any Transaction Party,
threatened against or affecting any member of the Holdings Group (i) as to which
there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters) or (ii) that involve any of the Loan Documents or the Transactions.
(b) Except for the Disclosed Matters and except with respect to any
other matters that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, no member of the Holdings Group
(i) has failed to comply with any Environmental Law or to obtain, maintain or
comply with any permit, license or other approval required under any
Environmental Law, (ii) has become subject to any Environmental Liability, (iii)
has received notice of any claim with respect to any Environmental Liability or
(iv) knows of any basis for any Environmental Liability.
(c) Since the date of this Agreement, there has been no change in
the status of the Disclosed Matters that, individually or in the aggregate, has
resulted in, or could reasonably be expected to result in, a Material Adverse
Effect.
SECTION 3.07. Compliance with Laws and Agreements. Each member of
the Holdings Group is in compliance with all laws, regulations and orders of any
Governmental Authority applicable to it or its property and all indentures,
agreements and other instruments binding upon it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. No Default has occurred and is
continuing.
SECTION 3.08. Investment and Holding Company Status. No member of
the Holdings Group is (a) an "investment company" as defined in, or subject to
regulation under, the Investment Company Act of 1940 or (b) a "holding company"
as defined in, or subject to regulation under, the Public Utility Holding
Company Act of 1935.
SECTION 3.09. Taxes. Each member of the Holdings Group has timely
filed or caused to be filed all Tax returns and reports required to have been
filed and has paid or caused to be paid all Taxes required to have been paid by
it, except (a) Taxes that are being contested in good faith by appropriate
proceedings and for which such member, as applicable, has set aside on its books
adequate reserves or (b) to the extent that the failure to do so could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed by more
than $500,000 the fair market value of the assets of such Plan, and the present
value of all accumulated benefit obligations of all underfunded Plans (based on
the assumptions used for purposes of Statement of Financial Accounting Standards
No. 87) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed by more than $1,000,000 the fair market value of
the assets of all such underfunded Plans.
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SECTION 3.11. Disclosure. The Transaction Parties have disclosed to
the Lenders all agreements, instruments and corporate or other restrictions to
which any member of the Holdings Group is subject, and all other matters known
to any of them, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. None of the Information
Memorandum, the December 1998 Bank Presentation or any of the other reports,
financial statements, certificates or other information furnished by or on
behalf of any Loan Party to the Administrative Agent or any Lender in connection
with the negotiation of this Agreement or any other Loan Document or the
Existing Loan Documents or delivered hereunder or thereunder (as modified or
supplemented by other information so furnished) contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, provided that, with respect to projected financial
information, the members of the Holdings Group represent only that such
information was prepared in good faith based upon assumptions believed to be
reasonable at the time.
SECTION 3.12. Subsidiaries. Holdings does not have any subsidiaries
other than the Borrower and the other Subsidiaries. Schedule 3.12 sets forth the
name of, and the ownership interest of Holdings in, each Subsidiary of Holdings
and identifies each Subsidiary that is a Subsidiary Loan Party, in each case as
of the Effective Date.
SECTION 3.13. Insurance. Schedule 3.13 sets forth a description of
all insurance maintained by or on behalf of Holdings and the Subsidiaries as of
the Effective Date. As of the Effective Date, all premiums in respect of such
insurance that are due and payable have been paid.
SECTION 3.14. Labor Matters. As of the Effective Date, there are no
strikes, lockouts or slowdowns against any member of the Holdings Group pending
or, to the knowledge of the Transaction Parties, threatened. The hours worked by
and payments made to employees of the Holdings Group have not been in violation
of the Fair Labor Standards Act or any other applicable Federal, state, local or
foreign law dealing with such matters. All payments due from any member of the
Holdings Group, or for which any claim may be made against any member of the
Holdings Group, on account of wages and employee health and welfare insurance
and other benefits, have been paid or accrued as a liability on the books of
such member. The consummation of the Transactions will not give rise to any
right of termination or right of renegotiation on the part of any union under
any collective bargaining agreement to which any member of the Holdings Group is
bound.
SECTION 3.15. Solvency. Immediately after the consummation of the
Additional Financing Transactions and immediately following the making of each
Loan made on the Effective Date, the making of each "Loan" (as such term is
defined in the Amended Existing Credit Agreement) made on the Effective Date and
after giving effect to the application of the proceeds of such Loans, (a) the
fair value of the assets of each Transaction Party on a consolidated basis with
its subsidiaries, at a fair valuation, will exceed its debts and liabilities,
subordinated, contingent or otherwise; (b) the present fair saleable value of
the property of each Transaction Party on a consolidated basis with its
subsidiaries will be greater than the amount that will be required to pay the
probable liability of its debts and other liabilities, subordinated, contingent
or otherwise, as such debts and other liabilities become absolute and matured;
(c) each Transaction Party on a consolidated basis with its subsidiaries will be
able to pay its debts and liabilities, subordinated, contingent or otherwise, as
such debts and liabilities become absolute and matured; and (d) each Transaction
Party on a consolidated basis with its subsidiaries will not have unreasonably
small capital with which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be conducted following the
Effective Date.
SECTION 3.16. Security Documents. (a) The Pledge Agreement is
effective to create in favor of the Collateral Agent, for the ratable benefit of
the
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Secured Parties, a legal, valid and enforceable security interest in the
Collateral (as defined in the Pledge Agreement) and, when the Collateral is
delivered to the Collateral Agent, the Pledge Agreement shall constitute a fully
perfected second-priority Lien on, and security interest in, all right, title
and interest of the pledgor thereunder in such Collateral, in each case prior
and superior in right to any other person (other than the Collateral Agent in
its capacity as Collateral Agent for the Amended Existing Credit Agreement).
(b) The Security Agreement is effective to create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid
and enforceable security interest in the Collateral (as defined in the Security
Agreement) and, when financing statements in appropriate form are filed in the
offices specified on Schedule 6 to the Perfection Certificate, the Security
Agreement shall constitute a fully perfected Lien on, and security interest in,
all right, title and interest of the grantors thereunder in such Collateral
(other than the Intellectual Property (as defined in the Security Agreement), in
each case prior and superior in right to any other person (other than the
Collateral Agent in its capacity as Collateral Agent for the Amended Existing
Credit Agreement), other than with respect to Liens expressly permitted by
Section 6.02.
(c) When the Security Agreement is filed in the United States Patent
and Trademark Office and the United States Copyright Office, the Security
Agreement shall constitute a fully perfected Lien on, and security interest in,
all right, title and interest of the Loan Parties in the Intellectual Property
(as defined in the Security Agreement) in which a security interest may be
perfected by filing, recording or registering a security agreement, financing
statement or analogous document in the United States Patent and Trademark Office
or the United States Copyright Office, as applicable, in each case prior and
superior in right to any other person (other than the Collateral Agent in its
capacity as Collateral Agent for the Amended Existing Credit Agreement), it
being understood that subsequent recordings in the United States Patent and
Trademark Office and the United States Copyright Office may be necessary to
perfect a lien on registered trademarks, trademark applications and copyrights
acquired by the Loan Parties after the date hereof.
SECTION 3.17. Federal Reserve Regulations. (a) No member of the
Holdings Group is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of buying or carrying Margin
Stock.
(b) No part of the proceeds of any Loan or any Letter of Credit will
be used, whether directly or indirectly, and whether immediately, incidentally
or ultimately, (i) to buy or carry Margin Stock or to extend credit to others
for the purpose of buying or carrying Margin Stock or to refund indebtedness
originally incurred for such purpose or (ii) for any purpose that entails a
violation of, or that is inconsistent with, the provisions of the Regulations of
the Board, including Regulation U or X.
(c) Less than 25% of the assets of Holdings Group on a consolidated
basis consist of Margin Stock.
SECTION 3.18. Year 2000 Compliance. To the best knowledge of any
Transaction Party, any reprogramming required to permit the proper functioning,
in and following the year 2000, of (a) the computer systems of each member of
the Holdings Group and (b) equipment containing embedded microchips and the
testing of all such systems and equipment, as so reprogrammed, will be completed
in all material respects by June 30, 1999. To the best knowledge of any
Transaction Party, the cost to the Holdings Group of such reprogramming and
testing and of the reasonably foreseeable consequences of year 2000 to any
member of the Holdings Group (including reprogramming errors and the failure of
others' systems or equipment) will not result in a Default or a Material Adverse
Effect.
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ARTICLE IV
Conditions
SECTION 4.01. Effective Date. This Agreement shall not become
effective until the date (the "Effective Date") on which each of the following
conditions is satisfied (or waived in accordance with Section 9.02):
(a) The Agents (or their counsel) shall have received from each
party hereto either (i) a counterpart of this Agreement signed on behalf
of such party or (ii) written evidence satisfactory to the Agents (which
may include telecopy transmission of a signed signature page of this
Agreement) that such party has signed a counterpart of this Agreement.
(b) The Agents shall have received a favorable written opinion
(addressed to each Agent and the Lenders and dated the Effective Date) of
each of (i) Irell & ▇▇▇▇▇▇▇ LLP, counsel for the Transaction Parties and
for GEI II, substantially in the form of Exhibit B, (ii) Kramer, Levin,
Naftalis & ▇▇▇▇▇▇▇, New York counsel for the Transaction Parties,
substantially in the form of Exhibit C-1, and (iii) Skadden, Arps, Slate,
▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, counsel for Kmart, substantially in the form of
Exhibit C-2, and, in the case of each such opinion required by this
paragraph, covering such other matters relating to the Loan Parties, the
Loan Documents or the Transactions as the Required Lenders shall
reasonably request. The Transaction Parties, GEI II and Kmart hereby
request such counsel to deliver such opinions.
(c) The Agents shall have received such documents and certificates
as the Agents or their counsel may reasonably request relating to the
organization, existence and good standing of each Loan Party, the
authorization of the Transactions and any other legal matters relating to
the Loan Parties, the Loan Documents or the Transactions, all in form and
substance satisfactory to the Agents and their counsel.
(d) The Agents shall have received a certificate, dated the
Effective Date and signed by the President, a Vice President or a
Financial Officer of the Borrower, confirming compliance with the
conditions set forth in paragraphs (a), (b) and (c) of Section 4.02.
(e) The Agents shall have received all fees and other amounts due
and payable on or prior to the Effective Date, including, to the extent
invoiced, reimbursement or payment of all reasonable and documented
out-of-pocket expenses required to be reimbursed or paid by any Loan Party
hereunder or under any other Loan Document.
(f) The Agents shall have received counterparts of the Pledge
Agreement signed on behalf of the Borrower and each other Loan Party.
(g) The Agents shall have received counterparts of the Security
Agreement (including any amendments thereto reasonably requested by the
Agents) signed on behalf of the Transaction Parties and each other Loan
Party, together with the following:
(i) all documents and instruments, including Uniform
Commercial Code financing statements, required by law or reasonably
requested by the Agents to be filed, registered or recorded to
create or perfect the Liens intended to be created under the
Security Agreement; and
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(ii) a completed Perfection Certificate dated the Effective
Date and signed by an executive officer or Financial Officer of
Holdings, together with all attachments contemplated thereby.
(h) The Agents shall have received (i) counterparts of the Guarantee
Agreements signed on behalf of each party thereto other than the Agents
and (ii) counterparts of the Indemnity, Subrogation and Contribution
Agreement signed on behalf of the Borrower and each Subsidiary Loan Party.
(i) The Lenders shall be satisfied with (i) the Existing Loan
Documents and any waivers or amendments thereto, (ii) the corporate and
capital structure of the Loan Parties after giving effect to the
Additional Financing Transactions and (iii) all legal, tax and accounting
matters relating to the Additional Financing Transactions.
(j) After giving effect to the Additional Financing Transactions and
the other transactions contemplated hereby, the Holdings Group shall have
outstanding no indebtedness or preferred stock other than (i) Indebtedness
created under the Loan Documents or the Existing Loan Documents, (ii) the
Existing Hechinger Public Debt, (iii) the BSQ Acqco/ Holdings Note, (iv)
the BSQ Newco/Builders Square Note, (v) the BSQ Newco Note, (vi) the
Hechinger/East Coast Note and (vii) Indebtedness set forth on Schedule
6.01. The terms and conditions of all indebtedness that will remain
outstanding after the Effective Date shall be satisfactory in all respects
to the Lenders.
(k) The Lenders shall be satisfied with the sufficiency of amounts
available under this Agreement and the Amended Existing Credit Agreement
to meet the ongoing working capital requirements of the Borrower and the
Borrower Subsidiaries following the Additional Financing Transactions and
the consummation of the other transactions contemplated hereby.
(l) The Lenders shall have received a pro forma consolidated balance
sheet of each of (i) Holdings and its subsidiaries and (ii) the Borrower
and its subsidiaries as of the date hereof, reflecting all pro forma
adjustments as if the Additional Financing Transactions had been
consummated on such date, and such pro forma consolidated balance sheets
shall be consistent in all material respects with the forecasts and other
information previously provided to the Lenders.
(m) The Agents shall have received a certificate, in form and
substance reasonably satisfactory to the Lenders, from the chief financial
officer of Holdings (i) with respect to the solvency of Hechinger and its
subsidiaries on a consolidated basis as of the Effective Date, (ii) the
Borrower and the Borrower Subsidiaries on a consolidated basis as of the
Effective Date and (iii) Holdings and the Subsidiaries on a consolidated
basis as of the Effective Date.
(n) The Agents shall have received a Borrowing Base Certificate
dated the Effective Date, relating to the calendar week ended on December
18, 1998, and executed by a Financial Officer of the Borrower.
(o) The Lenders shall be satisfied that substantially all the
inventory, accounts receivable and equipment of Builders Square and
Hechinger and their respective subsidiaries are held by the Borrower and
the Borrower Subsidiaries.
(p) The Lenders shall have received audits, in form and substance
satisfactory to the Agents, from Alco Capital Group Inc., the
Administrative Agent's asset-based evaluation group, and BABC, the
Borrowing Base Audit Agent under the Amended Existing Credit Agreement, in
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each case of the accounts receivable and inventory of the Borrower and the
Borrower Subsidiaries after giving effect to the Transactions.
(q) The Lenders shall be satisfied with the management of Holdings,
the Borrower and the other Subsidiaries.
(r) The Amended Existing Credit Agreement shall have been executed
and delivered to the Administrative Agent by each party thereto and the
Additional Financing Transactions shall have been consummated in
accordance with applicable law, the applicable Loan Documents and Existing
Loan Documents and the related agreements and documentation.
(s) The Lenders shall be satisfied with the capitalization,
structure and equity ownership of Holdings and the Borrower.
(t) The consummation of the Additional Financing Transactions and
the other transactions contemplated hereby shall not (a) violate any
applicable law, statute, rule or regulation or (b) conflict with, or
result in a default or event of default under, any material agreement of
any member of the Holdings Group (including the Existing Hechinger Public
Indebtedness), and the Lenders shall have received one or more legal
opinions to such effect, satisfactory to the Agents, from counsel to the
Transaction Parties satisfactory to the Agents.
(u) There shall be no litigation or administrative proceeding that
could reasonably be expected to have a Material Adverse Effect or to
adversely affect the ability of the parties to consummate the Additional
Financing Transactions.
(v) The Lenders shall be reasonably satisfied in all respects with
the tax position and the contingent tax and other liabilities of Holdings,
its Affiliates and the Subsidiaries, and with the plans of Holdings with
respect thereto.
(w) The Lenders shall have received a detailed business plan and
financial projections of the Borrower and its subsidiaries for fiscal
years 1999 through 2001, in form and substance reasonably satisfactory to
the Agents.
(x) The Agents (or their counsel) shall have received such documents
as they may require that are sufficient to approve the amendment and
restatement of the Existing Facility by the Existing Revolving Lenders
under Section 9.02 thereof.
(y) The Agents shall have received counterparts of (i) the GEI II
Credit Enhancement Agreement, signed on behalf of GEI II and the Borrower,
and (ii) the Kmart Credit Enhancement Agreement, signed on behalf of
Kmart and the Borrower.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of the Issuing
Bank to issue Letters of Credit hereunder shall not become effective unless each
of the foregoing conditions is satisfied (or waived pursuant to Section 9.02) at
or prior to 12:00 noon, New York City time, on January 4, 1999 (and, in the
event such conditions are not so satisfied or waived, this Agreement shall
terminate at such time).
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SECTION 4.02. Each Credit Event. The obligation of each Lender to
make a Loan on the occasion of any Borrowing, and of the Issuing Bank to issue,
amend, renew or extend any Letter of Credit, is subject to the satisfaction of
the following conditions:
(a) The representations and warranties of each Loan Party set forth
in the Loan Documents shall be true and correct in all material respects
on and as of the date of such Borrowing or the date of issuance,
amendment, renewal or extension of such Letter of Credit, as applicable,
as though made on and as of such date, other than any such representations
or warranties that by their terms refer to a date other than the date of
such Borrowing, issuance, amendment, renewal or extension, in which case
such representations and warranties shall be true and correct as of such
other date.
(b) At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such Letter
of Credit, as applicable, no Default shall have occurred and be
continuing.
(c) At the time of and immediately after giving effect to such
Borrowing, the Existing Lenders' "Total Exposure" (as such term is defined
in the Amended Existing Credit Agreement) shall not be less than the
lesser of (i) the Existing Revolving Commitments at such time and (ii) the
Borrowing Base (as such term is defined in the Amended Existing Credit
Agreement) in effect at such time.
(d) At the time of such Borrowing, no "Purchaser Bankruptcy Event of
Default" as such term is defined in the Credit Enhancement Agreements)
shall have occurred.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by each
Transaction Party on the date thereof as to the matters specified in paragraphs
(a) and (b) of this Section.
ARTICLE V
Affirmative Covenants
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full and all Letters of Credit shall have expired or terminated and
all LC Disbursements shall have been reimbursed, each Transaction Party
covenants and agrees with the Lenders that:
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SECTION 5.01. Financial Statements and Other Information. The
Transaction Parties will furnish to each Agent and each Lender:
(a) commencing with the fiscal year of Holdings ending October 3,
1998, within 90 days after the end of each fiscal year of Holdings, its
consolidated and consolidating balance sheet and related statements of
operations, stockholders' equity and cash flows as of the end of and for
such year, setting forth in each case in comparative form the figures for
the previous fiscal year, all audited (in the case of such consolidated
statements) and reported on by independent public accountants of
recognized national standing (without a "going concern" or like
qualification or exception and without any qualification or exception as
to the scope of such audit) to the effect that such consolidated financial
statements present fairly in all material respects the financial condition
and results of operations of Holdings and its consolidated Subsidiaries on
a consolidated basis in accordance with GAAP consistently applied;
(b) (a) commencing with the fiscal year of Holdings ending October
3, 1998, within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of Holdings, its consolidated and
consolidating balance sheet and related statements of operations,
stockholders' equity and cash flows as of the end of and for such fiscal
quarter and the then elapsed portion of the fiscal year, setting forth in
each case in comparative form the figures for the corresponding period or
periods of (or, in the case of the balance sheet, as of the end of) the
previous fiscal year, all certified by one of its Financial Officers as
presenting fairly in all material respects the financial condition and
results of operations of Holdings and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject
to normal year-end audit adjustments, purchase accounting adjustments and
the absence of footnotes;
(c) (a) commencing with the fiscal year of Holdings ending October
3, 1998, within 30 days after the end of each of the first two fiscal
months of each fiscal quarter of Holdings, its consolidated balance sheet
and related statements of operations, stockholders' equity and cash flows
as of the end of and for such fiscal month and the then elapsed portion of
the fiscal year, all certified by one of its Financial Officers as
presenting in all material respects the financial condition and results of
operations of Holdings and its consolidated Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied, subject to normal
year-end audit adjustments, purchase accounting adjustments and the
absence of footnotes;
(d) concurrently with any delivery of financial statements under
clause (a) or (b) above, a certificate of a Financial Officer of Holdings
(i) certifying as to whether a Default has occurred and, if a Default has
occurred, specifying the details thereof and any action taken or proposed
to be taken with respect thereto, (ii) setting forth reasonably detailed
calculations demonstrating compliance with Section 6.11 and Section 6.12
and (iii) stating whether any change in GAAP or in the application thereof
has occurred since the date of Holdings's audited financial statements
referred to in Section 3.04 and, if any such change has occurred,
specifying the effect of such change on the financial statements
accompanying such certificate;
(e) concurrently with any delivery of financial statements under
clause (a) above, a certificate of the accounting firm that reported on
such financial statements stating whether they obtained knowledge during
the course of their examination of such financial statements of any
Default (which certificate may be limited to the extent required by
accounting rules or guidelines);
(f) within 30 days following the commencement of each fiscal year of
Holdings, a detailed consolidated budget for such fiscal year (including a
projected consolidated balance sheet and related statements of projected
operations and cash flow as of the end of and for such fiscal year) and,
promptly when available, any significant revisions of such budget;
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(g) within four Business Days after the end of each calendar week, a
certificate in the form of Exhibit I (a "Borrowing Base Certificate")
showing the Borrowing Base as of the close of business on the last day of
such week, each such Certificate to be certified as complete and correct
on behalf of the Borrower by a Financial Officer of the Borrower;
(h) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by
any member of the Holdings Group with the Securities and Exchange
Commission, or any Governmental Authority succeeding to any or all of the
functions of said Commission, or with any national securities exchange, as
the case may be;
(i) promptly upon receipt thereof, copies of all reports submitted
to the Borrower by independent certified public accountants in connection
with each annual, interim or special audit of the books of the Borrower or
any of its Subsidiaries made by such accountants, including any management
letter commenting on the Borrower's internal controls submitted by such
accountants to management in connection with their annual audit;
(j) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of any
member of the Holdings Group, or compliance with the terms of any Loan
Document, as the Agents or any Lender may reasonably request; and
(k) commencing on January 14, 1999, and biweekly thereafter on the
first day of each applicable calendar week, a detailed projection of
Holdings's sources and uses of cash for the next 90 days, prepared in good
faith by Holdings's management, including projected borrowings hereunder
and under the Existing Facility and Holdings's projected consolidated cash
balance as of the end of each day during such 90-day period, and, promptly
when available, any significant revisions to such projections.
SECTION 5.02. Notices of Material Events. The Transaction Parties
will furnish to each Agent and each Lender prompt written notice of the
following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by
or before any arbitrator or Governmental Authority against or affecting
any member of the Holdings Group or any Affiliate thereof that, if
adversely determined, could reasonably be expected to result in a Material
Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together with
any other ERISA Events that have occurred, could reasonably be expected to
result in a Material Adverse Effect; and
(d) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of Holdings and the Borrower
setting forth the details of the event or development requiring such notice and
any action taken or proposed to be taken with respect thereto.
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SECTION 5.03. Information Regarding Collateral. (a) The Transaction
Parties will furnish to the Agents prompt written notice of any change (i) in
any Loan Party's corporate name or in any trade name used to identify it in the
conduct of its business or in the ownership of its properties, (ii) in the
location of any Loan Party's chief executive office, its principal place of
business, any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral owned by it
is located (including the establishment of any such new office or facility),
(iii) in any Loan Party's identity or corporate structure or (iv) in any Loan
Party's Federal Taxpayer Identification Number. The Transaction Parties agree
not to effect or permit any change referred to in the preceding sentence unless
all filings have been made under the Uniform Commercial Code or otherwise that
are required in order for the Agents to continue at all times following such
change to have a valid, legal and perfected security interest in all the
Collateral. The Transaction Parties also agree promptly to notify the Agents if
any material portion of the Collateral is damaged or destroyed.
(b) Each year, at the time of delivery of annual financial
statements with respect to the preceding fiscal year pursuant to clause (a) of
Section 5.01, Holdings shall deliver to the Agents a certificate of a Financial
Officer of Holdings setting forth the information required pursuant to Section 2
of the Perfection Certificate or confirming that there has been no change in
such information since the date of the Perfection Certificate delivered on the
Effective Date or the date of the most recent certificate delivered pursuant to
this Section.
SECTION 5.04. Existence; Conduct of Business. Each Transaction Party
will, and will cause each of the Subsidiaries to, do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges, franchises, patents,
copyrights, trademarks and trade names material to the conduct of its business,
provided that the foregoing shall not prohibit any merger, consolidation,
liquidation or dissolution permitted under Section 6.03.
SECTION 5.05. Payment of Obligations. Each Transaction Party will,
and will cause each of the Subsidiaries to, pay its Indebtedness and other
obligations, including Tax liabilities, before the same shall become delinquent
or in default, except where (a) the validity or amount thereof is being
contested in good faith by appropriate proceedings, (b) such Transaction Party
or such Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP, (c) such contest effectively suspends
collection of the contested obligation and the enforcement of any Lien securing
such obligation and (d) the failure to make payment pending such contest could
not reasonably be expected to result in a Material Adverse Effect.
SECTION 5.06. Maintenance of Properties. Each Transaction Party
will, and will cause each of the Subsidiaries to, keep and maintain all property
material to the conduct of its business in good working order and condition,
ordinary wear and tear excepted.
SECTION 5.07. Insurance. (a) Each Transaction Party shall (i)
maintain insurance with financially sound and reputable insurers with an A.M.
Best rating of A- or better (or, to the extent consistent with prudent business
practice, a program of self-insurance approved by the Administrative Agent) on
such of its property and in at least such amounts and against at least such
risks as is customary with companies in the same or similar businesses operating
in the same or similar locations, including public liability insurance against
claims for personal injury or death occurring upon, in or about or in connection
with the use of any properties owned, occupied or controlled by it (including
the insurance required pursuant to the Security Documents); (ii) maintain such
other insurance as may be required by law; and (iii) furnish to the
Administrative Agent, upon written request, full information as to the insurance
carried.
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(b) Fire and extended coverage policies maintained with respect to
any Collateral shall be endorsed or otherwise amended to include (i) a
non-contributing mortgage clause (regarding improvements to real property) and
lenders' loss payable clause (regarding personal property), in form and
substance satisfactory to the Administrative Agent, which endorsements or
amendments shall provide that, from and after the Effective Date, if the insurer
shall have received written notice from the Administrative Agent or the
Borrowing Base Audit Agent of the occurrence of an Event of Default, the insurer
shall pay all proceeds otherwise payable to the Borrower or the other Loan
Parties under the policies directly to the Administrative Agent or the
Collateral Agent, (ii) a provision to the effect that none of the Borrower, the
Administrative Agent or any other party shall be a coinsurer and (iii) such
other provisions as the Administrative Agent may reasonably require from time to
time to protect the interests of the Lenders. Commercial general liability
policies shall be endorsed to name the Administrative Agent as an additional
insured. Business interruption policies shall name the Administrative Agent as a
loss payee and shall be endorsed or amended to include (i) a provision that,
from and after the Effective Date, if the insurer shall have received written
notice from the Administrative Agent or the Collateral Agent of the occurrence
of an Event of Default, the insurer shall pay all proceeds otherwise payable to
the Borrower or the other Loan Parties under the policies directly to the
Administrative Agent or the Collateral Agent, (ii) a provision to the effect
that none of the Borrower, the Administrative Agent or any other party shall be
a co-insurer and (iii) such other provisions as the Administrative Agent may
reasonably require from time to time to protect the interests of the Lenders.
Each such policy referred to in this paragraph also shall provide that it shall
not be canceled, modified or not renewed (i) by reason of nonpayment of premium
except upon not less than 10 days' prior written notice thereof by the insurer
to the Administrative Agent (giving the Administrative Agent the right to cure
defaults in the payment of premiums) or (ii) for any other reason except upon
not less than 30 days' prior written notice thereof by the insurer to the
Administrative Agent. The Borrower shall deliver to the Administrative Agent,
prior to the cancelation, modification or nonrenewal of any such policy of
insurance, a copy of a renewal or replacement policy (or other evidence of
renewal of a policy previously delivered to the Administrative Agent) together
with evidence satisfactory to the Administrative Agent of payment of the premium
therefor.
SECTION 5.08. Casualty and Condemnation. Each Transaction Party will
furnish to the Agents and the Lenders prompt written notice of any casualty or
other insured damage to any material portion of any Collateral or the
commencement of any action or proceeding for the taking of any material portion
of the Collateral or any part thereof or interest therein under power of eminent
domain or by condemnation or similar proceeding.
SECTION 5.09. Books and Records; Inspection and Audit Rights. (a)
Each Transaction Party will, and will cause each of the Subsidiaries to, keep
proper books of record and account in which full, true and correct entries are
made of all dealings and transactions in relation to its business and
activities. Each Transaction Party will, and will cause each of the Subsidiaries
to, permit any representatives designated by any Agent or any Lender, upon
reasonable prior notice, to visit and inspect its properties, to examine and
make extracts from its books and records, and to discuss its affairs, finances
and condition with its officers and independent accountants, all at such
reasonable times and as often as reasonably requested.
(b) Each Transaction Party will, and will cause each of the
Subsidiaries to, from time to time upon the request of the Borrowing Base Audit
Agent, the Collateral Agent or the Required Lenders through the Administrative
Agent, permit the Borrowing Base Audit Agent, the Collateral Agent or the
Lenders or professionals (including investment bankers, consultants,
accountants, lawyers and appraisers) retained by the Borrowing Base Audit Agent,
the Collateral Agent, the Administrative Agent or the Lenders to conduct
evaluations and appraisals of (i) the Borrower's practices in the computation of
the Borrowing Base and (ii) the assets included in the Borrowing Base and
related financial information such as, but not limited to, sales, gross margins,
payables, accruals and reserves (it being understood and agreed
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to that, in the absence of a Default, the Borrowing Base Audit Agent or the
Collateral Agent will conduct such evaluations and appraisals each quarter), and
pay the reasonable and documented fees and expenses of the Borrowing Base Audit
Agent, the Collateral Agent, the Lenders or such professionals with respect to
such evaluations and appraisals. The Borrower hereby agrees that Alco Capital
Group, Inc. will update its inventory audit report, which is to be delivered to
the Lenders on or before the Effective Date pursuant to Section 4.01(p), as of
each of March 31, 1999, and June 30, 1999, and that such updated reports shall
be delivered to the Lenders immediately upon their completion.
(c) Each Transaction Party will, and will cause each of the
Subsidiaries to, in connection with any evaluation and appraisal relating to the
computation of the Borrowing Base, maintain such additional reserves (for
purposes of computing the Borrowing Base) in respect of Eligible Inventory and
in respect of Eligible Inventory Minus Reserves and make such other adjustments
to its parameters for including Inventory in the Borrowing Base as the Borrowing
Base Audit Agent and the Collateral Agent or the Required Lenders through the
Administrative Agent shall require based upon the results of such evaluation and
appraisal.
(d) Each Transaction Party will, and will cause each of the
Subsidiaries to, from time to time upon request of the Borrowing Base Audit
Agent, the Collateral Agent or the Required Lenders through the Administrative
Agent, permit its agents or representatives to conduct reviews to determine the
net recovery value of inventory, and pay the reasonable and documented fees and
expenses of such agents or representatives with respect to such reviews.
(e) Not less frequently than each fiscal quarter, Holdings shall
conduct a conference call with the Lenders to update them on the financial
performance and results of operations of the Holdings Group and other related
topics.
(f) Not later than January 29, 1999, Holdings shall host at the
offices of the Administrative Agent in New York, New York a bank meeting to
which each of the Lenders shall be invited to attend.
SECTION 5.10. Compliance with Laws. Each Transaction Party will, and
will cause each of the Subsidiaries to, comply with all laws, rules, regulations
and orders of any Governmental Authority applicable to it or its property,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 5.11. Use of Proceeds and Letters of Credit. The proceeds of
Loans made hereunder and Letters of Credit issued hereunder will be used only
(a) to finance the working capital needs of the Borrower and the Borrower
Subsidiaries, including the purchase of inventory and equipment, in each case in
the ordinary course of business and (b) to finance capital expenditures of the
Borrower and the Borrower Subsidiaries (it being understood that in no event
will any such proceeds be used to fund any Permitted Acquisition). No part of
the proceeds of any Loan will be used, whether directly or indirectly, for any
purpose that entails a violation of any of the Regulations of the Board,
including Regulations U and X.
SECTION 5.12. Additional Borrower Subsidiaries. If any additional
Borrower Subsidiary is formed or acquired after the Effective Date, Holdings and
the Borrower will notify the Agents and the Lenders thereof and (a) if such
Borrower Subsidiary is a Subsidiary Loan Party, Holdings and the Borrower will
cause such Borrower Subsidiary to become a party to the Subsidiary Guarantee
Agreement, the Indemnity, Subrogation and Contribution Agreement and each
applicable Security Document in the manner provided therein within three
Business Days after such Borrower Subsidiary is formed or acquired and promptly
take such actions to create and perfect Liens on such Borrower Subsidiary's
assets to secure the Obligations as any Agent or the Required Lenders shall
reasonably request and (b) if any shares of capital stock or Indebtedness of
such Borrower
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Subsidiary are owned by or on behalf of any Loan Party, Holdings and the
Borrower will cause such shares and promissory notes evidencing such
Indebtedness to be pledged pursuant to the Pledge Agreement within three
Business Days after such Borrower Subsidiary is formed or acquired (except that,
if such Borrower Subsidiary is a Foreign Subsidiary, shares of common stock of
such Borrower Subsidiary to be pledged pursuant to the Pledge Agreement may be
limited to 65% of the outstanding shares of common stock of such Borrower
Subsidiary).
SECTION 5.13. Further Assurances. (a) Each Transaction Party will,
and will cause each Subsidiary Loan Party to, execute any and all further
documents, financing statements, agreements and instruments, and take all such
further actions (including the filing and recording of financing statements and
other documents), that may be required under any applicable law, or which any
Agent or the Required Lenders may reasonably request, to effectuate the
transactions contemplated by the Loan Documents or to grant, preserve, protect
or perfect the Liens created or intended to be created by the Security Documents
or the validity or priority of any such Lien, all at the expense of the Loan
Parties. The Transaction Parties also agree to provide to the Agents, from time
to time upon request, evidence reasonably satisfactory to the Agents as to the
perfection and priority of the Liens created or intended to be created by the
Security Documents.
(b) If any material assets (other than real property and personal
property that is not of the type encumbered or to be encumbered by the Lien of
the Security Agreement on the Effective Date) are acquired by the Holdings Group
or any Subsidiary Loan Party after the Effective Date (other than assets
constituting Collateral under the Security Agreement that become subject to the
Lien of the Security Agreement upon acquisition thereof), the Transaction
Parties will notify the Agents and the Lenders thereof, and, if requested by any
Agent or the Required Lenders, the Transaction Parties will cause such assets to
be subjected to a Lien securing the Obligations and will take, and cause the
Subsidiary Loan Parties to take, such actions as shall be necessary or
reasonably requested by any Agent to grant and perfect such Liens, including
actions described in paragraph (a) of this Section, all at the expense of the
Loan Parties.
SECTION 5.14. Cash Management Procedures. As promptly as
practicable, the Holdings Group will establish and maintain (i) the cash
management procedures set forth in the Security Agreement and (ii) the lockbox
arrangements set forth in the Security Agreement (in no event later than 30 days
after the Effective Date).
SECTION 5.15. Delivery of Business Plan. As promptly as practicable
and in any event on or before March 31, 1999, the Borrower will, in consultation
with the independent financial advisor retained pursuant to Section 5.16,
develop and deliver to the Lenders a business plan, satisfactory in form and
substance to the Administrative Agent, with respect to (a) the
two-fiscal-quarter period ending on June 30, 1999, (b) the four-fiscal-quarter
period ending on December 31, 1999, and (c) the period from October 4, 1998, to
September 30, 2002, provided that if the Borrower delivers a business plan
pursuant to this Section 5.15, the failure of such plan to be satisfactory in
form and substance to the Administrative Agent shall not be a Default or an
Event of Default.
SECTION 5.16. Independent Financial Advisor. Promptly following the
Effective Date, the Transaction Parties shall retain an independent financial
consultant reasonably satisfactory to the Administrative Agent, to act as an
independent financial consultant to the Holdings Group and to provide each of
the Holdings Group, the Lenders, the Agents, GEI II and Kmart with monthly
reports (containing such information as is customary for such reports and such
other information as the Administrative Agent shall reasonably request) on the
financial condition and ongoing results of operations of the Holdings Group and
the Borrower.
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ARTICLE VI
Negative Covenants
Until the Commitments have expired or terminated and the principal
of and interest on each Loan and all fees payable hereunder have been paid in
full and all Letters of Credit have expired or terminated and all LC
Disbursements shall have been reimbursed, each Transaction Party covenants and
agrees with the Lenders that:
SECTION 6.01. Indebtedness; Certain Equity Securities. (a) The
Transaction Parties will not, and will not permit any Subsidiary to, create,
incur, assume or permit to exist any Indebtedness, except:
(i) Indebtedness created under the Loan Documents and the Existing
Loan Documents;
(ii) Indebtedness existing on September 26, 1997, and set forth in
Schedule 6.01 and extensions, renewals and replacements of any such
Indebtedness that do not increase the outstanding principal amount thereof
or result in an earlier maturity date or decreased weighted average life
thereof, provided that the material terms of such extensions, renewals and
replacements are at least as favorable to the Lenders as those of such
Indebtedness;
(iii) Indebtedness of (a) any Loan Party that is not a Foreign
Subsidiary to any other Loan Party that is not a Foreign Subsidiary (other
than the Borrower or the Borrower Subsidiaries) and (b) the Borrower to
any Borrower Subsidiary and of any Borrower Subsidiary to the Borrower or
any other Borrower Subsidiary, provided that Indebtedness of any Borrower
Subsidiary that is not a Loan Party to the Borrower or any Subsidiary Loan
Party shall be subject to Section 6.04;
(iv) Guarantees by any Subsidiary Loan Party of Indebtedness of any
Borrower Subsidiary and by any Borrower Subsidiary of Indebtedness of the
Borrower or any other such Borrower Subsidiary, provided that Guarantees
by the Borrower or any Subsidiary Loan Party of Indebtedness of any
Borrower Subsidiary that is not a Loan Party shall be subject to Section
6.04;
(v) Indebtedness of the Borrower, Hechinger, Hechinger East Coast,
BSQ Newco, Hechinger Stores or any Borrower Subsidiary incurred to finance
the acquisition, construction or improvement of any fixed or capital
assets, including Capital Lease Obligations and any Indebtedness assumed
in connection with the acquisition of any such assets or secured by a Lien
on any such assets prior to the acquisition thereof, and extensions,
renewals and replacements of any such Indebtedness that do not increase
the outstanding principal amount thereof or result in an earlier maturity
date or decreased weighted average life thereof, provided that (A) such
Indebtedness is incurred prior to or within 90 days after such acquisition
or the completion of such construction or improvement and (B) the
aggregate principal amount of Indebtedness permitted by this clause (v)
shall not exceed $15,000,000 at any time outstanding;
(vi) Indebtedness of any Person that becomes a Borrower Subsidiary
after the date hereof, provided that (A) such Indebtedness exists at the
time such Person becomes a Borrower Subsidiary and is not created in
contemplation of or in connection with such Person becoming a Borrower
Subsidiary and (B) the aggregate principal amount of Indebtedness
permitted by this clause (vi) shall not exceed $5,000,000 at any time
outstanding;
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(vii) the BSQ Newco Note, BSQ Acqco/Holdings Note and BSQ
Newco/Builders Square Note;
(viii) Indebtedness under Hedging Agreements entered into in
accordance with Section 6.06;
(ix) intentionally omitted;
(x) Indebtedness incurred in connection with the Receivables
Purchase Agreements;
(xi) Indebtedness incurred in connection with the Company Owned
Life Insurance Program, provided that the aggregate principal amount of
Indebtedness permitted by this clause (xi) shall not exceed $45,000,000 at
any time outstanding;
(xii) the Existing Hechinger Public Indebtedness; and
(xiii) other unsecured Indebtedness in an aggregate principal amount
not exceeding $10,000,000 at any time outstanding, provided that the
aggregate principal amount of Indebtedness of the Borrower Subsidiaries
permitted by this clause (xiii) shall not exceed $2,000,000 at any time
outstanding.
(b) Subject to the provisions of Section 6.07, none of the
Transaction Parties will, nor will they permit any Subsidiary to, issue any
preferred stock (except for preferred stock (i) all dividends in respect of
which are to be paid (and all other payments in respect of which are to be made)
in additional shares of such preferred stock, in lieu of cash, until the date
that is at least 360 days following the Existing Facility Maturity Date, (ii)
that is not subject to redemption other than redemption at the option of the
Transaction Party issuing such preferred stock and (iii) all payments in respect
of which are expressly subordinated to the Obligations) or be or become liable
in respect of any obligation (contingent or otherwise) to purchase, redeem,
retire, acquire or make any other payment in respect of (i) any shares of
capital stock of any member of the Holdings Group or (ii) any option, warrant or
other right to acquire any such shares of capital stock.
SECTION 6.02. Liens. The Transaction Parties will not, and will not
permit any Subsidiary to, create, incur, assume or permit to exist any Lien on
any property or asset now owned or hereafter acquired by it, or assign or sell
any income or revenues (including accounts receivable) or rights in respect of
any thereof, except:
(a) Liens created under the Loan Documents and the Existing Loan
Documents;
(b) Permitted Encumbrances;
(c) any Lien on any property or asset of any Loan Party existing
on September 26, 1997, and set forth in Schedule 6.02, provided that (i)
such Lien shall not apply to any other property or asset of any Loan Party
and (ii) such Lien shall secure only those obligations that it secures on
September 26, 1997, and extensions, renewals and replacements thereof that
do not increase the outstanding principal amount thereof;
(d) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Borrower Subsidiary or existing
on any property or asset of any Person that becomes a Borrower Subsidiary
after the date hereof prior to the time such Person becomes a Borrower
Subsidiary, provided that (i) such Lien is not created in contemplation of
or in connection with such acquisition or such Person becoming a Borrower
Subsidiary, as the case may be, (ii) such Lien shall not apply to any
other property or assets of the Borrower or any
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Borrower Subsidiary and (iii) such Lien shall secure only those
obligations that it secures on the date of such acquisition or the date
such Person becomes a Borrower Subsidiary, as the case may be and
extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof;
(e) Liens on fixed or capital assets acquired, constructed or
improved by the Borrower, Hechinger, Hechinger East Coast, BSQ Newco,
Hechinger Stores or any Borrower Subsidiary, provided that (i) such
security interests secure Indebtedness permitted by clause (v) of Section
6.01(a), (ii) such security interests and the Indebtedness secured thereby
are incurred prior to or within 90 days after such acquisition or the
completion of such construction or improvement, (iii) the Indebtedness
secured thereby does not exceed 100% of the cost of acquiring,
constructing or improving such fixed or capital assets and (iv) such
security interests shall not apply to any other property or assets of the
Borrower, Hechinger, Hechinger East Coast, BSQ Newco, Hechinger Stores or
any Borrower Subsidiary;
(f) the Warrant;
(g) leases and subleases on real property of any of the Transaction
Parties or any Subsidiary, provided that either (i) such lease or sublease
is entered into in the ordinary course of such Person's business or (ii)
such real property is not being used by such Person in the ordinary course
of its business or is being used in a manner not inconsistent with the
granting of such lease or sublease;
(h) Liens on account receivables created in connection with the
Receivables Purchase Agreements;
(i) Liens created in connection with the loans under the Company
Owned Life Insurance Program;
(j) Liens listed on Schedule 6.02; and
(k) the Lien of the Massachusetts Mutual Life Insurance Company on
the Holdings Group's real property located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇ (store #3152), provided that (i) such Lien shall not apply
to any other property or asset of any Loan Party and (ii) such Lien shall
secure only those obligations owed to the Massachusetts Mutual Life
Insurance Company that existed on September 26, 1997 (and extensions,
renewals and replacements thereof that do not increase the outstanding
principal amount thereof), and that were secured on such date by the Lien
of the Massachusetts Mutual Life Insurance Company on the Holdings Group's
real property located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇.
SECTION 6.03. Fundamental Changes. (a) The Transaction Parties will
not and will not permit any Subsidiary to, merge into or consolidate with any
other Person, or permit any other Person to merge into or consolidate with it,
or liquidate or dissolve, except that, if at the time thereof and immediately
after giving effect thereto no Default shall have occurred and be continuing,
(i) any Subsidiary may merge into the Borrower in a transaction in which the
Borrower is the surviving corporation, (ii) any Subsidiary may merge into any
Subsidiary Loan Party in a transaction in which the surviving entity is a
Subsidiary Loan Party, (iii) any Subsidiary that is not a Loan Party may merge
into any Subsidiary that is not a Loan Party and (iv) any Borrower Subsidiary
may liquidate or dissolve if the Borrower determines in good faith that such
liquidation or dissolution is in the best interests of the Borrower and is not
materially disadvantageous to the Lenders, provided that any such merger
involving a Person that is not a wholly owned Subsidiary immediately prior to
such merger shall not be permitted unless also permitted by Section 6.04.
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(b) The Borrower will not, and will not permit any of the Borrower
Subsidiaries to, engage to any material extent in any business other than
businesses of the type conducted by the Borrower and such Borrower Subsidiaries
on the date of execution of this Agreement and businesses reasonably related
thereto.
(c) Holdings will not, and will not permit any of the Subsidiaries
to, engage in any business or activity other than the ownership of all the
outstanding shares of capital stock of BSQ Acqco and activities incidental
thereto. Holdings will not own or acquire any assets (other than shares of
capital stock of BSQ Acqco, the BSQ Acqco/Holdings Note, cash and Permitted
Investments) or incur any liabilities (other than liabilities under the Loan
Documents and Existing Loan Documents, liabilities imposed by law, including tax
liabilities, and other liabilities incidental to its existence and permitted
business and activities, including intercompany Indebtedness permitted under
Section 6.01(a)(iii)).
(d) BSQ Acqco will not engage in any business or activity other than
the ownership of all the outstanding shares of capital stock of BSQ Newco and
Hechinger and activities incidental thereto. BSQ Acqco will not own or acquire
any assets (other than shares of capital stock of BSQ Newco and Hechinger, cash
and Permitted Investments) or incur any liabilities (other than liabilities
under the Loan Documents, the Existing Loan Documents and the BSQ Acqco/Holdings
Note, liabilities imposed by law, including tax liabilities, and other
liabilities incidental to its existence and permitted business and activities,
including intercompany indebtedness permitted under Section 6.01(a)(iii)).
(e) BSQ Newco will not engage in any business or activity other than
being the obligee under the BSQ Newco Note and the obligor under the BSQ
Newco/Builders Square Note and activities incidental thereto and the ownership
of the real and personal property set forth in Schedule 6.03(e) and the
activities incidental thereto. BSQ Newco will not own or acquire any assets
(other than the assets described in the first sentence hereof, cash and
Permitted Investments) or incur any liabilities (other than liabilities under
the Loan Documents, the Existing Loan Documents and the BSQ Newco/Builders
Square Note, liabilities imposed by law, including tax liabilities, and other
liabilities incidental to its existence and permitted business and activities,
including intercompany indebtedness permitted under Section 6.01(a)(iii)).
(f) Hechinger will not engage in any business or activity other than
the ownership of all the outstanding shares of capital stock of Hechinger
Stores, being the obligee under the Existing Hechinger Public Debt and
activities incidental thereto and the ownership of the real and personal
property set forth in Schedule 6.03(f) and the activities incidental thereto.
Hechinger will not own or acquire any assets (other than the assets described in
the first sentence hereof, cash and Permitted Investments) or incur any
liabilities (other than liabilities under the Loan Documents and Existing Loan
Documents, the Existing Hechinger Public Debt, liabilities imposed by law,
including tax liabilities, and other liabilities incidental to its existence and
permitted business and activities, including intercompany indebtedness permitted
under Section 6.01(a)(iii)).
(g) Hechinger Stores will not engage in any business or activity
other than the ownership of all the outstanding shares of capital stock of the
Borrower and Hechinger East Coast and activities incidental thereto and the
ownership of the real and personal property set forth in Schedule 6.03(g) and
the activities incidental thereto. Hechinger Stores will not own or acquire any
assets (other than the assets described in the first sentence hereof, cash and
Permitted Investments) or incur any liabilities (other than liabilities under
the Loan Documents and the Existing Loan Documents, liabilities imposed by law,
including tax liabilities, and other liabilities incidental to its existence and
permitted business and activities including intercompany indebtedness permitted
under Section 6.01(a)(iii)).
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(h) Hechinger East Coast will not engage in any business or activity
other than activities incidental thereto and the ownership of the real and
personal property set forth in Schedule 6.03(h) and the activities incidental
thereto. Hechinger East Coast will not own or acquire any assets (other than the
assets described in the first sentence hereof, cash and Permitted Investments)
or incur any liabilities (other than liabilities under the Loan Documents and
the Existing Loan Documents, liabilities imposed by law, including tax
liabilities, and other liabilities incidental to its existence and permitted
business and activities, including intercompany indebtedness permitted under
Section 6.01(a)(iii)).
SECTION 6.04. Investments, Loans, Advances, Guarantees and
Acquisitions. The Transaction Parties will not, and will not permit any of the
Subsidiaries to, purchase, hold or acquire (including pursuant to any merger
with any Person that was not a wholly owned Subsidiary prior to such merger) any
capital stock, evidences of indebtedness or other securities (including any
option, warrant or other right to acquire any of the foregoing) of, make or
permit to exist any loans or advances to, Guarantee any obligations of, or make
or permit to exist any investment or any other interest in, any other Person, or
purchase or otherwise acquire (in one transaction or a series of transactions)
any assets of any other Person constituting a business unit, except:
(a) intentionally omitted;
(b) Permitted Acquisitions, provided that the sum of (i) the
consideration paid in connection with all Permitted Acquisitions and (ii)
the consideration paid in connection with all acquisitions pursuant to
Section 6.04(c) shall not exceed $15,000,000 in the aggregate during the
period commencing on the "Effective Date" (as such term is defined in the
Amended Existing Credit Agreement) and ending on the date this Article VI
is no longer applicable by its terms;
(c) the acquisition of shares or other equity interests in any
Person in transactions not constituting Permitted Acquisitions, provided
that (i) the criteria set forth in clauses (a), (b), (c), (f), (g) and (h)
of the definition of the term "Permitted Acquisition" shall have been
satisfied in connection with such acquisition, (ii) the consideration paid
in connection with all acquisitions pursuant to this clause (c) shall not
exceed $7,500,000 during the term of this Agreement and (iii) the sum of
(A) the consideration paid in connection with all Permitted Acquisitions
and (B) the consideration paid in connection with all acquisitions
pursuant to this clause (c) shall not exceed $15,000,000 in the aggregate
during the period commencing on the "Effective Date" (as such term is
defined in the Amended Existing Credit Agreement) and ending on the date
this Article VI is no longer applicable by its terms;
(d) Permitted Investments;
(e) investments existing on September 26, 1997, and set forth on
Schedule 6.04, to the extent such investments would not be permitted under
any other clause of this Section;
(f) investments by the Transaction Parties in the capital stock of
the Subsidiaries, provided that (i) any such shares of capital stock shall
be pledged pursuant to the Pledge Agreement (subject to the limitations
applicable to common stock of a Foreign Subsidiary referred to in Section
5.12) and (ii) the amount of investments by the Transaction Parties in
Subsidiaries that are not Loan Parties shall not exceed $2,000,000 in the
aggregate at any time outstanding;
(g) loans or advances made by (i) any Loan Party that is not a
Foreign Subsidiary to any other Loan Party that is not a Foreign
Subsidiary (other than the Borrower or the Borrower Subsidiaries) and (ii)
the Transaction Parties to any Borrower Subsidiary and made by any
Borrower Subsidiary to the Borrower or any other Borrower Subsidiary,
provided that (i) any such
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loans and advances made by a Loan Party shall be evidenced by a promissory
note pledged pursuant to the Pledge Agreement and (ii) the amount of all
such loans and advances by Loan Parties to Subsidiaries that are not Loan
Parties shall not exceed $2,000,000 in the aggregate at any time
outstanding;
(h) Guarantees constituting Indebtedness permitted by Section 6.01,
provided that the amount of Indebtedness that is (i) outstanding with
respect to Subsidiaries that are not Loan Parties and (ii) Guaranteed by
any Loan Party shall not exceed $2,000,000 in the aggregate at any time
outstanding;
(i) investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes with,
customers and suppliers, in each case in the ordinary course of business;
(j) Hedging Agreements permitted under Section 6.06;
(k) loans or advances to employees (i) for the purpose of travel,
entertainment or relocation in the ordinary course of business in an
aggregate amount not to exceed $2,000,000 at any time outstanding and (ii)
for the purpose of enabling such employees to buy stock of Holdings in an
aggregate amount not exceeding $3,000,000 during the period commencing on
the "Effective Date" (as such term is defined in the Amended Existing
Credit Agreement) and ending on the date this Article VI is no longer
applicable by its terms, provided that loans or advances made under this
subclause (ii) shall be collateralized by the stock purchased with the
proceeds of such loans or advances; and
(l) other investments in an aggregate amount not to exceed
$5,000,000 at any time outstanding.
SECTION 6.05. Asset Sales. The Transaction Parties will not, and
will not permit any of the Subsidiaries to, sell, transfer, lease or otherwise
dispose of any asset, including any capital stock, nor will the Transaction
Parties permit any of the Subsidiaries to issue any additional shares of its
capital stock or other ownership interest in such Subsidiary, except:
(a) sales of inventory, used or surplus equipment and Permitted
Investments in the ordinary course of business;
(b) sales of inventory located at any store where the Borrower is
conducting a going-out-of-business or similar sale in connection with the
closing of such store;
(c) sales, transfers and dispositions to the Borrower or a Borrower
Subsidiary, provided that any such sales, transfers or dispositions
involving a Borrower Subsidiary that is not a Loan Party shall be made in
compliance with Section 6.08;
(d) sales of assets listed on Schedule 6.05;
(e) sales of real estate (it being understood that "real estate" as
such term is used in this Section 6.05 shall not include real estate that
is leased by a Transaction Party from a third party unless such lease is a
Capital Lease Obligation of a member of the Holdings Group) and fixtures
relating to such real estate, provided that the aggregate fair market
value of all real estate and fixtures sold in reliance upon this clause
(e) (other than the sale of the Holdings Group's real property located at
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, MD) shall not exceed $25,000,000 in the
aggregate during the term of this Agreement;
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(f) sales of accounts receivables in connection with the Receivables
Purchase Agreements; and
(g) sales, transfers and dispositions of assets (other than capital
stock of a Subsidiary) that are not permitted by any other clause of this
Section, provided that the aggregate fair market value of all assets sold,
transferred or otherwise disposed of in reliance upon this clause (g)
shall not exceed $10,000,000 in the aggregate during the period commencing
on the "Effective Date" (as such term is defined in the Amended Existing
Credit Agreement) and ending on the date this Article VI is no longer
applicable by its terms,
provided that all sales, transfers, leases and other dispositions permitted
hereby (other than sales, transfers and other disposition permitted under clause
(b) and (c)) shall be made for fair value and (other than sales, transfers and
other dispositions permitted under clause (c)) solely for cash consideration.
SECTION 6.06. Hedging Agreements. The Transaction Parties will not,
and will not permit any of the Subsidiaries to, enter into any Hedging
Agreement, other than Hedging Agreements entered into in the ordinary course of
business to hedge or mitigate risks to which the Borrower or any Borrower
Subsidiary is exposed in the conduct of its business or the management of its
liabilities.
SECTION 6.07. Restricted Payments; Certain Payments of Indebtedness.
(a) The Transaction Parties will not, and will not permit any Subsidiary to,
declare or make, or agree to pay or make, directly or indirectly, any Restricted
Payment, except (i) the Transaction Parties may declare and pay dividends with
respect to their capital stock payable solely in additional shares of their
common stock, (ii) the Borrower Subsidiaries may declare and pay dividends
ratably with respect to their capital stock and the Subsidiaries other than the
Borrower may declare and pay dividends ratably with respect to their capital
stock, (iii) the Borrower may make Restricted Payments pursuant to and in
accordance with stock option plans or other benefit plans for management or
employees of the Borrower and the Borrower Subsidiaries in an amount not
exceeding during any fiscal year of Holdings (A) $2,000,000 plus (B) the amount
by which (x) the product of $2,000,000 and the number of complete fiscal years
during the period from and after September 26, 1997, to but excluding the date
of such Restricted Payment exceeds (y) the amount of all such Restricted
Payments made during such fiscal years plus (C) the aggregate cash consideration
received by the Borrower during the period from and after September 26, 1997, to
but excluding the date of such Restricted Payment from the sale or issuance of
common stock to management or employees of the Borrower to the extent such cash
consideration was not previously taken into account in connection with any
Restricted Payment under this clause (iii), provided all such Restricted
Payments made under this clause (iii) shall not exceed $8,000,000 in the
aggregate plus any amounts permitted under sub-clause (iii) (C) during the term
of this Agreement, (iv) the Borrower and Hechinger Stores may pay dividends or
make loans to Hechinger to the extent necessary to enable Hechinger to redeem or
purchase any portion of the Existing Hechinger Public Debt to the extent that
the Borrower or Hechinger Stores would have been permitted to redeem or
repurchase such Existing Hechinger Public Debt pursuant to clause (b) (iii)
below and (v) any of the Transaction Parties or Subsidiaries may pay dividends
to enable payment of fees and other amounts owing under any of the transactions
specified in Schedule 6.08.
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(b) The Transaction Parties will not, and will not permit any
Subsidiary to, make or agree to pay or make, directly or indirectly, any payment
or other distribution (whether in cash securities or other property) of or in
respect of principal of or interest on any Indebtedness, or any payment or other
distribution (whether in cash, securities or other property), including any
sinking fund or similar deposit, on account of the purchase, redemption,
retirement, acquisition, cancelation or termination of any Indebtedness, except:
(i) payment of regularly scheduled interest and principal payments
as and when due in respect of any Indebtedness;
(ii) refinancings of Indebtedness to the extent permitted by Section
6.01; and
(iii) after October 3, 1997, redemptions or repurchases of any
portion of the Existing Hechinger Public Debt, provided that (A) at the
time of such redemption or repurchase and after giving effect thereto, (1)
no Default or Event of Default has occurred and is continuing and (2) the
Borrowing Base exceeds the aggregate Total Exposures by at least
$125,000,000 and (B) all such redemptions or repurchases under this clause
(iii) do not exceed in the aggregate $200,000,000 during the period
commencing on the "Effective Date" (as such term is defined in the Amended
Existing Credit Agreement) and ending on the date this Article VI is no
longer applicable by its terms.
SECTION 6.08. Transactions with Affiliates. The Transaction Parties
will not, and will not permit any Subsidiary to, sell, lease or otherwise
transfer any property or assets to, or purchase, lease or otherwise acquire any
property or assets from, or otherwise engage in any other transactions with, any
of its Affiliates, except (a) transactions in the ordinary course of business
that do not involve Holdings and are at prices and on terms and conditions not
less favorable to the Borrower or such Subsidiary than could be obtained on an
arm's-length basis from unrelated third parties, (b) transactions between or
among the Subsidiary Loan Parties not involving any other Affiliate, (c)
payments by the Borrower and the Borrower Subsidiaries to Holdings as common
parent (and to any intermediate Subsidiary Loan Party that is treated as a
common parent) in respect of Taxes attributable to the Borrower and the Borrower
Subsidiaries, but not in excess of the amount in respect of Taxes that the
Borrower and the Borrower Subsidiaries would pay in a separate company return,
(d) any Restricted Payment permitted by Section 6.07, (e) any transactions
listed on Schedule 6.08 and (f) the Holdings Group may pay fees specified in the
Management Agreement.
SECTION 6.09. Restrictive Agreements. The Transaction Parties will
not and will not permit any Subsidiary to, directly or indirectly, enter into,
incur or permit to exist any agreement or other arrangement that prohibits,
restricts or imposes any condition upon (a) the ability of the Transaction
Parties or any Subsidiary to create, incur or permit to exist any Lien upon any
of its property or assets or (b) the ability of any Subsidiary to pay dividends
or other distributions with respect to any shares of its capital stock or to
make or repay loans or advances to the Borrower or any other Subsidiary or to
Guarantee Indebtedness of the Borrower or any other Subsidiary, provided that
(i) the foregoing shall not apply to restrictions and conditions imposed by law
or by any Loan Document or Existing Loan Document (but only to the extent such
restriction or condition also is imposed by a Loan Document), (ii) the foregoing
shall not apply to restrictions and conditions existing on September 26, 1997,
identified on Schedule 6.09 (but shall apply to any extension or renewal of, or
any amendment or modification expanding the scope of, any such restriction or
condition), (iii) the foregoing shall not apply to customary restrictions and
conditions contained in agreements relating to the sale of a Subsidiary pending
such sale, provided such restrictions and conditions apply only to the
Subsidiary that is to be sold and such sale is permitted hereunder, (iv) clause
(a) of the foregoing shall not apply to restrictions or conditions imposed by
any agreement relating to secured Indebtedness permitted by this Agreement if
such restrictions or conditions apply only to the property or assets securing
such Indebtedness and (v) clause (a)
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of the foregoing shall not apply to customary provisions in leases restricting
the assignment or subleasing thereof.
SECTION 6.10. Amendment of Material Documents. The Transaction
Parties will not, and will not permit any Subsidiary to, amend, modify or waive
any of its rights under (a) its certificate of incorporation, by-laws or other
organizational documents, (b) the Management Agreement, (c) the Builders Square
Purchase Agreement (as such term is defined in the Existing Credit Agreement),
(d) the Hechinger Merger Agreement, (e) the BSQ Newco Note, (f) the BSQ
Acqco/Holdings Note, (g) the BSQ Newco/Builders Square Note, (h) Existing
Hechinger Public Debt, (i) the Hechinger/East Coast Note, (j) the Amended
Existing Credit Agreement or (k) the Receivables Purchase Agreements, in each
case to the extent that such amendment, modification or waiver would be adverse
to the interests of the Lenders.
SECTION 6.11. Capital Expenditures. (a) The Transaction Parties will
not permit the aggregate amount of Capital Expenditures made by the Borrower and
the Borrower Subsidiaries (i) during the fiscal quarter ending on the Saturday
closest to December 31, 1998, to exceed $13,500,000, (ii) during the
two-fiscal-quarter period ending on the Saturday closest to March 31, 1999, to
exceed $22,000,000, and (iii) during the three-fiscal-quarter period ending on
the Saturday closest to June 30, 1999, to exceed $30,000,000.
(b) The Transaction Parties will not permit the aggregate amount of
Capital Expenditures made by the Borrower and the Borrower Subsidiaries in any
fiscal year to exceed the amount set forth below opposite such year:
Fiscal Year Amount
----------- ------
1999 $35,000,000
2000 $35,000,000
2001 $35,000,000
2002 $35,000,000
Notwithstanding anything to the contrary, no Transaction Party (other than the
Borrower) shall be permitted to make any Capital Expenditures, except for any
Capital Expenditures made by BSQ Newco, Hechinger, Hechinger Stores and
Hechinger East Coast pursuant to Section 6.03(e), (f), (g) and (h).
SECTION 6.12. Minimum Consolidated EBITDA. (a) The Transaction
Parties will not permit Consolidated EBITDA (i) for the fiscal quarter ending on
the Saturday closest to December 31, 1998, to be less than $(32,000,000), (ii)
for the fiscal quarter ending on the Saturday closest to March 31, 1999, to be
less than $(4,000,000), (iii) for the two-fiscal-quarter period ending on the
Saturday closest to June 30, 1999, to be less than $46,000,000, (iv) for the
three-fiscal-quarter period ending on the Saturday closest to September 30,
1999, to be less than $60,000,000, and (v) for the four-fiscal-quarter period
ending on the Saturday closest to December 31, 1999, to be less than
$65,000,000.
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(b) The Transaction Parties will not permit Consolidated EBITDA for
any four-fiscal-quarter period ending during any period set forth below to be
less than the amount set forth below opposite such period:
Period Amount
------ ------
The fiscal quarter ending on the Saturday closest to
March 31, 2000 $70,000,000
The fiscal quarter ending on the Saturday
closest to June 30, 2000 $75,000,000
The fiscal quarter ending on the Saturday
closest to September 30, 2000 $75,000,000
The fiscal quarter ending on the Saturday
closest to December 31, 2000 $80,000,000
The fiscal quarter ending on the Saturday
closest to March 31, 2001 $85,000,000
The fiscal quarter ending on the Saturday
closest to June 30, 2001 and thereafter $90,000,000
SECTION 6.13. Additional Subsidiaries. The Transaction Parties will
not, and will not permit any Subsidiary to, create any additional Subsidiary,
unless such Subsidiary is a Borrower Subsidiary.
ARTICLE VII
Events of Default
If any of the following events ("Events of Default") shall occur:
(a) the Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the
same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or any
fee or any other amount (other than an amount referred to in clause (a) of
this Article) payable under this Agreement or any other Loan Document,
when and as the same shall become due and payable, and such failure shall
continue unremedied for a period of three Business Days;
(c) any representation or warranty made or deemed made by or on
behalf of any member of the Holdings Group in or in connection with any
Loan Document or any amendment or modification thereof or waiver
thereunder, or in any report, certificate, financial statement or other
document furnished pursuant to or in connection with any Loan Document or
any amendment or modification thereof or waiver thereunder, shall prove to
have been incorrect in any material respect when made or deemed made;
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(d) the Transaction Parties shall fail to observe or perform any
covenant, condition or agreement contained in Section 5.01(g), 5.02, 5.04
(with respect to the existence of the Transaction Parties), 5.11, 5.15 or
5.16 or in Article VI; provided, however, if such failure arises from a
non-consensual Lien created without the knowledge of, action by or consent
of any Transaction Party in violation of Section 6.02, such failure shall
not constitute an Event of Default unless such failure shall remain
unremedied for 10 days after knowledge thereof by a member of senior
management of Holdings or Borrower;
(e) any Loan Party shall fail to observe or perform any covenant,
condition or agreement contained in any Loan Document (other than those
specified in clause (a), (b) or (d) of this Article), and such failure
shall continue unremedied for a period of 30 days after notice thereof
from any Agent to the Borrower (which notice will be given at the request
of any Lender);
(f) any member of the Holdings Group shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of
any Material Indebtedness, when and as the same shall become due and
payable (after giving effect to the expiration of any grace or cure period
set forth therein);
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables
or permits (with or without the giving of notice, the lapse of time or
both) the holder or holders of any Material Indebtedness or any trustee or
agent on its or their behalf to cause any Material Indebtedness to become
due, or to require the prepayment, repurchase, redemption or defeasance
thereof, prior to its scheduled maturity, provided that this clause (g)
shall not apply to secured Indebtedness that becomes due as a result of
the voluntary sale or transfer of the property or assets securing such
Indebtedness;
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other
relief in respect of any member of the Holdings Group or its debts, or of
a substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect or (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for any member of the
Holdings Group or for a substantial part of its assets, and, in any such
case, such proceeding or petition shall continue undismissed for 60 days
or an order or decree approving or ordering any of the foregoing shall be
entered;
(i) any member of the Holdings Group shall (i) voluntarily commence
any proceeding or file any petition seeking liquidation, reorganization or
other relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to
the institution of, or fail to contest in a timely and appropriate manner,
any proceeding or petition described in clause (h) of this Article, (iii)
apply for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for any member of the
Holdings Group or for a substantial part of its assets, (iv) file an
answer admitting the material allegations of a petition filed against it
in any such proceeding, (v) make a general assignment for the benefit of
creditors or (vi) take any action for the purpose of effecting any of the
foregoing;
(j) any member of the Holdings Group shall become unable, admit in
writing its inability or fail generally to pay its debts as they become
due;
(k) one or more judgments for the payment of money in an aggregate
amount in excess of $5,000,000 shall be rendered against any member of the
Holdings Group or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by a
judgment
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creditor to attach or levy upon any assets of any member of the Holdings
Group to enforce any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other ERISA Events that
have occurred, could reasonably be expected to result in liability of
Holdings Group Subsidiaries in an aggregate amount exceeding $5,000,000;
(m) any Lien purported to be created under any Security Document
shall cease to be, or shall be asserted by any Loan Party not to be, a
valid and perfected Lien on any Collateral, with the priority required by
the applicable Security Document, except (i) as a result of the sale or
other disposition of the applicable Collateral in a transaction permitted
under the Loan Documents or (ii) as a result of the Collateral Agent's
failure to maintain possession of any stock certificates, promissory notes
or other instruments delivered to it under the Pledge Agreement; or
(n) a Change in Control shall occur;
then, and in every such event (other than an event with respect to the
Transaction Parties described in clause (h) or (i) of this Article), and at any
time thereafter during the continuance of such event, the Administrative Agent
may, and at the request of the Required Lenders shall, by notice to the
Borrower, take either or both of the following actions, at the same or different
times: (i) terminate the Commitments, and thereupon the Commitments shall
terminate immediately, and (ii) declare the Loans then outstanding to be due and
payable in whole (or in part, in which case any principal not so declared to be
due and payable may thereafter be declared to be due and payable), and thereupon
the principal of the Loans so declared to be due and payable, together with
accrued interest thereon and all fees and other obligations of the Borrower
accrued hereunder, shall become due and payable immediately, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower; and in case of any event with respect to the
Transaction Parties described in clause (h) or (i) of this Article, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and all fees and other
obligations of the Borrower accrued hereunder, shall automatically become due
and payable, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower.
ARTICLE VIII
The Administrative Agent, the Collateral Agent
and the Borrowing Base Audit Agent
Each of the Lenders and the Issuing Bank hereby (a) irrevocably
appoints Chase as the Administrative Agent, the Collateral Agent and the
Borrowing Base Audit Agent (collectively, the "Agents") and (b) authorizes each
Agent to take such actions on its behalf and to exercise such powers as are
delegated to such Agent by the terms of the Loan Documents, together with such
actions and powers as are reasonably incidental thereto.
Each Agent hereunder shall have the same rights and powers in its
capacity as a Lender as any other Lender and may exercise the same as though it
were not an Agent, and such Agent and its Affiliates may accept deposits from,
lend money to and generally engage in any kind of business with any Transaction
Party or any Subsidiary or other Affiliate thereof as if it were not an Agent
hereunder.
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The Agents shall not have any duties or obligations except those
expressly set forth in the Loan Documents. Without limiting the generality of
the foregoing, (a) no Agent shall be subject to any fiduciary or other implied
duties, regardless of whether a Default has occurred and is continuing, (b) no
Agent shall have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated by the Loan Documents that such Agent is required to exercise in
writing by the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Section
9.02), and (c) except as expressly set forth in the Loan Documents, no Agent
shall have any duty to disclose, and shall not be liable for the failure to
disclose, any information relating to any Transaction Party or any of the
Subsidiaries that is communicated to or obtained by such Agent or any of its
Affiliates in any capacity. No Agent shall be liable for any action taken or not
taken by it with the consent or at the request of the Required Lenders (or such
other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 9.02) or in the absence of such Agent's own
gross negligence or wilful misconduct. No Agent shall be deemed to have
knowledge of any Default unless and until written notice thereof is given to
such Agent by any Transaction Party or a Lender, and no Agent shall be
responsible for or have any duty to ascertain or inquire into (i) any statement,
warranty or representation made in or in connection with any Loan Document, (ii)
the contents of any certificate, report or other document delivered thereunder
or in connection therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth in any Loan
Document, (iv) the validity, enforceability, effectiveness or genuineness of any
Loan Document or any other agreement, instrument or document or (v) the
satisfaction of any condition set forth in Article IV or elsewhere in any Loan
Document, other than to confirm receipt of items expressly required to be
delivered to such Agent.
Each Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. Each Agent also may rely
upon any statement made to it orally or by telephone and believed by it to be
made by the proper Person, and shall not incur any liability for relying
thereon. Each Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.
Each Agent may perform any and all its duties and exercise its
rights and powers by or through any one or more sub-agents appointed by such
Agent. Each Agent and any such sub-agent may perform any and all its duties and
exercise its rights and powers through their respective Related Parties. The
exculpatory provisions of the preceding paragraphs shall apply to any such
sub-agent and to the Related Parties of each Agent and any such sub-agent, and
shall apply to their respective activities in connection with the syndication of
the credit facilities provided for herein as well as activities as an Agent.
Subject to the appointment and acceptance of a successor to the
Administrative Agent as provided in this paragraph, the Administrative Agent may
resign at any time by notifying the Lenders, the Issuing Bank and the
Transaction Parties. Upon any such resignation, the Required Lenders shall have
the right, in consultation with the Transaction Parties, to appoint a successor.
If no successor shall have been so appointed by the Required Lenders and shall
have accepted such appointment within 30 days after the retiring Administrative
Agent gives notice of its resignation, then the retiring Administrative Agent
may, on behalf of the Lenders and the Issuing Bank, appoint a successor
Administrative Agent that shall be a bank with an office in New York, New York,
or an Affiliate of any such bank. Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor, such successor shall succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. The fees payable by the
Borrower to a successor Administrative Agent shall be the same as those payable
to its predecessor unless otherwise agreed upon between the Borrower and such
successor. After the
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Administrative Agent's resignation hereunder, the provisions of this Article and
Section 9.03 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub-agents and their respective Related Parties in
respect of any actions taken or omitted to be taken by any of them while it was
acting as Administrative Agent.
Subject to the appointment and acceptance of a successor to the
Collateral Agent as provided in this paragraph, the Collateral Agent may resign
at any time by notifying the Lenders, the Issuing Bank and the Transaction
Parties. Upon any such resignation, the Required Lenders shall have the right,
in consultation with the Transaction Parties, to appoint a successor. If no
successor shall have been so appointed by the Required Lenders and shall have
accepted such appointment within 30 days after the retiring Collateral Agent
gives notice of its resignation, then the retiring Collateral Agent may, on
behalf of the Lenders and the Issuing Bank, appoint a successor Collateral Agent
that shall be a bank or an Affiliate of a bank. Upon the acceptance of its
appointment as Collateral Agent hereunder by a successor, such successor shall
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Collateral Agent, and the retiring Collateral Agent shall be
discharged from its duties and obligations hereunder. The fees payable by the
Borrower to a successor Collateral Agent shall be the same as those payable to
its predecessor unless otherwise agreed upon between the Borrower and such
successor. After the Collateral Agent's resignation hereunder, the provisions of
this Article and Section 9.03 shall continue in effect for the benefit of such
retiring Collateral Agent, its sub-agents and their respective Related Parties
in respect of any actions taken or omitted to be taken by any of them while it
was acting as Collateral Agent.
Subject to the appointment and acceptance of a successor to the
Borrowing Base Audit Agent as provided in this paragraph, the Borrowing Base
Audit Agent may resign at any time by notifying the Lenders, the Issuing Bank
and the Transaction Parties. Upon any such resignation, the Required Lenders
shall have the right, in consultation with the Transaction Parties, to appoint a
successor. If no successor shall have been so appointed by the Required Lenders
and shall have accepted such appointment within 30 days after the retiring
Borrowing Base Audit Agent gives notice of its resignation, then the retiring
Borrowing Base Audit Agent may, on behalf of the Lenders and the Issuing Bank,
appoint a successor Borrowing Base Audit Agent that shall be a bank or an
Affiliate of a bank. Upon the acceptance of its appointment as Borrowing Base
Audit Agent hereunder by a successor, such successor shall succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Borrowing Base Audit Agent, and the retiring Borrowing Base Audit Agent shall be
discharged from its duties and obligations hereunder. The fees payable by the
Borrower to a successor Borrowing Base Audit Agent shall be the same as those
payable to its predecessor unless otherwise agreed upon between the Borrower and
such successor. After the Borrowing Base Audit Agent's resignation hereunder,
the provisions of this Article and Section 9.03 shall continue in effect for the
benefit of such retiring Borrowing Base Audit Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while it was acting as Borrowing Base Audit Agent.
Each Lender acknowledges that it has, independently and without
reliance upon any Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the either Agent or any other
Lender and based on such documents and information as it shall from time to time
deem appropriate, continue to make its own decisions in taking or not taking
action under or based upon this Agreement, any other Loan Document or related
agreement or any document furnished hereunder or thereunder.
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ARTICLE IX
Miscellaneous
SECTION 9.01. Notices. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to any Transaction Party, to it at Hechinger Investment
Company of Delaware, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
Attention of ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. Vice President, Treasurer and Secretary,
(Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇) with a copy to Centers Holdings, Inc., ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention of
▇▇▇▇▇▇▇ ▇. Annick (Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇);
(b) if to the Administrative Agent, the Collateral Agent or the
Borrowing Base Audit Agent, to The Chase Manhattan Bank, Loan and Agency
Services Group, One Chase ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, Attention of ▇▇▇▇▇ ▇▇▇▇ (Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇), with a copy
to The Chase Manhattan Bank, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention of
▇▇▇▇ ▇▇▇▇▇ (Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇);
(c) if to the Issuing Bank, to The Chase Manhattan Bank, Loan and
Agency Services Group, One Chase ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, Attention of ▇▇▇▇▇ ▇▇▇▇ (Telecopy No.(▇▇▇) ▇▇▇-▇▇▇▇) with a
copy to The Chase Manhattan Bank, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, Attention of ▇▇▇▇ ▇▇▇▇▇ (Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇);
(d) if to the Swingline Lender, to The Chase Manhattan Bank, Loan
and Agency Services Group, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, Attention of ▇▇▇▇▇ ▇▇▇▇ (Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇) with a
copy to The Chase Manhattan Bank, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, Attention of ▇▇▇▇ ▇▇▇▇▇ (Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇); and
(e) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the
Administrative Agent, the Issuing Bank or any Lender in exercising any right or
power hereunder or under any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Agents, the Issuing Bank and the
Lenders hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of any Loan Document or consent to any departure by any Loan Party
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) of this Section, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
Without limiting the generality of the foregoing, the making of a Loan or
issuance of a Letter of Credit shall not be construed as a waiver of any
Default, regardless of whether the Agents, any Lender or the Issuing Bank may
have had notice or knowledge of such Default at the time.
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(b) Neither this Agreement nor any other Loan Document nor any
provision hereof or thereof may be waived, amended or modified except, in the
case of this Agreement, pursuant to an agreement or agreements in writing
entered into by the Transaction Parties and the Required Lenders or, in the case
of any other Loan Document, pursuant to an agreement or agreements in writing
entered into by the Agents and the Loan Party or Loan Parties that are parties
thereto, in each case with the consent of the Required Lenders, provided that no
such agreement shall (i) increase the Commitment of any Lender without the
written consent of such Lender, (ii) reduce the principal amount of any Loan or
LC Disbursement or reduce the rate of interest thereon, or reduce any fees
payable hereunder, without the written consent of each Lender affected thereby,
(iii) postpone the scheduled date of payment of the principal amount of any Loan
or LC Disbursement, or any interest thereon, or any fees payable hereunder, or
reduce the amount of, waive or excuse any such payment, or postpone the
scheduled date of expiration of the Revolving Commitment, without the written
consent of each Lender affected thereby, (iv) change Section 2.17(b) or (c) in a
manner that would alter the pro rata sharing of payments required thereby,
without the written consent of each Lender, (v) change any of the provisions of
this Section or the definition of the term "Required Lenders" or any other
provision of any Loan Document specifying the number or percentage of Lenders
required to waive, amend or modify any rights thereunder or make any
determination or grant any consent thereunder, without the written consent of
each Lender, (vi) release any member of the Holdings Group or any Subsidiary
Loan Party from its Guarantee under the applicable Guarantee Agreement (except
as expressly provided in such Guarantee Agreement), or limit its liability in
respect of such Guarantee, without the written consent of each Lender, (vii)
release all or any substantial part of the Collateral from the Liens of the
Security Documents, without the written consent of each Lender or (viii) change
the definition of the term "Borrowing Base" without the written consent of
Lenders having Total Exposures and unused Revolving Commitments representing at
least 67% of the sum of the Total Exposures and unused Revolving Commitments at
such time, and provided further that no such agreement shall amend, modify or
otherwise affect the rights or duties of the Agents, the Issuing Bank or the
Swingline Lender without the prior written consent of the Agents, the Issuing
Bank or the Swingline Lender, as the case may be.
SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The
Transaction Parties shall pay (i) all reasonable and documented out-of-pocket
expenses incurred by the Agents and their Affiliates, including the reasonable
and documented fees, charges and disbursements of counsel for the Agents,
outside consultants for the Agents and internally allocated charges with respect
to the Administrative Agent's collateral examination group, in connection with
the syndication of the credit facilities provided for herein, the preparation
and administration of the Loan Documents or any amendments, modifications or
waivers of the provisions thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all reasonable and documented
out-of-pocket expenses incurred by the Issuing Bank in connection with the
issuance, amendment, renewal or extension of any Letter of Credit or any demand
for payment thereunder and (iii) all reasonable and documented out-of-pocket
expenses incurred by the Agents, the Issuing Bank or any Lender, including the
reasonable and documented fees, charges and disbursements of any counsel and any
outside consultants for the Agents, the Issuing Bank or any Lender and the
internally allocated charges with respect to the Administrative Agent's
collateral examination group, in connection with the enforcement or protection
of its rights in connection with the Loan Documents, including its rights under
this Section, or in connection with the Loans made or Letters of Credit issued
hereunder, including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Loans or Letters of
Credit.
(b) The Transaction Parties shall, jointly and severally, indemnify
the Agents, the Issuing Bank and each Lender, and each Related Party of any of
the foregoing Persons (each such Person being called an "Indemnitee") against,
and hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including the reasonable and documented fees,
charges and disbursements of any counsel for any Indemnitee, incurred by or
asserted against any Indemnitee arising out of, in connection with, or as a
result of (i) the execution or delivery of any Loan Document or any other
agreement or instrument contemplated hereby, the performance by the parties to
the Loan Documents of their respective obligations thereunder or the
consummation of the Transactions or any other transactions contemplated hereby,
(ii) any
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Loan or Letter of Credit or the use of the proceeds therefrom (including any
refusal by the Issuing Bank to honor a demand for payment under a Letter of
Credit if the documents presented in connection with such demand do not strictly
comply with the terms of such Letter of Credit), (iii) any actual or alleged
presence or release of Hazardous Materials on or from any property currently or
formerly owned or operated by any Transaction Party or any of the Subsidiaries,
or any Environmental Liability related in any way to any Transaction Party or
any of the Subsidiaries, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory and regardless of whether any Indemnitee is a
party thereto, provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related expenses resulted from the gross negligence or wilful misconduct of such
Indemnitee or any Affiliate of such Indemnitee (or of any officer, director,
employee, advisor or agent of such Indemnitee or any such Indemnitee's
Affiliates).
(c) To the extent that any Loan Party fails to pay any amount
required to be paid by it to the Agents, the Issuing Bank or the Swingline
Lender under paragraph (a) or (b) of this Section, each Lender severally agrees
to pay to the Agents, the Issuing Bank or the Swingline Lender, as the case may
be, such Lender's pro rata share (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount,
provided that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as the case may be, was incurred by or asserted
against the Agents, the Issuing Bank or the Swingline Lender in its capacity as
such. For purposes hereof, a Lender's "pro rata share" shall be determined based
upon its share of the sum of the Total Exposures and unused Revolving
Commitments at the time.
(d) To the extent permitted by applicable law, no Transaction Party
shall assert, and each hereby waives, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement or any agreement or instrument contemplated
hereby, the Transactions, any Loan or Letter of Credit or the use of the
proceeds thereof.
(e) All amounts due under this Section shall be payable promptly
after written demand therefor.
SECTION 9.04. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby (including any
Affiliate of the Issuing Bank that issues any Letter of Credit), except that no
Transaction Party may assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender (and any
such attempted assignment or transfer without such consent shall be null and
void). Nothing in this Agreement, expressed or implied, shall be construed to
confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby (including any Affiliate of the Issuing
Bank that issues any Letter of Credit) and, to the extent expressly contemplated
hereby, the Related Parties of each of the Agents, the Issuing Bank and the
Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.
(b) Any Lender may assign to one or more assignees all or a portion
of its rights and obligations under this Agreement (including all or a portion
of its Commitment and the Loans at the time owing to it), provided that (i)
except in the case of an assignment to a Lender or an Affiliate of a Lender,
each of the Borrower and the Agents, the Issuing Bank and the Swingline Lender
must give their prior written consent to such assignment (which consent shall
not be unreasonably withheld), (ii) except in the case of an assignment to a
Lender or an Affiliate of a Lender or an assignment of the entire remaining
amount of the assigning Lender's Revolving Commitment or Loans, the amount of
the Revolving Commitment or Loans of the assigning Lender subject to each such
assignment (determined as of the date the Assignment and Acceptance with respect
to such assignment is delivered to the Administrative Agent) shall not be less
than $5,000,000 unless each of the Borrower and the Administrative Agent
otherwise consent, (iii) each partial assignment shall be made as an
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assignment of a proportionate part of all the assigning Lender's rights and
obligations under this Agreement, (iv) the parties to each assignment shall
execute and deliver to the Administrative Agent an Assignment and Acceptance,
together with a processing and recordation fee of $3,500, and (v) the assignee,
if it shall not be a Lender, shall deliver to the Administrative Agent an
Administrative Questionnaire, and provided further that any consent of the
Borrower otherwise required under this paragraph shall not be required if an
Event of Default under clause (h) or (i) of Article VII has occurred and is
continuing. Subject to acceptance and recording thereof pursuant to paragraph
(d) of this Section, from and after the effective date specified in each
Assignment and Acceptance the assignee thereunder shall be a party hereto and,
to the extent of the interest assigned by such Assignment and Acceptance, have
the rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all of the assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of Sections
2.15, 2.16, 2.17 and 9.03). Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this paragraph shall
be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (e) of
this Section.
(c) The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain at one of its offices in The City of New York a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries in
the Register shall be conclusive, and the Transaction Parties, the
Administrative Agent, the Issuing Bank and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Borrower, the
Issuing Bank and any Lender, at any reasonable time and from time to time upon
reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section and any written consent to such assignment required by paragraph
(b) of this Section, the Administrative Agent shall accept such Assignment and
Acceptance and record the information contained therein in the Register. No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower, the Agents,
the Issuing Bank or the Swingline Lender, sell participations to one or more
banks or other entities (a "Participant") in all or a portion of such Lender's
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it), provided that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Transaction Parties, the Agents, the Issuing Bank
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce the Loan Documents and to approve any amendment, modification or waiver
of any provision of the Loan Documents, provided that such agreement or
instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, modification or waiver described in the
first proviso to Section 9.02(b) that affects such Participant. Subject to
paragraph (f) of this Section, the Borrower agrees that each Participant shall
be entitled to the benefits of Sections 2.14, 2.15 and 2.16 to the same extent
as if it were a Lender and had acquired its interest by assignment pursuant to
paragraph (b) of this Section. To the extent permitted by law, each Participant
also shall be entitled to the benefits of Section 9.08 as though it were a
Lender, provided such Participant agrees to be subject to Section 2.17(c) as
though it were a Lender.
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(f) A Participant shall not be entitled to receive any greater
payment under Section 2.14 or 2.16 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the
Borrower's prior written consent. A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 2.16 unless
(i) the Borrower is notified of the participation sold to such Participant and
such Participant agrees, for the benefit of the Borrower, to comply with Section
2.16(e) as though it were a Lender and (ii) such Participant is eligible for
exemption from the withholding tax referred to therein, following compliance
with Section 2.16(e).
(g) Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement to secure obligations
of such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest, provided that no such pledge or assignment of
a security interest shall release a Lender from any of its obligations hereunder
or substitute any such pledgee or assignee for such Lender as a party hereto.
SECTION 9.05. Survival. All covenants, agreements, representations
and warranties made by the Loan Parties in the Loan Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any Loans and issuance of any
Letters of Credit, regardless of any investigation made by any such other party
or on its behalf and notwithstanding that the Agents, the Issuing Bank or any
Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and unpaid or any Letter of Credit is outstanding and
so long as the Commitments have not expired or terminated. The provisions of
Sections 2.14, 2.15, 2.16 and 9.03 and Article VIII shall survive and remain in
full force and effect regardless of the consummation of the transactions
contemplated hereby, the repayment of the Loans, the expiration or termination
of the Letters of Credit and the Commitments or the termination of this
Agreement or any provision hereof.
SECTION 9.06. Counterparts; Integration; Effectiveness. This
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement,
the other Loan Document and any separate letter agreements with respect to fees
payable to the Agents constitute the entire contract among the parties relating
to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except
as provided in Section 4.01, this Agreement shall become effective when it shall
have been executed by the Agents and when the Administrative Agent shall have
received counterparts hereof that, when taken together, bear the signatures of
each of the other parties hereto, and thereafter shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns. Delivery of an executed counterpart of a signature page of this
Agreement by telecopy shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 9.07. Severability. Any provision of this Agreement held to
be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 9.08. Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and
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from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other obligations at any time owing by such Lender or
Affiliate to or for the credit or the account of the Borrower against any of and
all the obligations of the Borrower now or hereafter existing under this
Agreement held by such Lender, irrespective of whether or not such Lender shall
have made any demand under this Agreement and although such obligations may be
unmatured. The rights of each Lender under this Section are in addition to other
rights and remedies (including other rights of setoff) that such Lender may
have.
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of
Process. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK.
(b) Each Transaction Party hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the
Supreme Court of the State of New York sitting in New York County and of the
United States District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to any Loan Document, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement or any other Loan Document shall affect any right that
the Agents, the Issuing Bank or any Lender may otherwise have to bring any
action or proceeding relating to this Agreement or any other Loan Document
against any Transaction Party or their proper ties in the courts of any
jurisdiction.
(c) Each Transaction Party hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or any other
Loan Document in any court referred to in paragraph (b) of this Section other
than a court referred to in the last sentence of such paragraph (b) that is not
referred to elsewhere in such paragraph (b). Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement or any other Loan Document will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
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SECTION 9.11. Headings. Article and Section headings and the Table
of Contents used herein are for convenience of reference only, are not part of
this Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 9.12. Confidentiality. Each of the Agents, the Issuing Bank
and the Lenders agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its and its
Affiliates' directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority, (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process, (d)
to any other party to this Agreement, (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or any other Loan Document or the enforcement of rights hereunder or thereunder,
(f) subject to an agreement containing provisions substantially the same as
those of this Section, to any assignee of or Participant in, or any prospective
assignee of or Participant in, any of its rights or obligations under this
Agreement, (g) with the consent of the Borrower or (h) to the extent such
Information (i) becomes publicly available other than as a result of a breach of
this Section or (ii) becomes available to the Agents, the Issuing Bank or any
Lender on a nonconfidential basis from a source other than the Holdings. For the
purposes of this Section, the term "Information" means all information received
from the Holdings Group relating to the or its business, other than any such
information that is available to the Agents, the Issuing Bank or any Lender on a
nonconfidential basis prior to disclosure by the Holdings Group, provided that,
in the case of information received from the Holdings Group after the date
hereof, such information is clearly identified at the time of delivery as
confidential. Any Person required to maintain the confidentiality of Information
as provided in this Section shall be considered to have complied with its
obligation to do so if such Person has exercised the same degree of care to
maintain the confidentiality of such Information as such Person would accord to
its own confidential information.
SECTION 9.13. Interest Rate Limitation. Notwithstanding anything
herein to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees, charges and other amounts that are treated as interest
on such Loan under applicable law (collectively the "Charges"), shall exceed the
maximum lawful rate (the "Maximum Rate") that may be contracted for, charged,
taken, received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.
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75
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
HECHINGER INVESTMENT COMPANY OF
DELAWARE, INC., as Borrower,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Executive Vice President
CENTERS HOLDINGS, INC.,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Executive Vice President
BSQ ACQUISITION, INC.,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Executive Vice President
BSQ TRANSFEREE CORP.,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Executive Vice President
HECHINGER COMPANY,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Executive Vice President
HECHINGER STORES COMPANY,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Executive Vice President
81
HECHINGER STORES EAST COAST COMPANY,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Executive Vice President
THE CHASE MANHATTAN BANK, individually
and as Administrative Agent, Collateral
Agent and Borrowing Base Audit Agent,
by
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Director
82
EXHIBIT A
[Form of]
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of December 31, 1998,
as amended, supplemented or otherwise modified from time to time (the "Credit
Agreement"), among Hechinger Investment Company of Delaware, Inc., a Delaware
corporation (the "Borrower"), Centers Holdings, Inc., a Delaware corporation,
BSQ Acquisition, Inc., a Delaware corporation, BSQ Transferee Corp., a Delaware
corporation, Hechinger Company, a Delaware corporation, Hechinger Stores
Company, a Delaware corporation, Hechinger Stores East Coast Company, a Delaware
corporation, the lenders listed on Schedule 2.01 thereto (the "Lenders"), The
Chase Manhattan Bank, as administrative agent for the Lenders (in such capacity,
the "Administrative Agent"), as collateral agent, as borrowing base audit agent,
as issuing bank (in such capacity, the "Issuing Bank") and as swingline lender
(in such capacity, the "Swingline Lender"). Terms defined in the Credit
Agreement are used herein with the same meanings.
1. The Assignor hereby sells and assigns, without recourse, to the
Assignee, and the Assignee hereby purchases and assumes, without recourse, from
the Assignor, effective as of the Effective Date set forth below (but not prior
to the registration of the information contained herein in the Register pursuant
to Section 9.04(d) of the Credit Agreement), the interests set forth below (the
"Assigned Interest") in the Assignor's rights and obligations under the Credit
Agreement and the other Loan Documents, including, without limitation, the
amounts and percentages set forth below of (i) the Commitments of the Assignor
on the Effective Date, (ii) the Loans owing to the Assignor which are
outstanding on the Effective Date and (iii) participations in Letters of Credit
which are outstanding on the Effective Date. Each of the Assignor and the
Assignee hereby makes and agrees to be bound by all the representations,
warranties and agreements set forth in Section 9.04(b) of the Credit Agreement,
a copy of which has been received by each such party. From and after the
Effective Date (i) the Assignee shall be a party to and be bound by the
provisions of the Credit Agreement and, to the extent of the interests assigned
by this Assignment and Acceptance, have the rights and obligations of a Lender
thereunder and under the Loan Documents and (ii) the Assignor shall, to the
extent of the interests assigned by this Assignment and Acceptance, relinquish
its rights and be released from its obligations under the Credit Agreement.
2. This Assignment and Acceptance is being delivered to the
Administrative Agent together with (i) if the Assignee is organized under the
laws of a jurisdiction outside the United States, the forms specified in Section
2.16(e) of the Credit Agreement, duly completed and executed by such Assignee,
(ii) if the Assignee is not already a Lender under the Credit Agreement, an
Administrative Questionnaire and (iii) a processing and recordation fee of
$3,500.
3. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of New York.
Date of Assignment:
Legal Name of Assignor:
83
Legal Name of Assignee:
Assignee's Address for Notices:
Effective Date of Assignment
(may not be fewer than 5 Business
Days after the Date of Assignment):
84
3
Percentage Assigned of Applicable
Facility/Commitment (set forth, to at
least 8 decimals, as a percentage of
the Facility and the aggregate
Commitments of all Lenders
Principal Amount Assigned thereunder) --------------
------------------------- -----------
Facility/Commitment
-------------------
Revolving Credit $ %
The terms set forth above are
hereby agreed to: Accepted */
_________________, as Assignor THE CHASE MANHATTAN BANK,
as Administrative Agent, Issuing Bank and
Swingline Lender
by: by:
--------------------------- ------------------------------
Name: Name:
Title: Title:
_________________, as Assignee
by:
---------------------------
HECHINGER INVESTMENT COMPANY OF
DELAWARE, INC.,
by:
------------------------------
Name:
Title:
--------------
*/ To be completed to the extent consents are required under Section
9.04(b) of the Credit Agreement.
85
4
86
EXHIBIT D
CONFORMED COPY
PARENT GUARANTEE AGREEMENT dated as of December 31,
1998, among CENTERS HOLDINGS, INC., a Delaware corporation
("Holdings"), BSQ ACQUISITION, INC., a Delaware corporation
("BSQ Acqco"), BSQ TRANSFEREE CORP., a Delaware corporation
("BSQ Newco"), HECHINGER COMPANY, a Delaware corporation
("Hechinger"), HECHINGER STORES COMPANY, a Delaware
corporation ("Hechinger Stores"), HECHINGER STORES EAST
COAST COMPANY, a Delaware corporation ("Hechinger Stores
East Coast"), each other Subsidiary of Holdings listed on
Schedule I hereto (each such other Subsidiary,
individually, a Subsidiary Guarantor and, collectively, the
"Subsidiary Guarantors"; Holdings, BSQ Acqco, BSQ Newco,
Hechinger and the Subsidiary Guarantors are referred to
collectively herein as, the "Guarantors"), THE CHASE
MANHATTAN BANK, a New York banking corporation ("Chase"),
as administrative agent (in such capacity, the
"Administrative Agent") and as collateral agent (in such
capacity, the "Collateral Agent" and, in its capacity as
both Administrative Agent and Collateral Agent, the
"Agent") for the Secured Parties (as defined in the Credit
Agreement referred to below).
Reference is made to (a) the Credit Agreement dated as of December 31,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among (i) Hechinger Investment Company of Delaware, Inc., a
Delaware corporation (the "Borrower"), (ii) Holdings, BSQ Acqco, BSQ Newco,
Hechinger, Hechinger Stores, Hechinger Stores East Coast (collectively, the
"Parent Guarantors"), (iii) the lenders from time to time party thereto (the
"Lenders") and (iv) the Agent, (b) the Credit Agreement dated as of September
26, 1997, as amended and restated as of December 31, 1998 (as amended,
supplemented or otherwise modified from time to time, the "Existing Credit
Agreement"), among the Borrower, the Parent Guarantors, the lenders from time to
time party thereto (the "Existing Lenders"), Chase, as administrative agent,
collateral agent, issuing bank and swingline lender thereunder, BANKAMERICA
BUSINESS CREDIT, INC., a Delaware corporation ("BABC"), as documentation agent
and as borrowing base audit agent thereunder, and CITICORP USA, INC., a Delaware
corporation ("Citicorp USA" and, together with Chase and BABC, each solely in
its capacity as an agent under the Existing Credit Agreement, the "Senior
Agents"), as syndication agent thereunder and (c) the Intercreditor Agreement
dated as of December 31, 1998 (as amended, supplemented or otherwise modified
from time to time, the "Intercreditor Agreement"), among the Borrower, Holdings,
the Subsidiary Loan Parties, the Senior Agents, the Agent, Green Equity
Investors II, L.P. and Kmart Corporation. Capitalized terms used herein and not
defined herein shall have the meanings assigned to such terms in the Credit
Agreement.
The Lenders have agreed to make Loans to the Borrower, and the Issuing
Bank has agreed to issue Letters of Credit for the account of the Borrower,
pursuant to, and upon the terms and subject to the conditions specified in, the
Credit Agreement. As the direct and indirect owners of all the issued and
outstanding capital stock of the Borrower (or, in the case of BSQ Newco and
Hechinger Stores East Coast, as a wholly owned subsidiary of an indirect owner
of all such stock), each Guarantor acknowledges that it will derive substantial
benefit from the making of Loans by the Lenders and the issuance of Letters of
Credit by the Issuing Bank. The obligations of the Lenders to make Loans and of
the Issuing Bank to issue Letters of Credit are conditioned on, among other
things, the execution and delivery by the Guarantors of a Parent Guarantee
Agreement in the form hereof. As consideration therefor and in order to induce
the Lenders to make Loans and the Issuing Bank to issue Letters of Credit, each
Guarantor is willing to execute this Agreement.
87
Accordingly, the parties hereto agree as follows:
SECTION 1. Guarantee. Each Guarantor unconditionally guarantees (the
"Guarantee"), jointly with the other Guarantors and severally, as a primary
obligor and not merely as a surety, (a) the due and punctual payment by the
Borrower of (i) the principal of and premium, if any, and interest (including
interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether such interest is
allowed or allowable as a claim in such proceeding) on the Loans, when and as
due, whether at maturity, by acceleration, upon one or more dates set for
prepayment or otherwise, (ii) each payment required to be made by the Borrower
under the Credit Agreement in respect of any Letter of Credit, when and as due,
including payments in respect of reimbursement of disbursements, interest
thereon and obligations to provide cash collateral, and (iii) all other monetary
obligations, including fees, costs, expenses and indemnities, whether primary,
secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether such monetary
obligations are allowed or allowable as a claim in such proceeding), of the
Borrower to the Secured Parties under the Credit Agreement and the other Loan
Documents, (b) the due and punctual performance of all covenants, agreements,
obligations and liabilities of the Borrower under or pursuant to the Credit
Agreement and the other Loan Documents and (c) the due and punctual payment and
performance of all the covenants, agreements, obligations and liabilities of
each Loan Party under or pursuant to this Agreement and the other Loan Documents
(all the monetary and other obligations described in the preceding clauses (a)
through (c) being collectively called the "Obligations"). Each Guarantor further
agrees that the Obligations may be extended or renewed, in whole or in part,
without notice to or further assent from it, and that it will remain bound upon
the Guarantee notwithstanding any extension or renewal of any Obligation.
SECTION 2. Obligations Not Waived. To the fullest extent permitted by
applicable law, each Guarantor waives presentment to, demand of payment from and
protest to the Borrower of any of the Obligations, and also waives notice of
acceptance of the Guarantee and notice of protest for nonpayment. To the fullest
extent permitted by applicable law, the obligations of each Guarantor hereunder
shall not be affected by (a) the failure of any Agent or any other Secured Party
to assert any claim or demand or to enforce or exercise any right or remedy
against the Borrower or any other guarantor of the Obligations under the
provisions of the Credit Agreement, any other Loan Document or otherwise, (b)
any rescission, waiver, amendment or modification of, or any release from any of
the terms or provisions of, this Agreement, any other Loan Document, any
Guarantee or any other agreement, including with respect to any other guarantor
of the Obligations under this Agreement, or (c) the failure to perfect any
security interest in, or the release of, any of the security held by or on
behalf of the Collateral Agent or any other Secured Party.
SECTION 3. Security. Each Guarantor authorizes the Collateral Agent and
each of the other Secured Parties to (a) take and hold security for the payment
of the Guarantee and the Obligations and exchange, enforce, waive and release
any such security, (b) apply such security and direct the order or manner of
sale thereof as they in their sole discretion may determine and (c) release or
substitute any one or more endorsees, other guarantors or other obligors.
SECTION 4. Guarantee of Payment. Each Guarantor further agrees that the
Guarantee constitutes a guarantee of payment when due and not of collection, and
waives any right to require that any resort be had by the Collateral Agent or
any other Secured Party to any of the security held for payment of the
Obligations or to any balance of any deposit account or credit on the books of
the Collateral Agent or any other Secured Party in favor of the Borrower or any
other person.
SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of
each Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the indefeasible payment in
full in cash of the Obligations), including any claim of waiver, release,
surrender, alteration or compromise of any of the Obligations, and shall not be
subject to any defense or set-off, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of each Guarantor hereunder shall not be discharged or impaired or
otherwise affected by the
88
3
failure of any Agent or any other Secured Party to assert any claim or demand or
to enforce any remedy under the Credit Agreement, any other Loan Document or any
other agreement, by any waiver or modification of any provision of any thereof,
by any default, failure or delay, wilful or otherwise, in the performance of the
Obligations, or by any other act or omission that may or might in any manner or
to any extent vary the risk of any Guarantor or that would otherwise operate as
a discharge of any Guarantor as a matter of law or equity (other than the
indefeasible payment in full in cash of all the Obligations).
SECTION 6. Defenses of Borrower Waived. To the fullest extent permitted
by applicable law, each Guarantor waives any defense based on or arising out of
any defense of the Borrower or the unenforceability of the Obligations or any
part thereof from any cause, or the cessation from any cause of the liability of
the Borrower, other than the indefeasible payment in full in cash of all the
Obligations. The Collateral Agent and the other Secured Parties may, at their
election, foreclose on any security held by one or more of them by one or more
judicial or nonjudicial sales, accept an assignment of any such security in lieu
of foreclosure, compromise or adjust any part of the Obligations, make any other
accommodation with the Borrower or any other guarantor or exercise any other
right or remedy available to them against the Borrower or any other guarantor,
without affecting or impairing in any way the liability of any Guarantor
hereunder except to the extent that all the Obligations have been indefeasibly
paid in full in cash. Pursuant to applicable law, each Guarantor waives any
defense arising out of any such election even though such election operates,
pursuant to applicable law, to impair or to extinguish any right of
reimbursement or subrogation or other right or remedy of such Guarantor against
the Borrower or any other guarantor, as the case may be, or any security.
SECTION 7. Agreement to Pay; Subordination. In furtherance of the
foregoing and not in limitation of any other right that the Agents or any other
Secured Party has at law or in equity against any Guarantor by virtue hereof,
upon the failure of the Borrower or any other Loan Party to pay any Obligation
when and as the same shall become due, whether at maturity, by acceleration,
after notice of prepayment or otherwise, each Guarantor hereby promises to and
will forthwith pay, or cause to be paid, to the Collateral Agent or such other
Secured Party as designated thereby in cash the amount of such unpaid
Obligations. Upon payment by any Guarantor of any sums to the Collateral Agent
or any Secured Party as provided above, all rights of such Guarantor against the
Borrower arising as a result thereof by way of right of subrogation,
contribution, reimbursement, indemnity or otherwise shall in all respects be
subordinate and junior in right of payment to the prior indefeasible payment in
full in cash of all the Obligations. In addition, any indebtedness of the
Borrower now or hereafter held by any Guarantor is hereby subordinated in right
of payment to the prior payment in full of the Obligations. If any amount shall
erroneously be paid to any Guarantor on account of (a) such subrogation,
contribution, reimbursement, indemnity or similar right or (b) any such
indebtedness of the Borrower, such amount shall be held in trust for the benefit
of the Secured Parties and shall forthwith be paid to the Collateral Agent to be
credited against the payment of the Obligations, whether matured or unmatured,
in accordance with the terms of the Loan Documents.
SECTION 8. Information. Each Guarantor assumes all responsibility for
being and keeping itself informed of the Borrower's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Obligations and the nature, scope and extent of the risks that such
Guarantor assumes and incurs hereunder, and agrees that none of the Agents or
the other Secured Parties will have any duty to advise any of the Guarantors of
information known to it or any of them regarding such circumstances or risks.
SECTION 9. Termination. The Guarantee (a) shall terminate when all the
Obligations have been indefeasibly paid in full and the Lenders have no further
commitment to lend under the Credit Agreement, the LC Exposure has been reduced
to zero and the Issuing Bank has no further obligation to issue Letters of
Credit under the Credit Agreement and (b) shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any Obligation is rescinded or must otherwise be restored
89
4
by any Secured Party or any Guarantor upon the bankruptcy or reorganization of
the Borrower, any Guarantor or otherwise.
SECTION 10. Binding Effect; Several Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party, and all covenants,
promises and agreements by or on behalf of the Guarantors that are contained in
this Agreement shall bind and inure to the benefit of each party hereto and
their respective successors and assigns. This Agreement shall become effective
as to any Guarantor when a counterpart hereof executed on behalf of such
Guarantor shall have been delivered to the Collateral Agent, and a counterpart
hereof shall have been executed on behalf of the Collateral Agent, and
thereafter shall be binding upon such Guarantor and the Collateral Agent and
their respective successors and assigns, and shall inure to the benefit of such
Guarantor, the Collateral Agent and the other Secured Parties, and their
respective successors and assigns, except that no Guarantor shall have the right
to assign its rights or obligations hereunder or any interest herein (and any
such attempted assignment shall be void).
SECTION 11. Waivers; Amendment. (a) No failure or delay of any Agent in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Agents hereunder and of the other
Secured Parties under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of this Agreement or consent to any departure by any Guarantor
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice or demand
on any Guarantor in any case shall entitle such Guarantor to any other or
further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered into between
the Guarantors with respect to which such waiver, amendment or modification
relates and each of the Agents, with the prior written consent of the Required
Lenders (except as otherwise provided in the Credit Agreement).
SECTION 12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 13. Notices. All communications and notices hereunder shall be in
writing and given as provided in Section 9.01 of the Credit Agreement. All
communications and notices hereunder to any Guarantor shall be given to it in
care of the Borrower.
SECTION 14. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made by the Guarantors herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Agents and the other Secured Parties and shall
survive the making by the Lenders of the Loans and the issuance of the Letters
of Credit by the Issuing Bank regardless of any investigation made by the
Secured Parties or on their behalf, and shall continue in full force and effect
as long as the principal of or any accrued interest on any Loan or any other fee
or amount payable under this Agreement or any other Loan Document is outstanding
and unpaid or the LC Exposure does not equal zero and as long as the Commitments
have not been terminated.
(b) In the event any one or more of the provisions contained in this
Agreement or in any other Loan Document should be held invalid, illegal or
unenforceable in any respect, the validity, legality and
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5
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision in a particular jurisdiction shall not in
and of itself affect the validity of such provision in any other jurisdiction).
The parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 15. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract, and shall become effective as provided in
Section 10. Delivery of an executed signature page to this Agreement by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 16. Rules of Interpretation. The rules of interpretation
specified in Section 1.03 of the Credit Agreement shall be applicable to this
Agreement.
SECTION 17. Intercreditor Agreement. The Agent, on behalf of the Secured
Parties, acknowledges that the Guarantee of each Guarantor made pursuant to this
Parent Guarantee Agreement is subject to the provisions of the Intercreditor
Agreement, including the provisions therein subordinating such Guarantees to
certain other obligations of the Guarantors. Notwithstanding anything to the
contrary contained herein, the rights, duties and obligations of the Agent are
subject to the provisions of the Intecreditor Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
CENTERS HOLDINGS, INC.,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
BSQ ACQUISITION, INC.,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
BSQ TRANSFEREE CORP.,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
HECHINGER COMPANY,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
HECHINGER STORES COMPANY,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
HECHINGER STORES EAST COAST COMPANY,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
92
7
THE SUBSIDIARY GUARANTORS LISTED ON
SCHEDULE I HERETO,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Authorized Officer
93
THE CHASE MANHATTAN BANK, as
Administrative Agent and as Collateral Agent,
by
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Director
94
Schedule I to the
Parent Guarantee Agreement
SUBSIDIARY GUARANTORS
Name Address
---- -------
95
EXHIBIT E
CONFORMED COPY
SUBSIDIARY GUARANTEE AGREEMENT dated as of December
31, 1998, among (a) each of the subsidiaries listed on
Schedule I hereto (each such subsidiary, individually, a
"Subsidiary Guarantor" and, collectively, the "Subsidiary
Guarantors") of HECHINGER INVESTMENT COMPANY OF DELAWARE,
INC., a Delaware corporation (the "Borrower"), (b) THE
CHASE MANHATTAN BANK, a New York banking corporation
("Chase"), as administrative agent (in such capacity, the
"Administrative Agent") and as collateral agent (in such
capacity, the "Collateral Agent" and, in its capacity as
both Administrative Agent and Collateral Agent, the
"Agent") for the Secured Parties (as defined in the Credit
Agreement referred to below).
Reference is made to (a) the Credit Agreement dated as of December 31,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among (i) the Borrower, (ii) CENTERS HOLDINGS, INC., a
Delaware corporation, BSQ ACQUISITION, INC., a Delaware corporation, BSQ
TRANSFEREE CORP., a Delaware corporation, HECHINGER COMPANY, a Delaware
corporation, HECHINGER STORES COMPANY, a Delaware corporation, HECHINGER STORES
EAST COAST COMPANY, a Delaware corporation (collectively, the "Parent
Guarantors"), the lenders from time to time party thereto (the "Lenders"), and
(iv) the Agent, (b) the Credit Agreement dated as of September 26, 1997, as
amended and restated as of December 31, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Existing Credit Agreement"), among
the Borrower, the Parent Guarantors, the lenders from time to time party thereto
(the "Existing Lenders"), Chase, as administrative agent, collateral agent,
issuing bank and swingline lender thereunder, BANKAMERICA BUSINESS CREDIT, INC.,
a Delaware corporation ("BABC"), as documentation agent and as borrowing base
audit agent thereunder, and CITICORP USA, INC., a Delaware corporation
("Citicorp USA" and, together with Chase and BABC, each solely in its capacity
as an agent under the Existing Credit Agreement, the "Senior Agents"), as
syndication agent thereunder and (c) the Intercreditor Agreement dated as of
December 31, 1998 (as amended, supplemented or otherwise modified from time to
time, the "Intercreditor Agreement"), among the Borrower, Holdings, the
Subsidiary Loan Parties, the Senior Agents, the Agent, Green Equity Investors
II, L.P. and Kmart Corporation. Capitalized terms used herein and not defined
herein shall have the meanings assigned to such terms in the Credit Agreement.
The Lenders have agreed to make Loans to the Borrower, and the Issuing
Bank has agreed to issue Letters of Credit for the account of the Borrower,
pursuant to, and upon the terms and subject to the conditions specified in, the
Credit Agreement. Each of the Subsidiary Guarantors is a Borrower Subsidiary and
acknowledges that it will derive substantial benefit from the making of the
Loans by the Lenders, and the issuance of the Letters of Credit by the Issuing
Bank. The obligations of the Lenders to make Loans and of the Issuing Bank to
issue Letters of Credit are conditioned on, among other things, the execution
and delivery by the Subsidiary Guarantors of a Subsidiary Guarantee Agreement in
the form hereof. As consideration therefor and in order to induce the Lenders to
make Loans and the Issuing Bank to issue Letters of Credit, the Subsidiary
Guarantors are willing to execute this Agreement.
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Accordingly, the parties hereto agree as follows:
SECTION 1. Guarantee. Each Subsidiary Guarantor unconditionally
guarantees (the "Guarantee"), jointly with the other Subsidiary Guarantors and
severally, as a primary obligor and not merely as a surety, (a) the due and
punctual payment by the Borrower of (i) the principal of and premium, if any,
and interest (including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether such
interest is allowed or allowable as a claim in such proceeding) on the Loans,
when and as due, whether at maturity, by acceleration, upon one or more dates
set for prepayment or otherwise, (ii) each payment required to be made by the
Borrower under the Credit Agreement in respect of any Letter of Credit, when and
as due, including payments in respect of reimbursement of disbursements,
interest thereon and obligations to provide cash collateral, and (iii) all other
monetary obligations, including fees, costs, expenses and indemnities, whether
primary, secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether such monetary
obligations are allowed or allowable as a claim in such proceeding), of the
Borrower to the Secured Parties under the Credit Agreement and the other Loan
Documents, (b) the due and punctual performance of all covenants, agreements,
obligations and liabilities of the Borrower under or pursuant to the Credit
Agreement and the other Loan Documents and (c) the due and punctual payment and
performance of all the covenants, agreements, obligations and liabilities of
each Loan Party under or pursuant to this Agreement and the other Loan Documents
(all the monetary and other obligations described in the preceding clauses (a)
through (c) being collectively called the "Obligations"). Each Subsidiary
Guarantor further agrees that the Obligations may be extended or renewed, in
whole or in part, without notice to or further assent from it, and that it will
remain bound upon the Guarantee notwithstanding any extension or renewal of any
Obligation.
Anything contained in this Agreement to the contrary notwithstanding, the
obligations of each Subsidiary Guarantor hereunder shall be limited to a maximum
aggregate amount equal to the greatest amount that would not render such
Subsidiary Guarantor's obligations hereunder subject to avoidance as a
fraudulent transfer or conveyance under Section 548 of Title 11 of the United
States Code or any provisions of applicable state law (collectively, the
"Fraudulent Transfer Laws"), in each case after giving effect to all other
liabilities of such Subsidiary Guarantor, contingent or otherwise, that are
relevant under the Fraudulent Transfer Laws (specifically excluding, however,
any liabilities of such Subsidiary Guarantor (a) in respect of intercompany
indebtedness to the Borrower or Affiliates of the Borrower to the extent that
such indebtedness would be discharged in an amount equal to the amount paid by
such Subsidiary Guarantor hereunder and (b) under any guarantee of senior
unsecured indebtedness or Indebtedness subordinated in right of payment to the
Obligations, which guarantee contains a limitation as to maximum amount similar
to that set forth in this paragraph, pursuant to which the liability of such
Subsidiary Guarantor hereunder is included in the liabilities taken into account
in determining such maximum amount) and after giving effect as assets to the
value (as determined under the applicable provisions of the Fraudulent Transfer
Laws) of any rights to subrogation, contribution, reimbursement, indemnity or
similar rights of such Subsidiary Guarantor pursuant to (i) applicable law or
(ii) any agreement providing for an equitable allocation among such Subsidiary
Guarantor and other Affiliates of the Borrower of obligations arising under
Guarantees by such parties (including the Indemnity, Subrogation and
Contribution Agreement).
SECTION 2. Obligations Not Waived. To the fullest extent permitted by
applicable law, each Subsidiary Guarantor waives presentment to, demand of
payment from and protest to the Borrower of any of the Obligations, and also
waives notice of acceptance of the Guarantee
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and notice of protest for nonpayment. To the fullest extent permitted by
applicable law, the obligations of each Subsidiary Guarantor hereunder shall not
be affected by (a) the failure of any Agent or any other Secured Party to assert
any claim or demand or to enforce or exercise any right or remedy against the
Borrower or any other Subsidiary Guarantor under the provisions of the Credit
Agreement, any other Loan Document or otherwise, (b) any rescission, waiver,
amendment or modification of, or any release from any of the terms or provisions
of, this Agreement, any other Loan Document, any Guarantee or any other
agreement, including with respect to any other Subsidiary Guarantor under this
Agreement, or (c) the failure to perfect any security interest in, or the
release of, any of the security held by or on behalf of the Collateral Agent or
any other Secured Party.
SECTION 3. Security. Each of the Subsidiary Guarantors authorizes the
Collateral Agent and each of the other Secured Parties to (a) take and hold
security for the payment of the Guarantee and the Obligations and exchange,
enforce, waive and release any such security, (b) apply such security and direct
the order or manner of sale thereof as they in their sole discretion may
determine and (c) release or substitute any one or more endorsees, other
Subsidiary Guarantors or other obligors.
SECTION 4. Guarantee of Payment. Each Subsidiary Guarantor further agrees
that the Guarantee constitutes a guarantee of payment when due and not of
collection, and waives any right to require that any resort be had by the
Collateral Agent or any other Secured Party to any of the security held for
payment of the Obligations or to any balance of any deposit account or credit on
the books of the Collateral Agent or any other Secured Party in favor of the
Borrower or any other person.
SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of
each Subsidiary Guarantor hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason (other than the
indefeasible payment in full in cash of the Obligations), including any claim of
waiver, release, surrender, alteration or compromise of any of the Obligations,
and shall not be subject to any defense or set-off, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Subsidiary Guarantor
hereunder shall not be discharged or impaired or otherwise affected by the
failure of any Agent or any other Secured Party to assert any claim or demand or
to enforce any remedy under the Credit Agreement, any other Loan Document or any
other agreement, by any waiver or modification of any provision of any thereof,
by any default, failure or delay, wilful or otherwise, in the performance of the
Obligations, or by any other act or omission that may or might in any manner or
to any extent vary the risk of any Subsidiary Guarantor or that would otherwise
operate as a discharge of any Subsidiary Guarantor as a matter of law or equity
(other than the indefeasible payment in full in cash of all the Obligations).
SECTION 6. Defenses of Borrower Waived. To the fullest extent permitted
by applicable law, each of the Subsidiary Guarantors waives any defense based on
or arising out of any defense of the Borrower or the unenforceability of the
Obligations or any part thereof from any cause, or the cessation from any cause
of the liability of the Borrower, other than the indefeasible payment in full in
cash of all the Obligations. The Collateral Agent and the other
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Secured Parties may, at their election, foreclose on any security held by one or
more of them by one or more judicial or nonjudicial sales, accept an assignment
of any such security in lieu of foreclosure, compromise or adjust any part of
the Obligations, make any other accommodation with the Borrower or any other
Subsidiary Guarantor or exercise any other right or remedy available to them
against the Borrower or any other Subsidiary Guarantor, without affecting or
impairing in any way the liability of any Subsidiary Guarantor hereunder except
to the extent that all the Obligations have been indefeasibly paid in full in
cash. Pursuant to applicable law, each of the Subsidiary Guarantors waives any
defense arising out of any such election even though such election operates,
pursuant to applicable law, to impair or to extinguish any right of
reimbursement or subrogation or other right or remedy of such Subsidiary
Guarantor against the Borrower or any other Subsidiary Guarantor or Subsidiary
Guarantors, as the case may be, or any security.
SECTION 7. Agreement to Pay; Subordination. In furtherance of the
foregoing and not in limitation of any other right that the Agents or any other
Secured Party has at law or in equity against any Subsidiary Guarantor by virtue
hereof, upon the failure of the Borrower or any other Loan Party to pay any
Obligation when and as the same shall become due, whether at maturity, by
acceleration, after notice of prepayment or otherwise, each Subsidiary Guarantor
hereby promises to and will forthwith pay, or cause to be paid, to the
Collateral Agent or such other Secured Party as designated thereby in cash the
amount of such unpaid Obligations. Upon payment by any Subsidiary Guarantor of
any sums to the Collateral Agent or any Secured Party as provided above, all
rights of such Subsidiary Guarantor against the Borrower arising as a result
thereof by way of right of subrogation, contribution, reimbursement, indemnity
or otherwise shall in all respects be subordinate and junior in right of payment
to the prior indefeasible payment in full in cash of all the Obligations. In
addition, any indebtedness of the Borrower now or hereafter held by any
Subsidiary Guarantor is hereby subordinated in right of payment to the prior
payment in full of the Obligations. If any amount shall erroneously be paid to
any Subsidiary Guarantor on account of (a) such subrogation, contribution,
reimbursement, indemnity or similar right or (b) any such indebtedness of the
Borrower, such amount shall be held in trust for the benefit of the Secured
Parties and shall forthwith be paid to the Collateral Agent to be credited
against the payment of the Obligations, whether matured or unmatured, in
accordance with the terms of the Loan Documents.
SECTION 8. Information. Each of the Subsidiary Guarantors assumes all
responsibility for being and keeping itself informed of the Borrower's financial
condition and assets, and of all other circumstances bearing upon the risk of
nonpayment of the Obligations and the nature, scope and extent of the risks that
such Subsidiary Guarantor assumes and incurs hereunder, and agrees that none of
the Agents or the other Secured Parties will have any duty to advise any of the
Subsidiary Guarantors of information known to it or any of them regarding such
circumstances or risks.
SECTION 9. Representations and Warranties. Each of the Subsidiary
Guarantors represents and warrants as to itself that all representations and
warranties relating to it contained in the Credit Agreement are true and
correct.
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SECTION 10. Termination. The Guarantees (a) shall terminate when all the
Obligations have been indefeasibly paid in full and the Lenders have no further
commitment to lend under the Credit Agreement, the LC Exposure has been reduced
to zero and the Issuing Bank has no further obligation to issue Letters of
Credit under the Credit Agreement and (b) shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any Obligation is rescinded or must otherwise be restored by any Secured Party
or any Subsidiary Guarantor upon the bankruptcy or reorganization of the
Borrower, any Subsidiary Guarantor or otherwise.
SECTION 11. Binding Effect; Several Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party, and all covenants,
promises and agreements by or on behalf of the Subsidiary Guarantors that are
contained in this Agreement shall bind and inure to the benefit of each party
hereto and their respective successors and assigns. This Agreement shall become
effective as to any Subsidiary Guarantor when a counterpart hereof executed on
behalf of such Subsidiary Guarantor shall have been delivered to the Collateral
Agent, and a counterpart hereof shall have been executed on behalf of the
Collateral Agent, and thereafter shall be binding upon such Subsidiary Guarantor
and the Collateral Agent and their respective successors and assigns, and shall
inure to the benefit of such Subsidiary Guarantor, the Collateral Agent and the
other Secured Parties, and their respective successors and assigns, except that
no Subsidiary Guarantor shall have the right to assign its rights or obligations
hereunder or any interest herein (and any such attempted assignment shall be
void). If all of the capital stock of a Subsidiary Guarantor is sold,
transferred or otherwise disposed of pursuant to a transaction permitted by
Section 6.05 of the Credit Agreement, such Subsidiary Guarantor shall be
released from its obligations under this Agreement without further action. This
Agreement shall be construed as a separate agreement with respect to each
Subsidiary Guarantor and may be amended, modified, supplemented, waived or
released with respect to any Subsidiary Guarantor without the approval of any
other Subsidiary Guarantor and without affecting the obligations of any other
Subsidiary Guarantor hereunder.
SECTION 12. Waivers; Amendment. (a) No failure or delay of any Agent in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Agents hereunder and of the other
Secured Parties under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of this Agreement or consent to any departure by any Subsidiary
Guarantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on any Subsidiary Guarantor in any case shall entitle such
Subsidiary Guarantor to any other or further notice or demand in similar or
other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered into between
the Subsidiary Guarantors with respect to which such waiver, amendment or
modification relates and each of the Agents,
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with the prior written consent of the Required Lenders (except as otherwise
provided in the Credit Agreement).
SECTION 13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 14. Notices. All communications and notices hereunder shall be in
writing and given as provided in Section 9.01 of the Credit Agreement. All
communications and notices hereunder to each Subsidiary Guarantor shall be given
to it in care of the Borrower.
SECTION 15. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made by the Subsidiary Guarantors
herein and in the certificates or other instruments prepared or delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the Agents and the other Secured
Parties and shall survive the making by the Lenders of the Loans and the
issuance of the Letters of Credit by the Issuing Bank regardless of any
investigation made by the Secured Parties or on their behalf, and shall continue
in full force and effect as long as the principal of or any accrued interest on
any Loan or any other fee or amount payable under this Agreement or any other
Loan Document is outstanding and unpaid or the LC Exposure does not equal zero
and as long as the Commitments have not been terminated.
(b) In the event any one or more of the provisions contained in this
Agreement or in any other Loan Document should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The parties
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 16. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract, and shall become effective as provided in
Section 11. Delivery of an executed signature page to this Agreement by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 17. Rules of Interpretation. The rules of interpretation
specified in Section 1.03 of the Credit Agreement shall be applicable to this
Agreement.
SECTION 18. Jurisdiction; Consent to Service of Process. (a) Each
Subsidiary Guarantor hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of the Supreme Court of the
State of New York sitting in New York County and of the United States District
Court of the Southern District of New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement or any other Loan Document, or for recognition or enforcement of any
judgment, and
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each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by law, in such
Federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement or any other Loan Document shall affect any right that
the Collateral Agent or any other Secured Party may otherwise have to bring any
action or proceeding relating to this Agreement or any other Loan Document
against any Subsidiary Guarantor or its properties in the courts of any
jurisdiction.
(b) Each Subsidiary Guarantor irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or any other Loan
Document in any court referred to in paragraph (a) of this Section. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 14. Nothing in this
Agreement or any other Loan Document will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 19. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 19.
SECTION 20. Additional Subsidiary Guarantors. Pursuant to Section 5.12 of
the Credit Agreement, each Subsidiary that was not in existence on the date of
the Credit Agreement is required to enter into this Agreement as a Subsidiary
Guarantor upon becoming a Subsidiary. Upon execution and delivery after the date
hereof by the Collateral Agent and such a Subsidiary of an instrument in the
form of Annex 1, such Subsidiary shall become a Subsidiary Guarantor hereunder
with the same force and effect as if originally named as a Subsidiary Guarantor
herein. The execution and delivery of any instrument adding an additional
Subsidiary Guarantor as a party to this Agreement shall not require the consent
of any other Subsidiary Guarantor
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hereunder. The rights and obligations of each Subsidiary Guarantor hereunder
shall remain in full force and effect notwithstanding the addition of any new
Subsidiary Guarantor as a party to this Agreement.
SECTION 21. Right of Set-off. If an Event of Default shall have occurred
and be continuing, each Secured Party is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other Indebtedness at any time owing by such Secured Party to
or for the credit or the account of any Subsidiary Guarantor against any or all
the obligations of such Subsidiary Guarantor now or hereafter existing under
this Agreement and the other Loan Documents held by such Secured Party,
irrespective of whether or not such Secured Party shall have made any demand
under this Agreement or any other Loan Document and although such obligations
may be unmatured. The rights of each Secured Party under this Section 21 are in
addition to other rights and remedies (including other rights of set-off) that
such Secured Party may have.
Section 22. Intercreditor Agreement. The Agent, on behalf of the Secured
Parties, acknowledges that the Guarantee of each Subsidiary Guarantor made
pursuant to this Subsidiary Guarantee Agreement is subject to the provisions of
the Intercreditor Agreement, including the provisions therein subordinating such
Guarantees to certain other obligations of the Subsidiary Guarantors.
Notwithstanding anything to the contrary contained herein, the rights, duties
and obligations of the Agent are subject to the provisions of the Intercreditor
Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
EACH OF THE BORROWER SUBSIDIARIES
LISTED ON SCHEDULE I HERETO,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Authorized Officer
THE CHASE MANHATTAN BANK, as
Administrative Agent and as Collateral Agent,
by
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Director
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SCHEDULE I TO THE
Subsidiary Guarantee AGREEMENT
Subsidiary Guarantor Address
-------------------- -------
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Annex 1 to the
Subsidiary Guarantee Agreement
SUPPLEMENT NO. dated as of , to the
Subsidiary Guarantee Agreement dated as of December 31,
1998, among (a) each of the subsidiaries listed on Schedule
I thereto (each such subsidiary, individually, a
"Subsidiary Guarantor" and, collectively, the "Subsidiary
Guarantors") of HECHINGER INVESTMENT COMPANY OF DELAWARE,
INC., a Delaware corporation (the "Borrower"), (b) THE
CHASE MANHATTAN BANK, a New York banking corporation
("Chase"), as administrative agent (in such capacity, the
"Administrative Agent") for the Secured Parties (as defined
in the Credit Agreement referred to below), and as
collateral agent (in such capacity, the "Collateral Agent"
and, in its capacity as both Administrative Agent and
Collateral Agent, the "Agent") for the Secured Parties (as
defined in the Credit Agreement referred to below).
A. Reference is made to (a) the Credit Agreement dated as of December 31,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among (i) the Borrower, (ii) CENTERS HOLDINGS, INC., a
Delaware corporation, BSQ ACQUISITION, INC., a Delaware corporation, BSQ
TRANSFEREE CORP., a Delaware corporation, HECHINGER COMPANY, a Delaware
corporation, HECHINGER STORES COMPANY, a Delaware corporation, HECHINGER STORES
EAST COAST COMPANY, a Delaware corporation (collectively, the "Parent
Guarantors"), the lenders from time to time party thereto (the "Lenders"), and
(iv) the Agent, (b) the Credit Agreement dated as of September 26, 1997, as
amended and restated as of December 31, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Existing Credit Agreement"), among
the Borrower, the Parent Guarantors, the lenders from time to time party thereto
(the "Existing Lenders"), Chase, as administrative agent, collateral agent,
issuing bank and swingline lender thereunder, BANKAMERICA BUSINESS CREDIT, INC.,
a Delaware corporation ("BABC"), as documentation agent and as borrowing base
audit agent thereunder, and CITICORP USA, INC., a Delaware corporation
("Citicorp USA" and, together with Chase and BABC, each solely in its capacity
as an agent under the Existing Credit Agreement, the "Senior Agents"), as
syndication agent thereunder and (c) the Intercreditor Agreement dated as of
December 31, 1998 (as amended, supplemented or otherwise modified from time to
time, the "Intercreditor Agreement"), among the Borrower, Holdings, the
Subsidiary Loan Parties, the Senior Agents, the Agent, Green Equity Investors
II, L.P. and Kmart Corporation. Capitalized terms used herein and not defined
herein shall have the meanings assigned to such terms in the Credit Agreement.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Subsidiary Guarantee Agreement
and the Credit Agreement.
C. The Subsidiary Guarantors have entered into the Subsidiary Guarantee
Agreement in order to induce the Lenders to make Loans and the Issuing Bank to
issue Letters of Credit. Pursuant to Section 5.12 of the Credit Agreement, each
Borrower Subsidiary that was not in
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existence or not a Borrower Subsidiary on the date of the Credit Agreement is
required to enter into the Subsidiary Guarantee Agreement as a Subsidiary
Guarantor upon becoming a Borrower Subsidiary. Section 20 of the Subsidiary
Guarantee Agreement provides that additional Borrower Subsidiaries of may become
Subsidiary Guarantors under the Subsidiary Guarantee Agreement by execution and
delivery of an instrument in the form of this Supplement. The undersigned
Subsidiary (the "New Subsidiary Guarantor") is executing this Supplement in
accordance with the requirements of the Credit Agreement to become a Subsidiary
Guarantor under the Subsidiary Guarantee Agreement in order to induce the
Lenders to make additional Loans and the Issuing Bank to issue additional
Letters of Credit and as consideration for Loans previously made and Letters of
Credit previously issued.
Accordingly, the Collateral Agent and the New Subsidiary Guarantor agree
as follows:
SECTION 1. In accordance with Section 20 of the Subsidiary Guarantee
Agreement, the New Subsidiary Guarantor by its signature below becomes a
Subsidiary Guarantor under the Subsidiary Guarantee Agreement with the same
force and effect as if originally named therein as a Subsidiary Guarantor and
the New Subsidiary Guarantor hereby (a) agrees to all the terms and provisions
of the Subsidiary Guarantee Agreement applicable to it as a Subsidiary Guarantor
thereunder and (b) represents and warrants that the representations and
warranties made by it as a Subsidiary Guarantor thereunder are true and correct
on and as of the date hereof. Each reference to a "Subsidiary Guarantor" in the
Subsidiary Guarantee Agreement shall be deemed to include the New Subsidiary
Guarantor. The Subsidiary Guarantee Agreement is hereby incorporated herein by
reference.
SECTION 2. The New Subsidiary Guarantor represents and warrants to the
Collateral Agent and the other Secured Parties that this Supplement has been
duly authorized, executed and delivered by it and constitutes its legal, valid
and binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts, each of which
shall constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when the
Collateral Agent shall have received counterparts of this Supplement that, when
taken together, bear the signatures of the New Subsidiary Guarantor and the
Collateral Agent. Delivery of an executed signature page to this Supplement by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart of this Supplement.
SECTION 4. Except as expressly supplemented hereby, the Subsidiary
Guarantee Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Subsidiary Guarantee Agreement shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision hereof in a particular jurisdiction shall not in and of
itself affect the validity of such provision in any other jurisdiction). The
parties hereto shall endeavor
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in good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in writing
and given as provided in Section 14 of the Subsidiary Guarantee Agreement. All
communications and notices hereunder to the New Subsidiary Guarantor shall be
given to it at the address set forth under its signature below, with a copy to
the Borrower.
SECTION 8. The New Subsidiary Guarantor agrees to reimburse the
Collateral Agent for its reasonable and documented out-of-pocket expenses in
connection with this Supplement, including the reasonable and documented fees,
disbursements and other charges of counsel for the Collateral Agent.
108
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IN WITNESS WHEREOF, the New Subsidiary Guarantor and the Collateral Agent
have duly executed this Supplement to the Subsidiary Guarantee Agreement as of
the day and year first above written.
[Name Of New Subsidiary Guarantor],
by
------------------------------------
Name:
Title:
Address:
----------------------------
----------------------------------------
----------------------------------------
THE CHASE MANHATTAN BANK, as
Administrative Agent and as Collateral
Agent,
by
------------------------------------
Name:
Title:
109
EXHIBIT F
CONFORMED COPY
INDEMNITY, SUBROGATION and CONTRIBUTION
AGREEMENT dated as of December 31, 1998 among
HECHINGER INVESTMENT COMPANY OF DELAWARE, INC., a
Delaware corporation (the "Borrower"), each
subsidiary of the Borrower listed on Schedule I
hereto (the "Guarantors"), THE CHASE MANHATTAN BANK,
a New York banking corporation ("Chase"), as
administrative agent (in such capacity, the
"Administrative Agent") and as collateral agent (in
such capacity, the "Collateral Agent" and, in its
capacity as both Administrative Agent and Collateral
Agent, the "Agent") for the Secured Parties (as
defined in the Credit Agreement referred to below).
Reference is made to (a) the Credit Agreement dated as of December 31,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among (i) the Borrower, (ii) CENTERS HOLDINGS, INC., a
Delaware corporation, BSQ ACQUISITION, INC., a Delaware corporation, BSQ
TRANSFEREE CORP., a Delaware corporation, HECHINGER COMPANY, a Delaware
corporation, HECHINGER STORES COMPANY, a Delaware corporation, HECHINGER STORES
EAST COAST COMPANY, a Delaware corporation (collectively, the "Parent
Guarantors"), (iii) the lenders from time to time party thereto (the
"Lenders"), and (iv) the Agent, (b) the Credit Agreement dated as of September
26, 1997, as amended and restated as of December 31, 1998 (as amended,
supplemented or otherwise modified from time to time, the "Existing Credit
Agreement"), among the Borrower, the Parent Guarantors, the lenders from time
to time party thereto (the "Existing Lenders"), Chase, as administrative
agent, collateral agent, issuing bank and swingline lender thereunder,
BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation ("BABC"), as
documentation agent and as borrowing base audit agent thereunder, and CITICORP
USA, INC., a Delaware corporation ("Citicorp USA" and, together with Chase and
BABC, each solely in its capacity as an agent under the Existing Credit
Agreement, the "Senior Agents"), as syndication agent thereunder, (c) the
Subsidiary Guarantee Agreement dated as of December 31, 1998 between the
Guarantors and the Agents (as amended, supplemented or otherwise modified from
time to time, the "Guarantee Agreement") and (d) the Intercreditor Agreement
dated as of December 31, 1998 (as amended, supplemented or otherwise modified
from time to time, the "Intercreditor Agreement"), among the Borrower,
Holdings, the Subsidiary Loan Parties, the Senior Agents, the Agent, Green
Equity Investors II, L.P. and Kmart Corporation. Capitalized terms used herein
and not defined herein shall have the meanings assigned to such terms in the
Credit Agreement.
The Lenders have agreed to make Loans to the Borrower, and the Issuing
Bank has agreed to issue Letters of Credit for the account of the Borrower,
pursuant to, and upon the terms and subject to the conditions specified in, the
Credit Agreement. The Guarantors have guaranteed such Loans and the other
Obligations (as defined in the Guarantee Agreement) of the Borrower under the
Credit Agreement pursuant to the Guarantee Agreement; certain Guarantors have
granted Liens on and security interests in certain of their assets to secure
such guarantees. The obligations of the Lenders to make Loans and of the
Issuing Bank to issue Letters of Credit are conditioned on, among other things,
the execution and delivery by the Borrower and the Guarantors of an agreement
in the form hereof.
110
Accordingly, the Borrower, each Guarantor and the Agents agree as
follows:
SECTION 1. Indemnity and Subrogation. In addition to all such rights
of indemnity and subrogation as the Guarantors may have under applicable law
(but subject to Section 3), the Borrower agrees that (a) in the event a payment
shall be made by any Guarantor under the Guarantee Agreement, the Borrower
shall indemnify such Guarantor for the full amount of such payment and such
Guarantor shall be subrogated to the rights of the Person to whom such payment
shall have been made to the extent of such payment and (b) in the event any
assets of any Guarantor shall be sold pursuant to any Security Document to
satisfy a claim of any Secured Party, the Borrower shall indemnify such
Guarantor in an amount equal to the greater of (i) the book value of the assets
so sold and (ii) the fair market value of the assets so sold.
SECTION 2. Contribution and Subrogation. Each Guarantor (a
"Contributing Guarantor") agrees (subject to Section 3) that, in the event a
payment shall be made by any other Guarantor under the Guarantee Agreement or
assets of any other Guarantor shall be sold pursuant to any Security Document
to satisfy a claim of any Secured Party and such other Guarantor (the "Claiming
Guarantor") shall not have been fully indemnified by the Borrower as provided
in Section 1, the Contributing Guarantor shall indemnify the Claiming Guarantor
in an amount equal to the amount of such payment or the greater of (a) the book
value of the assets so sold and (b) the fair market value of such assets, as
the case may be, in each case multiplied by a fraction of which the numerator
shall be the net worth of the Contributing Guarantor on the date hereof and the
denominator shall be the aggregate net worth of all the Guarantors on the date
hereof (or, in the case of any Guarantor becoming a party hereto pursuant to
Section 12, the date of the Supplement hereto executed and delivered by such
Guarantor). Any Contributing Guarantor making any payment to a Claiming
Guarantor pursuant to this Section 2 shall be subrogated to the rights of such
Claiming Guarantor under Section 1 to the extent of such payment.
SECTION 3. Subordination. Notwithstanding any provision of this
Agreement to the contrary, all rights of the Guarantors under Sections 1 and 2
and all other rights of indemnity, contribution or subrogation under applicable
law or otherwise shall be fully subordinated to the indefeasible payment in
full in cash of the Obligations. No failure on the part of the Borrower or any
Guarantor to make the payments required by Sections 1 and 2 (or any other
payments required under applicable law or otherwise) shall in any respect limit
the obligations and liabilities of any Guarantor with respect to its
obligations hereunder, and each Guarantor shall remain liable for the full
amount of the obligations of such Guarantor hereunder.
SECTION 4. Termination. This Agreement shall survive and be in full
force and effect so long as any Obligation is outstanding and has not been
indefeasibly paid in full in cash, and so long as the LC Exposure has not been
reduced to zero or any of the Commitments under the Credit Agreement have not
been terminated, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment, or any part thereof, of any Obligation is
rescinded or must otherwise be restored by any Secured Party or any Guarantor
upon the bankruptcy or reorganization of the Borrower, any Guarantor or
otherwise.
SECTION 5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. No Waiver; Amendment. (a) No failure on the part of any
Agent or any Guarantor to exercise, and no delay in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or remedy by the Agents or
any Guarantor preclude any other or further exercise thereof or the exercise of
any other right, power or remedy. All remedies hereunder are cumulative and
are not exclusive of any other remedies provided by law. None of the Agents or
any of the Guarantors shall be deemed to have waived any rights hereunder
unless such waiver shall be in writing and signed by such parties.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered into between
the Borrower, the Guarantors and each of the Agents, with the prior written
consent of the Required Lenders (except as otherwise provided in the Credit
Agreement).
111
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SECTION 7. Notices. All communications and notices hereunder shall
be in writing and given as provided in the Guarantee Agreement and addressed as
specified therein.
SECTION 8. Binding Agreement; Assignments. Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party, and all covenants,
promises and agreements by or on behalf of the parties that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns. Neither the Borrower nor any Guarantor may assign or
transfer any of its rights or obligations hereunder (and any such attempted
assignment or transfer shall be void) without the prior written consent of the
Required Lenders. Notwithstanding the foregoing, at the time any Guarantor is
released from its obligations under the Guarantee Agreement in accordance with
such Guarantee Agreement and the Credit Agreement, such Guarantor will cease to
have any rights or obligations under this Agreement.
SECTION 9. Survival of Agreement; Severability. (a) All covenants
and agreements made by the Borrower and each Guarantor herein and in the
certificates or other instruments prepared or delivered in connection with this
Agreement or the other Loan Documents shall be considered to have been relied
upon by the Agents, the other Secured Parties and each Guarantor and shall
survive the making by the Lenders of the Loans and the issuance of the Letters
of Credit by the Issuing Bank, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loans or any other fee
or amount payable under the Credit Agreement or this Agreement or under any of
the other Loan Documents is outstanding and unpaid or the LC Exposure does not
equal zero and as long as the Commitments have not been terminated.
(b) In case any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, no
party hereto shall be required to comply with such provision for so long as
such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 10. Counterparts. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract. This Agreement shall be effective with
respect to any Guarantor when a counterpart bearing the signature of such
Guarantor shall have been delivered to the Collateral Agent. Delivery of an
executed signature page to this Agreement by facsimile transmission shall be as
effective as delivery of a manually signed counterpart of this Agreement.
SECTION 11. Rules of Interpretation. The rules of interpretation
specified in Section 1.03 of the Credit Agreement shall be applicable to this
Agreement.
112
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SECTION 12. Additional Guarantors. Pursuant to Section 5.12 of the
Credit Agreement, each Borrower Subsidiary that was not in existence or not
such a Borrower Subsidiary on the date of the Credit Agreement is required to
enter into the Guarantee Agreement as a Guarantor upon becoming such a Borrower
Subsidiary. Upon execution and delivery, after the date hereof, by the
Collateral Agent and such a Borrower Subsidiary of an instrument in the form of
Annex 1 hereto, such Borrower Subsidiary shall become a Guarantor hereunder
with the same force and effect as if originally named as a Guarantor hereunder.
The execution and delivery of any instrument adding an additional Guarantor as
a party to this Agreement shall not require the consent of any Guarantor
hereunder. The rights and obligations of each Guarantor hereunder shall remain
in full force and effect notwithstanding the addition of any new Guarantor as a
party to this Agreement.
SECTION 13. Intercreditor Agreement. The Agent, on behalf of the
Secured Parties, and the Guarantors acknowledge that all such rights of
indemnity and subrogation that the Guarantors may have pursuant to this
Indemnity, Subrogation and Contribution Agreement are subject to the provisions
of the Intercreditor Agreement, including the provisions therein subordinating
such rights to certain other obligations of the Guarantors. Notwithstanding
anything to the contrary contained herein, the rights, duties and obligations
of the Agent are subject to the provisions of the Intercreditor Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the date first appearing
above.
HECHINGER INVESTMENT COMPANY OF DELAWARE,
INC.,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
EACH OF THE BORROWER SUBSIDIARIES LISTED ON
SCHEDULE I HERETO, as a Guarantor,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Authorized Officer
THE CHASE MANHATTAN BANK, as
Administrative Agent and as Collateral Agent,
by
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Director
114
SCHEDULE I
to the Indemnity Subrogation
and Contribution Agreement
Guarantors
Name Address
115
Annex 1 to
the Indemnity, Subrogation and
Contribution Agreement
SUPPLEMENT NO. dated as of [ ], to the
Indemnity, Subrogation and Contribution Agreement
dated as of December 31, 1998 (as the same may be
amended, supplemented or otherwise modified from time
to time, the "Indemnity, Subrogation and Contribution
Agreement"), among HECHINGER INVESTMENT COMPANY OF
DELAWARE, INC., a Delaware corporation (the
"Borrower"), each Borrower Subsidiary listed on
Schedule I thereto (the "Guarantors"), THE CHASE
MANHATTAN BANK, a New York banking corporation
("Chase"), as administrative agent (in such capacity,
the "Administrative Agent") and as collateral agent
(in such capacity, the "Collateral Agent" and, in its
capacity as both Administrative Agent and Collateral
Agent, the "Agent") for the Secured Parties (as
defined in the Credit Agreement referred to below).
A. Reference is made to (a) the Credit Agreement dated as of December
31, 1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among (i) the Borrower, (ii) CENTERS HOLDINGS, INC., a
Delaware corporation, BSQ ACQUISITION, INC., a Delaware corporation, BSQ
TRANSFEREE CORP., a Delaware corporation, HECHINGER COMPANY, a Delaware
corporation, HECHINGER STORES COMPANY, a Delaware corporation, HECHINGER STORES
EAST COAST COMPANY, a Delaware corporation (collectively, the "Parent
Guarantors"), (iii) the lenders from time to time party thereto (the
"Lenders"), and (iv) the Agent, (b) the Credit Agreement dated as of September
26, 1997, as amended and restated as of December 31, 1998 (as amended,
supplemented or otherwise modified from time to time, the "Existing Credit
Agreement"), among the Borrower, the Parent Guarantors, the lenders from time
to time party thereto (the "Existing Lenders"), Chase, as administrative
agent, collateral agent, issuing bank and swingline lender thereunder,
BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation ("BABC"), as
documentation agent and as borrowing base audit agent thereunder, and CITICORP
USA, INC., a Delaware corporation ("Citicorp USA" and, together with Chase and
BABC, each solely in its capacity as an agent under the Existing Credit
Agreement, the "Senior Agents"), as syndication agent thereunder, (c) the
Subsidiary Guarantee Agreement dated as of December 31, 1998 between the
Guarantors and the Agents (as amended, supplemented or otherwise modified from
time to time, the "Guarantee Agreement") and (d) the Intercreditor Agreement
dated as of December 31, 1998 (as amended, supplemented or otherwise modified
from time to time, the "Intercreditor Agreement"), among the Borrower,
Holdings, the Subsidiary Loan Parties, the Senior Agents, the Agent, Green
Equity Investors II, L.P. and Kmart Corporation. Capitalized terms used herein
and not defined herein shall have the meanings assigned to such terms in the
Credit Agreement.
B. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Indemnity, Subrogation
and Contribution Agreement and the Credit Agreement.
C. The Borrower and the Guarantors have entered into the Indemnity,
Subrogation and Contribution Agreement in order to induce the Lenders to make
Loans and the Issuing Bank to issue Letters of Credit. Pursuant to Section 5.12
of the Credit Agreement, each Borrower Subsidiary that was not in existence or
not such a Borrower Subsidiary on the date of the Credit Agreement is required
to enter into the Guarantee Agreement as a Guarantor upon becoming a Borrower
Subsidiary. Section 12 of the Indemnity, Subrogation and Contribution
Agreement provides that additional Borrower Subsidiaries may become Guarantors
under the Indemnity, Subrogation and Contribution Agreement by execution and
delivery of an instrument in the form of this Supplement. The undersigned
Borrower Subsidiary (the "New Guarantor") is executing this Supplement in
accordance with the requirements of the Credit Agreement to become a Guarantor
under the Indemnity, Subrogation and Contribution Agreement in order to induce
the Lenders to make additional Loans and the Issuing Bank to issue additional
Letters of Credit and as consideration for Loans previously made and Letters of
Credit previously issued.
116
Accordingly, the Collateral Agent and the New Guarantor agree as
follows:
SECTION 1. In accordance with Section 12 of the Indemnity,
Subrogation and Contribution Agreement, the New Guarantor by its signature
below becomes a Guarantor under the Indemnity, Subrogation and Contribution
Agreement with the same force and effect as if originally named therein as a
Guarantor and the New Guarantor hereby agrees to all the terms and provisions
of the Indemnity, Subrogation and Contribution Agreement applicable to it as a
Guarantor thereunder. Each reference to a "Guarantor" in the Indemnity,
Subrogation and Contribution Agreement shall be deemed to include the New
Guarantor. The Indemnity, Subrogation and Contribution Agreement is hereby
incorporated herein by reference.
SECTION 2. The New Guarantor represents and warrants to the
Collateral Agent and the other Secured Parties that this Supplement has been
duly authorized, executed and delivered by it and constitutes its legal, valid
and binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Collateral
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Guarantor and the Collateral Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. Except as expressly supplemented hereby, the Indemnity,
Subrogation and Contribution Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in
this Supplement should be held invalid, illegal or unenforceable in any
respect, neither party hereto shall be required to comply with such provision
for so long as such provision is held to be invalid, illegal or unenforceable,
but the validity, legality and enforceability of the remaining provisions
contained herein and in the Indemnity, Subrogation and Contribution Agreement
shall not in any way be affected or impaired. The parties hereto shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7. All communications and notices hereunder shall be in
writing and given as provided in Section 7 of the Indemnity, Subrogation and
Contribution Agreement. All communications and notices hereunder to the New
Guarantor shall be given to it at the address set forth under its signature.
SECTION 8. The New Guarantor agrees to reimburse the Collateral Agent
for its reasonable and documented out-of-pocket expenses in connection with
this Supplement, including the reasonable and documented fees, other charges
and disbursements of counsel for the Collateral Agent.
IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have
duly executed this Supplement to the Indemnity, Subrogation and Contribution
Agreement as of the day and year first above written.
[Name Of New Guarantor],
by
-------------------------
Name:
Title:
Address:
117
THE CHASE MANHATTAN BANK, as Administrative
and as Collateral Agent,
by
--------------------------------------------
Name:
Title:
118
SCHEDULE I
to Supplement No.___ to the Indemnity
Subrogation and Contribution Agreement
Guarantors
Name Address
119
EXHIBIT G
CONFORMED COPY
PLEDGE AGREEMENT dated as of December 31, 1998, among
HECHINGER INVESTMENT COMPANY OF DELAWARE, INC., a
Delaware corporation (the "Borrower"), CENTERS
HOLDINGS, INC., a Delaware corporation ("Holdings"),
BSQ ACQUISITION, INC., a Delaware corporation ("BSQ
Acqco"), BSQ TRANSFEREE CORP., a Delaware corporation
("BSQ Newco"), HECHINGER COMPANY, a Delaware
corporation ("Hechinger"), HECHINGER STORES COMPANY,
a Delaware corporation ("Hechinger Stores"),
HECHINGER STORES EAST COAST COMPANY, a Delaware
corporation ("Hechinger Stores East Coast"), each
other Subsidiary of Holdings listed on Schedule I
hereto (each such other Subsidiary, individually, a
"Subsidiary Pledgor" and, collectively, the
"Subsidiary Pledgors"; the Borrower, Holdings, BSQ
Acqco, BSQ Newco, Hechinger, Hechinger Stores,
Hechinger Stores East Coast and the Subsidiary
Pledgors are referred to collectively herein as the
"Pledgors") and THE CHASE MANHATTAN BANK, a New York
banking corporation ("Chase"), as collateral agent
(in such capacity, the "Collateral Agent") for the
Secured Parties (as defined in the Credit Agreement
referred to below).
Reference is made to (a) the Credit Agreement dated as of December 31,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among (i) the Borrower, (ii) Holdings, BSQ Acqco, BSQ
Newco, Hechinger, Hechinger Stores, Hechinger Stores East Coast (collectively,
the "Parent Guarantors"), (iii) the lenders from time to time party thereto
(the "Lenders") and (iv) the Agent, (b) the Credit Agreement dated as of
September 26, 1997, as amended and restated as of December 31, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Existing
Credit Agreement"), among the Borrower, the Parent Guarantors, the lenders from
time to time party thereto (the "Existing Lenders"), Chase, as administrative
agent, collateral agent (in such capacity, the "Senior Collateral Agent"),
issuing bank and swingline lender thereunder, BANKAMERICA BUSINESS CREDIT,
INC., a Delaware corporation ("BABC"), as documentation agent and as borrowing
base audit agent thereunder, and CITICORP USA, INC., a Delaware corporation
("Citicorp USA" and, together with Chase and BABC, each solely in its capacity
as an agent under the Existing Credit Agreement, the "Senior Agents"), as
syndication agent thereunder, (c) the Parent Guarantee Agreement dated as of
December 31, 1998 (as amended, supplemented or otherwise modified from time to
time), among the Parent Guarantors and the Agent, (d) the Subsidiary Guarantee
Agreement dated as of December 31, 1998 (as amended, supplemented or otherwise
modified from time to time), among the Subsidiary Pledgors and the Agent and
(e) the Intercreditor Agreement dated as of December 31, 1998 (as amended,
supplemented or otherwise modified from time to time, the "Intercreditor
Agreement"), among the Borrower, Holdings, the Subsidiary Loan Parties, the
Senior Agents, the Collateral Agent, Green Equity Investors II, L.P. and Kmart
Corporation. Capitalized terms used herein and not defined herein shall have
the meanings assigned to such terms in the Credit Agreement.
The Lenders have agreed to make Loans to the Borrower, and the Issuing
Bank has agreed to issue Letters of Credit for the account of the Borrower,
pursuant to, and upon the terms and subject to the conditions specified in, the
Credit Agreement. Holdings, BSQ Acqco, BSQ Newco, Hechinger, Hechinger Stores
and the Subsidiary Guarantors have agreed to guarantee, among other things, all
the obligations of the Borrower under the Credit Agreement. The obligations of
the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit
are conditioned upon, among other things, the execution and delivery by the
Pledgors of a Pledge Agreement in the form hereof to secure (a) the due and
punctual payment by the Borrower of (i) the principal of and premium, if any,
and interest (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether such interest is allowed or allowable as a claim in such proceeding) on
the Loans,
120
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when and as due, whether at maturity, by acceleration, upon one or more dates
set for prepayment or otherwise, (ii) each payment required to be made by the
Borrower under the Credit Agreement in respect of any Letter of Credit, when
and as due, including payments in respect of reimbursement of disbursements,
interest thereon and obligations to provide cash collateral, and (iii) all
other monetary obligations, including fees, costs, expenses and indemnities,
whether primary, secondary, direct, contingent, fixed or otherwise (including
monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
such monetary obligations are allowed or allowable as a claim in such
proceeding), of the Borrower to the Secured Parties under the Credit Agreement
and the other Loan Documents, (b) the due and punctual performance of all
covenants, agreements, obligations and liabilities of the Borrower under or
pursuant to the Credit Agreement and the other Loan Documents and (c) the due
and punctual payment and performance of all the covenants, agreements,
obligations and liabilities of each Loan Party under or pursuant to this
Agreement and the other Loan Documents (all the monetary and other obligations
described in the preceding clauses (a) through (c) being collectively called
the "Obligations").
Accordingly, the Pledgors and the Collateral Agent, on behalf of
itself and each Secured Party (and each of their respective successors or
assigns), hereby agree as follows:
SECTION 1. Pledge. As security for the payment and performance, as
the case may be, in full of the Obligations, each Pledgor hereby transfers,
grants, bargains, sells, conveys, hypothecates, pledges, sets over and delivers
unto the Collateral Agent, its successors and assigns, and hereby grants to the
Collateral Agent, its successors and assigns, for the ratable benefit of the
Secured Parties, a security interest in all of the Pledgor's right, title and
interest in, to and under (a) the shares of capital stock or other equity
interest (including any equity interest in any joint venture listed on Schedule
III hereto (the "Joint Ventures")) owned by it and listed on Schedule II hereto
and any shares of capital stock or other equity interest of or any Subsidiary
or Joint Ventures obtained in the future by the Pledgor and the certificates
representing all such shares or equity interest (the "Pledged Stock"), provided
that the Pledged Stock shall not include (i) more than 65% of the issued and
outstanding shares of stock of any Foreign Subsidiary or (ii) to the extent
that applicable law requires that a Subsidiary of the Pledgor issue directors'
qualifying shares, such qualifying shares; (b)(i) the debt securities listed
opposite the name of the Pledgor on Schedule II hereto, (ii) any debt
securities in the future issued to the Pledgor and (iii) the promissory notes
and any other instruments evidencing such debt securities (the "Pledged Debt
Securities"); (c) all other property that may be delivered to and held by the
Collateral Agent pursuant to the terms hereof; (d) subject to Section 5, all
payments of principal or interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed, in
respect of, in exchange for or upon the conversion of the securities referred
to in clauses (a) and (b) above; (e) subject to Section 5, all rights and
privileges of the Pledgor with respect to the securities and other property
referred to in clauses (a), (b), (c) and (d) above; and (f) all proceeds of any
of the foregoing (the items referred to in clauses (a) through (f) above being
collectively referred to as the "Collateral"). Upon delivery to the Collateral
Agent, (a) any stock certificates, notes or other securities now or hereafter
included in the Collateral (the "Pledged Securities") shall be accompanied by
stock powers duly executed in blank or other instruments of transfer
satisfactory to the Collateral Agent and by such other instruments and
documents as the Collateral Agent may reasonably request and (b) all other
property comprising part of the Collateral shall be accompanied by proper
instruments of assignment duly executed by the applicable Pledgor and such
other instruments or documents as the Collateral Agent may reasonably request.
Each delivery of Pledged Securities shall be accompanied by a schedule
describing the securities theretofore and then being pledged hereunder, which
schedule shall be attached hereto as Schedule II and made a part hereof. Each
schedule so delivered shall supersede any prior schedules so delivered.
TO HAVE AND TO HOLD the Collateral, together with all right, title,
interest, powers, privileges and preferences pertaining or incidental thereto,
unto the Collateral Agent, its successors and assigns, for
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the ratable benefit of the Secured Parties, forever; subject, however, to the
terms, covenants and conditions hereinafter set forth.
SECTION 2. Delivery of the Collateral. (a) Each Pledgor agrees
promptly to deliver or cause to be delivered to the Collateral Agent any and
all Pledged Securities, and any and all certificates or other instruments or
documents representing the Collateral.
(b) Each Pledgor will cause any Indebtedness for borrowed money owed
to the Pledgor by any person to be evidenced by a duly executed promissory note
that is pledged and delivered to the Collateral Agent pursuant to the terms
thereof.
SECTION 3. Representations, Warranties and Covenants. Each Pledgor
hereby represents, warrants and covenants, as to itself and the Collateral
pledged by it hereunder, to and with the Collateral Agent that:
(a) the Pledged Stock represents that percentage as set forth
on Schedule II of the issued and outstanding shares of each class of
the capital stock or other equity interest of the issuer with respect
thereto;
(b) except for the security interest granted hereunder and the
first-priority Lien granted to the Senior Collateral Agent for the
benefit of the Existing Lenders, the Pledgor (i) is and will at all
times continue to be the direct owner, beneficially and of record, of
the Pledged Securities indicated on Schedule II, (ii) holds the same
free and clear of all Liens, (iii) will make no assignment, pledge,
hypothecation or transfer of, or create or permit to exist any
security interest in or other Lien on, the Collateral, other than
pursuant hereto, and (iv) subject to Section 5, will cause any and all
Collateral, whether for value paid by the Pledgor or otherwise, to be
forthwith deposited with the Collateral Agent and pledged or assigned
hereunder;
(c) the Pledgor (i) has the power and authority to pledge the
Collateral in the manner hereby done or contemplated and (ii) will
defend its title or interest thereto or therein against any and all
Liens (other than the Lien created by this Agreement), however
arising, of all persons whomsoever;
(d) no consent of any other person (including stockholders or
creditors of any Pledgor) and no consent or approval of any
Governmental Authority or any securities exchange was or is necessary
to the validity of the pledge effected hereby;
(e) by virtue of the execution and delivery by the Pledgors of
this Agreement, when the Pledged Securities, certificates or other
documents representing or evidencing the Collateral are delivered to
the Collateral Agent in accordance with this Agreement, the Collateral
Agent will obtain a valid and perfected first lien upon and security
interest in such Pledged Securities as security for the payment and
performance of the Obligations;
(f) the pledge effected hereby is effective to vest in the
Collateral Agent, on behalf of the Secured Parties, the rights of the
Collateral Agent in the Collateral as set forth herein;
(g) all the Pledged Stock has been duly authorized and validly
issued and is fully paid and nonassessable;
(h) all information set forth herein relating to the Pledged
Stock is accurate and complete in all material respects as of the date
hereof; and
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(i) the pledge of the Pledged Stock pursuant to this Agreement
does not violate Regulation G, T, U or X or any successor thereto as
of the date hereof.
SECTION 4. Registration in Nominee Name; Denominations. The
Collateral Agent, on behalf of the Secured Parties, shall have the right (in
its sole and absolute discretion) to hold the Pledged Securities in its own
name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the
name of the Pledgors, endorsed or assigned in blank or in favor of the
Collateral Agent. Each Pledgor will promptly give to the Collateral Agent
copies of any notices or other communications received by it with respect to
Pledged Securities registered in the name of such Pledgor. Following an Event
of Default, the Collateral Agent shall have the right to exchange the
certificates representing Pledged Securities for certificates of smaller or
larger denominations for any purpose consistent with this Agreement.
SECTION 5. Voting Rights; Dividends and Interest, etc. (a) Unless
and until an Event of Default shall have occurred and be continuing:
(i) Each Pledgor shall be entitled to exercise any and all
voting and/or other consensual rights and powers inuring to an owner
of Pledged Securities or any part thereof for any purpose consistent
with the terms of this Agreement, the Credit Agreement and the other
Loan Documents; provided, however, that such Pledgor will not be
entitled to exercise any such right if the result thereof could
materially and adversely affect the rights inuring to a holder of the
Pledged Securities or the rights and remedies of any of the Secured
Parties under this Agreement or the Credit Agreement or any other Loan
Document or the ability of the Secured Parties to exercise the same.
(ii) The Collateral Agent shall execute and deliver to each
Pledgor, or cause to be executed and delivered to each Pledgor, all
such proxies, powers of attorney and other instruments as such Pledgor
may reasonably request for the purpose of enabling such Pledgor to
exercise the voting and/or consensual rights and powers it is entitled
to exercise pursuant to subparagraph (i) above and to receive the cash
dividends it is entitled to receive pursuant to subparagraph (iii)
below.
(iii) Each Pledgor shall be entitled to receive and retain any
and all cash dividends, interest and principal paid on the Pledged
Securities to the extent and only to the extent that such cash
dividends, interest and principal are permitted by, and otherwise paid
in accordance with, the terms and conditions of the Credit Agreement,
the other Loan Documents and applicable laws. All noncash dividends,
interest and principal, and all dividends, interest and principal paid
or payable in cash or otherwise in connection with a partial or total
liquidation or dissolution, return of capital, capital surplus or
paid-in surplus, and all other distributions (other than distributions
referred to in the preceding sentence) made on or in respect of the
Pledged Securities, whether paid or payable in cash or otherwise,
whether resulting from a subdivision, combination or reclassification
of the outstanding capital stock of the issuer of any Pledged
Securities or received in exchange for Pledged Securities or any part
thereof, or in redemption thereof, or as a result of any merger,
consolidation, acquisition or other exchange of assets to which such
issuer may be a party or otherwise, shall be and become part of the
Collateral, and, if received by any Pledgor, shall not be commingled
by such Pledgor with any of its other funds or property but shall be
held separate and apart therefrom, shall be held in trust for the
benefit of the Collateral Agent and shall be forthwith delivered to
the Collateral Agent in the same form as so received (with any
necessary endorsement).
(b) Upon the occurrence and during the continuance of an Event of
Default, all rights of any Pledgor to dividends, interest or principal that
such Pledgor is authorized to receive pursuant to paragraph (a)(iii) above
shall cease, and all such rights shall thereupon become vested in the
Collateral Agent, which shall have the sole and exclusive right and authority
to receive and retain such dividends,
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interest or principal. All dividends, interest or principal received by the
Pledgor contrary to the provisions of this Section 5 shall be held in trust for
the benefit of the Collateral Agent, shall be segregated from other property or
funds of such Pledgor and shall be forthwith delivered to the Collateral Agent
upon demand in the same form as so received (with any necessary endorsement).
Any and all money and other property paid over to or received by the Collateral
Agent pursuant to the provisions of this paragraph (b) shall be retained by the
Collateral Agent in an account to be established by the Collateral Agent upon
receipt of such money or other property and shall be applied in accordance with
the provisions of Section 7. After all Events of Default have been cured or
waived, the Collateral Agent shall, within five Business Days after all such
Events of Default have been cured or waived, repay to each Pledgor all cash
dividends, interest or principal (without interest), that such Pledgor would
otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii)
above and which remain in such account.
(c) Upon the occurrence and during the continuance of an Event of
Default, all rights of any Pledgor to exercise the voting and consensual rights
and powers it is entitled to exercise pursuant to paragraph (a)(i) of this
Section 5, and the obligations of the Collateral Agent under paragraph (a)(ii)
of this Section 5, shall cease, and all such rights shall thereupon become
vested in the Collateral Agent, which shall have the sole and exclusive right
and authority to exercise such voting and consensual rights and powers,
provided that, unless otherwise directed by the Required Lenders, the
Collateral Agent shall have the right from time to time following and during
the continuance of an Event of Default to permit the Pledgors to exercise such
rights. After all Events of Default have been cured or waived, such Pledgor
will have the right to exercise the voting and consensual rights and powers
that it would otherwise be entitled to exercise pursuant to the terms of
paragraph (a)(i) above.
SECTION 6. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, subject to applicable regulatory and legal
requirements, the Collateral Agent may sell the Collateral, or any part
thereof, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as the
Collateral Agent shall deem appropriate. The Collateral Agent shall be
authorized at any such sale (if it deems it advisable to do so) to restrict the
prospective bidders or purchasers to persons who will represent and agree that
they are purchasing the Collateral for their own account for investment and not
with a view to the distribution or sale thereof, and upon consummation of any
such sale the Collateral Agent shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold. Each
such purchaser at any such sale shall hold the property sold absolutely free
from any claim or right on the part of any Pledgor, and, to the extent
permitted by applicable law, the Pledgors hereby waive all rights of
redemption, stay, valuation and appraisal any Pledgor now has or may at any
time in the future have under any rule of law or statute now existing or
hereafter enacted.
The Collateral Agent shall give a Pledgor 10 days' prior written
notice (which each Pledgor agrees is reasonable notice within the meaning of
Section 9-504(3) of the Uniform Commercial Code as in effect in the State of
New York or its equivalent in other jurisdictions) of the Collateral Agent's
intention to make any sale of such Pledgor's Collateral. Such notice, in the
case of a public sale, shall state the time and place for such sale and, in the
case of a sale at a broker's board or on a securities exchange, shall state the
board or exchange at which such sale is to be made and the day on which the
Collateral, or portion thereof, will first be offered for sale at such board or
exchange. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Collateral Agent may
fix and state in the notice of such sale. At any such sale, the Collateral, or
portion thereof, to be sold may be sold in one lot as an entirety or in
separate parcels, as the Collateral Agent may (in its sole and absolute
discretion) determine. The Collateral Agent shall not be obligated to make any
sale of any Collateral if it shall determine not to do so, regardless of the
fact that notice of sale of such Collateral shall have been given. The
Collateral Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. In case any
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sale of all or any part of the Collateral is made on credit or for future
delivery, the Collateral so sold may be retained by the Collateral Agent until
the sale price is paid in full by the purchaser or purchasers thereof, but the
Collateral Agent shall not incur any liability in case any such purchaser or
purchasers shall fail to take up and pay for the Collateral so sold and, in
case of any such failure, such Collateral may be sold again upon like notice.
At any public (or, to the extent permitted by applicable law, private) sale
made pursuant to this Section 6, any Secured Party may bid for or purchase,
free from any right of redemption, stay or appraisal on the part of any Pledgor
(all said rights being also hereby waived and released), the Collateral or any
part thereof offered for sale and may make payment on account thereof by using
any claim then due and payable to it from such Pledgor as a credit against the
purchase price, and it may, upon compliance with the terms of sale, hold,
retain and dispose of such property without further accountability to such
Pledgor therefor. For purposes hereof, (a) a written agreement to purchase the
Collateral or any portion thereof shall be treated as a sale thereof, (b) the
Collateral Agent shall be free to carry out such sale pursuant to such
agreement and (c) such Pledgor shall not be entitled to the return of the
Collateral or any portion thereof subject thereto, notwithstanding the fact
that after the Collateral Agent shall have entered into such an agreement all
Events of Default shall have been remedied and the Obligations paid in full.
As an alternative to exercising the power of sale herein conferred upon it, the
Collateral Agent may proceed by a suit or suits at law or in equity to
foreclose upon the Collateral and to sell the Collateral or any portion thereof
pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any
sale pursuant to the provisions of this Section 6 shall be deemed to conform to
the commercially reasonable standards as provided in Section 9-504(3) of the
Uniform Commercial Code as in effect in the State of New York or its equivalent
in other jurisdictions.
SECTION 7. Application of Proceeds of Sale. The proceeds of any sale
of Collateral pursuant to Section 6, as well as any Collateral consisting of
cash, shall be applied by the Collateral Agent as follows:
FIRST, to the payment of all costs and expenses incurred by
the Collateral Agent in connection with such sale or otherwise in
connection with this Agreement, any other Loan Document or any of the
Obligations, including all court costs and the reasonable and
documented fees and expenses of its agents and legal counsel, the
repayment of all advances made by the Collateral Agent hereunder or
under any other Loan Document on behalf of any Pledgor and any other
reasonable and documented costs or expenses incurred in connection
with the exercise of any right or remedy hereunder or under any other
Loan Document;
SECOND, to the payment in full of the Obligations (the amounts
so applied to be distributed among the Secured Parties pro rata in
accordance with the amounts of the Obligations owed to them on the
date of any such distribution); and
THIRD, to the Pledgors, their successors or assigns, or as a
court of competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the purchase money by the Collateral Agent or of the officer
making the sale shall be a sufficient discharge to the purchaser or purchasers
of the Collateral so sold and such purchaser or purchasers shall not be
obligated to see to the application of any part of the purchase money paid over
to the Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.
SECTION 8. Reimbursement of Collateral Agent. (a) Each Pledgor
agrees to pay upon demand to the Collateral Agent the amount of any and all
reasonable and documented expenses, including the reasonable and documented
fees, other charges and disbursements of its counsel and of any experts or
agents, that the Collateral Agent may incur in connection with (i) the
administration of this Agreement,
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(ii) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of the Collateral Agent hereunder or (iv) the failure by such
Pledgor to perform or observe any of the provisions hereof.
(b) Without limitation of its indemnification obligations under the
other Loan Documents, each Pledgor agrees to indemnify the Collateral Agent and
the Indemnitees (as defined in Section 9.03 of the Credit Agreement) against,
and hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including reasonable and documented counsel
fees, other charges and disbursements, incurred by or asserted against any
Indemnitee arising out of, in any way connected with, or as a result of (i) the
execution or delivery of this Agreement or any other Loan Document or any
agreement or instrument contemplated hereby or thereby, the performance by the
parties hereto of their respective obligations thereunder or the consummation
of the Transactions and the other transactions contemplated thereby or (ii) any
claim, litigation, investigation or proceeding relating to any of the
foregoing, whether or not any Indemnitee is a party thereto, provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses resulted from the
gross negligence or wilful misconduct of such Indemnitee or any Affiliate of
such Indemnitee (or of any officer, director, employee, advisor or agent of
such Indemnitee or any of such Indemnitee's Affiliates).
(c) Any amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 8 shall remain operative and in full force and effect
regardless of the termination of this Agreement, the consummation of the
transactions contemplated hereby, the repayment of any of the Obligations, the
invalidity or unenforceability of any term or provision of this Agreement or
any other Loan Document or any investigation made by or on behalf of the
Collateral Agent or any other Secured Party. All amounts due under this
Section 8 shall be payable on written demand therefor and shall bear interest
at the rate specified in Section 2.12 of the Credit Agreement.
SECTION 9. Collateral Agent Appointed Attorney-in-Fact. Each Pledgor
hereby appoints the Collateral Agent the attorney-in-fact of such Pledgor for
the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instrument that the Collateral Agent may deem
necessary or advisable to accomplish the purposes hereof, which appointment is
irrevocable and coupled with an interest. Without limiting the generality of
the foregoing, the Collateral Agent shall have the right, upon the occurrence
and during the continuance of an Event of Default, with full power of
substitution either in the Collateral Agent's name or in the name of such
Pledgor, to ask for, demand, ▇▇▇ for, collect, receive and give acquittance for
any and all moneys due or to become due under and by virtue of any Collateral,
to endorse checks, drafts, orders and other instruments for the payment of
money payable to the Pledgor representing any interest or dividend or other
distribution payable in respect of the Collateral or any part thereof or on
account thereof and to give full discharge for the same, to settle, compromise,
prosecute or defend any action, claim or proceeding with respect thereto, and
to sell, assign, endorse, pledge, transfer and to make any agreement
respecting, or otherwise deal with, the same; provided, however, that nothing
herein contained shall be construed as requiring or obligating the Collateral
Agent to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by the Collateral Agent, or to present or
file any claim or notice, or to take any action with respect to the Collateral
or any part thereof or the moneys due or to become due in respect thereof or
any property covered thereby. The Collateral Agent and the other Secured
Parties shall be accountable only for amounts actually received as a result of
the exercise of the powers granted to them herein, and neither they nor their
officers, directors, employees or agents shall be responsible to any Pledgor
for any act or failure to act hereunder, except for their own gross negligence
or wilful misconduct.
SECTION 10. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right
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or power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent
hereunder and of the other Secured Parties under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provisions of this Agreement or consent to
any departure by any Pledgor therefrom shall in any event be effective unless
the same shall be permitted by paragraph (b) below, and then such waiver or
consent shall be effective only in the specific instance and for the purpose
for which given. No notice or demand on any Pledgor in any case shall entitle
such Pledgor to any other or further notice or demand in similar or other
circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered into between
the Collateral Agent and the Pledgor or Pledgors with respect to which such
waiver, amendment or modification is to apply, subject to any consent required
in accordance with Section 9.02 of the Credit Agreement.
SECTION 11. Securities Act, etc. In view of the position of the
Pledgors in relation to the Pledged Securities, or because of other current or
future circumstances, a question may arise under the Securities Act of 1933, as
now or hereafter in effect, or any similar statute hereafter enacted analogous
in purpose or effect (such Act and any such similar statute as from time to
time in effect being called the "Federal Securities Laws") with respect to any
disposition of the Pledged Securities permitted hereunder. Each Pledgor
understands that compliance with the Federal Securities Laws might very
strictly limit the course of conduct of the Collateral Agent if the Collateral
Agent were to attempt to dispose of all or any part of the Pledged Securities,
and might also limit the extent to which or the manner in which any subsequent
transferee of any Pledged Securities could dispose of the same. Similarly,
there may be other legal restrictions or limitations affecting the Collateral
Agent in any attempt to dispose of all or part of the Pledged Securities under
applicable Blue Sky or other state securities laws or similar laws analogous in
purpose or effect. Each Pledgor recognizes that in light of such restrictions
and limitations the Collateral Agent may, with respect to any sale of the
Pledged Securities, limit the purchasers to those who will agree, among other
things, to acquire such Pledged Securities for their own account, for
investment, and not with a view to the distribution or resale thereof. Each
Pledgor acknowledges and agrees that in light of such restrictions and
limitations, the Collateral Agent, in its sole and absolute discretion, (a) may
proceed to make such a sale whether or not a registration statement for the
purpose of registering such Pledged Securities or part thereof shall have been
filed under the Federal Securities Laws and (b) may approach and negotiate with
a single potential purchaser to effect such sale. Each Pledgor acknowledges
and agrees that any such sale might result in prices and other terms less
favorable to the seller than if such sale were a public sale without such
restrictions. In the event of any such sale, the Collateral Agent shall incur
no responsibility or liability for selling all or any part of the Pledged
Securities at a price that the Collateral Agent, in its sole and absolute
discretion, may in good ▇▇▇▇▇ ▇▇▇▇ reasonable under the circumstances,
notwithstanding the possibility that a substantially higher price might have
been realized if the sale were deferred until after registration as aforesaid
or if more than a single purchaser were approached. The provisions of this
Section 11 will apply notwithstanding the existence of a public or private
market upon which the quotations or sales prices may exceed substantially the
price at which the Collateral Agent sells.
SECTION 12. Registration, etc. Each Pledgor agrees that, upon the
occurrence and during the continuance of an Event of Default hereunder, if for
any reason the Collateral Agent desires to sell any of the Pledged Securities
of the Borrower at a public sale, it will, at any time and from time to time,
upon the written request of the Collateral Agent, use its best efforts to take
or to cause the issuer of such Pledged Securities to take such action and
prepare, distribute and/or file such documents, as are required or advisable in
the reasonable opinion of counsel for the Collateral Agent to permit the public
sale of such Pledged Securities. Each Pledgor further agrees to indemnify,
defend and hold harmless the Collateral Agent, each other Secured Party, any
underwriter and their respective officers, directors, affiliates and
controlling persons from and against all loss, liability, expenses, costs of
counsel (including reasonable and documented fees and expenses to the
Collateral Agent of legal counsel), and claims (including the
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reasonable and documented costs of investigation) that they may incur insofar
as such loss, liability, expense or claim arises out of or is based upon any
alleged untrue statement of a material fact contained in any prospectus (or any
amendment or supplement thereto) or in any notification or offering circular,
or arises out of or is based upon any alleged omission to state a material fact
required to be stated therein or necessary to make the statements in any
thereof not misleading, except insofar as the same may have been caused by any
untrue statement or omission based upon information furnished in writing to
such Pledgor or the issuer of such Pledged Securities by the Collateral Agent
or any other Secured Party expressly for use therein. Each Pledgor further
agrees, upon such written request referred to above, to use its best efforts to
qualify, file or register, or cause the issuer of such Pledged Securities to
qualify, file or register, any of the Pledged Securities under the Blue Sky or
other securities laws of such states as may be requested by the Collateral
Agent and keep effective, or cause to be kept effective, all such
qualifications, filings or registrations. Each Pledgor will bear all costs and
expenses of carrying out its obligations under this Section 12. Each Pledgor
acknowledges that there is no adequate remedy at law for failure by it to
comply with the provisions of this Section 12 and that such failure would not
be adequately compensable in damages, and therefore agrees that its agreements
contained in this Section 12 may be specifically enforced.
SECTION 13. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the grant of a security interest in the Collateral and all
obligations of each Pledgor hereunder, shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the Credit
Agreement, any other Loan Document, any agreement with respect to any of the
Obligations or any other agreement or instrument relating to any of the
foregoing, (b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Credit Agreement, any other Loan
Document or any other agreement or instrument relating to any of the foregoing,
(c) any exchange, release or nonperfection of any other collateral, or any
release or amendment or waiver of or consent to or departure from any guaranty,
for all or any of the Obligations or (d) any other circumstance that might
otherwise constitute a defense available to, or a discharge of, any Pledgor in
respect of the Obligations or in respect of this Agreement (other than the
indefeasible payment in full of all the Obligations).
SECTION 14. Termination or Release. (a) This Agreement and the
security interests granted hereby shall terminate when all the Obligations have
been indefeasibly paid in full in cash and the Lenders have no further
commitment to lend under the Credit Agreement, the LC Exposure has been reduced
to zero and the Issuing Bank has no further obligation to issue Letters of
Credit under the Credit Agreement.
(b) Upon any sale or other transfer by any Pledgor of any Collateral
that is permitted under the Credit Agreement to any person that is not a
Pledgor, or, upon the effectiveness of any written consent to the release of
the security interest granted hereby in any Collateral pursuant to Section
9.02(b) of the Credit Agreement, the security interest in such Collateral shall
be automatically released.
(c) In connection with any termination or release pursuant to
paragraph (a) or (b) above, the Collateral Agent shall execute and deliver to
any Pledgor, at such Pledgor's expense, all documents that such Pledgor shall
reasonably request to evidence such termination or release. Any execution and
delivery of documents pursuant to this Section 14 shall be without recourse to
or warranty by the Collateral Agent.
SECTION 15. Notices. All communications and notices hereunder shall
be in writing and given as provided in Section 9.01 of the Credit Agreement.
All communications and notices hereunder to any Subsidiary Pledgor shall be
given to it in care of the Borrower.
SECTION 16. Further Assurances. Each Pledgor agrees to do such
further acts and things, and to execute and deliver such additional
conveyances, assignments, agreements and instruments, as the Collateral Agent
may at any time reasonably request in connection with the administration and
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enforcement of this Agreement or with respect to the Collateral or any part
thereof or in order better to assure and confirm unto the Collateral Agent its
rights and remedies hereunder.
SECTION 17. Binding Effect; Several Agreement; Assignments. Whenever
in this Agreement any of the parties hereto is referred to, such reference
shall be deemed to include the successors and assigns of such party, and all
covenants, promises and agreements by or on behalf of any Pledgor that are
contained in this Agreement shall bind and inure to the benefit of its
successors and assigns. This Agreement shall become effective as to any Pledgor
when a counterpart hereof executed on behalf of such Pledgor shall have been
delivered to the Collateral Agent and a counterpart hereof shall have been
executed on behalf of the Collateral Agent, and thereafter shall be binding
upon such Pledgor and the Collateral Agent and their respective successors and
assigns, and shall inure to the benefit of such Pledgor, the Collateral Agent
and the other Secured Parties, and their respective successors and assigns,
except that no Pledgor shall have the right to assign its rights hereunder or
any interest herein or in the Collateral (and any such attempted assignment
shall be void), except as expressly contemplated by this Agreement or the other
Loan Documents. If all the capital stock of a Pledgor is sold, transferred or
otherwise disposed of to a person that is not an Affiliate of the Borrower
pursuant to a transaction permitted by Section 6.05 of the Credit Agreement,
such Pledgor shall be released from its obligations under this Agreement
without further action. This Agreement shall be construed as a separate
agreement with respect to each Pledgor and may be amended, modified,
supplemented, waived or released with respect to any Pledgor without the
approval of any other Pledgor and without affecting the obligations of any
other Pledgor hereunder.
SECTION 18. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made by each Pledgor herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Collateral Agent and the other Secured Parties and
shall survive the making by the Lenders of the Loans and the issuance of the
Letters of Credit by the Issuing Bank, regardless of any investigation made by
the Secured Parties or on their behalf, and shall continue in full force and
effect as long as the principal of or any accrued interest on any Loan or any
other fee or amount payable under this Agreement or any other Loan Document is
outstanding and unpaid or the LC Exposure does not equal zero and as long as
the Commitments have not been terminated.
(b) In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being
understood that the invalidity of a particular provision in a particular
jurisdiction shall not in and of itself affect the validity of such provision
in any other jurisdiction). The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
SECTION 19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 20. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute a single contract, and shall
become effective as provided in Section 17. Delivery of an executed
counterpart of a signature page to this Agreement by facsimile transmission
shall be as effective as delivery of a manually executed counterpart of this
Agreement.
SECTION 21. Rules of Interpretation. The rules of interpretation
specified in Section 1.03 of the Credit Agreement shall be applicable to this
Agreement. Section headings used herein are for convenience of reference only,
are not part of this Agreement and are not to affect the construction of, or to
be taken into consideration in interpreting this Agreement.
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SECTION 22. Jurisdiction; Consent to Service of Process. (a) Each
Pledgor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of the Supreme Court of the State of
New York sitting in New York County and of the United States District Court of
the Southern District of New York, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to this Agreement or any
other Loan Document, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by law, in such
Federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement or any other Loan Document shall affect any right
that the Collateral Agent or any other Secured Party may otherwise have to
bring any action or proceeding relating to this Agreement or any other Loan
Document against any Pledgor or its properties in the courts of any
jurisdiction.
(b) Each Pledgor irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or any other Loan Document in any
court referred to in paragraph (a) of this Section other than a court referred
to in the last sentence of paragraph (a) that is not referred to elsewhere in
paragraph (a). Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 15. Nothing in this
Agreement or any other Loan Document will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 23. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF
ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 23.
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SECTION 24. Additional Pledgors. Pursuant to Section 5.12 of the
Credit Agreement, each Borrower Subsidiary that was not in existence or not a
Borrower Subsidiary on the date of the Credit Agreement is required to enter in
this Agreement as a Subsidiary Pledgor upon becoming a Borrower Subsidiary.
Upon execution and delivery by the Collateral Agent and a Borrower Subsidiary
of an instrument in the form of Annex 1, such Borrower Subsidiary shall become
a Subsidiary Pledgor hereunder with the same force and effect as if originally
named as a Subsidiary Pledgor herein. The execution and delivery of such
instrument shall not require the consent of any Pledgor hereunder. The rights
and obligations of each Pledgor hereunder shall remain in full force and effect
notwithstanding the addition of any new Subsidiary Pledgor as a party to this
Agreement.
SECTION 25. Intercreditor Agreement. The Collateral Agent, on behalf
of the Secured Parties, acknowledges that the pledge of each Pledgor made
pursuant to this Pledge Agreement is subject to the provisions of the
Intercreditor Agreement, including the provisions therein subordinating such
pledges to certain other obligations of the Pledgors. Notwithstanding anything
to the contrary contained herein, the rights, duties and obligations of the
Collateral Agent are subject to the provisions of the Intercreditor Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
HECHINGER INVESTMENT COMPANY OF DELAWARE, INC.,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
CENTERS HOLDINGS, INC.,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
BSQ ACQUISITION, INC.,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
BSQ TRANSFEREE CORP.,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
HECHINGER COMPANY,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
HECHINGER STORES COMPANY,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
HECHINGER STORES EAST COAST COMPANY,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
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Title: Executive Vice President
THE SUBSIDIARY PLEDGORS LISTED ON SCHEDULE I
HERETO,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Authorized Officer
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15
THE CHASE MANHATTAN BANK, as Collateral Agent,
by
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Director
134
Schedule I to the
Pledge Agreement
SUBSIDIARY PLEDGORS
Name Address
135
Schedule II to the
Pledge Agreement
CAPITAL STOCK
Number of Registered Owner Number and Percentage
Issuer Certificate ------ Class of Shares of Shares
------ ----------- --------------- ---------
DEBT SECURITIES
Issuer Principal Amount Date of Note Maturity Date
136
Schedule III to the
Pledge Agreement
JOINT VENTURES
Name Description
137
Annex 1 to the
Pledge Agreement
SUPPLEMENT NO. dated as of , to the
PLEDGE AGREEMENT dated as of December 31, 1998, among
HECHINGER INVESTMENT COMPANY OF DELAWARE, INC., a
Delaware corporation (the "Borrower"), CENTERS
HOLDINGS, INC., a Delaware corporation ("Holdings"),
BSQ ACQUISITION, INC., a Delaware corporation ("BSQ
Acqco"), BSQ TRANSFEREE CORP., a Delaware corporation
("BSQ Newco"), HECHINGER COMPANY, a Delaware
corporation ("Hechinger"), HECHINGER STORES COMPANY,
a Delaware corporation ("Hechinger Stores"),
HECHINGER STORES EAST COAST COMPANY, a Delaware
corporation ("Hechinger Stores East Coast"), each
other Subsidiary of Holdings listed on Schedule I
thereto (each such other Subsidiary, individually, a
"Subsidiary Pledgor" and, collectively, the
"Subsidiary Pledgors"; the Borrower, Holdings, BSQ
Acqco, BSQ Newco, Hechinger, Hechinger Stores,
Hechinger Stores East Coast and the Subsidiary
Pledgors are referred to collectively herein as the
"Pledgors") and THE CHASE MANHATTAN BANK, a New York
banking corporation ("Chase"), as collateral agent
(in such capacity, the "Collateral Agent") for the
Secured Parties (as defined in the Credit Agreement
referred to below).
A. Reference is made to (a) the Credit Agreement dated as of December
31, 1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among (i) the Borrower, (ii) Holdings, BSQ Acqco, BSQ
Newco, Hechinger, Hechinger Stores, Hechinger Stores East Coast (collectively,
the "Parent Guarantors"), (iii) the lenders from time to time party thereto
(the "Lenders") and (iv) the Agent, (b) the Credit Agreement dated as of
September 26, 1997, as amended and restated as of December 31, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Existing
Credit Agreement"), among the Borrower, the Parent Guarantors, the lenders from
time to time party thereto (the "Existing Lenders"), Chase, as administrative
agent, collateral agent (in such capacity, the "Senior Collateral Agent"),
issuing bank and swingline lender thereunder, BANKAMERICA BUSINESS CREDIT,
INC., a Delaware corporation ("BABC"), as documentation agent and as borrowing
base audit agent thereunder, and CITICORP USA, INC., a Delaware corporation
("Citicorp USA" and, together with Chase and BABC, each solely in its capacity
as an agent under the Existing Credit Agreement, the "Senior Agents"), as
syndication agent thereunder, (c) the Parent Guarantee Agreement dated as of
December 31, 1998 (as amended, supplemented or otherwise modified from time to
time), among the Parent Guarantors and the Agent, (d) the Subsidiary Guarantee
Agreement dated as of December 31, 1998 (as amended, supplemented or otherwise
modified from time to time), among the Subsidiary Pledgors and the Agent and
(e) the Intercreditor Agreement dated as of December 31, 1998 (as amended,
supplemented or otherwise modified from time to time, the "Intercreditor
Agreement"), among the Borrower, Holdings, the Subsidiary Loan Parties, the
Senior Agents, the Collateral Agent, Green Equity Investors II, L.P. and Kmart
Corporation.
B. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Credit Agreement.
C. The Pledgors have entered into the Pledge Agreement in order to
induce the Lenders to make Loans and the Issuing Bank to issue Letters of
Credit. Pursuant to Section 5.12 of the Credit Agreement, each Borrower
Subsidiary that was not in existence or not a Borrower Subsidiary on the date
of the Credit Agreement is required to enter into the Pledge Agreement as a
Subsidiary Pledgor upon becoming a Subsidiary. Section 24 of the Pledge
Agreement provides that such Borrower Subsidiaries may become Subsidiary
Pledgors under the Pledge Agreement by execution and delivery of an instrument
in the form of this Supplement. The undersigned Borrower Subsidiary (the "New
Pledgor") is executing this Supplement in accordance with the requirements of
the Credit Agreement to become a Subsidiary Pledgor under the Pledge Agreement
in order to induce the Lenders to make additional Loans and the Issuing Bank to
issue
138
additional Letters of Credit and as consideration for Loans previously made and
Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Pledgor agree as
follows:
SECTION 1. In accordance with Section 24 of the Pledge Agreement, the
New Pledgor by its signature below becomes a Pledgor under the Pledge Agreement
with the same force and effect as if originally named therein as a Pledgor and
the New Pledgor hereby (a) agrees to all the terms and provisions of the Pledge
Agreement applicable to it as a Pledgor thereunder and (b) represents and
warrants that the representations and warranties made by it as a Pledgor
thereunder are true and correct on and as of the date hereof. In furtherance
of the foregoing, the New Pledgor, as security for the payment and performance
in full of the Obligations (as defined in the Pledge Agreement), does hereby
create and grant to the Collateral Agent, its successors and assigns, for the
benefit of the Secured Parties, their successors and assigns, a security
interest in and lien on all the New Pledgor's right, title and interest in and
to the Collateral (as defined in the Pledge Agreement) of the New Pledgor.
Each reference to a "Subsidiary Pledgor" or a "Pledgor" in the Pledge Agreement
shall be deemed to include the New Pledgor. The Pledge Agreement is hereby
incorporated herein by reference.
SECTION 2. The New Pledgor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts, each of
which shall constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when the
Collateral Agent shall have received counterparts of this Supplement that, when
taken together, bear the signatures of the New Pledgor and the Collateral
Agent. Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. The New Pledgor hereby represents and warrants that set
forth on Schedule I attached hereto is a true and correct schedule of all its
Pledged Securities.
SECTION 5. Except as expressly supplemented hereby, the Pledge
Agreement shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. In case any one or more of the provisions contained in
this Supplement should be held invalid, illegal or unenforceable in any
respect, neither party hereto shall be required to comply with such provision
for so long as such provision is held to be invalid, illegal or unenforceable,
but the validity, legality and enforceability of the remaining provisions
contained herein and in the Pledge Agreement shall not in any way be affected
or impaired. The parties hereto shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 8. All communications and notices hereunder shall be in
writing and given as provided in Section 15 of the Pledge Agreement. All
communications and notices hereunder to the New Pledgor shall be given to it
[at the address set forth under its signature hereto][in care of the Borrower].
139
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SECTION 9. The New Pledgor agrees to reimburse the Collateral Agent
for its reasonable and documented out-of-pocket expenses in connection with
this Supplement, including the reasonable and documented fees, other charges
and disbursements of counsel for the Collateral Agent.
IN WITNESS WHEREOF, the New Pledgor and the Collateral Agent have duly
executed this Supplement to the Pledge Agreement as of the day and year first
above written.
[Name of New Pledgor],
by
---------------------------------
Name:
Title:
Address:
THE CHASE MANHATTAN BANK, as Collateral
Agent,
by
---------------------------------
Name:
Title:
140
Schedule I to
Supplement No.
to the Pledge Agreement
Pledged Securities of the New Pledgor
CAPITAL STOCK
Number of Registered Owner Number and Percentage
Issuer Certificate ------ Class of Shares of Shares
------ ----------- --------------- ---------
DEBT SECURITIES
Issuer Principal Amount Date of Note Maturity Date
141
EXHIBIT H
CONFORMED COPY
SECURITY AGREEMENT dated as of December 31, 1998
among HECHINGER INVESTMENT COMPANY OF DELAWARE, INC., a
Delaware corporation (the "Borrower"), CENTERS HOLDINGS, INC.,
a Delaware corporation ("Holdings"), BSQ ACQUISITION, INC., a
Delaware corporation ("BSQ Acqco"), BSQ TRANSFEREE CORP., a
Delaware corporation ("BSQ Newco"), HECHINGER COMPANY, a
Delaware corporation ("Hechinger"), HECHINGER STORES COMPANY,
a Delaware corporation ("Hechinger Stores"), HECHINGER STORES
EAST COAST COMPANY, a Delaware corporation ("Hechinger Stores
East Coast"), each other Subsidiary of Holdings listed on
Schedule I hereto (each of Holdings, BSQ Acqco, BSQ Newco,
Hechinger, Hechinger Stores, Hechinger Stores East Coast and
each such other Subsidiary, individually, a "Guarantor" and,
collectively, the "Guarantors"; the Guarantors and the
Borrower are referred to collectively herein as the
"Grantors") and THE CHASE MANHATTAN BANK, a New York banking
corporation ("Chase"), as administrative agent (in such
capacity, the "Administrative Agent") and as collateral agent
(in such capacity, the "Collateral Agent" and, in its capacity
as both Administrative Agent and Collateral Agent, the
"Agent") for the Secured Parties (as defined herein).
Reference is made to (a) the Credit Agreement dated as of December 31,
1998, (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among (i) the Borrower, (ii) Holdings, BSQ Acqco, BSQ
Newco, Hechinger, Hechinger Stores, Hechinger Stores East Coast (collectively,
the "Parent Guarantors"), (iii) the lenders from time to time party thereto
(the "Lenders") and (iv) the Agent, (b) the Parent Guarantee Agreement dated as
of December 31, 1998 (as amended, supplemented or otherwise modified from time
to time), among the Parent Guarantors and the Agent, (c) the Subsidiary
Guarantee Agreement dated as of December 31, 1998 (as amended, supplemented or
otherwise modified from time to time), among the Guarantors listed on schedule
I hereto and the Agent, (d) the Credit Agreement dated as of September 26,
1997, as amended and restated as of December 31, 1998 (as amended, supplemented
or otherwise modified from time to time, the "Existing Credit Agreement"),
among the Borrower, the Parent Guarantors, the lenders from time to time party
thereto (the "Existing Lenders"), Chase, as administrative agent, collateral
agent, issuing bank and swingline lender thereunder, BANKAMERICA BUSINESS
CREDIT, INC., a Delaware corporation ("BABC"), as documentation agent and as
borrowing base audit agent thereunder, and CITICORP USA, INC., a Delaware
corporation ("Citicorp USA" and, together with Chase and BABC, each solely in
its capacity as an agent under the Existing Credit Agreement, the "Senior
Agents"), as syndication agent thereunder, and (e) the Intercreditor Agreement
dated as of December 31, 1998 (as amended, supplemented or otherwise modified
from time to time, the "Intercreditor Agreement"), among the Borrower,
Holdings, the Subsidiary Loan Parties, the Senior Agents, the Agent, Green
Equity Investors II, L.P. and Kmart Corporation.
The Lenders have agreed to make Loans to the Borrower, and the Issuing
Bank has agreed to issue Letters of Credit for the account of the Borrower,
pursuant to, and upon the terms and subject to the conditions specified in, the
Credit Agreement. Each of the Guarantors has agreed to guarantee, among other
things, all the obligations of the Borrower under the Credit Agreement. The
obligations of the Lenders to make Loans and of the Issuing Bank to issue
Letters of Credit are conditioned upon, among other things, the execution and
delivery by the Grantors of an agreement in the form hereof to secure (a) the
due and punctual payment by the Borrower of (i) the principal of and premium,
if any, and interest (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether such interest is allowed or allowable as a claim in such proceeding) on
the Loans, when and as due, whether at maturity, by acceleration, upon one or
more dates set for prepayment or otherwise, (ii) each payment required to be
made by the Borrower under the Credit Agreement in respect of any Letter of
Credit, when and as due, including payments in respect of reimbursement of
disbursements, interest thereon and obligations to provide cash collateral and
(iii) all other monetary obligations, including fees, costs, expenses and
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indemnities, whether primary, secondary, direct, contingent, fixed or otherwise
(including monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
such monetary obligations are allowed or allowable as a claim in such
proceeding), of the Borrower to the Secured Parties under the Credit Agreement
and the other Loan Documents, (b) the due and punctual performance of all
covenants, agreements, obligations and liabilities of the Borrower under or
pursuant to the Credit Agreement and the other Loan Documents and (c) the due
and punctual payment and performance of all the covenants, agreements,
obligations and liabilities of each Loan Party under or pursuant to this
Agreement and the other Loan Documents (all the monetary and other obligations
described in the preceding clauses (a) through (c) being collectively called
the "Obligations").
Accordingly, the Grantors and the Collateral Agent, on behalf of
itself and each Secured Party (and each of their respective successors or
assigns), hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definition of Terms Used Herein. Unless the context
otherwise requires, all capitalized terms used but not defined herein shall
have the meanings set forth in the Credit Agreement and all references to the
Uniform Commercial Code shall mean the Uniform Commercial Code in effect in the
State of New York as of the date hereof.
SECTION 1.02. Definition of Certain Terms Used Herein. As used herein,
the following terms shall have the following meanings:
"Account Debtor" shall mean any person who is or who may become
obligated to any Grantor under, with respect to or on account of an Account.
"Accounts" shall mean any and all right, title and interest of any
Grantor to payment for goods and services sold or leased, including any such
right evidenced by chattel paper, whether due or to become due, whether or not
it has been earned by performance, and whether now or hereafter acquired or
arising in the future, including accounts receivable from Affiliates of the
Grantors.
"Accounts Receivable" shall mean all Accounts and all right, title and
interest in any returned goods, together with all rights, titles, securities
and guarantees with respect thereto, including any rights to stoppage in
transit, replevin, reclamation and resales, and all related security interests,
liens and pledges, whether voluntary or involuntary, in each case whether now
existing or owned or hereafter arising or acquired.
"Collateral" shall mean all (a) Accounts Receivable, (b) Documents,
(c) Equipment, (d) General Intangibles, (e) Inventory, (f) cash and cash
accounts (including each of the Collection Deposit Accounts), (g) Investment
Property and (h) Proceeds.
"Collection Deposit Account" shall mean any deposit account of a
Grantor maintained for the benefit of the Secured Parties with the Collateral
Agent or with a Sub-Agent pursuant to a Depository Agreement.
"Commodity Account" shall mean an account maintained by a Commodity
Intermediary in which a Commodity Contract is carried out for a Commodity
Customer.
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"Commodity Contract" shall mean a commodity futures contract, an
option on a commodity futures contract, a commodity option or any other
contract that, in each case, is (a) traded on or subject to the rules of a
board of trade that has been designated as a contract market for such a
contract pursuant to the federal commodities laws or (b) traded on a foreign
commodity board of trade, exchange or market, and is carried on the books of a
Commodity Intermediary for a Commodity Customer.
"Commodity Customer" shall mean a person for whom a Commodity
Intermediary carries a Commodity Contract on its books.
"Commodity Intermediary" shall mean (a) a person who is registered as
a futures commission merchant under the federal commodities laws or (b) a
person who in the ordinary course of its business provides clearance or
settlement services for a board of trade that has been designated as a contract
market pursuant to federal commodities laws.
"Concentration Account" shall mean the cash collateral account
established at the office of The Chase Manhattan Bank located at ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, in the name of the Collateral Agent, Account No.
323-515355.
"Copyright License" shall mean any written agreement, now or
hereafter in effect, granting any right to any third party under any Copyright
now or hereafter owned by any Grantor or which such Grantor otherwise has the
right to license, or granting any right to such Grantor under any Copyright now
or hereafter owned by any third party, and all rights of such Grantor under any
such agreement.
"Copyrights" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all copyright rights in any work subject to the
copyright laws of the United States or any other country, whether as author,
assignee, transferee or otherwise, and (b) all registrations and applications
for registration of any such copyright in the United States or any other
country, including registrations, recordings, supplemental registrations and
pending applications for registration in the United States Copyright Office,
including those listed on Schedule II.
"Credit Agreement" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"Depository Agreement" shall mean a Depository Agreement substantially
in the form of Annex 1 hereto among the Borrower, the Collateral Agent and a
Sub-Agent.
"Depository System" shall have the meaning assigned to such term in
Section 5.01.
"Documents" shall mean all instruments, files, records, ledger sheets
and documents covering or relating to any of the Collateral.
"Entitlement Holder" shall mean a person identified in the records of
a Securities Intermediary as the person having a Security Entitlement against
the Securities Intermediary. If a person acquires a Security Entitlement by
virtue of Section 8-501(b)(2) or (3) of the Uniform Commercial Code, such
person is the Entitlement Holder.
"Equipment" shall mean all equipment, furniture and furnishings, and
all tangible personal property similar to any of the foregoing, including
tools, parts and supplies of every kind and description, and all improvements,
accessions or appurtenances thereto, that are now or hereafter owned by any
Grantor. The term "Equipment" shall include Fixtures.
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4
"Existing Credit Agreement" shall have the meaning assigned to such
term in the preliminary statement of this Agreement.
"Financial Asset" shall mean (a) a Security, (b) an obligation of a
person or a share, participation or other interest in a person or in property
or an enterprise of a person, which is, or is of a type, dealt with in or
traded on financial markets, or which is recognized in any area in which it is
issued or dealt in as a medium for investment or (c) any property that is held
by a Securities Intermediary for another person in a Securities Account if the
Securities Intermediary has expressly agreed with the other person that the
property is to be treated as a Financial Asset under Article 8 of the Uniform
Commercial Code. As the context requires, the term Financial Asset shall mean
either the interest itself or the means by which a person's claim to it is
evidenced, including a certificated or uncertificated security, a certificate
representing a Security or a Security Entitlement.
"Fixtures" shall mean all items of Equipment, whether now owned or
hereafter acquired, of any Grantor that become so related to particular real
estate that an interest in them arises under any real estate law applicable
thereto.
"General Fund Account" shall mean the general fund account established
at the office of The Chase Manhattan located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇, in the name of the Borrower, Account No. 323-071287.
"General Intangibles" shall mean all choses in action and causes of
action and all other assignable intangible personal property of any Grantor of
every kind and nature (other than Accounts Receivable) now owned or hereafter
acquired by any Grantor, including all rights and interests in partnerships,
limited partnerships, limited liability companies and other unincorporated
entities, corporate or other business records, indemnification claims, contract
rights (including rights under leases, whether entered into as lessor or
lessee, Hedging Agreements and other agreements), Intellectual Property,
goodwill, registrations, franchises, tax refund claims and any letter of
credit, guarantee, claim, security interest or other security held by or
granted to any Grantor to secure payment by an Account Debtor of any of the
Accounts Receivable.
"Intellectual Property" shall mean all intellectual and similar
property of any Grantor of every kind and nature now owned or hereafter
acquired by any Grantor, including inventions, designs, Patents, Copyrights,
Licenses, Trademarks, trade secrets, confidential or proprietary technical and
business information, know-how, show-how or other data or information, software
and databases and all embodiments or fixations thereof and related
documentation, registrations and franchises, and all additions, improvements
and accessions to, and books and records describing or used in connection with,
any of the foregoing.
"Inventory" shall mean all goods of any Grantor, whether now owned or
hereafter acquired, held for sale or lease, or furnished or to be furnished by
any Grantor under contracts of service, or consumed in any Grantor's business,
including raw materials, intermediates, work in process, packaging materials,
finished goods, semi-finished inventory, scrap inventory, manufacturing
supplies and spare parts, and all such goods that have been returned to or
repossessed by or on behalf of any Grantor.
"Investment Property" shall mean all Securities (whether certificated
or uncertificated), Security Entitlements, Securities Accounts, Commodity
Contracts and Commodity Accounts of any Grantor, whether now owned or hereafter
acquired by any Grantor.
"License" shall mean any Patent License, Trademark License, Copyright
License or other license or sublicense to which any Grantor is a party,
including those listed on Schedule III (other than those
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license agreements in existence on the date hereof and listed on Schedule III
and those license agreements entered into after the date hereof that by their
terms prohibit assignment or a grant of a security interest by such Grantor as
licensee thereunder).
"Obligations" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"Overdraft" means, at any time, the amount by which the aggregate
amount debited from any deposit, concentration, operating or disbursement
account (including any Collection Deposit Account, the Concentration Account
and the General Fund Account) maintained by the Borrower or any other Grantor
with any Lender or any Affiliate of any Lender, as a result of processing of
payment orders issued by the Borrower or such Grantor or otherwise, exceeds the
aggregate funds on deposit in such account.
"Patent License" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to make, use or sell any
invention on which a Patent, now or hereafter owned by any Grantor or which any
Grantor otherwise has the right to license, is in existence, or granting to any
Grantor any right to make, use or sell any invention on which a Patent, now or
hereafter owned by any third party, is in existence, and all rights of any
Grantor under any such agreement.
"Patents" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all letters patent of the United States or any
other country, all registrations and recordings thereof, and all applications
for letters patent of the United States or any other country, including
registrations, recordings and pending applications in the United States Patent
and Trademark Office or any similar offices in any other country, including
those listed on Schedule IV, and (b) all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof, and the inventions
disclosed or claimed therein, including the right to make, use and/or sell the
inventions disclosed or claimed therein.
"Perfection Certificate" shall mean a certificate substantially in the
form of Annex 2 hereto, completed and supplemented with the schedules and
attachments contemplated thereby, and duly executed by a Financial Officer and
the chief legal officer of the Borrower.
"Proceeds" shall mean any consideration received from the sale,
exchange, license, lease or other disposition of any asset or property that
constitutes Collateral, any value received as a consequence of the possession
of any Collateral and any payment received from any insurer or other person or
entity as a result of the destruction, loss, theft, damage or other involuntary
conversion of whatever nature of any asset or property which constitutes
Collateral, and shall include (a) all cash and negotiable instruments received
by or held on behalf of the Collateral Agent, (b) any claim of any Grantor
against any third party for (and the right to ▇▇▇ and recover for and the
rights to damages or profits due or accrued arising out of or in connection
with) (i) past, present or future infringement of any Patent now or hereafter
owned by any Grantor, or licensed under a Patent License, (ii) past, present or
future infringement or dilution of any Trademark now or hereafter owned by any
Grantor or licensed under a Trademark License or injury to the goodwill
associated with or symbolized by any Trademark now or hereafter owned by any
Grantor, (iii) past, present or future breach of any License and (iv) past,
present or future infringement of any Copyright now or hereafter owned by any
Grantor or licensed under a Copyright License and (c) any and all other amounts
from time to time paid or payable under or in connection with any of the
Collateral.
"Secured Parties" shall mean (a) the Lenders, (b) the Administrative
Agent, (c) the Collateral Agent, (d) the Documentation Agent, (e) the Borrowing
Base Audit Agent, (f) the Syndication Agent, (g) the Issuing Bank, (h) the
beneficiaries of each indemnification obligation undertaken by any Grantor
under any Loan Document and (i) the successors and assigns of each of the
foregoing.
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"Securities" shall mean any obligations of an issuer or any shares,
participations or other interests in an issuer or in property or an enterprise
of an issuer which (a) are represented by a certificate representing a security
in bearer or registered form, or the transfer of which may be registered upon
books maintained for that purpose by or on behalf of the issuer, (b) are one of
a class or series or by its terms is divisible into a class or series of
shares, participations, interests or obligations and (c)(i) are, or are of a
type, dealt with or traded on securities exchanges or securities markets or
(ii) are a medium for investment and by their terms expressly provide that they
are a security governed by Article 8 of the Uniform Commercial Code.
"Securities Account" shall mean an account to which a Financial Asset
is or may be credited in accordance with an agreement under which the person
maintaining the account undertakes to treat the person for whom the account is
maintained as entitled to exercise rights that comprise the Financial Asset.
"Securities Intermediary" shall mean (a) a clearing corporation or (b)
a person, including a bank or broker, that in the ordinary course of its
business maintains Securities Accounts for others and is acting in that
capacity.
"Security Entitlements" shall mean the rights and property interests
of an Entitlement Holder with respect to a Financial Asset.
"Security Interest" shall have the meaning assigned to such term in
Section 2.01.
"Sub-Agent" shall mean a financial institution which shall have
delivered to the Collateral Agent an executed Depository Agreement.
"Trademark License" shall mean any written agreement, now or hereafter
in effect, granting to any third party any right to use any Trademark now or
hereafter owned by any Grantor or which any Grantor otherwise has the right to
license, or granting to any Grantor any right to use any Trademark now or
hereafter owned by any third party, and all rights of any Grantor under any
such agreement.
"Trademarks" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all trademarks, service marks, trade names,
corporate names, company names, business names, fictitious business names,
trade styles, trade dress, logos, other source or business identifiers, designs
and general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all registration and
recording applications filed in connection therewith, including registrations
and registration applications in the United States Patent and Trademark Office,
any State of the United States or any similar offices in any other country or
any political subdivision thereof, and all extensions or renewals thereof,
including those listed on Schedule V, (b) all goodwill associated therewith or
symbolized thereby and (c) all other assets, rights and interests that uniquely
reflect or embody such goodwill.
SECTION 1.03. Rules of Interpretation. The rules of interpretation
specified in Section 1.03 of the Credit Agreement shall be applicable to this
Agreement.
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ARTICLE II
Security Interest
SECTION 2.01. Security Interest. As security for the payment or
performance, as the case may be, in full of the Obligations, each Grantor
hereby bargains, sells, conveys, assigns, sets over, mortgages, pledges,
hypothecates and transfers to the Collateral Agent, its successors and assigns,
for the ratable benefit of the Secured Parties, and hereby grants to the
Collateral Agent, its successors and assigns, for the ratable benefit of the
Secured Parties, a security interest in, all of such Grantor's right, title and
interest in, to and under the Collateral (the "Security Interest"). Without
limiting the foregoing, the Collateral Agent is hereby authorized to file one
or more financing statements (including fixture filings), continuation
statements, filings with the United States Patent and Trademark Office or
United States Copyright Office (or any successor office or any similar office
in any other country) or other documents for the purpose of perfecting,
confirming, continuing, enforcing or protecting the Security Interest granted
by each Grantor, without the signature of any Grantor, and naming any Grantor
or the Grantors as debtors and the Collateral Agent as secured party.
SECTION 2.02. No Assumption of Liability. The Security Interest is
granted as security only and shall not subject the Collateral Agent or any
other Secured Party to, or in any way alter or modify, any obligation or
liability of any Grantor with respect to or arising out of the Collateral.
ARTICLE III
Representations and Warranties
The Grantors jointly and severally represent and warrant to the
Collateral Agent and the Secured Parties that:
SECTION 3.01. Title and Authority. Each Grantor has good and valid
rights in and title to the Collateral with respect to which it has purported to
grant a Security Interest hereunder and has full power and authority to grant
to the Collateral Agent the Security Interest in such Collateral pursuant
hereto and to execute, deliver and perform its obligations in accordance with
the terms of this Agreement, without the consent or approval of any other
person other than any consent or approval which has been obtained.
SECTION 3.02. Filings. (a) The Perfection Certificate has been duly
prepared, completed and executed and the information set forth therein is
correct and complete. Fully executed Uniform Commercial Code financing
statements (including fixture filings, as applicable) or other appropriate
filings, recordings or registrations containing a description of the Collateral
have been delivered to the Collateral Agent for filing in each governmental,
municipal or other office specified in Schedule 6 to the Perfection
Certificate, which are all the filings, recordings and registrations (other
than filings required to be made in the United States Patent and Trademark
Office and the United States Copyright Office in order to perfect the Security
Interest in Collateral consisting of United States Patents, Trademarks and
Copyrights) that are necessary to publish notice of and protect the validity of
and to establish a legal, valid and perfected security interest in favor of the
Collateral Agent (for the ratable benefit of the Secured Parties) in respect of
all Collateral in which the Security Interest may be perfected by filing,
recording or registration in the United States (or any political subdivision
thereof) and its territories and possessions, and no further or subsequent
filing, refiling, recording, rerecording, registration or reregistration is
necessary in any such jurisdiction, except as provided under applicable law
with respect to the filing of continuation statements.
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(b) Each Grantor represents and warrants that fully executed security
agreements in the form hereof and containing a description of all Collateral
consisting of Intellectual Property with respect to United States Patents and
United States registered Trademarks (and Trademarks for which United States
registration applications are pending) and United States registered Copyrights
have been delivered to the Collateral Agent for recording by the United States
Patent and Trademark Office and the United States Copyright Office pursuant to
35 U.S.C. Section 261, 15 U.S.C. Section 1060 or 17 U.S.C. Section 205 and the
regulations thereunder, as applicable, and otherwise as may be required
pursuant to the laws of any other necessary jurisdiction, to protect the
validity of and to establish a legal, valid and perfected security interest in
favor of the Collateral Agent (for the ratable benefit of the Secured Parties)
in respect of all Collateral consisting of Patents, Trademarks and Copyrights
in which a security interest may be perfected by filing, recording or
registration in the United States (or any political subdivision thereof) and
its territories and possessions, or in any other necessary jurisdiction, and no
further or subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary (other than such actions as are necessary to
perfect the Security Interest with respect to any Collateral consisting of
Patents, Trademarks and Copyrights (or registration or application for
registration thereof) acquired or developed after the date hereof).
SECTION 3.03. Validity of Security Interest. The Security Interest
constitutes (a) a legal and valid security interest in all the Collateral
securing the payment and performance of the Obligations, (b) subject to the
filings described in Section 3.02 above, a perfected security interest in all
Collateral in which a security interest may be perfected by filing, recording
or registering a financing statement or analogous document in the United States
(or any political subdivision thereof) and its territories and possessions
pursuant to the Uniform Commercial Code or other applicable law in such
jurisdictions and (c) a security interest that shall be perfected in all
Collateral in which a security interest may be perfected upon the receipt and
recording of this Agreement with the United States Patent and Trademark Office
and the United States Copyright Office, as applicable, within the three month
period (commencing as of the date hereof) pursuant to 35 U.S.C. Section 261 or
15 U.S.C. Section 1060 or the one month period (commencing as of the date
hereof) pursuant to 17 U.S.C. Section 205 and otherwise as may be required
pursuant to the laws of any other necessary jurisdiction. The Security
Interest is and shall be prior to any other Lien on any of the Collateral,
other than Liens expressly permitted to be prior to the Security Interest
pursuant to Section 6.02 of the Credit Agreement.
SECTION 3.04. Absence of Other Liens. The Collateral is owned by the
Grantors free and clear of any Lien, except for Liens expressly permitted
pursuant to Section 6.02 of the Credit Agreement. The Grantor has not filed or
consented to the filing of (a) any financing statement or analogous document
under the Uniform Commercial Code or any other applicable laws covering any
Collateral, (b) any assignment in which any Grantor assigns any Collateral or
any security agreement or similar instrument covering any Collateral with the
United States Patent and Trademark Office or the United States Copyright Office
or (c) any assignment in which any Grantor assigns any Collateral or any
security agreement or similar instrument covering any Collateral with any
foreign governmental, municipal or other office, which financing statement or
analogous document, assignment, security agreement or similar instrument is
still in effect, except, in each case, for Liens expressly permitted pursuant
to Section 6.02 of the Credit Agreement.
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ARTICLE IV
Covenants
SECTION 4.01. Change of Name; Location of Collateral; Records; Place
of Business. (a) Each Grantor agrees promptly to notify the Collateral Agent
in writing of any change (i) in its corporate name or in any trade name used to
identify it in the conduct of its business or in the ownership of its
properties, (ii) in the location of its chief executive office, its principal
place of business, any office in which it maintains books or records relating
to Collateral owned by it or any office or facility at which Collateral owned
by it is located (including the establishment of any such new office or
facility), (iii) in its identity or corporate structure or (iv) in its Federal
Taxpayer Identification Number. Each Grantor agrees not to effect or permit
any change referred to in the preceding sentence unless all filings have been
made under the Uniform Commercial Code or otherwise that are required in order
for the Collateral Agent to continue at all times following such change to have
a valid, legal and perfected first priority security interest in all the
Collateral. Each Grantor agrees promptly to notify the Collateral Agent if any
material portion of the Collateral owned or held by such Grantor is damaged or
destroyed.
(b) Each Grantor agrees to maintain, at its own cost and expense,
such complete and accurate records with respect to the Collateral owned by it
as is consistent with its current practices and in accordance with such prudent
and standard practices used in industries that are the same as or similar to
those in which such Grantor is engaged, but in any event to include complete
accounting records indicating all payments and proceeds received with respect
to any part of the Collateral, and, at such time or times as the Collateral
Agent may reasonably request, promptly to prepare and deliver to the Collateral
Agent a duly certified schedule or schedules in form and detail satisfactory to
the Collateral Agent showing the identity, amount and location of any and all
Collateral.
SECTION 4.02. Periodic Certification. Each year, at the time of
delivery of annual financial statements with respect to the preceding fiscal
year pursuant to Section 5.01 of the Credit Agreement, the Borrower shall
deliver to the Collateral Agent a certificate executed by a Financial Officer
and the chief legal officer of the Borrower (a) setting forth the information
required pursuant to Section 2 of the Perfection Certificate or confirming that
there has been no change in such information since the date of such certificate
or the date of the most recent certificate delivered pursuant to Section 4.02
and (b) certifying that all Uniform Commercial Code financing statements
(including fixture filings, as applicable) or other appropriate filings,
recordings or registrations, including all refilings, rerecordings and
reregistrations, containing a description of the Collateral have been filed of
record in each governmental, municipal or other appropriate office in each
jurisdiction identified pursuant to clause (a) above to the extent necessary to
protect and perfect the Security Interest for a period of not less than 18
months after the date of such certificate (except as noted therein with respect
to any continuation statements to be filed within such period and except for
any fixture filings not filed as of the Effective Date). Each certificate
delivered pursuant to this Section 4.02 shall identify in the format of
Schedule II, III, IV or V, as applicable, all Intellectual Property of any
Grantor in existence on the date thereof and not then listed on such Schedules
or previously so identified to the Collateral Agent.
SECTION 4.03. Protection of Security. Each Grantor shall, at its own
cost and expense, take any and all actions necessary to defend title to the
Collateral against all persons and to defend the Security Interest of the
Collateral Agent in the Collateral and the priority thereof against any Lien
not expressly permitted pursuant to Section 6.02 of the Credit Agreement.
SECTION 4.04. Further Assurances. Each Grantor agrees, at its own
expense, to execute, acknowledge, deliver and cause to be duly filed all such
further instruments and documents and take all such actions as the Collateral
Agent may from time to time request to better assure, preserve, protect and
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perfect the Security Interest and the rights and remedies created hereby,
including the payment of any fees and taxes required in connection with the
execution and delivery of this Agreement, the granting of the Security Interest
and the filing of any financing statements (including fixture filings) or other
documents in connection herewith or therewith. If any amount payable under or
in connection with any of the Collateral shall be or become evidenced by any
promissory note or other instrument, such note or instrument shall be
immediately pledged and delivered to the Collateral Agent, duly endorsed in a
manner satisfactory to the Collateral Agent.
Without limiting the generality of the foregoing, each Grantor hereby
authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to
supplement this Agreement by supplementing Schedule II, III, IV or V hereto or
adding additional schedules hereto to specifically identify any asset or item
that may constitute Copyrights, Licenses, Patents or Trademarks; provided,
however, that any Grantor shall have the right, exercisable within 10 days
after it has been notified by the Collateral Agent of the specific
identification of such Collateral, to advise the Collateral Agent in writing of
any inaccuracy of the representations and warranties made by such Grantor
hereunder with respect to such Collateral. Each Grantor agrees that it will
use its best efforts to take such action as shall be necessary in order that
all representations and warranties hereunder shall be true and correct with
respect to such Collateral within 30 days after the date it has been notified
by the Collateral Agent of the specific identification of such Collateral.
SECTION 4.05. Inspection and Verification. Following an Event of
Default and during the continuance thereof or otherwise in accordance with the
Credit Agreement, the Collateral Agent and such persons as the Collateral Agent
may reasonably designate shall have the right, at the Grantors' own cost and
expense, to inspect the Collateral, all records related thereto (and to make
extracts and copies from such records) and the premises upon which any of the
Collateral is located, to discuss the Grantors' affairs with the officers of
the Grantors and their independent accountants and to verify under reasonable
procedures the validity, amount, quality, quantity, value, condition and status
of, or any other matter relating to, the Collateral, including, in the case of
Accounts or Collateral in the possession of any third person, by contacting
Account Debtors or the third person possessing such Collateral for the purpose
of making such a verification. The Collateral Agent shall have the absolute
right to share any information it gains from such inspection or verification
with any Secured Party (it being understood that any such information shall be
deemed to be "Information" subject to the provisions of Section 9.12).
SECTION 4.06. Taxes; Encumbrances. At its option, on five days'
prior notice to the Borrower, the Collateral Agent may discharge past due
taxes, assessments, charges, fees, Liens, security interests or other
encumbrances at any time levied or placed on the Collateral and not permitted
pursuant to Section 6.02 of the Credit Agreement, and may pay for the
maintenance and preservation of the Collateral to the extent any Grantor fails
to do so as required by the Credit Agreement or this Agreement, and each
Grantor jointly and severally agrees to reimburse the Collateral Agent on
demand for any payment made or any expense incurred by the Collateral Agent
pursuant to the foregoing authorization; provided, however, that nothing in
this Section 4.06 shall be interpreted as excusing any Grantor from the
performance of, or imposing any obligation on the Collateral Agent or any
Secured Party to cure or perform, any covenants or other promises of any
Grantor with respect to taxes, assessments, charges, fees, liens, security
interests or other encumbrances and maintenance as set forth herein or in the
other Loan Documents.
SECTION 4.07. Assignment of Security Interest. If at any time any
Grantor shall take a security interest in any property of an Account Debtor or
any other person to secure payment and performance of an Account, such Grantor
shall promptly assign such security interest to the Collateral Agent. Such
assignment need not be filed of public record unless necessary to continue the
perfected status of the security interest against creditors of and transferees
from the Account Debtor or other person granting the security interest.
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SECTION 4.08. Continuing Obligations of the Grantors. Each Grantor
shall remain liable to observe and perform all the conditions and obligations
to be observed and performed by it under each contract, agreement or instrument
relating to the Collateral, all in accordance with the terms and conditions
thereof, and each Grantor jointly and severally agrees to indemnify and hold
harmless the Collateral Agent and the Secured Parties from and against any and
all liability for such performance.
SECTION 4.09. Use and Disposition of Collateral. None of the
Grantors shall make or permit to be made an assignment, pledge or hypothecation
of the Collateral or shall grant any other Lien in respect of the Collateral,
except as expressly permitted by Section 6.02 of the Credit Agreement. Except
as expressly permitted in the Credit Agreement, none of the Grantors shall make
or permit to be made any transfer of the Collateral and each Grantor shall
remain at all times in possession of the Collateral owned by it, except that
(a) Inventory may be sold in the ordinary course of business and (b) unless and
until the Collateral Agent shall notify the Grantors that an Event of Default
shall have occurred and be continuing and that during the continuance thereof
the Grantors shall not sell, convey, lease, assign, transfer or otherwise
dispose of any Collateral (which notice may be given by telephone if promptly
confirmed in writing), the Grantors may use and dispose of the Collateral in
any lawful manner not inconsistent with the provisions of this Agreement, the
Credit Agreement or any other Loan Document. Without limiting the generality
of the foregoing, each Grantor agrees that it shall not permit any Inventory to
be in the possession or control of any warehouseman, bailee, agent or processor
at any time unless such warehouseman, bailee, agent or processor shall have
been notified of the Security Interest and shall have agreed in writing to hold
the Inventory subject to the Security Interest and the instructions of the
Collateral Agent and to waive and release any Lien held by it with respect to
such Inventory, whether arising by operation of law or otherwise.
SECTION 4.10. Limitation on Modification of Accounts. None of the
Grantors will, without the Collateral Agent's prior written consent, grant any
extension of the time of payment of any of the Accounts Receivable, compromise,
compound or settle the same for less than the full amount thereof, release,
wholly or partly, any person liable for the payment thereof or allow any credit
or discount whatsoever thereon, other than extensions, credits, discounts,
compromises or settlements granted or made in the ordinary course of business
and consistent with its current practices and in accordance with such prudent
and standard practices used in industries that are the same as or similar to
those in which such Grantor is engaged.
SECTION 4.11. Insurance. (a) The Grantors shall (i) maintain or
shall cause to be maintained insurance with financially sound and reputable
insurers with an A.M. Best rating of A- or better (or, to the extent consistent
with prudent business practice, a program of self-insurance approved by the
Administrative Agent) on such of its property and in at least such amounts and
against at least such risks as is customary with companies in the same or
similar businesses operating in the same or similar locations, including public
liability insurance against claims for personal injury or death occurring upon,
in or about or in connection with the use of any properties owned, occupied or
controlled by it; (ii) maintain such other insurance as may be required by law;
and (iii) furnish to the Collateral Agent, upon written request, full
information as to the insurance carried.
(b) Fire and extended coverage policies maintained with
respect to any Collateral shall be endorsed or otherwise amended to include (i)
a non-contributing mortgage clause (regarding improvements to real property)
and lenders' loss payable clause (regarding personal property), in form and
substance satisfactory to the Collateral Agent, which endorsements or
amendments shall provide that, from and after the Effective Date, if the
insurer shall have received written notice from the Administrative Agent or the
Collateral Agent of the occurrence of an Event of Default, the insurer shall
pay all proceeds otherwise payable to the Borrower or the other Loan Parties
under the policies directly to the
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Administrative Agent or the Collateral Agent, (ii) a provision to the effect
that neither the Grantor, the Collateral Agent nor any other party shall be a
coinsurer and (iii) such other provisions as the Collateral Agent may
reasonably require from time to time to protect the interests of the Lenders.
Commercial general liability policies shall be endorsed to name the Collateral
Agent as an additional insured. Business interruption policies shall name the
Collateral Agent as loss payee and shall be endorsed or amended to include (i)
a provision that, from and after the Effective Date, if the insurer shall have
received written notice from the Administrative Agent or the Collateral Agent
of the occurrence of an Event of Default, the insurer shall pay all proceeds
otherwise payable to the Borrower or the other Loan Parties under the policies
directly to the Administrative Agent or the Collateral Agent, (ii) a provision
to the effect that none of the Borrower, the Administrative Agent or any other
party shall be a co-insurer and (iii) such other provisions as the
administrative Agent may reasonably require from time to time to protect the
interests of the Lenders. Each such policy referred to in this paragraph also
shall provide that it shall not be canceled, modified or not renewed (i) by
reason of nonpayment of premium except upon not less than 10 days' prior
written notice thereof by the insurer to the Collateral Agent (giving the
Collateral Agent the right to cure defaults in the payment of premiums) or (ii)
for any other reason except upon not less than 30 days' prior written notice
thereof by the insurer to the Collateral Agent. Such Grantor shall deliver to
the Collateral Agent, prior to the cancelation, modification or nonrenewal of
any such policy of insurance, a copy of a renewal or replacement policy (or
other evidence of renewal of a policy previously delivered to the Collateral
Agent) together with evidence satisfactory to the Collateral Agent of payment
of the premium therefor.
(c) Each Grantor irrevocably makes, constitutes and appoints
the Collateral Agent (and all officers, employees or agents designated by the
Collateral Agent) as such Grantor's true and lawful agent (and
attorney-in-fact) for the purpose, during the continuance of an Event of
Default, of making, settling and adjusting claims in respect of Collateral
under policies of insurance, endorsing the name of such Grantor on any check,
draft, instrument or other item of payment for the proceeds of such policies of
insurance and for making all determinations and decisions with respect thereto.
In the event that any Grantor at any time or times shall fail to obtain or
maintain any of the policies of insurance required hereby or to pay any premium
in whole or part relating thereto, the Collateral Agent may, without waiving or
releasing any obligation or liability of the Grantors hereunder or any Event of
Default, in its sole discretion, obtain and maintain such policies of insurance
and pay such premium and take any other actions with respect thereto as the
Collateral Agent deems advisable. All sums disbursed by the Collateral Agent
in connection with this Section 4.11, including reasonable attorneys' fees,
court costs, expenses and other charges relating thereto, shall be payable,
upon demand, by the Grantors to the Collateral Agent and shall be additional
Obligations secured hereby.
SECTION 4.12. Intentionally Omitted.
SECTION 4.13. Legend. Subject to the rights and liens of the parties
to the Receivables Purchase Agreements, each Grantor shall legend, in form and
manner satisfactory to the Collateral Agent, its Accounts Receivable and its
books, records and documents evidencing or pertaining thereto with an
appropriate reference to the fact that such Accounts Receivable have been
assigned to the Collateral Agent for the benefit of the Secured Parties and
that the Collateral Agent has a security interest therein.
SECTION 4.14. Covenants Regarding Patent, Trademark and Copyright
Collateral. (a) Each Grantor agrees that it will not, nor will it permit any
of its licensees to, do any act, or omit to do any act, whereby any Patent that
is material to the conduct of such Grantor's business may become invalidated or
dedicated to the public, and agrees that it shall continue to ▇▇▇▇ any products
covered by a Patent with the relevant patent number as necessary and sufficient
to establish and preserve its maximum rights under applicable patent laws.
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(b) Each Grantor (either itself or through its licensees or its
sublicensees) will, for each Trademark material to the conduct of such
Grantor's business, (i) maintain such Trademark in full force free from any
claim of abandonment or invalidity for non-use, (ii) maintain the quality of
products and services offered under such Trademark, (iii) display such
Trademark with notice of Federal or foreign registration to the extent
necessary and sufficient to establish and preserve its maximum rights under
applicable law and (iv) not knowingly use or knowingly permit the use of such
Trademark in violation of any third party rights.
(c) Each Grantor (either itself or through licensees) will, for each
work covered by a material Copyright, continue to publish, reproduce, display,
adopt and distribute the work with appropriate copyright notice as necessary
and sufficient to establish and preserve its maximum rights under applicable
copyright laws.
(d) Each Grantor shall notify the Collateral Agent immediately if it
knows or has reason to know that any Patent, Trademark or Copyright material to
the conduct of its business may become abandoned, lost or dedicated to the
public, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office, United States Copyright Office
or any court or similar office of any country) regarding such Grantor's
ownership of any Patent, Trademark or Copyright, its right to register the
same, or to keep and maintain the same.
(e) In no event shall any Grantor, either itself or through any
agent, employee, licensee or designee, file an application for any Patent,
Trademark or Copyright (or for the registration of any Trademark or Copyright)
with the United States Patent and Trademark Office, United States Copyright
Office or any office or agency in any political subdivision of the United
States or in any other country or any political subdivision thereof, unless it
promptly informs the Collateral Agent, and, upon request of the Collateral
Agent, executes and delivers any and all agreements, instruments, documents and
papers as the Collateral Agent may request to evidence the Collateral Agent's
security interest in such Patent, Trademark or Copyright, and each Grantor
hereby appoints the Collateral Agent as its attorney-in-fact to execute and
file such writings for the foregoing purposes, all acts of such attorney being
hereby ratified and confirmed; such power, being coupled with an interest, is
irrevocable.
(f) Each Grantor will take all necessary steps that are consistent
with the practice in any proceeding before the United States Patent and
Trademark Office, United States Copyright Office or any office or agency in any
political subdivision of the United States or in any other country or any
political subdivision thereof, to maintain and pursue each material application
relating to the Patents, Trademarks and/or Copyrights (and to obtain the
relevant grant or registration) and to maintain each issued Patent and each
registration of the Trademarks and Copyrights that is material to the conduct
of any Grantor's business, including timely filings of applications for
renewal, affidavits of use, affidavits of incontestability and payment of
maintenance fees, and, if consistent with good business judgment, to initiate
opposition, interference and cancelation proceedings against third parties.
(g) In the event that any Grantor has reason to believe that any
Collateral consisting of a Patent, Trademark or Copyright material to the
conduct of any Grantor's business has been or is about to be infringed,
misappropriated or diluted by a third party, such Grantor promptly shall notify
the Collateral Agent and shall, if consistent with good business judgment,
promptly ▇▇▇ for infringement, misappropriation or dilution and to recover any
and all damages for such infringement, misappropriation or dilution, and take
such other actions as are appropriate under the circumstances to protect such
Collateral.
(h) Upon and during the continuance of an Event of Default, each
Grantor shall use its best efforts to obtain all requisite consents or
approvals by the licensor of each Copyright License, Patent
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License or Trademark License to effect the assignment of all of such Grantor's
right, title and interest thereunder to the Collateral Agent or its designee.
ARTICLE V
Collections
SECTION 5.01. Depository System. (a) To the extent not already
established, within 30 days after the Restatement Closing Date, the Grantors
shall establish, subject to the control of the Collateral Agent pursuant to the
Depository Agreements, for the ratable benefit of the Collateral Agent and the
other Secured Parties, a system of deposit accounts (the "Depository System")
with one or more financial institutions that are reasonably satisfactory to the
Collateral Agent into which the Proceeds of all Accounts Receivable and
Inventory shall be deposited and forwarded to the Collateral Agent in
accordance with the Depository Agreements. To the extent any Grantor's deposit
accounts are not part of the Depository System within 30 days after the
Restatement Closing Date, such Grantor shall move such deposit accounts to a
financial institution designated by the Administrative Agent and such Grantor
will use best efforts to cause such financial institution to enter into a
Depository Agreement.
(b) All Proceeds of Inventory and Accounts Receivable that have been
received on any Business Day through the Depository System will be transferred
into the Concentration Account on such Business Day to the extent required by
the applicable Depository Agreement. All Proceeds stemming from the sale of a
substantial portion of the Collateral (other than Proceeds of Accounts) that
have been received by a Grantor on any Business Day will be transferred into
the Concentration Account on such Business Day. All Proceeds received on any
Business Day by the Collateral Agent pursuant to Section 5.02 will be
transferred into the Concentration Account on such Business Day.
(c) The Concentration Account is, and shall remain, under the sole
dominion and control of the Collateral Agent. Each Grantor acknowledges and
agrees that (i) such Grantor has no right of withdrawal from the Concentration
Account, (ii) the funds on deposit in the Concentration Account shall continue
to be collateral security for all of the Obligations and (iii) upon the
occurrence and during the continuance of an Event of Default, at the Collateral
Agent's election, the funds on deposit in the Concentration Account shall be
applied as provided in Section 6.02 of this Agreement. So long as no Event of
Default has occurred and is continuing, the Collateral Agent shall promptly
remit any funds on deposit in the Concentration Account to the General Fund
Account and the Borrower shall have the right, at any time and from time to
time, to withdraw such amounts from the General Fund Account as it shall deem
to be necessary or desirable.
(d) Effective upon notice to the Grantors from the Collateral Agent
after the occurrence and during the continuance of an Event of Default (which
notice may be given by telephone if promptly confirmed in writing), the
Concentration Account will, without any further action on the part of any
Grantor, the Collateral Agent or any Sub-Agent, convert into a closed account
under the exclusive dominion and control of the Collateral Agent in which funds
are held subject to the rights of the Collateral Agent hereunder. Each Grantor
irrevocably authorizes the Collateral Agent to notify each Sub-Agent (i) of the
occurrence of an Event of Default and (ii) of the matters referred to in this
paragraph (d). Following the occurrence of an Event of Default, the Collateral
Agent may instruct each Sub-Agent to transfer immediately all funds held in
each deposit account to the Concentration Account.
SECTION 5.02. Collections. (a) Subject to the rights and liens of
the parties to the Receivables Purchase Agreements, each Grantor agrees (i) to
notify and direct promptly each Account Debtor and every other person obligated
to make payments on Accounts Receivable or in respect of any Inventory to make
all such payments directly to the Depository System established in accordance
with Section 5.01,
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(ii) to use all reasonable efforts to cause each Account Debtor and every other
person identified in clause (i) above to make all payments with respect to
Accounts Receivable and Inventory directly to such Depository System and (iii)
promptly to deposit all payments received by it on account of Accounts
Receivable and Inventory, whether in the form of cash, checks, credit card
payments, notes, drafts, bills of exchange, money orders or otherwise, in the
Depository System in precisely the form in which received (but with any
endorsements of such Grantor necessary for deposit or collection), and until
they are so deposited such payments shall be held by such Grantor for the
benefit of the Collateral Agent.
(b) Without the prior written consent of the Collateral Agent, no
Grantor shall, in a manner adverse to the Lenders, change the general
instructions given to Account Debtors in respect of payment on Accounts to be
deposited in the Depository System. Until the Collateral Agent shall have
advised the Grantors to the contrary, each Grantor shall, and the Collateral
Agent hereby authorizes each Grantor to, enforce and collect all amounts owing
on the Inventory and Accounts Receivable, for the benefit and on behalf of the
Collateral Agent and the other Secured Parties; provided, however, that such
privilege may at the option of the Collateral Agent be terminated upon the
occurrence and during the continuance of any Event of Default.
SECTION 5.03. Power of Attorney. Each Grantor irrevocably makes,
constitutes and appoints the Collateral Agent (and all officers, employees or
agents designated by the Collateral Agent) as such Grantor's true and lawful
agent and attorney-in-fact, and in such capacity the Collateral Agent shall
have the right, with power of substitution for each Grantor and in each
Grantor's name or otherwise, for the use and benefit of the Collateral Agent
and the Secured Parties, upon the occurrence and during the continuance of an
Event of Default (a) to receive, endorse, assign and/or deliver any and all
notes, acceptances, checks, drafts, money orders or other evidences of payment
relating to the Collateral or any part thereof; (b) to demand, collect, receive
payment of, give receipt for and give discharges and releases of all or any of
the Collateral; (c) to sign the name of any Grantor on any invoice or ▇▇▇▇ of
lading relating to any of the Collateral; (d) to send verifications of Accounts
Receivable to any Account Debtor; (e) to commence and prosecute any and all
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect or otherwise realize on all or any of the Collateral or
to enforce any rights in respect of any Collateral; (f) to settle, compromise,
compound, adjust or defend any actions, suits or proceedings relating to all or
any of the Collateral; (g) to notify, or to require any Grantor to notify,
Account Debtors to make payment directly to the Collateral Agent; and (h) to
use, sell, assign, transfer, pledge, make any agreement with respect to or
otherwise deal with all or any of the Collateral, and to do all other acts and
things necessary to carry out the purposes of this Agreement, as fully and
completely as though the Collateral Agent were the absolute owner of the
Collateral for all purposes; provided, however, that nothing herein contained
shall be construed as requiring or obligating the Collateral Agent or any
Secured Party to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by the Collateral Agent or any Secured
Party, or to present or file any claim or notice, or to take any action with
respect to the Collateral or any part thereof or the moneys due or to become
due in respect thereof or any property covered thereby, and no action taken or
omitted to be taken by the Collateral Agent or any Secured Party with respect
to the Collateral or any part thereof shall give rise to any defense,
counterclaim or offset in favor of any Grantor or to any claim or action
against the Collateral Agent or any Secured Party. It is understood and agreed
that the appointment of the Collateral Agent as the agent and attorney-in-fact
of the Grantors for the purposes set forth above is coupled with an interest
and is irrevocable. The provisions of this Section shall in no event relieve
any Grantor of any of its obligations hereunder or under any other Loan
Document with respect to the Collateral or any part thereof or impose any
obligation on the Collateral Agent or any Secured Party to proceed in any
particular manner with respect to the Collateral or any part thereof, or in any
way limit the exercise by the Collateral Agent or any Secured Party of any
other or further right which it may have on the date of this Agreement or
hereafter, whether hereunder, under any other Loan Document, by law or
otherwise.
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ARTICLE VI
Remedies
SECTION 6.01. Remedies upon Default. Upon the occurrence and during
the continuance of an Event of Default, each Grantor agrees to deliver each
item of Collateral to the Collateral Agent on demand, and it is agreed that the
Collateral Agent shall have the right to take any of or all the following
actions at the same or different times: (a) with respect to any Collateral
consisting of Intellectual Property, on demand, to cause the Security Interest
to become an assignment, transfer and conveyance of any of or all such
Collateral by the applicable Grantors to the Collateral Agent, or to license or
sublicense, whether general, special or otherwise, and whether on an exclusive
or non-exclusive basis, any such Collateral throughout the world on such terms
and conditions and in such manner as the Collateral Agent shall determine
(other than in violation of any then-existing licensing arrangements to the
extent that waivers cannot be obtained), and (b) with or without legal process
and with or without prior notice or demand for performance, to take possession
of the Collateral and without liability for trespass to enter any premises
where the Collateral may be located for the purpose of taking possession of or
removing the Collateral and, generally, to exercise any and all rights afforded
to a secured party under the Uniform Commercial Code or other applicable law.
Without limiting the generality of the foregoing, each Grantor agrees that the
Collateral Agent shall have the right, subject to the mandatory requirements of
applicable law, to sell or otherwise dispose of all or any part of the
Collateral, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as the
Collateral Agent shall deem appropriate. The Collateral Agent shall be
authorized at any such sale (if it deems it advisable to do so) to restrict the
prospective bidders or purchasers to persons who will represent and agree that
they are purchasing the Collateral for their own account for investment and not
with a view to the distribution or sale thereof, and upon consummation of any
such sale the Collateral Agent shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold. Each
such purchaser at any such sale shall hold the property sold absolutely, free
from any claim or right on the part of any Grantor, and each Grantor hereby
waives (to the extent permitted by law) all rights of redemption, stay and
appraisal which such Grantor now has or may at any time in the future have
under any rule of law or statute now existing or hereafter enacted.
The Collateral Agent shall give the Grantors 10 days' written notice
(which each Grantor agrees is reasonable notice within the meaning of Section
9-504(3) of the Uniform Commercial Code as in effect in the State of New York
or its equivalent in other jurisdictions) of the Collateral Agent's intention
to make any sale of Collateral. Such notice, in the case of a public sale,
shall state the time and place for such sale and, in the case of a sale at a
broker's board or on a securities exchange, shall state the board or exchange
at which such sale is to be made and the day on which the Collateral, or
portion thereof, will first be offered for sale at such board or exchange. Any
such public sale shall be held at such time or times within ordinary business
hours and at such place or places as the Collateral Agent may fix and state in
the notice (if any) of such sale. At any such sale, the Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. The Collateral Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given. The Collateral Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and
place fixed for sale, and such sale may, without further notice, be made at the
time and place to which the same was so adjourned. In case any sale of all or
any part of the Collateral is made on credit or for future delivery, the
Collateral so sold may be retained by the Collateral Agent until the sale price
is paid by the purchaser or purchasers thereof, but the Collateral Agent shall
not incur any liability in case any such purchaser or purchasers shall fail to
take up and pay for the Collateral so sold and, in case of any such failure,
such Collateral may be sold
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again upon like notice. At any public (or, to the extent permitted by law,
private) sale made pursuant to this Section, any Secured Party may bid for or
purchase, free (to the extent permitted by law) from any right of redemption,
stay, valuation or appraisal on the part of any Grantor (all said rights being
also hereby waived and released to the extent permitted by law), the Collateral
or any part thereof offered for sale and may make payment on account thereof by
using any claim then due and payable to such Secured Party from any Grantor as
a credit against the purchase price, and such Secured Party may, upon
compliance with the terms of sale, hold, retain and dispose of such property
without further accountability to any Grantor therefor. For purposes hereof, a
written agreement to purchase the Collateral or any portion thereof shall be
treated as a sale thereof; the Collateral Agent shall be free to carry out such
sale pursuant to such agreement and no Grantor shall be entitled to the return
of the Collateral or any portion thereof subject thereto, notwithstanding the
fact that after the Collateral Agent shall have entered into such an agreement
all Events of Default shall have been remedied and the Obligations paid in
full. As an alternative to exercising the power of sale herein conferred upon
it, the Collateral Agent may proceed by a suit or suits at law or in equity to
foreclose this Agreement and to sell the Collateral or any portion thereof
pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver.
SECTION 6.02. Application of Proceeds. The Collateral Agent shall
apply the proceeds of any collection or sale of the Collateral, as well as any
Collateral consisting of cash, as follows:
FIRST, to the payment of all costs and expenses incurred by
the Administrative Agent or the Collateral Agent (in its capacity as
such hereunder or under any other Loan Document) in connection with
such collection or sale or otherwise in connection with this Agreement
or any of the Obligations, including all court costs and the
reasonable and documented fees and expenses of its agents and legal
counsel, the repayment of all advances made by the Collateral Agent
hereunder or under any other Loan Document on behalf of any Grantor
and any other reasonable and documented costs or expenses incurred in
connection with the exercise of any right or remedy hereunder or under
any other Loan Document;
SECOND, to the payment in full of the Obligations (the amounts
so applied to be distributed among the Secured Parties pro rata in
accordance with the amounts of the Obligations owed to them on the
date of any such distribution); and
THIRD, to the Grantors, their successors or assigns, or as a
court of competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be
a sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Collateral Agent
or such officer or be answerable in any way for the misapplication thereof.
SECTION 6.03. Grant of License to Use Intellectual Property. For the
purpose of enabling the Collateral Agent to exercise rights and remedies under
this Article at such time as the Collateral Agent shall be lawfully entitled to
exercise such rights and remedies, each Grantor hereby grants to the Collateral
Agent an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to the Grantors) to use, license or sub-license
any of the Collateral consisting of Intellectual Property now owned or
hereafter acquired by such Grantor, and wherever the same may be located, and
including in such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to
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all computer software and programs used for the compilation or printout
thereof. The use of such license by the Collateral Agent shall be exercised,
at the option of the Collateral Agent, upon the occurrence and during the
continuation of an Event of Default, provided that any license, sub-license or
other transaction entered into by the Collateral Agent in accordance herewith
shall be binding upon the Grantors notwithstanding any subsequent cure of an
Event of Default.
ARTICLE VII
Miscellaneous
SECTION 7.01. Notices. All communications and notices hereunder
shall (except as otherwise expressly permitted herein) be in writing and given
as provided in Section 9.01 of the Credit Agreement. All communications and
notices hereunder to any Guarantor shall be given to it at its address or
telecopy number set forth on Schedule I, with a copy to the Borrower.
SECTION 7.02. Security Interest Absolute. All rights of the
Collateral Agent hereunder, the Security Interest and all obligations of the
Grantors hereunder shall be absolute and unconditional irrespective of (a) any
lack of validity or enforceability of the Credit Agreement, any other Loan
Document, any agreement with respect to any of the Obligations or any other
agreement or instrument relating to any of the foregoing, (b) any change in the
time, manner or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any
departure from the Credit Agreement, any other Loan Document or any other
agreement or instrument, (c) any exchange, release or non-perfection of any
Lien on other collateral, or any release or amendment or waiver of or consent
under or departure from any guarantee, securing or guaranteeing all or any of
the Obligations, or (d) any other circumstance that might otherwise constitute
a defense available to, or a discharge of, any Grantor in respect of the
Obligations or this Agreement.
SECTION 7.03. Survival of Agreement. All covenants, agreements,
representations and warranties made by any Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement shall be considered to have been relied upon by the
Secured Parties and shall survive the making by the Lenders of the Loans, and
the execution and delivery to the Lenders of any notes evidencing such Loans,
regardless of any investigation made by the Lenders or on their behalf, and
shall continue in full force and effect until this Agreement shall terminate.
SECTION 7.04. Binding Effect; Several Agreement. This Agreement
shall become effective as to any Grantor when a counterpart hereof executed on
behalf of such Grantor shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral Agent,
and thereafter shall be binding upon such Grantor and the Collateral Agent and
their respective successors and assigns, and shall inure to the benefit of such
Grantor, the Collateral Agent and the other Secured Parties and their
respective successors and assigns, except that no Grantor shall have the right
to assign or transfer its rights or obligations hereunder or any interest
herein or in the Collateral (and any such assignment or transfer shall be void)
except as expressly contemplated by this Agreement or the Credit Agreement.
This Agreement shall be construed as a separate agreement with respect to each
Grantor and may be amended, modified, supplemented, waived or released with
respect to any Grantor without the approval of any other Grantor and without
affecting the obligations of any other Grantor hereunder.
SECTION 7.05. Successors and Assigns. Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of any Grantor or the Collateral Agent that are
contained in this Agreement shall bind and inure to the benefit of their
respective successors and assigns.
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SECTION 7.06. Overdrafts. Each Grantor agrees to pay any such
Grantor's Overdrafts. Any such amounts payable as provided hereunder shall be
additional Obligations secured hereby and by the other Security Documents.
SECTION 7.07. Collateral Agent's Fees and Expenses; Indemnification.
(a) Each Grantor jointly and severally agrees to pay upon demand to the
Collateral Agent the amount of any and all reasonable and documented expenses,
including the reasonable and documented fees, disbursements and other charges
of its counsel and of any experts or agents, which the Collateral Agent may
incur in connection with (i) the administration of this Agreement, (ii) the
custody or preservation of, or the sale of, collection from or other
realization upon any of the Collateral, (iii) the exercise, enforcement or
protection of any of the rights of the Collateral Agent hereunder or (iv) the
failure of any Grantor to perform or observe any of the provisions hereof.
(b) Without limitation of its indemnification obligations under the
other Loan Documents, each Grantor jointly and severally agrees to indemnify
the Collateral Agent and the other Indemnitees against, and hold each of them
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable and documented fees, disbursements and other
charges of counsel, incurred by or asserted against any of them arising out of,
in any way connected with, or as a result of, the execution, delivery or
performance of this Agreement or any claim, litigation, investigation or
proceeding relating hereto or to the Collateral, whether or not any Indemnitee
is a party thereto; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the
gross negligence or willful misconduct of such Indemnitee.
(c) Any such amounts payable as provided hereunder shall be
additional Obligations secured hereby and by the other Security Documents. The
provisions of this Section 7.06 shall remain operative and in full force and
effect regardless of the termination of this Agreement or any other Loan
Document, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the invalidity or unenforceability of any term
or provision of this Agreement or any other Loan Document, or any investigation
made by or on behalf of the Collateral Agent or any Lender. All amounts due
under this Section 7.07 shall be payable on written demand therefor.
SECTION 7.08. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7.09. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent
hereunder and of the Agents, the Issuing Bank and the Lenders under the other
Loan Documents are cumulative and are not exclusive of any rights or remedies
that they would otherwise have. No waiver of any provisions of this Agreement
or any other Loan Document or consent to any departure by any Grantor therefrom
shall in any event be effective unless the same shall be permitted by paragraph
(b) below, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No notice to or demand
on any Grantor in any case shall entitle such Grantor or any other Grantor to
any other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Collateral Agent and the Grantor or
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Grantors with respect to which such waiver, amendment or modification is to
apply, subject to any consent required in accordance with Section 9.02 of the
Credit Agreement.
SECTION 7.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 7.10.
SECTION 7.11. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7.12. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract (subject to Section
7.04), and shall become effective as provided in Section 7.04. Delivery of an
executed signature page to this Agreement by facsimile transmission shall be
effective as delivery of a manually executed counterpart hereof.
SECTION 7.13. Headings. Article and Section headings used herein are
for the purpose of reference only, are not part of this Agreement and are not
to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
SECTION 7.14. Jurisdiction; Consent to Service of Process. (a) Each
Grantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Agreement shall affect any right that
the Agents, the Issuing Bank or any Lender may otherwise have to bring any
action or proceeding relating to this Agreement or the other Loan Documents
against any Grantor or its properties in the courts of any jurisdiction.
(b) Each Grantor hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents in any New York State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest
161
21
extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 7.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 7.15. Termination. (a) This Agreement and the Security
Interest shall terminate when all the Obligations have been indefeasibly paid
in full, the Lenders have no further commitment to lend, the L/C Exposure has
been reduced to zero and the Issuing Bank has no further commitment to issue
Letters of Credit under the Credit Agreement, at which time the Collateral
Agent shall execute and deliver to the Grantors, at the Grantors' expense, all
Uniform Commercial Code termination statements and similar documents that the
Grantors shall reasonably request to evidence such termination. Any execution
and delivery of termination statements or documents pursuant to this Section
7.15 shall be without recourse to or warranty by the Collateral Agent. A
Guarantor shall automatically be released from its obligations hereunder and
the Security Interest in the Collateral of such Guarantor shall be
automatically released in the event that all the capital stock of such
Guarantor shall be sold, transferred or otherwise disposed of to a person that
is not an Affiliate of the Borrower in accordance with the terms of the Credit
Agreement; provided that the Required Lenders shall have consented to such
sale, transfer or other disposition (to the extent required by the Credit
Agreement) and the terms of such consent did not provide otherwise.
(b) The Security Interest in any Fixtures relating to particular real
estate that is sold, transferred, leased or otherwise disposed of by any
Transaction Party in accordance with Section 6.05 or Section 6.06 of the Credit
Agreement shall terminate automatically upon such sale, transfer, lease or
other disposition.
SECTION 7.16. Additional Grantors. Pursuant to Section 5.12 of the
Credit Agreement, each Borrower Subsidiary that was not in existence or not a
Borrower Subsidiary on the date of the Credit Agreement is required to enter
into this Agreement as a Grantor upon becoming a Borrower Subsidiary. Upon
execution and delivery by the Collateral Agent and a Borrower Subsidiary of an
instrument in the form of Annex 3 hereto, such Borrower Subsidiary shall become
a Grantor hereunder with the same force and effect as if originally named as a
Grantor herein. The execution and delivery of any such instrument shall not
require the consent of any Grantor hereunder. The rights and obligations of
each Grantor hereunder shall remain in full force and effect notwithstanding
the addition of any new Grantor as a party to this Agreement.
SECTION 7.17. Intercreditor Agreement. The Agent, on behalf of the
Secured Parties, acknowledges that all the security interests granted pursuant
to this Security Agreement are subject to the provisions of the Intercreditor
Agreement, including the provisions therein subordinating such security
interests to certain other obligations of the Grantors. Notwithstanding
anything to the contrary contained herein, the rights, duties and obligations
of the Agent hereunder are subject to the provisions of the Intercreditor
Agreement.
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22
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
HECHINGER INVESTMENT COMPANY OF DELAWARE, INC.,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
CENTERS HOLDINGS, INC.,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
BSQ ACQUISITION, INC.,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
BSQ TRANSFEREE CORP.,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
HECHINGER COMPANY,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
HECHINGER STORES COMPANY,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
163
23
HECHINGER STORES EAST COAST COMPANY,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
EACH OF THE GUARANTORS LISTED ON SCHEDULE I HERETO,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Authorized Officer
164
THE CHASE MANHATTAN BANK, as
Administrative Agent and as Collateral Agent,
by
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Director
165
SCHEDULE I
GUARANTORS
166
SCHEDULE II
COPYRIGHTS
167
SCHEDULE III
LICENSES
168
SCHEDULE IV
PATENTS
169
SCHEDULE V
TRADEMARKS
170
Annex 1 to the
Security Agreement
DEPOSITORY AGREEMENT dated as of [ ], among
[Name of Grantor], a [ ] corporation (the "Grantor"), THE
CHASE MANHATTAN BANK, a New York banking corporation
("Chase"), as administrative agent (in such capacity, the
"Administrative Agent") for the Secured Parties (such term,
and each other capitalized term used but not defined herein,
having the meaning given it in the Security Agreement referred
to below) and as collateral agent (in such capacity, the
"Collateral Agent") and [ ], a [
] banking corporation (the "Sub-Agent").
A. The Grantor and the Collateral Agent are parties to (a) a Security
Agreement dated as of December [ ], 1998 (as amended, supplemented or
otherwise modified from time to time, the "Security Agreement"), (b) an
Existing Security Agreement dated as of September 26, 1997, as amended and
restated as of December [ ], 1998 (as amended, supplemented or otherwise
modified from time to time, the "Existing Security Agreement"), (c) a
Depository Agreement dated as of [ ], with the Sub-Agent and (d)
the Intercreditor Agreement dated as of December [ ], 1998, attached hereto
as Exhibit A. Pursuant to the terms of the Security Agreement, the Grantor has
granted to the Collateral Agent, for the ratable benefit of the Secured
Parties, a security interest in its Accounts Receivable and other Collateral
(including Inventory, cash, cash accounts and Proceeds) to secure the payment
and performance of the Obligations and has irrevocably appointed the Collateral
Agent as its agent to collect amounts due in respect of Accounts Receivable and
Inventory.
B. The Sub-Agent has agreed to act as collection sub-agent of the
Collateral Agent to receive and forward payments with respect to the Accounts
Receivable and Inventory on the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. The Collateral Agent hereby appoints the Sub-Agent as its
collection sub-agent under the Security Agreement and authorizes the Sub-Agent,
on the terms and subject to the conditions set forth herein, to receive
payments in respect of Collateral consisting of Accounts Receivable and
Inventory.
2. The Sub-Agent has established and shall maintain deposit account
number [ ] (including all subaccounts thereof) for the benefit of the Collateral
Agent (such account being called the "Collection Deposit Account"). [Subject to
the Sub-Agent's Terms for Deposit Services attached hereto as Exhibit A, to the
extent that the terms thereof relate to procedures or fees and to the extent
not inconsistent with the terms hereof,] all payments received by the Sub-Agent
in Account Number [ ] and [ ] or any replacements in
respect thereof (the "Accounts") shall be promptly deposited in the Collection
Deposit Account and shall not be commingled with other funds. All funds at any
time on deposit in the Collection Deposit Account shall be held by the
Sub-Agent for application in accordance with the terms of this Agreement. The
Sub-Agent agrees to give the Collateral Agent prompt notice if the Collection
Deposit Account shall become subject to any writ, judgment, warrant of
attachment, execution or similar process. As security for the payment and
performance of the Obligations, the Grantor hereby confirms and pledges,
assigns and transfers to the Collateral Agent, and hereby creates and grants to
the Collateral Agent, a security interest in the Collection Deposit Account,
all property and assets held therein and all Proceeds thereof.
171
3. Effective upon notice to the Grantors and the Sub-Agent from the
Collateral Agent after the occurrence and during the continuance of any Event
of Default, the Collection Deposit Account shall be under the sole dominion and
control of the Collateral Agent, who shall possess all right, title and
interest in all of the items from time to time in the Collection Deposit
Account and their Proceeds. Effective upon such notice, the Sub-Agent shall be
the Collateral Agent's agent for the purpose of holding and collecting such
items and their Proceeds, and neither the Grantor nor any person or entity
claiming by, through or under the Grantor shall have any right, title or
interest in, or control over the use of, or any right to withdraw any amount
from, the Collection Deposit Account, except that the Collateral Agent shall
have the right to withdraw amounts from the Collection Deposit Account.
Effective upon such notice, the Sub-Agent shall be entitled to rely on, and
shall act in accordance with, all instructions given to it by the Collateral
Agent with respect to the Collection Deposit Account. Effective upon such
notice, the Collateral Agent shall have the sole power to agree with the
Sub-Agent as to specifications for Account services.
4. Upon receipt of written, telecopy or telephonic notice (which, in
the case of telephonic notice, shall be promptly confirmed in writing or by
telecopy) from the Collateral Agent, the Sub-Agent shall, if so directed in
such notice (subject to the Sub-Agent's right to request that the Collateral
Agent furnish, in form satisfactory to the Sub-Agent, signature cards and/or
other appropriate documentation), promptly transmit or deliver to the
Collateral Agent at the office specified in paragraph 12 hereof (or such other
office as the Collateral Agent shall specify) (a) all funds, if any, then on
deposit in, or otherwise to the credit of, the Collection Deposit Account
(provided that funds on deposit that are subject to collection may be
transmitted promptly upon availability for withdrawal), (b) all checks, drafts
and other instruments for the payment of money received in the Accounts and in
the possession of the Sub-Agent, without depositing such checks, drafts or
other instruments in the Collection Deposit Account or any other account and
(c) any checks, drafts and other instruments for the payment of money received
in the Accounts by the Sub-Agent after such notice, in whatever form received,
provided that the Sub-Agent may retain a reasonable reserve in a separate
deposit account with the Sub-Agent in respect of unpaid fees and amounts which
may be subject to collection.
5. The Sub-Agent is hereby instructed and authorized to transfer by
wire transfer or Automated Clearing House ("ACH") from the Collection Deposit
Account all funds that are from time to time deposited or otherwise credited to
such account (after such funds become available to the Sub-Agent, either
through the Federal Reserve System or other clearing mechanism used by the
Sub-Agent's branch), to such account as the Collateral Agent may from time to
time direct, provided that, unless the Collateral Agent otherwise instructs, no
such transfer shall be required if such transfer would result in the transfer
of an amount less than $1,000. Unless otherwise directed by the Collateral
Agent, such funds shall be transferred on each business day by wire transfer or
ACH and shall be identified as follows:
The Chase Manhattan Bank
ABA Number
For credit to The Chase Manhattan Bank
New York, NY [ ]
Account Number
Re: Hechinger Investment Company of Delaware, Inc.
Cash Collateral Account
These transfer instructions and authorizations may not be amended,
altered or revoked by the Grantor without the prior written consent of the
Collateral Agent. The Collateral Agent, however, shall have the right to amend
or revoke these transfer instructions and authorizations at any time without
the consent of the Grantor.
6. The Sub-Agent shall furnish the Collateral Agent with monthly
statements setting forth the amounts deposited in the Collection Deposit
Account and all transfers and withdrawals therefrom, and shall furnish such
other information at such times as shall be reasonably requested by the
Collateral Agent.
7. The fees for the services of the Sub-Agent shall be mutually
agreed upon between the Grantor and the Sub-Agent and shall be the obligation
of the Grantor; provided, however, that, notwithstanding the
172
3
terms of any agreement under which the Collection Deposit Account shall have
been established with the Sub-Agent, the Grantor and the Sub-Agent agree not to
terminate such Collection Deposit Account for any reason (including the failure
of the Grantor to pay such fees) for so long as this Agreement shall remain in
effect (it being understood that the foregoing shall not be construed to
prohibit the resignation of the Sub-Agent in accordance with paragraph 9
below). Neither the Collateral Agent nor the Secured Parties shall have any
liability for the payment of any such fees. The Sub-Agent may perform any of
its duties hereunder by or through its agents, officers or employees.
8. The Sub-Agent hereby represents and warrants that (a) it is a
banking corporation duly organized, validly existing and in good standing under
the laws of [ ] and has full corporate power and authority under such laws to
execute, deliver and perform its obligations under this Agreement and (b) the
execution, delivery and performance of this Agreement by the Sub-Agent have
been duly and effectively authorized by all necessary corporate action and this
Agreement has been duly executed and delivered by the Sub-Agent and constitutes
a valid and binding obligation of the Sub-Agent enforceable in accordance with
its terms.
9. The Sub-Agent may resign at any time as Sub-Agent hereunder by
delivery to the Collateral Agent of written notice of resignation not less than
thirty days prior to the effective date of such resignation. The Sub-Agent may
be removed by the Collateral Agent at any time, with or without cause, by
written, telecopy or telephonic notice (which, in the case of telephonic
notice, shall be promptly confirmed in writing or by telecopy) of removal
delivered to the Sub-Agent. Upon receipt of such notice of removal, or
delivery of such notice of resignation, the Sub-Agent shall (subject to the
Sub-Agent's right to request that the Collateral Agent furnish, in form
satisfactory to the Sub-Agent, signature cards and/or other appropriate
documentation), promptly transmit or deliver to the Collateral Agent at the
office specified in paragraph 12 (or such other office as the Collateral Agent
shall specify) (a) all funds, if any, then on deposit in, or otherwise to the
credit of, the Collection Deposit Account (provided that funds on deposit that
are subject to collection may be transmitted promptly upon availability for
withdrawal), (b) all checks, drafts and other instruments for the payment of
money received in the Accounts and in the possession of the Sub-Agent, without
depositing such checks, drafts or other instruments in the Collection Deposit
Account or any other account and (c) any checks, drafts and other instruments
for the payment of money received in the Accounts by the Sub-Agent after such
notice, in whatever form received.
10. The Grantor consents to the appointment of the Sub-Agent and
agrees that the Sub-Agent shall incur no liability to the Grantor as a result
of any action taken pursuant to an instruction given by the Collateral Agent in
accordance with the provisions of this Agreement. The Grantor agrees to
indemnify and defend the Sub-Agent against any loss, liability, claim or
expense (including reasonable attorneys' fees) arising from the Sub-Agent's
entry into this Agreement and actions taken hereunder, except to the extent
resulting from the Sub-Agent's gross negligence or willful misconduct.
11. The term of this Agreement shall extend from the date hereof
until the earlier of (a) the date on which the Sub-Agent has been notified in
writing by the Collateral Agent that the Sub-Agent has no further duties under
this Agreement and (b) the date of termination specified in the notice of
removal given by the Collateral Agent, or notice of resignation given by the
Sub-Agent, as the case may be, pursuant to paragraph 9. The obligations of the
Sub-Agent contained in the last sentence of paragraph 9 and in paragraph 15,
and the obligations of the Grantor contained in paragraphs 7 and 10, shall
survive the termination of this Agreement.
12. All notices and communications hereunder shall be in writing and
shall be delivered by hand or by courier service, mailed by certified or
registered mail or sent by telecopy (except where telephonic instructions or
notices are authorized herein) and shall be effective on the day on which
received (a) in the case of the Collateral Agent, to The Chase Manhattan Bank,
[ ], Attention of [ ], and (b) in the
173
4
case of the Sub-Agent, addressed to [ ], Attention of [ ]. For purposes of this
Agreement, any officer of the Collateral Agent shall be authorized to act, and
to give instructions and notices, on behalf of the Collateral Agent hereunder.
13. The Sub-Agent will not assign or transfer any of its rights or
obligations hereunder (other than to the Collateral Agent) without the prior
written consent of the other parties hereto, and any such attempted assignment
or transfer shall be void.
14. Except as provided in paragraph 5 above, this Agreement may be
amended only by a written instrument executed by the Collateral Agent, the
Sub-Agent and the Grantor, acting by their duly authorized representative
officers.
15. Except as otherwise provided in the Credit Agreement with respect
to rights of set off available to the Sub-Agent in its capacity as a Lender (if
and so long as the Sub-Agent is a Lender thereunder), the Sub-Agent hereby
irrevocably waives any right to set off against, or otherwise deduct from, any
funds held in the Collection Deposit Account and all items (and Proceeds
thereof) that come into its possession in connection with the Collection
Deposit Account any indebtedness or other claim owed by the Grantor or any
affiliate thereof to the Sub-Agent; provided, however, that this paragraph
shall not limit the ability of the Sub-Agent to, and the Sub-Agent may, (a)
exercise any right to set off against, or otherwise deduct from, any such funds
to the extent necessary for the Sub-Agent to collect any fees owed to it by the
Grantor in connection with the Collection Deposit Account, (b) charge back and
net against the Collection Deposit Account any returned or dishonored items or
other adjustments in accordance with the Sub-Agent's usual practices and (c)
(i) establish the reserves contemplated in paragraph 4 in respect of unpaid
fees and amounts which may be subject to collection and (ii) transfer funds in
respect of such reserves from the Collection Deposit Account to the separate
deposit account with the Sub-Agent as contemplated in paragraph 4.
16. This Agreement shall inure to the benefit of and be binding upon
the Collateral Agent, the Sub-Agent, the Grantor and their respective permitted
successors and assigns.
17. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument. Delivery of an executed signature page to this
Agreement by facsimile transmission shall be effective as delivery of a
manually executed counterpart hereof.
18. EXCEPT TO THE EXTENT THE LAWS OF THE STATE OF [ ] GOVERN
THE COLLECTION DEPOSIT ACCOUNT, THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
19. The Sub-Agent shall be an independent contractor. This Agreement
does not give rise to any partnership, joint venture or fiduciary relationship.
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5
20. In the event any one or more of the provisions contained in
this Agreement should be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being
understood that the invalidity of a particular provision in a particular
jurisdiction shall not in and of itself affect the validity of such provision
in any other jurisdiction). The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
21. The Sub-Agent acknowledges that all the security interests
granted pursuant to the Security Agreement are subject to the Intercreditor
Agreement attached hereto as Exhibit A. Notwithstanding anything to the
contrary contained herein, the rights, duties and obligations of the Sub-Agent
are subject to the provisions of the Intercreditor Agent.
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6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
above written.
[Name of Grantor],
by
-------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as
Administrative Agent and as Collateral Agent,
by
-------------------------
Name:
Title:
[Sub-Agent],
by
-------------------------
Name:
Title:
176
Annex 2 to the
Security Agreement
[Form Of]
PERFECTION CERTIFICATE
Reference is made to (a) the Credit Agreement dated as of December
[ ], 1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among Hechinger Investment Company of Delaware, Inc., a
Delaware corporation (the "Borrower"), Centers Holdings, Inc., a Delaware
corporation, BSQ Acquisition, Inc., a Delaware corporation, BSQ Transferee
Corp., a Delaware corporation, Hechinger Company, a Delaware corporation,
Hechinger Stores Company, a Delaware corporation, Hechinger Stores East Coast
Company, a Delaware corporation, the lenders from time to time party thereto
(the "Lenders"), The Chase Manhattan Bank, as administrative agent for the
Lenders (in such capacity, the "Administrative Agent"), and as collateral agent
(in such capacity, the "Collateral Agent" and, together with the Administrative
Agent, the "Agents") for the Lenders, (b) the Parent Guarantee Agreement dated
as of December [ ], 1998 (as amended, supplemented or otherwise modified from
time to time), among the Guarantors (as defined therein) and the Agents and (c)
the Subsidiary Guarantee Agreement dated as of December [ ], 1998 (as
amended, supplemented or otherwise modified from time to time), among the
Subsidiary Guarantors (as defined therein) and the Agents. All capitalized
terms used but not defined herein shall have the meanings set forth in the
Credit Agreement.
The undersigned, a Financial Officer and a Legal Officer,
respectively, of the Borrower, hereby certify to the Agents and each other
Secured Party as follows:
1. Names. (a) The exact corporate name of each Grantor, as such name
appears in its respective certificate of incorporation, is as follows:
(b) Set forth below is each other corporate name each Grantor has had
in the past five years, together with the date of the relevant change:
(c) Except as set forth in Schedule 1 hereto, no Grantor has changed
its identity or corporate structure in any way within the past five years.
Changes in identity or corporate structure would include mergers,
consolidations and acquisitions, as well as any change in the form, nature or
jurisdiction of corporate organization. If any such change has occurred,
include in Schedule 1 the information required by Sections 1 and 2 of this
certificate as to each acquiree or constituent party to a merger or
consolidation.
(d) The following is a list of all other names (including trade names
or similar appellations) used by each Grantor or any of its divisions or other
business units in connection with the conduct of its business or the ownership
of its properties at any time during the past five years:
(e) Set forth below is the Federal Taxpayer Identification Number of
each Grantor:
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2
2. Current Locations. (a) The chief executive office of each Grantor
is located at the address set forth opposite its name below:
Grantor Mailing Address County State
(b) Set forth below opposite the name of each Grantor are all
locations where such Grantor maintains any books or records relating to any
Accounts Receivable (with each location at which chattel paper, if any, is kept
being indicated by an "*"):
Grantor Mailing Address County State
(c) Set forth below opposite the name of each Grantor are all the
places of business of such Grantor not identified in paragraph (a) or (b)
above:
Grantor Mailing Address County State
(d) Set forth below opposite the name of each Grantor are all the
locations where such Grantor maintains any Collateral not identified above:
Grantor Mailing Address County State
(e) Set forth below opposite the name of each Grantor are the names
and addresses of all persons other than such Grantor that have possession of
any of the Collateral of such Grantor:
Grantor Mailing Address County State
3. Unusual Transactions. All Accounts Receivable have been
originated by the Grantors and all Inventory has been acquired by the Grantors
in the ordinary course of business.
4. File Search Reports. Attached hereto as Schedule 4(A) are true
copies of file search reports from the Uniform Commercial Code filing offices
where filings described in Section 3.16 of the Credit Agreement are to be made.
Attached hereto as Schedule 4(B) is a true copy of each financing statement or
other filing identified in such file search reports.
5. UCC Filings. Duly signed financing statements on Form UCC-1 in
substantially the form of Schedule 5 hereto have been prepared for filing in
the Uniform Commercial Code filing office in each jurisdiction where a Grantor
has Collateral as identified in Section 2 hereof.
6. Schedule of Filings. Attached hereto as Schedule 6 is a schedule
setting forth, with respect to the filings described in Section 5 above, each
filing and the filing office in which such filing is to be made.
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3
7. Filing Fees. All filing fees and taxes payable in connection with
the filings described in Section 5 above have been paid.
8. Stock Ownership. Attached hereto as Schedule 8 is a true and
correct list of all the duly authorized, issued and outstanding stock of each
Subsidiary and the record and beneficial owners of such stock. Also set forth
on Schedule 8 is each equity Investment of the Borrower and each Subsidiary
that represents 50% or less of the equity of the entity in which such
investment was made.
9. Notes. Attached hereto as Schedule 9 is a true and correct list
of all notes held by the Borrower and each Subsidiary and all intercompany
notes between the Borrower and each Subsidiary of the Borrower and between each
Subsidiary of the Borrower and each other such Subsidiary.
10. Advances. Attached hereto as Schedule 10 is (a) a true and
correct list of all advances made by the Borrower to any Subsidiary of the
Borrower or made by any Subsidiary of the Borrower to the Borrower or any other
Subsidiary of the Borrower, which advances will be on and after the date hereof
evidenced by one or more intercompany notes pledged to the Collateral Agent
under the Pledge Agreement, and (b) a true and correct list of all unpaid
intercompany transfers of goods sold and delivered by or to the Borrower or any
Subsidiary of the Borrower.
11. Mortgage Filings. Attached hereto as Schedule 11 is a schedule
setting forth, with respect to each Mortgaged Property, (i) the exact corporate
name of the corporation that owns such property as such name appears in its
certificate of incorporation, (ii) if different from the name identified
pursuant to clause (i), the exact name of the current record owner of such
property reflected in the records of the filing office for such property
identified pursuant to the following clause and (iii) the filing office in
which a Mortgage with respect to such property must be filed or recorded in
order for the Collateral Agent to obtain a perfected security interest therein.
IN WITNESS WHEREOF, the undersigned have duly executed this
certificate on this [ ] day of [ ].
HECHINGER INVESTMENT COMPANY OF DELAWARE, INC.,
by
-------------------------------------
Name:
Title:[Financial Officer]
by
-------------------------------------
Name:
Title: [Legal Officer]
179
Annex 3 to the
Security Agreement
SUPPLEMENT NO. __ dated as of , to
the Security Agreement dated as of December 31, 1998, among
HECHINGER INVESTMENT COMPANY OF DELAWARE, INC., a Delaware
corporation (the "Borrower"), CENTERS HOLDINGS, INC., a Delaware
corporation ("Holdings"), BSQ ACQUISITION, INC., a Delaware
corporation ("BSQ Acqco"), BSQ TRANSFEREE CORP., a Delaware
corporation ("BSQ Newco"), HECHINGER COMPANY, a Delaware
corporation ("Hechinger"), HECHINGER STORES COMPANY, a Delaware
corporation ("Hechinger Stores"), HECHINGER STORES EAST COAST
COMPANY, a Delaware corporation ("Hechinger Stores East Coast"),
each other Subsidiary of Holdings listed on Schedule I thereto
(each of Holdings, BSQ Acqco, BSQ Newco, Hechinger, Hechinger
Stores and each such other Subsidiary individually a "Guarantor"
and collectively, the "Guarantors"; the Guarantors and the
Borrower are referred to collectively herein as the "Grantors")
and THE CHASE MANHATTAN BANK, a New York banking corporation
("Chase"), as administrative agent (in such capacity, the
"Administrative Agent") and as collateral agent (in such
capacity, the "Collateral Agent" and, in its capacity as both
Administrative Agent and Collateral Agent, the "Agent") for the
Secured Parties (as defined herein).
A. Reference is made to (a) the Credit Agreement dated as of
December 31, 1998 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among (i) the Borrower, (ii) Holdings, BSQ
Acqco, BSQ Newco, Hechinger, Hechinger Stores, Hechinger Stores East Coast
(collectively, the "Parent Guarantors"), (iii) the lenders from time to time
party thereto (the "Lenders") and (iv) the Agent, (b) the Parent Guarantee
Agreement dated as of December 31, 1998 (as amended, supplemented or otherwise
modified from time to time), among the Parent Guarantors and the Agent, (c) the
Subsidiary Guarantee Agreement dated as of December 31, 1998 (as amended,
supplemented or otherwise modified from time to time), among the Guarantors
listed on schedule I hereto and the Agent, (d) the Credit Agreement dated as of
September 26, 1997, as amended and restated as of December 31, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Existing
Credit Agreement"), among the Borrower, the Parent Guarantors, the lenders from
time to time party thereto (the "Existing Lenders"), Chase, as administrative
agent, collateral agent, issuing bank and swingline lender thereunder,
BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation ("BABC"), as
documentation agent and as borrowing base audit agent thereunder, and CITICORP
USA, INC., a Delaware corporation ("Citicorp USA" and, together with Chase and
BABC, each solely in its capacity as an agent under the Existing Credit
Agreement, the "Senior Agents"), as syndication agent thereunder, and (e) the
Intercreditor Agreement dated as of December 31, 1998 (as amended, supplemented
or otherwise modified from time to time, the "Intercreditor Agreement"), among
the Borrower, Holdings, the Subsidiary Loan Parties, the Senior Agents, the
Agent, Green Equity Investors II, L.P. and Kmart Corporation.
B. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Security Agreement and
the Credit Agreement.
C. The Grantors have entered into the Security Agreement in order to
induce the Lenders to make Loans and the Issuing Bank to issue Letters of
Credit. Section 7.16 of the Security Agreement provides that additional
Borrower Subsidiaries may become Grantors under the Security Agreement by
execution and delivery of an instrument in the form of this Supplement. The
undersigned Borrower Subsidiary (the "New Grantor") is executing this
Supplement in accordance with the requirements of the Credit Agreement to
become a Grantor under the Security Agreement in order to induce the Lenders to
make additional Loans and the Issuing Bank to issue additional Letters of
Credit and as consideration for Loans previously made and Letters of Credit
previously issued.
Accordingly, the Agent and the New Grantor agree as follows:
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SECTION 1. In accordance with Section 7.16 of the Security Agreement,
the New Grantor by its signature below becomes a Grantor under the Security
Agreement with the same force and effect as if originally named therein as a
Grantor and the New Grantor hereby (a) agrees to all the terms and provisions
of the Security Agreement applicable to it as a Grantor thereunder and (b)
represents and warrants that the representations and warranties made by it as a
Grantor thereunder are true and correct on and as of the date hereof. In
furtherance of the foregoing, the New Grantor, as security for the payment and
performance in full of the Obligations (as defined in the Security Agreement),
does hereby create and grant to the Collateral Agent, its successors and
assigns, for the benefit of the Secured Parties, their successors and assigns,
a security interest in and lien on all of the New Grantor's right, title and
interest in and to the Collateral (as defined in the Security Agreement) of the
New Grantor. Each reference to a "Grantor" in the Security Agreement shall be
deemed to include the New Grantor. The Security Agreement is hereby
incorporated herein by reference.
SECTION 2. The New Grantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Collateral
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Grantor and the Collateral Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. The New Grantor hereby represents and warrants that (a) set
forth on Schedule I attached hereto is a true and correct schedule of the
location of any and all Collateral of the New Grantor and (b) set forth under
its signature hereto, is the true and correct location of the chief executive
office of the New Grantor.
SECTION 5. Except as expressly supplemented hereby, the Security
Agreement shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Security Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties hereto
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 8. All communications and notices hereunder shall be in
writing and given as provided in Section 7.01 of the Security Agreement. All
communications and notices hereunder to the New Grantor shall be given to it at
the address set forth under its signature below.
SECTION 9. The New Grantor agrees to reimburse the Collateral Agent
for its reasonable and documented out-of-pocket expenses in connection with
this Supplement, including the reasonable and documented fees, other charges
and disbursements of counsel for the Collateral Agent.
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IN WITNESS WHEREOF, the New Grantor and the Agent have duly executed
this Supplement to the Security Agreement as of the day and year first above
written.
[Name Of New Grantor],
by
--------------------------------------------
Name:
Title:
Address:
THE CHASE MANHATTAN BANK, as Administrative
Agent and as Collateral Agent,
by
--------------------------------------------
Name:
Title:
182
SCHEDULE I
to Supplement No.___ to the
Security Agreement
LOCATION OF COLLATERAL
Description Location
183
EXHIBIT I
CENTERS HOLDINGS, INC.
FORM OF BORROWING BASE CERTIFICATE
As of the period ended:
------------------
------------------------------------------------------------------------------------------------------------- ------------------
Inventory Value per SMO Report ________________
------------------------------------------------------------------------------------------------------------- ------------------
Add back: negative inventory balance (at cost) included in SMO Report as result of special orders ________________
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Sub-total ________________
------------------------------------------------------------------------------------------------------------- ------------------
Less ineligibles:
------------------------------------------------------------------------------------------------------------- ------------------
Consigned inventory ________________
------------------------------------------------------------------------------------------------------------- ------------------
Inventory located at third parties (locations not owned or leased with no landlord waiver) ________________
------------------------------------------------------------------------------------------------------------- ------------------
Inventory located at pool-points operated by third parties ________________
------------------------------------------------------------------------------------------------------------- ------------------
Damaged and defective store inventory ________________
------------------------------------------------------------------------------------------------------------- ------------------
Goods returned or rejected by customers ________________
------------------------------------------------------------------------------------------------------------- ------------------
Goods to be returned to vendors ________________
------------------------------------------------------------------------------------------------------------- ------------------
Inventory subject to layaway purchase agreements ________________
------------------------------------------------------------------------------------------------------------- ------------------
Inventory not located in United States or located in Puerto Rico ________________
------------------------------------------------------------------------------------------------------------- ------------------
Live plants and other perishable items ________________
------------------------------------------------------------------------------------------------------------- ------------------
GOB or similar inventory ________________
------------------------------------------------------------------------------------------------------------- ------------------
Not solely owned or without good and valid title ________________
------------------------------------------------------------------------------------------------------------- ------------------
No perfected first priority lien ________________
------------------------------------------------------------------------------------------------------------- ------------------
Other (in order to comply with terms of Credit Agreement) ________________
------------------------------------------------------------------------------------------------------------- ------------------
Total ineligibles ________________
------------------------------------------------------------------------------------------------------------- ------------------
Eligible Inventory ________________
------------------------------------------------------------------------------------------------------------- ------------------
Less reserves:
------------------------------------------------------------------------------------------------------------- ------------------
Shrink Reserve ________________
------------------------------------------------------------------------------------------------------------- ------------------
Discontinued Inventory and Aged Goods Reserve ________________
------------------------------------------------------------------------------------------------------------- ------------------
Excess Inventory, Slow-Moving, and Markdown Reserve ________________
------------------------------------------------------------------------------------------------------------- ------------------
Other (in order to comply with terms of Credit Agreement) ________________
------------------------------------------------------------------------------------------------------------- ------------------
Total reserves ________________
------------------------------------------------------------------------------------------------------------- ------------------
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------------------------------------------------------------------------------------------------------------- ------------------
Eligible Inventory Minus Reserves ________________
------------------------------------------------------------------------------------------------------------- ------------------
Advance rate ________________
------------------------------------------------------------------------------------------------------------- ------------------
Available inventory prior to Gift Certificate and Special Order Deposit Liabilities ________________
------------------------------------------------------------------------------------------------------------- ------------------
Less:
------------------------------------------------------------------------------------------------------------- ------------------
Gift Certificate Liability ________________
------------------------------------------------------------------------------------------------------------- ------------------
Special Order Deposit Liability - calculated per Schedule A to Exhibit I ________________
------------------------------------------------------------------------------------------------------------- ------------------
Borrowing Base ________________
------------------------------------------------------------------------------------------------------------- ------------------
Pursuant to the Credit Agreement dated December __, 1998, the undersigned
certifies that the information provided in this certificate to BankAmerica
Business Credit, Inc. as Borrowing Base Audit Agent, is complete and accurate
based on the accounting records of Centers Holdings, Inc.
-------------------------------
Title:
185
EXHIBIT J
CONFORMED COPY
INTERCREDITOR AGREEMENT dated as
of December 31, 1998, among (a) HECHINGER
INVESTMENT COMPANY OF DELAWARE, INC., as
Borrower (such term and each other term not
defined in this introductory statement
having the meaning assigned thereto in
Article I), (b) CENTERS HOLDINGS, INC., BSQ
ACQUISITION, INC., BSQ TRANSFEREE CORP.,
HECHINGER COMPANY, HECHINGER STORES COMPANY,
HECHINGER STORES EAST COAST COMPANY, the
other Holdings Subsidiary Guarantors and the
Subsidiary Guarantors, as Guarantors, (c)
THE CHASE MANHATTAN BANK, as Senior Agent
for the Senior Lenders and as Junior Agent
for the Junior Lenders, (d) BANKAMERICA
BUSINESS CREDIT, INC., and CITICORP USA,
INC., each as an Additional Agent, and (e)
GREEN EQUITY INVESTORS II, L.P. and KMART
CORPORATION, each as a CE Party.
The parties hereto have entered into this Agreement providing for
the subordination of the Junior Obligations to the Senior Obligations and for
certain rights and obligations with respect to the Collateral in order (a) to
induce each of the Senior Lenders to, among other things, (i) approve certain
amendments to the Senior Credit Agreement, (ii) approve the incurrence by the
Borrower and the Guarantors of Indebtedness pursuant to the Junior Credit
Agreement and the other Junior Loan Documents and the granting of the Junior
Security Interest and (iii) continue to extend credit to the Borrower pursuant
to the Senior Credit Agreement and (b) to induce each of the Junior Lenders to,
among other things, extend credit to the Borrower pursuant to the Junior Credit
Agreement. In extending credit to the Borrower and in entering into this
Agreement, each of the Senior Secured Parties and each of the Junior Secured
Parties is mutually relying on the undertakings of each of the Junior Secured
Parties and each of the Senior Secured Parties, respectively, as set forth
herein.
Each Grantor acknowledges that it will derive substantial economic
benefit from the making of loans to, and the issuance of letters of credit on
behalf of, the Borrower pursuant to the Senior Credit Agreement and the Junior
Credit Agreement. As consideration therefor and in order to induce the Senior
Lenders and the Junior Lenders to make loans and the Issuing Bank to issue
letters of credit pursuant to the Senior Credit Agreement and the Junior Credit
Agreement, each Grantor is willing to execute this Agreement.
Accordingly, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. (a) Capitalized terms used but not
otherwise defined herein shall have the meanings assigned to them in the Senior
Loan Documents or, if not defined in the Senior Loan Documents or the context
otherwise requires, in the Junior Loan Documents.
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(b) As used in this Agreement, the following terms have the meanings
specified below:
"Additional Agents" means collectively BankAmerica Business Credit,
Inc., as documentation agent and as borrowing base audit agent for the Senior
Lenders under the Senior Credit Agreement, and Citicorp USA, Inc., as
syndication agent for the Senior Lenders under the Senior Credit Agreement.
"Bankruptcy Code" shall have the meaning assigned to such term in
Section 4.01(g).
"Borrower" means Hechinger Investment Company of Delaware, Inc., a
Delaware corporation.
"CE Agreements" means collectively the GEI II Credit Enhancement
Agreement and the Kmart Credit Enhancement Agreement.
"CE Parties" means collectively Kmart and GEI II.
"Chase" means The Chase Manhattan Bank, a New York banking
corporation.
"Collateral" means the Security Agreement Collateral and the Pledge
Agreement Collateral unless expressly provided otherwise.
"Designated Event of Default" means (a) any Event of Default
described in paragraphs (a) or (b) of Article VII of the Senior Credit
Agreement, (b) pursuant to Article VII of the Senior Credit Agreement, the
termination by the Senior Administrative Agent of the Commitments and the
declaration by the Senior Administrative Agent that the Senior Revolving Loans
outstanding are immediately due and payable in whole, (c) any Event of Default
described in paragraphs (a) or (b) of Article VII of the Junior Credit Agreement
or (d) pursuant to Article VII of the Junior Credit Agreement, the termination
of the Supplemental Facility (as described in the Senior Credit Agreement) and
the declaration that the Junior Revolving Loans then outstanding are immediately
due and payable in whole.
"Event of Default Blockage Period" has the meaning assigned to such
term in Section 2.03.
"GEI II" means Green Equity Investors II, L.P., an investment fund
controlled by an Affiliate of LG&P.
"GEI II Credit Enhancement Agreement" means the Loan Purchase
Agreement dated as of December 31, 1998, among GEI II, the Borrower, the Junior
Lenders and the Junior Administrative Agent on behalf of the Junior Lenders.
"Grantors" means the Borrower and the Guarantors.
"Guarantors" means the Holdings Guarantors and the Subsidiary
Guarantors.
"Holdings Guarantors" means Centers Holdings, Inc., a Delaware
corporation ("Holdings"), BSQ Acquisition, Inc., a Delaware corporation, BSQ
Transferee Corp., a Delaware corporation, Hechinger Company, a Delaware
corporation, Hechinger Stores Company, a Delaware corporation, Hechinger Stores
East Coast Company, a Delaware corporation, and each other Subsidiary of
Holdings listed on Schedule I to the Senior Parent Guarantee Agreement (each
such Subsidiary, individually, a "Holdings Subsidiary Guarantor" and,
collectively, the "Holdings Subsidiary Guarantors").
"Junior Administrative Agent" means Chase solely in its capacity as
administrative agent for the Junior Lenders under the Junior Credit Agreement
and the other Junior Loan Documents to which Chase (and its successors and
permitted assigns) is a party in its capacity as administrative agent for the
Junior Lenders.
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"Junior Agent" means collectively the Junior Administrative Agent
and Junior Collateral Agent.
"Junior Borrower Obligations" means the Loans, LC Disbursements,
other monetary obligations and other obligations of the Borrower arising under
the Junior Credit Agreement or any other Junior Loan Document.
"Junior Collateral Agent" means Chase solely in its capacity as
collateral agent for the Junior Lenders under the Junior Credit Agreement and
the other Junior Loan Documents to which Chase (and its successors and permitted
assigns) is a party in its capacity as collateral agent for the Junior Lenders.
"Junior Credit Agreement" means the Credit Agreement dated as of
December 31, 1998, among the Borrower, the Holdings Guarantors party thereto,
the several lenders from time to time parties thereto (in such capacity, the
"Junior Lenders"), the Junior Agent and Chase, as issuing bank and swingline
lender, as the same may be amended, supplemented or otherwise modified from time
to time.
"Junior Creditors" means the Junior Lenders and the other holders of
Junior Borrower Obligations.
"Junior Guarantee Agreements" means the Junior Parent Guarantee
Agreement and the Junior Subsidiary Guarantee Agreement.
"Junior Guarantor Obligations" means, with respect to a particular
Guarantor, the guarantees, other monetary obligations and other obligations of
such Guarantor arising under the Junior Credit Agreement, the Junior Guarantee
Agreements, the Junior Security Documents or any other Junior Loan Document.
"Junior Holder" means any beneficiary of Junior Guarantor
Obligations.
"Junior Lenders" has the meaning assigned to such term in the
definition of the term Junior Credit Agreement.
"Junior Loan Documents" means the "Loan Documents" (as such term is
defined in the Junior Credit Agreement).
"Junior Obligations" means the Junior Borrower Obligations and the
Guarantors' Junior Guarantor Obligations.
"Junior Parent Guarantee Agreement" means the Parent Guarantee
Agreement dated as of December 31, 1998, among the Borrower, the Holdings
Guarantors and the Junior Agent, as the same may be amended, supplemented or
otherwise modified from time to time.
"Junior Pledge Agreement" means the Pledge Agreement dated as of
December 31, 1998, among the Borrower, the Holdings Guarantors party thereto,
the Subsidiary Guarantors party thereto and the Junior Collateral Agent, as the
same may be amended, supplemented or otherwise modified from time to time.
"Junior Revolving Borrowing" means a "Revolving Borrowing" (as such
term is defined in the Junior Credit Agreement).
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"Junior Revolving Commitment" means, with respect to each Junior
Lender, its "Revolving Commitment" (as such term is defined in the Junior Credit
Agreement).
"Junior Revolving Loan" means a "Revolving Loan" (as such term is
defined in the Junior Credit Agreement).
"Junior Secured Parties" means the Junior Lenders, the Junior Agent,
the beneficiaries of each indemnification obligation undertaken by any Grantor
under the Junior Credit Agreement, the Junior Guarantee Agreements, the Junior
Security Documents or any other Junior Loan Document, and the successors and
assigns of each of the foregoing.
"Junior Security Agreement" means the Security Agreement dated as of
December 31, 1998, among the Borrower, the Holdings Guarantors party thereto,
the Subsidiary Guarantors party thereto and the Junior Collateral Agent, as the
same may be amended, supplemented or otherwise modified from time to time.
"Junior Security Documents" means the Junior Security Agreement, the
Junior Pledge Agreement and any other documents given after the date hereof for
the purpose of providing collateral security or credit support for the loans
made pursuant to the Junior Credit Agreement.
"Junior Security Interest" means the second-priority security
interest in the Collateral granted pursuant to the Junior Security Documents by
the Grantors to the Junior Collateral Agent, for the ratable benefit of the
Junior Secured Parties, to secure the payment and performance of the Junior
Obligations.
"Junior Subsidiary Guarantee Agreement" means the Subsidiary
Guarantee Agreement dated as of December 31, 1998, among the Borrower, the
Subsidiary Guarantors and the Junior Agent, as the same may be amended,
supplemented or otherwise modified from time to time.
"Kmart" means Kmart Corporation, a Michigan corporation.
"Kmart Credit Enhancement Agreement" means the Loan Purchase
Agreement dated as of December 31, 1998, among Kmart, the Borrower, the Junior
Lenders and the Junior Administrative Agent on behalf of the Junior Lenders.
"LG&P" means ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Partners, L.P., a Delaware limited
partnership.
"Participating Creditors" means the Senior Agent, the Additional
Agents, the Senior Creditors, the Senior Holders, the Junior Agent, the Junior
Creditors, the Junior Holders and each CE Party.
"Pledge Agreement Collateral" means the "Collateral" (as such term
is defined in the Senior Pledge Agreement).
"Secured Parties" means Senior Secured Parties and the Junior
Secured Parties.
"Security Agreement Collateral" means the "Collateral" (as such term
is defined in the Senior Security Agreement).
"Senior Administrative Agent" means Chase solely in its capacity as
administrative agent for the Senior Lenders under the Senior Credit Agreement
and the other Senior Loan Documents to which Chase is a party in its capacity as
administrative agent for the Senior Lenders.
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"Senior Agent" means collectively the Senior Administrative Agent
and the Senior Collateral Agent.
"Senior Borrower Obligations" means the Loans, LC Disbursements,
other monetary obligations and other obligations of the Borrower arising under
the Senior Credit Agreement or any other Senior Loan Document.
"Senior Collateral Agent" means Chase solely in its capacity as
collateral agent for the Senior Lenders under the Senior Credit Agreement and
the other Senior Loan Documents to which Chase is a party in its capacity as
collateral agent for the Senior Lenders.
"Senior Credit Agreement" means the Credit Agreement dated as of
September 26, 1997, as amended and restated as of December 31, 1998, among the
Borrower, the Holdings Guarantors party thereto, the several lenders from time
to time parties thereto (in such capacity, the "Senior Lenders"), the Senior
Agent and Chase, as issuing bank and swingline lender, and the Additional
Agents, as the same may be amended, supplemented or otherwise modified from time
to time.
"Senior Creditors" means the Senior Lenders and the other holders of
Senior Borrower Obligations.
"Senior Guarantee Agreements" means the Senior Parent Guarantee
Agreement and the Senior Subsidiary Guarantee Agreement.
"Senior Guarantor Obligations" means, with respect to a particular
Guarantor, the guarantees, other monetary obligations and other obligations of
such Guarantor arising under the Senior Credit Agreement, the Senior Guarantee
Agreements, the Senior Security Documents or any other Senior Loan Document.
"Senior Holder" means any beneficiary of Senior Guarantor
Obligations.
"Senior Lenders" means the "Lenders" (as such term is defined in the
Senior Credit Agreement).
"Senior Loan Documents" means the "Loan Documents" (as such term is
defined in the Senior Credit Agreement).
"Senior Obligations" means the Senior Borrower Obligations and the
Guarantors' Senior Guarantor Obligations.
"Senior Parent Guarantee Agreement" means the Parent Guarantee
Agreement dated as of September 26, 1997, among the Borrower, the Holdings
Guarantors, the Senior Agent and the Additional Agents, as the same may be
amended, supplemented or otherwise modified from time to time.
"Senior Pledge Agreement" means the Pledge Agreement dated as of
September 26, 1997, among the Borrower, the Holdings Guarantors party thereto,
the Subsidiary Guarantors party thereto and the Senior Collateral Agent, as the
same may be amended, supplemented or otherwise modified from time to time.
"Senior Revolving Borrowing" means a "Revolving Borrowing" (as such
term is defined in the Senior Credit Agreement).
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"Senior Revolving Loan" means a "Revolving Loan" (as such term is
defined in the Senior Credit Agreement).
"Senior Secured Parties" means the Senior Lenders, the Senior Agent,
the Additional Agents, the beneficiaries of each indemnification obligation
undertaken by any Grantor under the Senior Credit Agreement, the Senior Parent
Guarantee Agreement, the Senior Subsidiary Guarantee Agreement, the Senior
Security Documents or any other Senior Loan Document, and the successors and
assigns of each of the foregoing.
"Senior Security Agreement" means the Security Agreement dated as of
September 26, 1997, as amended and restated as of December 31, 1998, among the
Borrower, the Holdings Guarantors party thereto, the Subsidiary Guarantors party
thereto and the Senior Collateral Agent, as the same may be amended,
supplemented or otherwise modified from time to time.
"Senior Security Documents" means the Senior Security Agreement, the
Senior Pledge Agreement and any other documents given after the date hereof for
the purpose of providing collateral security or credit support for the loans
made and letters of credit issued pursuant to the Senior Credit Agreement.
"Senior Security Interest" means the first-priority security
interests in the Collateral granted pursuant to the Senior Security Agreement by
the Grantors to the Senior Collateral Agent, for the ratable benefit of the
Senior Secured Parties to secure the payment and performance of the Senior
Obligations.
"Senior Subsidiary Guarantee Agreement" means the Subsidiary
Guarantee Agreement dated as of September 26, 1997, among the Borrower, the
Subsidiary Guarantors, the Senior Agent and the Additional Agents, as the same
may be amended, supplemented or otherwise modified from time to time.
"Senior Swingline Loan" means the "Swingline Loan" (as such term is
defined in the Senior Credit Agreement).
"Specified Event of Default" means (a) any Event of Default
described in paragraphs (a), (b), (h) or (i) of Article VII of the Senior Credit
Agreement, (b) pursuant to Article VII of the Senior Credit Agreement, the
termination by the Senior Administrative Agent of the Commitments and the
declaration by the Senior Administrative Agent that the Senior Revolving Loans
then outstanding are immediately due and payable in whole, (c) any Event of
Default described in paragraphs (a), (b), (h) or (i) of Article VII of the
Junior Credit Agreement or (d) pursuant to Article VII of the Junior Credit
Agreement, the termination of the Supplemental Facility (as defined in the
Senior Credit Agreement) and the declaration that the Junior Revolving Loans
then outstanding are immediately due and payable in whole.
"Specified Lenders" has the meaning assigned to such term in Section
5.06(c)(iii).
"Subsidiary Guarantors" means each Subsidiary of the Borrower listed
on Schedule I to the Senior Subsidiary Guarantee Agreement.
SECTION 1.02. Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires
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otherwise (a) any definition of or reference to any agreement, instrument or
other document herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended, supplemented or
otherwise modified (subject to any restrictions on such amendments, supplements
or modifications set forth herein), (b) any reference herein to any Person shall
be construed to include such Person's successors and assigns, (c) the words
"herein", "hereof" and "hereunder", and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (d) all references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits
and Schedules to, this Agreement and (e) the words "asset" and "property" shall
be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.
ARTICLE II
Subordination of Junior Borrower Obligations
SECTION 2.01. Agreement To Subordinate. The Borrower agrees, and
each Junior Creditor by becoming a party to the Junior Credit Agreement or any
other Junior Loan Document or accepting the benefits of the Junior Borrower
Obligations arising thereunder agrees, that the Junior Borrower Obligations are
expressly subordinated in right of payment, to the extent and in the manner
provided in this Article II, to the prior payment in full in cash of all Senior
Borrower Obligations, and that such subordination is for the benefit of and
enforceable by the Senior Creditors.
SECTION 2.02. Liquidation, Dissolution, Bankruptcy. Upon any payment
or distribution of the assets of the Borrower to creditors of the Borrower upon
a total or partial liquidation or a total or partial dissolution of the Borrower
or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Borrower and its property:
(a) holders of Senior Borrower Obligations shall be entitled to
receive payment in full in cash of such Senior Borrower Obligations or
provisions satisfactory to the holders of such Senior Borrower Obligations
shall be made for such payment before any Junior Creditor shall be
entitled to receive any payment of principal or interest with respect to
any Junior Borrower Obligations; and
(b) until the Senior Borrower Obligations are paid in full in cash
any distribution to which a Junior Creditor would be entitled but for this
Article II shall be made to holders of Senior Borrower Obligations as
their interests may appear, except that a Junior Creditor may receive
interest that may continue to accrue and be added to the principal amount
of such Junior Obligations.
SECTION 2.03. Designated Event of Default in Respect of the Senior
Obligations. (a) Upon the occurrence and during the continuance of a Designated
Event of Default, the Borrower may not pay principal of or interest on its
Junior Borrower Obligations or acquire or redeem Junior Borrower Obligations for
cash, property or securities (other than interest that is added to the principal
amount of such Junior Borrower Obligations) unless and until such Designated
Event of Default shall have been cured, waived or rescinded in writing or shall
have ceased to exist or such Senior Borrower Obligations shall have been
discharged in accordance with their terms or the holders of such Senior Borrower
Obligations shall have waived in writing the benefit of this sentence, after
which the Borrower shall resume making any and all required payments in respect
of its Junior Obligations including any missed
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payments (such period during which such payments and acquisitions and
redemptions are prohibited being hereinafter referred to as a "Designated Event
of Default Blockage Period"). The Borrower agrees to give each Junior Creditor
prompt written notice of the occurrence of a Designated Event of Default
Blockage Period, provided that the failure to furnish such notice shall not in
any way limit or adversely affect the rights of the holders of Senior Borrower
Obligations with respect to such Designated Event of Default Blockage Period or
otherwise.
SECTION 2.04. When Distribution Must Be Paid Over. If any payment or
distribution is made to Junior Creditors that pursuant to this Article II should
not have been made to them, such Junior Creditors shall hold such payment or
distribution in trust for holders of Senior Borrower Obligations and pay it over
to them as their interests may appear.
SECTION 2.05. Subrogation. Subject to the prior payment in full in
cash of all Senior Borrower Obligations and until the Junior Obligations of the
Borrower are paid in full, Junior Creditors shall be subrogated to the rights of
holders of Senior Borrower Obligations to receive the payments or distributions
applicable to such Senior Borrower Obligations. Any payment or distribution made
under this Article II to holders of Senior Borrower Obligations that otherwise
would have been made to Junior Creditors except for the provisions of this
Article II shall, as between the Borrower, its creditors (other than the holders
of such Senior Borrower Obligations) and Junior Creditors, be deemed to be a
payment by the Borrower to or on account of such Senior Borrower Obligations,
and no payments or distributions to Junior Creditors of cash, property or
securities by virtue of the subrogation herein provided shall, as between the
Borrower, its creditors (other than the holders of such Senior Borrower
Obligations) and Junior Creditors, be deemed to be a payment to or on account of
the Junior Borrower Obligations, it being understood that the provisions of this
Article II are and are intended solely for the purpose of defining the relative
rights of Junior Creditors on the one hand and the holders of Senior Borrower
Obligations on the other.
SECTION 2.06. Relative Rights. This Article II defines the relative
rights of Junior Creditors and holders of Senior Borrower Obligations. Nothing
herein shall:
(a) impair, as between the Borrower and Junior Creditors, the
obligations of the Borrower, which are absolute and unconditional, to pay
principal of and interest on the Junior Borrower Obligations in accordance
with their terms (provided, however, that this provision is not intended
to limit the restrictions on payments on such Junior Borrower Obligations
set forth in Section 2.03); or
(b) prevent any Junior Creditor or the Junior Agent from exercising
its available remedies upon an Event of Default under the Junior Credit
Agreement, subject to the rights of holders of Senior Borrower Obligations
to receive distributions otherwise payable to Junior Creditors (provided,
however, that this provision is not intended to limit the provisions of
Section 4.02).
SECTION 2.07. Subordination May Not Be Impaired by the Borrower. No
right of a holder of Senior Borrower Obligations to enforce the subordination of
the Junior Borrower Obligations shall be impaired by any act or failure to act
by the Borrower or by its failure to comply with the terms and conditions of the
Junior Credit Agreement or the other Junior Loan Documents.
SECTION 2.08. Reinstatement. If, at any time, all or part of any
payment previously made by the Borrower or any other Person with respect to
Senior
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Borrower Obligations is rescinded for any reason whatsoever (including the
insolvency, bankruptcy or reorganization of the Borrower or such other Person),
the subordination provisions set forth in this Article II shall continue to be
effective or be reinstated, as the case may be, all as though such payment had
not been made.
SECTION 2.09. Non-Impairment. Each Junior Creditor agrees (and
consents) that, without notice to or assent by it, and without affecting the
liabilities and obligations of the Borrower and the rights and benefits of the
holders of the Senior Borrower Obligations set forth in this Article II:
(a) the obligations and liabilities of the Borrower and any other
party or parties for or upon the Senior Borrower Obligations may, from
time to time, be increased (but not above $600,000,000 in aggregate
principal amount), renewed, refinanced, extended, modified, amended,
restated, compromised, supplemented, terminated, waived or released;
(b) the holders of Senior Borrower Obligations, and any
representative or representatives acting on behalf thereof, including the
Senior Agent, may exercise or refrain from exercising any right, remedy or
power granted by or in connection with any agreements relating to such
Senior Borrower Obligations; and
(c) any balance or balances of funds at any time outstanding to the
credit of the Borrower with any holder of Senior Borrower Obligations may,
from time to time, in whole or in part, be surrendered or released, all as
the holders of any Senior Borrower Obligations, or any representative or
representatives acting on behalf thereof, including any Senior Agent, may
deem advisable, and all without impairing, abridging, diminishing,
releasing or affecting the subordination of the Junior Borrower
Obligations to such Senior Obligations.
SECTION 2.10. No Modification. The provisions of this Article II and
the definitions used herein are for the benefit of the holders from time to time
of Senior Borrower Obligations and, so long as any such Senior Obligations or
any commitments with respect thereto remain outstanding, such provisions and
definitions may not be modified, rescinded or canceled in whole or in part,
provided that the provisions of this Article II and such definitions may be
modified, amended or supplemented in accordance with Section 5.04, provided the
prior written consent has been obtained of (i) the holders of more than 50% of
the principal amount of such Senior Obligations (taken together as one class),
(ii) Senior Lenders holding more than 50% of the Senior Loans and commitments
outstanding under the Senior Credit Agreement and (iii) the Senior
Administrative Agent.
SECTION 2.11. Waivers; Reliance by Holders of Senior Obligations. To
the extent permitted by applicable law, the Borrower and each Junior Creditor
hereby waive (a) notice of acceptance hereof by the holders of the Senior
Borrower Obligations and (b) all diligence in the collection or protection of or
realization upon such Senior Borrower Obligations. Each of the Junior Creditors
by accepting the Junior Borrower Obligations acknowledges and agrees that the
subordination provisions in this Article II are, and are intended to be, an
inducement and a consideration to each holder of any Senior Borrower
Obligations, whether such Senior Borrower Obligations were created or acquired
before or after the issuance of the Junior Borrower Obligations, to acquire and
continue to hold, or to continue to hold, such Senior Borrower Obligations and
such holder of Senior Borrower Obligations shall be deemed conclusively to have
relied on such subordination provisions in acquiring and continuing to hold, or
in continuing to hold, such Senior Borrower Obligations.
SECTION 2.12. Enforcement of Rights. The Borrower and Junior
Creditors hereby expressly agree that the holders of Senior Obligations may
enforce
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any and all rights derived herein by suit, either in equity or at law, for
specific performance of any agreement contained in this Article II or for
judgment at law and any other relief whatsoever appropriate to such action or
procedure.
SECTION 2.13. Proofs of Claim. If, while any Senior Borrower
Obligation is outstanding, any Specified Event of Default occurs and is
continuing, the Junior Creditors shall, to the extent permitted by applicable
law, duly and promptly take such action as the Senior Agent may reasonably
request to collect any payment hereunder to which the holders of Senior Borrower
Obligations may be entitled hereunder and to file appropriate claims or proofs
of claim in respect thereof. Upon the failure of any Junior Creditor to take any
such action, the Senior Agent is hereby irrevocably authorized and empowered (in
its own name or otherwise and to the extent permitted by applicable law), but
shall have no obligation, to file claims and proofs of claim with respect
thereof and each Junior Creditor hereby appoints the Senior Agent as
attorney-in-fact for such Junior Creditor to take any and all such actions;
provided, however, that the Senior Agent shall only be permitted to file such
proofs of claim upon notice to such Junior Creditor and to the extent that such
Junior Creditor has failed to make such filings by the date that is ten (10)
days prior to the last date on which such Junior Creditor is permitted to make
such filings as a matter of law under the Bankruptcy Code.
SECTION 2.14. Rights of Junior Agent. (a) Notwithstanding Section
2.03, the Junior Agent may continue to make payments on the Junior Borrower
Obligations and shall not be charged with knowledge of the existence of facts
that would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, the Junior Agent receives
notice satisfactory to it that payments may not be made under this Article II.
Only the Borrower or the Senior Agent may give such a notice to the Junior
Agent.
(b) The Junior Agent in its individual or any other capacity may
hold Senior Borrower Obligations with the same rights it would have if it were
not the Junior Agent. The Junior Agent shall be entitled to all the rights set
forth in this Article II with respect to any such Senior Borrower Obligations
that may at any time be held by it, to the same extent as any other holder of
such Senior Obligations, and nothing in the Junior Credit Agreement or this
Agreement shall deprive the Junior Agent of its rights as such holder. Nothing
in this Article II shall apply to claims of, or payments to, the Junior Agent
under or pursuant to Article VIII of the Junior Credit Agreement.
SECTION 2.15. Distribution or Notice to Senior Agent. Whenever a
distribution is to be made or a notice given to the holders of Senior Borrower
Obligations, the distribution may be made to the Senior Administrative Agent and
the notice given to the Senior Agent.
SECTION 2.16. Article II Not To Prevent Events of Default or Limit
Right To Accelerate. The failure to make a payment pursuant to the Junior
Borrower Obligations by reason of any provision in this Article II shall not be
construed as preventing the occurrence of a default under the Junior Credit
Agreement or any other Junior Loan Document. Nothing in this Article II shall
have any effect on the right of the Junior Creditors or the Junior Agent to
accelerate the maturity of such Junior Borrower Obligations.
SECTION 2.17. Junior Agent To Effectuate Subordination. Each Junior
Creditor by accepting Junior Borrower Obligations authorizes and directs the
Junior Agent on its behalf to take such action as may be necessary or
appropriate to acknowledge or effectuate the subordination between the Junior
Creditors and the holders of Senior Borrower Obligations as provided in this
Article II and appoints the Junior Agent as attorney-in-fact for any and all
such purposes.
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SECTION 2.18. Junior Agent Not Fiduciary for Holders of Senior
Obligations. The Junior Agent shall not be deemed to owe any fiduciary duty to
the holders of Senior Borrower Obligations and shall not be liable to any such
holders if it shall mistakenly pay over or distribute to a Junior Creditor or
the Borrower or any other Person, money or assets to which any holders of Senior
Borrower Obligations shall be entitled by virtue of this Article II or
otherwise.
SECTION 2.19. Junior Agent's Compensation Not Prejudiced. Nothing in
this Article II shall apply to amounts due to the Junior Agent pursuant to the
Junior Credit Agreement or any other Junior Loan Document.
ARTICLE III
Subordination of Junior Guarantor Obligations
Each of the Guarantors agrees, and each Junior Holder by becoming a
party to the Junior Credit Agreement or any other Junior Loan Document or
accepting the benefits of the Junior Guarantor Obligations arising thereunder
agrees, that the obligations of each Guarantor to the Junior Holders pursuant to
the Junior Guarantee Agreements are expressly subordinate and subject in right
of payment to the prior payment in full of all Senior Guarantor Obligations of
such Guarantor, to the same extent as and in the manner provided in Article II
hereof with respect to the subordination of the Junior Borrower Obligations to
the prior payment in full of all Senior Borrower Obligations, and that such
subordination is for the benefit of and enforceable by the Senior Holders. For
purposes of this Article III, each Guarantor shall have the same rights and be
subject to the same duties and obligations as the Borrower pursuant to said
Article II. For purposes of this Article III, Senior Borrower Obligations shall
have the meaning set forth in Article I but substituting such Guarantor, as the
case may be, for the Borrower and shall include any guarantee by such Guarantor,
as the case may be, of Senior Borrower Obligations. It is further understood and
agreed that during any Designated Event of Default Blockage Period no payments
in respect of any Junior Obligations may be made by any Guarantor.
ARTICLE IV
Rights in Collateral
SECTION 4.01. Perfection and Priority of Security Interests. (a) Any
and all security interests, assignments, pledges and other liens, charges or
encumbrances now existing or hereafter created or arising in favor of the Junior
Secured Parties with respect to the Collateral are expressly junior in priority,
operation and effect to any and all security interests, assignments, pledges and
other secured claims, liens, charges or encumbrances now existing or hereafter
created or arising in favor of the Senior Collateral Agent for the benefit of
the Senior Secured Parties with respect to the Collateral, notwithstanding
anything to the contrary contained in any agreement or filing to which the
Junior Agent or any Junior Secured Party may now or hereafter be a party, and
irrespective of the time, order or method of attachment or perfection of any
financing statements or other security interests, assignments, pledges and other
liens, charges or encumbrances or any defect or deficiency or alleged defect or
deficiency in any of the foregoing.
(b) The Junior Agent, on behalf of itself and the other Junior
Secured Parties, acknowledges that the Senior Obligations represent indebtedness
that is revolving in nature and that the
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amount thereof that may be outstanding at any time or from time to time may be
increased or reduced and subsequently reborrowed, and that the terms of the
Senior Obligations may be modified, extended, amended, restated, compromised,
supplemented, terminated, waived or released from time to time, and the
aggregate amount of the Senior Obligations may be increased, renewed, replaced
or refinanced, all without notice to or consent by the Junior Secured Parties
and without affecting the provisions hereof, provided that no such modification,
extension or amendment shall be effective for purposes of this Agreement if it
increases the principal amount of the loans outstanding under the Senior Credit
Agreement to an amount in excess of $600,000,000. The lien priorities provided
in this Section 4.01 shall not be altered or otherwise affected by any
amendment, modification, supplement, extension, increase, replacement, renewal,
restatement or refinancing of either the Senior Obligations or the Junior
Obligations, or any portion thereof, nor by any action that the Senior Secured
Parties or the Junior Secured Parties may take or fail to take in respect of the
Collateral.
(c) For purposes of perfecting the Junior Security Interest in the
Collateral and the proceeds thereof, the Grantors and the Senior Agent hereby
acknowledge that each Grantor will file such UCC-1 financing statements covering
the Collateral as it shall deem appropriate, naming the Borrower (or one or more
Guarantors) as debtor, and the Junior Agents, on behalf of the Junior Secured
Parties, as secured party. Each of the Junior Agent and the Junior Secured
Parties agrees that all UCC-1 Financing Statements filed by or on behalf of
Junior Secured Parties shall be in form satisfactory to the Senior Agent and
shall contain the following notation: "The interest of the Secured Party in the
collateral described herein is junior and subordinate to the interests of The
Chase Manhattan Bank and its successors and assigns, as agent, and the Lenders
party to that certain Credit Agreement dated as of September 26, 1997, as
amended and restated as of December 31, 1998 (as amended, supplemented or
otherwise modified from time to time) with Hechinger Investment Company of
Delaware, Inc. pursuant to that certain Intercreditor Agreement dated as of
December 31, 1998 (as amended, supplemented or otherwise modified from time to
time)."
(d) It is acknowledged that (i) pursuant to the Junior Security
Agreement, the Grantors have granted to the Junior Agent for the benefit of the
Junior Secured Parties a second-priority security interest in the Collection
Deposit Accounts, (ii) the Collection Deposit Accounts are maintained with the
Senior Collateral Agent or with a Sub-Agent under the dominion and control of
the Senior Collateral Agent in accordance with the terms of the Depository
Agreements and (iii) pursuant to the Senior Security Agreement, the Grantors
have granted to the Senior Collateral Agent for the benefit of the Senior
Secured Parties a first-priority security interest in the Collection Deposit
Accounts. Subject to the provisions of this Article IV, the Senior Collateral
Agent shall maintain sole dominion and control over the Collection Deposit
Accounts for the benefit of the Junior Secured Parties in addition to the Senior
Secured Parties. Notwithstanding any provision to the contrary in this Section
4.01(d), the Senior Collateral Agent shall continue to have a first-priority
security interest in the Collection Deposit Accounts for the benefit of the
Senior Secured Parties. Notwithstanding anything to the contrary in this
Agreement, under no circumstances shall the Senior Collateral Agent have, or be
deemed to have, any fiduciary duty or any other duty (other than as expressly
set forth in paragraph (f) below) to any Junior Secured Party or the Junior
Agent with respect to actions it takes or is permitted to take hereunder with
respect to the Collection Accounts.
(e) It is acknowledged that (i) pursuant to the Junior Pledge
Agreement, the Borrower, the Holdings Guarantors party thereto and the
Subsidiary Guarantors party thereto have granted to the Junior Agent for the
benefit of the Junior Secured Parties a second-priority security interest in the
Pledge Agreement Collateral, (ii) to the extent necessary to perfect a security
interest under the Uniform Commercial Code, the Pledge Agreement Collateral is
in the possession of the Senior Collateral Agreement in accordance with the
terms of the Senior Pledge Agreement and (iii) the Borrower, the Holdings
Guarantors party to the Senior Pledge Agreement and the Subsidiary Guarantors
party to the Senior Pledge Agreement have granted to the Senior Collateral Agent
for the benefit of the Senior
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Secured Parties a first-priority security interest in the Pledge Agreement
Collateral. Subject to the provisions of this Article IV, the Senior Collateral
Agent shall maintain possession, to the extent reasonably possible, of the
Pledge Agreement Collateral for the benefit of the Junior Secured Parties in
addition to the Senior Secured Parties. Notwithstanding any provision to the
contrary in this Section 4.01(e), the Senior Collateral Agent shall continue to
have a first-priority security interest in the Pledge Agreement Collateral for
the benefit of the Senior Secured Parties. Notwithstanding anything to the
contrary in this Agreement, under no circumstances shall the Senior Collateral
Agent have, or be deemed to have, any fiduciary duty or any other duty (other
than as expressly set forth in paragraph (f) below) to any Junior Secured Party
or the Junior Agent with respect to actions it takes or is permitted to take
hereunder with respect to the Pledge Agreement Collateral.
(f) The Junior Agent, on behalf of itself and the other Junior
Secured Parties, acknowledges and agrees with the Senior Secured Parties that
the arrangements described in paragraphs (a), (b), (c), (d) and (e) above are
solely for the purpose of providing the Junior Secured Parties with a perfected
Junior Security Interest in the Collateral and shall in no way be construed as
imposing any duties or other obligations on the Senior Agent other than to
transfer to the Junior Secured Parties (or as a court of competent jurisdiction
may otherwise direct) the proceeds, if any, that remain following a sale,
transfer or other disposition of the Collateral by the Senior Collateral Agent
on behalf of the Senior Secured Parties and the payment and satisfaction in full
of any and all Senior Obligations or, if the Senior Collateral Agent shall still
be in possession of all or any part of the Collateral after such payment and
satisfaction in full, the Collateral or such part thereof remaining, without
representation or warranty on the part of the Senior Agent or the Senior Secured
Parties. In furtherance of the foregoing, the Junior Secured Parties acknowledge
and agree with the Senior Secured Parties that, at all times until the Senior
Obligations shall have been paid and satisfied in full, the Senior Collateral
Agent shall be entitled to (i) maintain control over the Collection Deposit
Accounts in accordance with the Senior Security Agreement and the Depository
Agreements, (ii) maintain control over the Pledge Agreement Collateral in
accordance with the Senior Pledge Agreement and (iii) sell, transfer or
otherwise dispose of or deal with the Collateral as provided in the Senior
Security Documents without regard to the security interest of the Junior Secured
Parties therein, or any rights to which the Junior Secured Parties would
otherwise be entitled as a result of such security interest, the only obligation
of the Senior Agent to the Junior Secured Parties in respect thereof being to
promptly deliver to the Junior Agent (unless otherwise directed in writing by
the Junior Agent or by a court of competent jurisdiction) any proceeds remaining
from such sale, transfer or other disposition of the Collateral after such
payment and satisfaction in full of the Senior Obligations or, if the Senior
Agent shall still be in possession of all or any part of the Collateral after
such payment and satisfaction in full, the Collateral or such part thereof
remaining, without representation or warranty on the part of the Senior Agent or
the Senior Secured Parties, provided that nothing contained in this sentence
shall be construed to give rise to, nor shall the Junior Agent or the Junior
Secured Parties have, any claims whatsoever against the Senior Agent or any
Senior Secured Party on account of any act or omission to act in connection with
the exercise of any right or remedy of the Senior Agent with respect to the
Collateral (other than with respect to any claims that may arise as a result of
the failure of the Senior Agent, after the payment and satisfaction in full of
the Senior Obligations, to deliver any remaining Collateral or proceeds to the
Junior Agent or the Junior Secured Parties). The Junior Agent, on behalf of
itself and the other Junior Secured Parties, agrees that, without the prior
written consent of the Senior Agent, it shall not, and shall not attempt to,
exercise any rights of enforcement with respect to (A) the Senior Security
Interest in the Collateral or (B) the Junior Security Interest in the
Collateral, whether pursuant to the Junior Security Documents or otherwise,
until the payment and satisfaction in full of the Senior Obligations.
(g) The Junior Agent, on behalf of itself and the other Junior
Secured Parties, agrees that in the event a proceeding under Title 11 of the
U.S. Code (the "Bankruptcy Code") or any other Federal, state or foreign
bankruptcy, insolvency, receivership or similar law shall be commenced by or
against any Grantor, the Junior Agent or such Junior Secured Party shall not
file any objection or in any
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other manner attempt to prevent the court conducting such proceeding from (and
shall be deemed to have consented to such proceeding) (i) authorizing such
Grantor under Section 364 of the Bankruptcy Code (or the analogous provision of
such other law) to incur secured indebtedness and priority administration
indebtedness to the Senior Secured Parties (or any of them) for loans that may
be made by the Senior Secured Parties (or any of them) to such Grantor after the
commencement and/or termination of such proceedings, and to secure the repayment
and performance of such post-petition indebtedness (and interest thereon and
costs and expenses in connection therewith) by granting to the Senior Secured
Parties (or any of them) a first-priority security interest in and a
first-priority lien on all the Collateral, (ii) pursuant to Section 364 of the
Bankruptcy Code (or the analogous provision of such other law), granting the
Senior Secured Parties (or any of them) a first-priority security interest in
and a first-priority lien on all the Collateral, (iii) authorizing such Grantor
under the Bankruptcy Code to grant the Senior Secured Parties (or any of them)
adequate protection, whether in the form of cash payments, accrued interest or
otherwise, in connection with the use of cash collateral or in connection with
the transactions contemplated by clauses (i) and (ii) hereof.
SECTION 4.02. No Interference; Right to Instruct Agent; Payment
Over; Reinstatement; Permitted Actions. (a) The Junior Agent, on behalf of
itself and the other Junior Secured Parties, agrees that (i) it will not take or
cause to be taken any action, the purpose or effect of which is, or could be, to
make any Junior Security Interest pari passu with, or to give any Junior Secured
Party any preference or priority relative to, the Senior Security Interest or
the Senior Secured Parties with respect to the Collateral or any part thereof,
(ii) it will not interfere, hinder or delay, in any manner, whether by judicial
proceedings or otherwise, any sale, transfer or other disposition of the
Collateral by the Senior Collateral Agent or any other Senior Secured Party,
(iii) it has no right to (A) direct the Senior Collateral Agent or any other
Senior Secured Party to exercise any right, remedy or power with respect to the
Collateral or (B) consent to the exercise by the Senior Collateral Agent or any
other Senior Secured Party of any right, remedy or power with respect to the
Collateral, (iv) it will not institute any suit or assert in any suit,
bankruptcy, insolvency or other proceeding any claim against the Senior
Collateral Agent or any other Senior Secured Party seeking damages from or other
relief by way of specific performance, instructions or otherwise, with respect
to, and neither the Senior Collateral Agent nor any other Senior Secured Party
shall be liable for, any action taken or omitted to be taken by the Agent or the
Senior Secured Parties with respect to the Collateral, (v) it will not commence
judicial or nonjudicial foreclosure proceedings with respect to, seek to have a
trustee, receiver, liquidator or similar official appointed for or over, attempt
any action to take possession of, exercise any right, remedy or power with
respect to, or otherwise take any action to enforce its interest in or realize
upon, the Collateral (other than filing a proof of claim) until all the Senior
Obligations shall have been paid and satisfied in full, (vi) it will not seek,
and hereby waives any right, to have the Collateral or any part thereof
marshaled upon any foreclosure or other disposition of the Collateral, (vii) it
will not attempt, directly or indirectly, whether by judicial proceedings or
otherwise, to challenge the enforceability of any provision of this Agreement.
(b) The Junior Agent, on behalf of itself and the other Junior
Secured Parties, hereby agrees that, in the event of a sale, transfer or other
disposition of Collateral in accordance with the provisions of the Senior Credit
Agreement or any Senior Security Document or pursuant to any judicial or
nonjudicial foreclosure proceedings with respect to the Collateral undertaken by
or on behalf of the Senior Collateral Agent or any other Senior Secured Party,
any security interest or lien of the Junior Secured Parties in such Collateral
shall terminate and be released automatically and without further action to the
extent that the lien of the Senior Collateral Agent for the benefit of the
Senior Secured Parties in such Collateral is released. The Junior Agent further
agrees to execute all necessary instruments and documents to evidence such
termination and release. Notwithstanding the foregoing, the Junior Agent shall
not be deemed to release or terminate the security interest or lien of the
Junior Secured Parties to
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the extent that any proceeds of the sale, transfer or disposition of Collateral
are in excess of the amount necessary to pay in full all the Senior Obligations.
(c) The Junior Agent, on behalf of itself and the other Junior
Secured Parties, hereby agrees that if any Junior Secured Party shall obtain
possession of any of the Collateral (other than cash proceeds deposited with the
Junior Agent to pay principal or interest in respect of the Junior Obligations
at a time when the Senior Agent has not informed the Junior Agent of the
occurrence of a Specified Event of Default), or shall realize any payment in
respect of the Collateral, or shall realize any payment or receive any
distribution that pursuant to Article II or Article III should not have been
made to it, in each case prior to the time when the Senior Obligations have been
paid in full, then it shall hold such Collateral, payment or distribution in
trust for the Senior Secured Parties and transfer such Collateral, payment or
distribution, as the case may be, to the Senior Agent. If, at any time, all or
part of any payment with respect to the Senior Obligations previously made is
rescinded for any reason whatsoever (including, without limitation, the
insolvency, bankruptcy or reorganization of the Borrower or such other Person),
the Junior Agent and the Junior Secured Parties shall promptly turn any
Collateral then held by any of them over to the Senior Agent, and the provisions
set forth in this Agreement (including without limitation, the subordination
provisions set forth herein) shall continue to be effective or be reinstated, as
the case may be, as if such payment had not been made, until the payment and
satisfaction in full of the Senior Obligations.
ARTICLE V
Miscellaneous
SECTION 5.01. Notices. All notices and other communications provided
for herein shall be in writing and shall be delivered by hand or overnight
courier service, mailed by certified or registered mail or sent by telecopy, as
follows:
(a) to any party to the Senior Credit Agreement, as provided in the
Senior Credit Agreement;
(b) to any party to the Junior Credit Agreement, as provided in the
Junior Credit Agreement;
(c) to any party to both the Senior Credit Agreement and the Junior
Credit Agreement, as provided in either the Senior Credit Agreement or the
Junior Credit Agreement;
(d) to GEI II, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇, Attention of ▇▇▇▇▇▇▇ ▇. Annick (Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇); and
(e) to Kmart, ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇)
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
SECTION 5.02. Status of Agreement. This Agreement shall constitute a
Loan Document for all purposes under each of the Senior Credit Agreement and the
Junior Credit Agreement.
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SECTION 5.03. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 5.04. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER SENIOR LOAN DOCUMENT, JUNIOR LOAN DOCUMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY
OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION.
SECTION 5.05. Further Assurances. Each of the parties hereto agrees
to execute such further documentation and take such further action as shall be
reasonably necessary to fully effectuate the provisions of this Agreement.
SECTION 5.06. Modification of Agreement. (a) No modification or
amendment of any provision of this Agreement shall in any event be effective
unless the same shall be in writing and signed by the Required Lenders (as
defined in the Senior Credit Agreement), the Required Lenders (as defined in the
Junior Credit Agreement) and each of the CE Parties; provided, however, that (i)
no such modification or amendment shall adversely affect any of the Senior
Agent's and Junior Agent's rights, immunities or rights to indemnification
hereunder or under any Senior Loan Document or Junior Loan Document or expand
its duties hereunder, without the prior written consent of such Senior Agent or
Junior Agent, as the case may be, and (ii) no such modification or amendment
shall modify any provision hereof that is intended to provide for the
subordination of the Junior Obligations to the Senior Obligations without the
prior written consent of all Participating Creditors.
(b) No waiver of any provision of this Agreement and no consent to
any departure by any party hereto from the provisions hereof shall be effective
unless such waiver or consent shall be set forth in a written instrument
executed by the party against which it is sought to be enforced, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. No notice to or demand on any party hereto in any case
shall entitle such party to any other or further notice or demand in the same,
similar or other circumstances.
(c) The parties hereto agree that neither Section 2.10 of the Senior
Credit Agreement nor Section 2.10 of the Junior Credit Agreement shall be
modified or amended without the written consent of (i) Senior Lenders having
"Total Exposures" and unused "Revolving Commitments" representing more than 50%
of the sum of the aggregate "Total Exposures" and aggregate unused "Revolving
Commitments" at such time (as such terms are defined in the Senior Credit
Agreement), (ii) Junior Lenders having "Total Exposures" and unused "Revolving
Commitments" representing more than 50% of the sum of the aggregate Total
Exposure and aggregate unused Revolving Commitments at such time (as such terms
are defined in the Junior Credit Agreement) and (iii) each of the CE Parties
(collectively, the "Specified Lenders").
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SECTION 5.07. Successors and Assigns. (a) This Agreement shall be
binding on and inure to the benefit of the parties hereto, including the Senior
Agent, the Junior Agent, each of the Senior Creditors, the Junior Creditors and
their respective successors and permitted assigns (including any assignee of any
Senior Lender in accordance with the Senior Credit Agreement, any Junior Lender
in accordance with the Junior Credit Agreement and each of the CE Parties in
accordance with the CE Agreements); provided, however, that, except as provided
in the next sentence, no Participating Creditor may assign its rights or
obligations hereunder. The rights and obligations of any Senior Creditors and
Junior Creditors under this Agreement shall be assigned automatically (without
the need for the execution of any document or any other action) to, and the term
"Senior Creditor" or "Junior Creditor" as used in this Agreement shall include,
any assignee, transferee or successor of such Senior Creditors or Junior
Creditors under the Senior Credit Agreement or the Junior Credit Agreement, as
the case may be, in accordance with the terms of and upon the effectiveness of
an assignment pursuant to the Senior Credit Agreement or the Junior Credit
Agreement, as the case may be, and any such assignee, transferee or successor
shall automatically become a party to this Agreement. If required by any party
to this Agreement, such assignee, transferee or successor shall execute and
deliver to the other parties to this Agreement a written confirmation of its
assumption of the obligations of the assignor or transferor hereunder. Each of
the Senior Creditors and the Junior Creditors agrees that it shall deliver a
complete copy of this Agreement to any potential assignee, transferee or
successor of such Senior Creditor or Junior Creditor prior to the execution of
any such assignment or transfer. Any Senior Lender or Junior Lender may, without
the consent of the other Participating Creditors, sell one or more
participations in its Loans, the Swingline Loans or Letters of Credit, as the
case may be, held by it or issued pursuant to the terms and conditions of the
Senior Credit Agreement or Junior Credit Agreement, as the case may be;
provided, however, that (except as otherwise specified herein) each of the
Senior Creditors and the Junior Creditors shall remain liable to each other for
the full performance of their obligations hereunder with the same effect as
though no such participation had been sold and as though any and all amounts,
payments or security received by a participant with whom it dealt in respect of
the loan participation were received by such party and shall continue to deal
solely and directly with each other with respect to their respective rights and
obligations under this Agreement.
SECTION 5.08. Severability. In case any one or more of the
provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
SECTION 5.09. Counterparts. This Agreement may be executed in more
than one counterpart, each of which shall constitute an original but all of
which, when taken together, shall constitute but one instrument. Delivery of an
executed signature page to this Agreement by facsimile transmission shall be
effective as delivery of a manually executed counterpart hereof.
SECTION 5.10. Headings. The section headings of this Agreement are
for purposes of reference only and shall not limit or otherwise affect the
meaning or construction of any provisions hereof.
SECTION 5.11. Termination. This Agreement shall terminate
automatically upon the indefeasible payment in full in cash of the outstanding
Senior Obligations or the outstanding Junior Obligations; provided, however,
that Section 4.02(c), Section 5.02, Section 5.03 and this Section 5.11 shall
survive, and remain operative and in full force and effect, regardless of the
termination of this Agreement.
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SECTION 5.12. Complete Agreement. This Agreement constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior representations, negotiations, writings,
memoranda and agreements. To the extent any provision of this Agreement
conflicts with any other Senior Loan Document or Junior Loan Document, the
provisions of this Agreement shall be controlling.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective duly authorized officers, all
as of the day and year first above written.
HECHINGER INVESTMENT COMPANY OF
DELAWARE, INC.,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
CENTERS HOLDINGS, INC.,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
BSQ ACQUISITION, INC.,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
BSQ TRANSFEREE CORP.,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
HECHINGER COMPANY,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
203
HECHINGER STORES COMPANY,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
HECHINGER STORES EAST COAST
COMPANY,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
THE SUBSIDIARY GUARANTORS
LISTED ON SCHEDULE I HERETO,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Authorized Officer
THE CHASE MANHATTAN BANK, as Senior
Agent,
by
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Director
BANKAMERICA BUSINESS CREDIT, INC.,
as an Additional Agent,
by
/s/ ▇▇▇▇▇▇ ▇. Ujfalvsky
---------------------------
Name: ▇▇▇▇▇▇ ▇. Ujfalvsky
Title: Senior Vice President
204
CITICORP USA, INC., as an Additional Agent,
by
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Attorney-In-Fact
THE CHASE MANHATTAN BANK, as Junior
Agent,
by
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Director
GREEN EQUITY INVESTORS II, L.P.,
by GRAND AVENUE CAPITAL
PARTNERS, L.P., a Delaware
limited partnership, its general
partner,
by GRAND AVENUE CAPITAL
CORPORATION, a Delaware
corporation, its general partner
by
/s/ ▇▇▇▇▇▇▇ ▇. Annick
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. Annick
Title: Vice President
KMART CORPORATION,
by
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President and Treasurer
205
SCHEDULE I
to the Intercreditor Agreement
Subsidiary Guarantors
206
EXHIBIT K
CONFORMED COPY
LOAN PURCHASE AGREEMENT dated as
of December 31, 1998, among GREEN EQUITY
INVESTORS II, L.P., a Delaware limited
partnership (the "Purchaser"), the lenders
listed on Schedule I hereto (the "Lenders")
and THE CHASE MANHATTAN BANK, as Agent (as
defined below).
Reference is made to the Credit Agreement dated as of December 31,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among Hechinger Investment Company of Delaware, Inc., a
Delaware corporation (the "Borrower"), Centers Holdings, Inc., BSQ Acquisition,
Inc., BSQ Transferee Corp., Hechinger Company, Hechinger Stores Company,
Hechinger Stores East Coast Company, the Lenders and The Chase Manhattan Bank,
as administrative agent (in such capacity, the "Agent") and as collateral agent
for the Lenders.
The Purchaser, desiring to provide credit support for the Loans,
wishes to grant the Agent the right, exercisable in the event the Loans are
accelerated, to put to the Purchaser in a single transaction a portion of the
Loans, together with a portion of the Lenders' other rights and obligations
under the Credit Agreement, representing up to 20% of the aggregate Total
Exposure (not to exceed in aggregate $10,000,000) (the "Purchase Transaction").
NOW, THEREFORE, the Purchaser, the Lenders and the Agent hereby
agree as follows:
SECTION 1. Defined Terms. (a) Capitalized terms used but not defined
herein shall have the meanings assigned to such terms in the Credit Agreement.
(b) As used in this Agreement, the following terms have the meanings
specified below:
"Acceleration Date" means the date on which there occurs a Specified
Event of Default.
"Approved Bank" means a commercial bank of recognized standing,
organized under the laws of the United States of America or a state thereof,
that has combined capital and surplus and undivided profits of not less than
$500,000,000 and that is rated (or the senior debt securities of the holding
company of such bank are rated) A or better by S&P or A2 by ▇▇▇▇▇'▇.
"Assigned Interests" means the Loans (the "Assigned Loans"),
together with the Lenders' other rights and obligations under the Credit
Agreement and the other Loan Documents, including interests in participations in
Swingline Loans and Letters of Credit, corresponding to the aggregate Total
Exposure being assigned to and assumed by the Purchaser in connection with the
Purchase Transaction.
"Available Guarantee Amount" means, as of any date, the lesser of
(a) 20% of the aggregate Total Exposures of all the Lenders (including the
Purchaser and Kmart) as of such date and (b) $10,000,000.
"Effective Date" means (a) the date specified by the Agent in the
Purchase Notice or (b) such other Business Day as the Agent, the Required
Lenders and the Purchaser shall mutually agree, provided that in the event of a
Purchaser Bankruptcy Event of Default, the Effective Date shall be the
applicable Acceleration Date without any action by any Person.
"Purchase Price" means, with respect to the Assigned Interests being
assigned to and assumed by the Purchaser in the Purchase Transaction, an amount
determined as of the Effective Date equal to the sum of (a) the aggregate
principal amount of the Assigned Loans that are a part of such Assigned
Interests, (b) the aggregate principal amount of any participations in Swingline
Loans that are a part of such Assigned Interests, (c) the aggregate principal
amount of any participations in unreimbursed
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LC Disbursements that are a part of such Assigned Interests, (d) all unpaid
interest accrued to but excluding the Effective Date in respect of such Assigned
Interests, (c) all unpaid fees accrued to but excluding the Effective Date in
respect of such Assigned Interests and (d) all expenses accrued through the
Effective Date and payable under the terms of the Credit Agreement in respect of
such Assigned Interests.
"Purchaser Bankruptcy Event of Default" means a Specified Event of
Default arising with respect to the Purchaser under paragraph (h) or (i) of
Article VII of the Credit Agreement or under paragraph (h) or (i) of Article VII
of the Amended Existing Credit Agreement.
"Purchase Notice" means the written notice given (or deemed given)
by the Agent pursuant to Section 2(b) notifying the Purchaser of the Agent's
exercise, on behalf of the Lenders, of the Lenders' right pursuant to Section 2
to require the Purchaser to purchase a portion of the Loans and the Lenders'
other rights and obligations under the Credit Agreement.
"Purchase Transaction" has the meaning assigned to such term in the
introductory paragraphs of this Agreement.
"Required Lenders" means, at any time, Lenders having Total
Exposures and unused Revolving Commitments representing more than 50% of the sum
of the Total Exposures and unused Revolving Commitments at such time.
"Specified Event of Default' means (a) any Event of Default
described in paragraph (a), (b), (h) or (i) of Article VII of the Credit
Agreement, (b) pursuant to Article VII of the Credit Agreement, the termination
by the Agent of the Commitments and the declaration by the Agent that the Loans
then outstanding are immediately due and payable in whole, (c) any "Event of
Default" described in paragraph (a), (b), (h) or (i) of Article VII of the
Amended Existing Credit Agreement or (d) pursuant to Article VII of the Amended
Existing Credit Agreement, the termination of the Existing Facility and the
declaration that the Existing Revolving Loans then outstanding are immediately
due and payable in whole, provided that for the purpose of this definition and
the definition of the term "Purchaser Bankruptcy Event of Default", the term
"Holdings Group" as used in paragraph (h) or (i) of Article VII of the Credit
Agreement and paragraph (h) or (i) of Article VII of the Amended Exiting Credit
Agreement also shall include the Purchaser.
"Termination Date" has the meaning assigned to such term in Section
6.
(c) The rules of interpretation specified in Section 1.03 of the
Credit Agreement shall be applicable to this Agreement.
SECTION 2. Unconditional Obligation to Purchase Loans. (a) The
Purchaser hereby agrees that (i) upon its receipt from the Agent of the Purchase
Notice as provided in Section 2(b), the Purchaser shall purchase from the
Lenders on the Effective Date Assigned Interests representing the aggregate
Total Exposure specified in the Purchase Notice or (ii) upon a Purchaser
Bankruptcy Event of Default, the Purchaser shall be automatically deemed to have
purchased from the Lenders on the Effective Date Assigned Interests representing
an aggregate Total Exposure equal to the Available Guarantee Amount, without
actual delivery of a Purchase Notice or other notice of any kind, all of which
are hereby irrevocably waived; provided, however, that in no event shall the
Purchaser be required in any Purchase Transaction to purchase Assigned Interests
representing an aggregate Total Exposure in excess of the Available Guarantee
Amount as determined as of the Effective Date. The Purchaser shall purchase such
Assigned Interests on a pro rata basis from all Lenders based on the Total
Exposure of each Lender as of the Effective Date. Except as provided in Section
6, (i) the Purchase Transaction shall be effected in a single transaction on a
single Effective Date and (ii) upon the consummation of the Purchase
Transaction, the Purchaser shall not be obligated pursuant to this Agreement to
purchase any additional Assigned Interests.
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(b) The Agent may, and at the request of the Required Lenders shall,
deliver the Purchase Notice to the Purchaser at any time on or after the
Acceleration Date. The Purchase Notice shall specify the following information:
(i) the Effective Date, which shall be a Business Day and may not be
less than 10 Business Days after the Purchaser receives the Purchase
Notice;
(ii) the portion of the Lenders' aggregate Total Exposures
represented by the Assigned Interests, both as a percentage (which may
not exceed 20%) and as an absolute amount (which may not exceed the
Available Guarantee Amount);
(iii) a description of the Assigned Interests, including the
aggregate principal amount of the Assigned Loans and the amount of
Swingline Exposure and LC Exposure to be assumed;
(iv) the calculation of the Purchase Price with respect to such
Assigned Interests; and
(v) the location and number of the Agent's account to which the
Purchase Price is to be paid.
A Purchase Notice delivered to the Purchaser not later than 12:00 noon, New York
City time, on a Business Day shall be deemed delivered on such Business Day and
otherwise the Purchase Notice shall be deemed delivered on the next succeeding
Business Day. The Agent promptly shall deliver a copy of the Purchase Notice to
the Lenders. Notwithstanding anything to the contrary set forth above, in the
event of a Purchaser Bankruptcy Event of Default, the Purchase Notice shall be
deemed to have been delivered to, and received by, the Purchaser as of the
applicable Acceleration Date without any action by any Person.
(c) The Purchaser hereby absolutely and unconditionally agrees, upon
receipt (or the deemed receipt) of the Purchase Notice as provided in paragraph
(b), to pay on the Effective Date to the Agent, for the account of the Lenders,
the Purchase Price for the Assigned Interests described in the Purchase Notice
and to assume all the obligations of the Lenders under the Loan Documents with
respect to such Assigned Interests. Upon receipt of the Purchase Price on the
Effective Date, the Lenders hereby absolutely and unconditionally agree to sell
and assign to the Purchaser the Assigned Interests described in the Purchase
Notice effective as of the Effective Date.
(d) From and after the Effective Date, the Purchaser shall be a
party to the Credit Agreement and, to the extent of the Assigned Interests, have
the rights and obligations of a Lender under the Credit Agreement, and each
Lender shall, to the extent of the Assigned Interests sold and assigned by it,
be released from its obligations under the Credit Agreement (and, if a Lender
shall have assigned to the Purchaser all the Lender's remaining rights and
obligations under the Credit Agreement, such Lender shall cease to be a party to
the Credit Agreement but shall continue to be entitled to the benefits of
Sections 2.15, 2.16, 2.17 and 9.03 of the Credit Agreement). As of the Effective
Date, each of the Lenders, the Purchaser and the Agent shall execute and deliver
such Assignment and Assumption Agreements in the form attached hereto as Exhibit
A as shall be necessary or desirable to evidence the assignment and assumption
of each Lender's Assigned Interests hereby.
(e) Each of the Borrower, the Agents, the Issuing Bank and the
Swingline Lender, by their acknowledgment of this Agreement, consents to the
assignments and purchases provided for in this Section 2 and agrees that the
Purchaser shall have all the rights of a Lender under the Credit Agreement with
respect to the Assigned Interests purchased by it pursuant to this Section 2.
The Agent hereby waives the recordation fee of $3,500 provided for in Section
9.04(b) of the Credit Agreement. Each assignment
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and assumption of an Assigned Interest effected in compliance with this
Agreement shall be deemed to comply with Section 9.04(b) of the Credit
Agreement.
(f) The Purchaser acknowledges and agrees that its obligations
pursuant to this Section 2 are absolute and unconditional and shall not be
affected by any circumstance whatsoever, including the existence of any Default
or Event of Default under the Credit Agreement or the acceleration of the Loans
by the Agent or the Required Lenders, and that payment of the Purchase Price
shall be made without offset, abatement, withholding or reduction whatsoever.
The purchase of Loans pursuant to this Section 2 shall not relieve the Borrower
of any default in the payment thereof.
(g) On the Effective Date, the Purchaser shall wire transfer to the
Agent the Purchase Price for the Assigned Interests to be purchased by the
Purchaser on the Effective Date, in immediately available funds, in the same
manner as provided in Section 2.06 of the Credit Agreement with respect to Loans
made by a Lender (and Section 2.06 is hereby incorporated herein and shall
apply, mutatis mutandis, to the payment obligations of the Purchaser), and the
Agent shall promptly apply all assumptions of interests and payments of amounts
received to reduce the interests of the Lenders and to purchase from the Lenders
the outstanding principal, accrued interest and other charges for the Assigned
Interests with respect to which the Purchase Notice is presented, each on a pro
rata basis.
(h) For all purposes of this Agreement, (i) Assigned Interests
purchased by the Purchaser pursuant to this Agreement may not be put by the
Agent or the Purchaser to Kmart pursuant to the Kmart Credit Enhancement
Agreement and (ii) Assigned Interests purchased by Kmart pursuant to the Kmart
Credit Enhancement Agreement may not be put by the Agent or Kmart to the
Purchaser pursuant to this Agreement. The Agent shall note on the Register these
restrictions on the Assigned Interests sold to the Purchaser pursuant hereto and
to Kmart pursuant to the Kmart Credit Enhancement Agreement. Each reference to
the Lenders in this Agreement shall be deemed to not include the Purchaser or
Kmart in their capacity as holders of such Assigned Interests except as
otherwise expressly provided herein.
(i) No Lender may require the Agent to take or refrain from taking
any action hereunder except as and to the extent expressly set forth in this
Agreement.
SECTION 3. Credit Support. The Purchaser shall obtain as account
party as of the date hereof and shall maintain until the Termination Date for
the benefit of the Agent and the Lenders a standby letter of credit from an
Approved Bank in the amount of $10,000,000. Such letter of credit shall be in
form and substance satisfactory to the Agent and shall provide that the Agent
may draw on such letter of credit in connection with the Purchase Transaction in
an amount up to the Purchase Price payable in connection with the Purchase
Transaction to the extent that the Purchaser fails to pay such Purchase Price on
the Effective Date.
SECTION 4. No Amendment or Waiver of the Loan Documents. None of the
Borrower, the Agent or any Lender shall approve any waiver, amendment or
modification of the Credit Agreement or any other Loan Document without the
written consent of the Purchaser. Without the consent of the Purchaser, the
Borrower shall not approve any amendment, waiver or modification of the Existing
Loan Documents, to the extent that such amendment, modification or waiver would
be adverse to the interests of the Purchaser.
SECTION 5. Information. (a) The Purchaser assumes all responsibility
for being and keeping itself informed of the Borrower's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Loans and the nature, scope and extent of the risks that the Purchaser
assumes and incurs hereunder, and agrees that none of the Agent or the Lenders
will have any
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duty to advise the Purchaser of information known to it or any of
them regarding such circumstances or risks.
(b) The Borrower hereby agrees to (i) provide the Purchaser with
(A) copies of each report or other document provided by or on behalf of any
member of the Holdings Group to the Lenders under the Credit Agreement or the
"Lenders" under the Amended Existing Credit Agreement and (B) such other
information regarding the operations, business affairs and financial condition
of any member of the Holdings Group as the Purchaser may reasonably request and
(ii) provide the Purchaser with notice of, and permit the Purchaser to
participate in or attend, any conference call or bank meeting conducted by
Holdings pursuant to Section 5.09(e) or (f), respectively, of the Credit
Agreement.
SECTION 6. Termination; Reinstatement. This Agreement (a) shall
terminate as of the date (the "Termination Date") that is the earlier of (i)
the date on which the Purchase Price has been paid in full with respect to the
Purchase Transaction and (ii) the date on which (A) the aggregate principal
amount of all outstanding Loans has been paid in full, (B) the aggregate
principal amount of any participations in unreimbursed LC Disbursements has
been paid in full, (C) all accrued and unpaid interest and fees have been paid
in full, (D) all expenses reimbursable to the Lenders pursuant to Section 9.03
of the Credit Agreement have been paid in full, (E) the LC Exposure is zero and
(F) the Lenders have no further commitment to lend under the Credit Agreement
and (b) shall continue to be effective or be reinstated, as the case may be, if
at any time payment, or any part thereof, of the Purchase Price or an
Obligation is rescinded or must otherwise be restored by any Lender, Secured
Party or Guarantor upon the bankruptcy or reorganization of the Purchaser, the
Borrower, any Guarantor or otherwise. In the event that any such payment of an
Obligation is rescinded or must otherwise be restored, such amount shall be
deemed to have been outstanding on the Effective Date and included in the
Lenders' aggregate Total Exposures as of such date and, to the extent that
there would have been any unused Available Guarantee Amount on the Effective
Date after giving effect to the increase in the Lenders' aggregate Total
Exposure and to the Purchase Transaction, the Purchaser shall be required to
purchase additional Assigned Interests of the Lenders representing such
rescinded or restored payment (but not exceeding the amount of such unused
Available Guarantee Amount) on the same basis as provided in Section 2 hereof
with respect to the Purchase Transaction.
SECTION 7. Successors and Assigns. Subject to Section 2(h), this
Agreement shall be binding on and inure to the benefit of the Purchaser, the
Agent, each of the Lenders and their respective successors and permitted
assigns (including any assignee of any Lender in accordance with the Credit
Agreement); provided, however, that, except as provided in the next succeeding
sentence, no Lender may assign its rights or obligations hereunder. The rights
and obligations of any Lender under this Agreement shall be assigned
automatically (without the need for the execution of any document or any other
action) to, and, subject to Section 2(h), the term "Lender" as used in this
Agreement shall include, any assignee, transferee or successor of such Lender
under the Credit Agreement in accordance with the terms of and upon the
effectiveness of an assignment pursuant to Section 9.04 of the Credit
Agreement, and any such assignee, transferee or successor shall automatically
become a party to this Agreement. Each of the Lenders agrees that it shall
deliver a complete copy of this Agreement to any potential assignee, transferee
or successor of such Lender prior to the execution of any such assignment or
transfer. The Purchaser shall not have the right to assign its rights or
obligations hereunder or any interest herein (and any such attempted assignment
shall be void).
SECTION 8. Waivers; Amendment. (a) No failure or delay of the Agent
or a Lender in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Agent hereunder and of the
other Secured Parties under the other Loan
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Documents are cumulative and are not exclusive of any rights or remedies that
they would otherwise have. No waiver of any provision of this Agreement or
consent to any departure by the Purchaser therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice or demand on the Purchaser in any case
shall entitle the Purchaser to any other or further notice or demand in similar
or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered into between
the Purchaser and the Agent, with the prior written consent of the Required
Lenders (except as otherwise provided in the Credit Agreement).
SECTION 9. Governing Law. (A) THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
(B) EACH PARTY HERETO HEREBY AGREES WITH THE OTHER PARTIES HERETO
AS SET FORTH IN SECTION 9.10 OF THE CREDIT AGREEMENT AS IF SUCH SECTION WERE SET
FORTH IN FULL HEREIN.
SECTION 10. Notices. All communications and notices hereunder shall
be in writing and given as provided in Section 9.01 of the Credit Agreement,
except that notices to the Purchaser shall be given as provided in Section 5.01
of the Intercreditor Agreement.
SECTION 11. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made by the Purchaser herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement shall be considered to have been relied upon by
the Agent and the Lenders and shall survive the making by the Lenders of the
Loans and the issuance of the Letters of Credit by the Issuing Bank regardless
of any investigation made by the Secured Parties on their behalf, and shall
continue in full force and effect until this Agreement terminates as provided
in Section 6.
(b) In the event any one or more of the provisions contained in
this Agreement or in any other Loan Document should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The parties
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 12. Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement shall become
effective as to the Purchaser when a counterpart hereof executed on behalf of
the Purchaser shall have been delivered to the Agent, and a counterpart hereof
shall have been executed on behalf of the Agent. Delivery of an executed
signature page to this Agreement by facsimile transmission shall be effective
as delivery of a manually executed counterpart of this Agreement.
SECTION 13. Loan Document. This Agreement shall constitute a Loan
Document for all purposes.
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7
SECTION 14. Expenses; Indemnity; Intercreditor Agreement. The
Borrower hereby agrees with the other parties hereto as set forth in Section
9.03 of the Credit Agreement as if such Section were set forth in full herein
and the Purchaser shall be deemed to be a Lender and indemnitee thereunder.
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8
IN WITNESS WHEREOF, the parties hereto have caused this Purchase
Agreement to be duly executed by their duly authorized officers, all as of the
date and year first above written.
GREEN EQUITY INVESTORS II, L.P.,
by GRAND AVENUE CAPITAL PARTNERS,
L.P., a Delaware limited
partnership, its general partner
by GRAND AVENUE CAPITAL CORPORATION,
a Delaware corporation, its
general partner
by
/s/ ▇▇▇▇▇▇▇ ▇. Annick
---------------------------
Name: ▇▇▇▇▇▇▇ ▇. Annick
Title: Vice President
THE CHASE MANHATTAN BANK, as Agent,
by
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Director
214
9
SIGNATURE PAGE TO
LOAN PURCHASE AGREEMENT
DATED AS OF DECEMBER 31, 1998
THE CHASE MANHATTAN BANK,
by/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Director
215
10
Acknowledged and Agreed to
as of December 31, 1998,
HECHINGER INVESTMENT COMPANY
OF DELAWARE, INC.,
by /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
216
SCHEDULE I
Lenders
The Chase Manhattan Bank
217
EXHIBIT L
LOAN PURCHASE AGREEMENT dated as
of December 31, 1998, among KMART
CORPORATION, a Michigan corporation, (the
"Purchaser"), the lenders listed on Schedule
I hereto (the "Lenders") and THE CHASE
MANHATTAN BANK, as Agent (as defined below).
Reference is made to the Credit Agreement dated as of December 31,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among Hechinger Investment Company of Delaware, Inc., a
Delaware corporation (the "Borrower"), Centers Holdings, Inc., BSQ Acquisition,
Inc., BSQ Transferee Corp., Hechinger Company, Hechinger Stores Company,
Hechinger Stores East Coast Company, the Lenders and The Chase Manhattan Bank,
as administrative agent (in such capacity, the "Agent") and as collateral agent
for the Lenders.
The Purchaser, desiring to provide credit support for the Loans,
wishes to grant the Agent the right, exercisable in the event the Loans are
accelerated, to put to the Purchaser in a single transaction a portion of the
Loans, together with a portion of the Lenders' other rights and obligations
under the Credit Agreement, representing up to 80% of the aggregate Total
Exposure (not to exceed in aggregate $40,000,000) (the "Purchase Transaction").
NOW, THEREFORE, the Purchaser, the Lenders and the Agent hereby
agree as follows:
SECTION 1. Defined Terms. (a) Capitalized terms used but not defined
herein shall have the meanings assigned to such terms in the Credit Agreement.
(b) As used in this Agreement, the following terms have the meanings
specified below:
"Acceleration Date" means the date on which there occurs a Specified
Event of Default.
"Assigned Interests" means the Loans (the "Assigned Loans"),
together with the Lenders' other rights and obligations under the Credit
Agreement and the other Loan Documents, including interests in participations in
Swingline Loans and Letters of Credit, corresponding to the aggregate Total
Exposure being assigned to and assumed by the Purchaser in connection with the
Purchase Transaction.
"Available Guarantee Amount" means, as of any date, the lesser of
(a) 80% of the aggregate Total Exposures of all the Lenders (including the
Purchaser and GEI II) as of such date and (b) $40,000,000.
"Effective Date" means (a) the date specified by the Agent in the
Purchase Notice or (b) such other Business Day as the Agent, the Required
Lenders and the Purchaser shall mutually agree, provided that in the event of a
Purchaser Bankruptcy Event of Default, the Effective Date shall be the
applicable Acceleration Date without any action by any Person.
"Purchase Price" means, with respect to the Assigned Interests being
assigned to and assumed by the Purchaser in the Purchase Transaction, an amount
determined as of the Effective Date equal to the sum of (a) the aggregate
principal amount of the Assigned Loans that are a part of such Assigned
Interests, (b) the aggregate principal amount of any participations in Swingline
Loans that are a part of such Assigned Interests, (c) the aggregate principal
amount of any participations in unreimbursed LC Disbursements that are a part of
such Assigned Interests, (d) all unpaid interest accrued to but excluding the
Effective Date in respect of such Assigned Interests, (c) all unpaid fees
accrued to but excluding the Effective Date in respect of such Assigned
Interests and (d) all expenses accrued through the Effective Date and payable
under the terms of the Credit Agreement in respect of such Assigned Interests.
218
"Purchaser Bankruptcy Event of Default" means a Specified Event of
Default arising with respect to the Purchaser under paragraph (h) or (i) of
Article VII of the Credit Agreement or under paragraph (h) or (i) of Article VII
of the Amended Existing Credit Agreement.
"Purchase Notice" means the written notice given (or deemed given)
by the Agent pursuant to Section 2(b) notifying the Purchaser of the Agent's
exercise, on behalf of the Lenders, of the Lenders' right pursuant to Section 2
to require the Purchaser to purchase a portion of the Loans and the Lenders'
other rights and obligations under the Credit Agreement.
"Purchase Transaction" has the meaning assigned to such term in the
introductory paragraphs of this Agreement.
"Required Lenders" means, at any time, Lenders having Total
Exposures and unused Revolving Commitments representing more than 50% of the sum
of the Total Exposures and unused Revolving Commitments at such time.
"Specified Event of Default' means (a) any Event of Default
described in paragraph (a), (b), (h) or (i) of Article VII of the Credit
Agreement, (b) pursuant to Article VII of the Credit Agreement, the termination
by the Agent of the Commitments and the declaration by the Agent that the Loans
then outstanding are immediately due and payable in whole, (c) any "Event of
Default" described in paragraph (a), (b), (h) or (i) of Article VII of the
Amended Existing Credit Agreement or (d) pursuant to Article VII of the Amended
Existing Credit Agreement, the termination of the Existing Facility and the
declaration that the Existing Revolving Loans then outstanding are immediately
due and payable in whole, provided that for the purpose of this definition and
the definition of the term "Purchaser Bankruptcy Event of Default", the term
"Holdings Group" as used in paragraph (h) or (i) of Article VII of the Credit
Agreement and paragraph (h) or (i) of Article VII of the Amended Exiting Credit
Agreement also shall include the Purchaser.
"Termination Date" has the meaning assigned to such term in Section
6.
(c) The rules of interpretation specified in Section 1.03 of the
Credit Agreement shall be applicable to this Agreement.
SECTION 2. Unconditional Obligation to Purchase Loans. (a) The
Purchaser hereby agrees that (i) upon its receipt from the Agent of the Purchase
Notice as provided in Section 2(b), the Purchaser shall purchase from the
Lenders on the Effective Date Assigned Interests representing the aggregate
Total Exposure specified in the Purchase Notice or (ii) upon a Purchaser
Bankruptcy Event of Default, the Purchaser shall be automatically deemed to have
purchased from the Lenders on the Effective Date Assigned Interests representing
an aggregate Total Exposure equal to the Available Guarantee Amount, without
actual delivery of a Purchase Notice or other notice of any kind, all of which
are hereby irrevocably waived; provided, however, that in no event shall the
Purchaser be required in any Purchase Transaction to purchase Assigned Interests
representing an aggregate Total Exposure in excess of the Available Guarantee
Amount as determined as of the Effective Date. The Purchaser shall purchase such
Assigned Interests on a pro rata basis from all Lenders based on the Total
Exposure of each Lender as of the Effective Date. Except as provided in Section
5, (i) the Purchase Transaction shall be effected in a single transaction on a
single Effective Date and (ii) upon the consummation of the Purchase
Transaction, the Purchaser shall not be obligated pursuant to this Agreement to
purchase any additional Assigned Interests.
(b) The Agent may, and at the request of the Required Lenders shall,
deliver the Purchase Notice to the Purchaser at any time on or after the
Acceleration Date. The Purchase Notice shall specify the following information:
(i) the Effective Date, which shall be a Business Day and may not be
less than 10 Business Days after the Purchaser receives the Purchase
Notice;
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3
(ii) the portion of the Lenders' aggregate Total Exposures
represented by the Assigned Interests, both as a percentage (which may not
exceed 80%) and as an absolute amount (which may not exceed the Available
Guarantee Amount);
(iii) a description of the Assigned Interests, including the
aggregate principal amount of the Assigned Loans and the amount of
Swingline Exposure and LC Exposure to be assumed;
(iv) the calculation of the Purchase Price with respect to such
Assigned Interests; and
(v) the location and number of the Agent's account to which the
Purchase Price is to be paid.
A Purchase Notice delivered to the Purchaser not later than 12:00 noon, New York
City time, on a Business Day shall be deemed delivered on such Business Day and
otherwise the Purchase Notice shall be deemed delivered on the next succeeding
Business Day. The Agent promptly shall deliver a copy of the Purchase Notice to
the Lenders. Notwithstanding anything to the contrary set forth above, in the
event of a Purchaser Bankruptcy Event of Default, the Purchase Notice shall be
deemed to have been delivered to, and received by, the Purchaser as of the
applicable Acceleration Date without any action by any Person.
(c) The Purchaser hereby absolutely and unconditionally agrees, upon
receipt (or the deemed receipt) of the Purchase Notice as provided in paragraph
(b), to pay on the Effective Date to the Agent, for the account of the Lenders,
the Purchase Price for the Assigned Interests described in the Purchase Notice
and to assume all the obligations of the Lenders under the Loan Documents with
respect to such Assigned Interests. Upon receipt of the Purchase Price on the
Effective Date, the Lenders hereby absolutely and unconditionally agree to sell
and assign to the Purchaser the Assigned Interests described in the Purchase
Notice effective as of the Effective Date.
(d) From and after the Effective Date, the Purchaser shall be a
party to the Credit Agreement and, to the extent of the Assigned Interests, have
the rights and obligations of a Lender under the Credit Agreement, and each
Lender shall, to the extent of the Assigned Interests sold and assigned by it,
be released from its obligations under the Credit Agreement (and, if a Lender
shall have assigned to the Purchaser all the Lender's remaining rights and
obligations under the Credit Agreement, such Lender shall cease to be a party to
the Credit Agreement but shall continue to be entitled to the benefits of
Sections 2.15, 2.16, 2.17 and 9.03 of the Credit Agreement). As of the Effective
Date, each of the Lenders, the Purchaser and the Agent shall execute and deliver
such Assignment and Assumption Agreements in the form attached hereto as Exhibit
A as shall be necessary or desirable to evidence the assignment and assumption
of each Lender's Assigned Interests hereby.
(e) Each of the Borrower, the Agents, the Issuing Bank and the
Swingline Lender, by their acknowledgment of this Agreement, consents to the
assignments and purchases provided for in this Section 2 and agrees that the
Purchaser shall have all the rights of a Lender under the Credit Agreement with
respect to the Assigned Interests purchased by it pursuant to this Section 2.
The Agent hereby waives the recordation fee of $3,500 provided for in Section
9.04(b) of the Credit Agreement. Each assignment and assumption of an Assigned
Interest effected in compliance with this Agreement shall be deemed to comply
with Section 9.04(b) of the Credit Agreement.
(f) The Purchaser acknowledges and agrees that its obligations
pursuant to this Section 2 are absolute and unconditional and shall not be
affected by any circumstance whatsoever, including the existence of any Default
or Event of Default under the Credit Agreement or the acceleration of the Loans
by the Agent or the Required Lenders, and that payment of the Purchase Price
shall be made without offset,
220
4
abatement, withholding or reduction whatsoever. The purchase of Loans pursuant
to this Section 2 shall not relieve the Borrower of any default in the payment
thereof.
(g) On the Effective Date, the Purchaser shall wire transfer to the
Agent the Purchase Price for the Assigned Interests to be purchased by the
Purchaser on the Effective Date, in immediately available funds, in the same
manner as provided in Section 2.06 of the Credit Agreement with respect to Loans
made by a Lender (and Section 2.06 is hereby incorporated herein and shall
apply, mutatis mutandis, to the payment obligations of the Purchaser), and the
Agent shall promptly apply all assumptions of interests and payments of amounts
received to reduce the interests of the Lenders and to purchase from the Lenders
the outstanding principal, accrued interest and other charges for the Assigned
Interests with respect to which the Purchase Notice is presented, each on a pro
rata basis.
(h) For all purposes of this Agreement, (i) Assigned Interests
purchased by the Purchaser pursuant to this Agreement may not be put by the
Agent or the Purchaser to GEI II pursuant to the GEI II Credit Enhancement
Agreement and (ii) Assigned Interests purchased by GEI II pursuant to the GEI II
Credit Enhancement Agreement may not be put by the Agent or GEI II to the
Purchaser pursuant to this Agreement. The Agent shall note on the Register these
restrictions on the Assigned Interests sold to the Purchaser pursuant hereto and
to GEI II pursuant to the GEI II Credit Enhancement Agreement. Each reference to
the Lenders in this Agreement shall be deemed to not include the Purchaser or
GEI II in their capacity as holders of such Assigned Interests except as
otherwise expressly provided herein.
(i) No Lender may require the Agent to take or refrain from taking
any action hereunder except as and to the extent expressly set forth in this
Agreement.
SECTION 3. No Amendment or Waiver of the Loan Documents. None of the
Borrower, the Agent or any Lender shall approve any waiver, amendment or
modification of the Credit Agreement or any other Loan Document without the
written consent of the Purchaser. Without the consent of the Purchaser, the
Borrower shall not approve any amendment, waiver or modification of the Existing
Loan Documents, to the extent that such amendment, modification or waiver would
be adverse to the interests of the Purchaser.
SECTION 4. Information. (a) The Purchaser assumes all responsibility
for being and keeping itself informed of the Borrower's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Loans and the nature, scope and extent of the risks that the Purchaser
assumes and incurs hereunder, and agrees that none of the Agent or the Lenders
will have any duty to advise the Purchaser of information known to it or any of
them regarding such circumstances or risks.
(b) The Borrower hereby agrees to (i) provide the Purchaser with (A)
copies of each report or other document provided by or on behalf of any member
of the Holdings Group to the Lenders under the Credit Agreement or the "Lenders"
under the Amended Existing Credit Agreement and (B) such other information
regarding the operations, business affairs and financial condition of any member
of the Holdings Group as the Purchaser may reasonably request and (ii) provide
the Purchaser with notice of, and permit the Purchaser to participate in or
attend, any conference call or bank meeting conducted by Holdings pursuant to
Section 5.09(e) or (f), respectively, of the Credit Agreement.
SECTION 5. Termination; Reinstatement. This Agreement (a) shall
terminate as of the date (the "Termination Date") that is the earlier of (i) the
date on which the Purchase Price has been paid in full with respect to the
Purchase Transaction and (ii) the date on which (A) the aggregate principal
amount of all outstanding Loans has been paid in full, (B) the aggregate
principal amount of any participations in unreimbursed LC Disbursements has been
paid in full, (C) all accrued and unpaid interest and fees have
221
5
been paid in full, (D) all expenses reimbursable to the Lenders pursuant to
Section 9.03 of the Credit Agreement have been paid in full, (E) the LC Exposure
is zero and (F) the Lenders have no further commitment to lend under the Credit
Agreement and (b) shall continue to be effective or be reinstated, as the case
may be, if at any time payment, or any part thereof, of the Purchase Price or an
Obligation is rescinded or must otherwise be restored by any Lender, Secured
Party or Guarantor upon the bankruptcy or reorganization of the Purchaser, the
Borrower, any Guarantor or otherwise. In the event that any such payment of an
Obligation is rescinded or must otherwise be restored, such amount shall be
deemed to have been outstanding on the Effective Date and included in the
Lenders' aggregate Total Exposures as of such date and, to the extent that there
would have been any unused Available Guarantee Amount on the Effective Date
after giving effect to the increase in the Lenders' aggregate Total Exposure and
to the Purchase Transaction, the Purchaser shall be required to purchase
additional Assigned Interests of the Lenders representing such rescinded or
restored payment (but not exceeding the amount of such unused Available
Guarantee Amount) on the same basis as provided in Section 2 hereof with respect
to the Purchase Transaction.
SECTION 6. Successors and Assigns. Subject to Section 2(h), this
Agreement shall be binding on and inure to the benefit of the Purchaser, the
Agent, each of the Lenders and their respective successors and permitted assigns
(including any assignee of any Lender in accordance with the Credit Agreement);
provided, however, that, except as provided in the next succeeding sentence, no
Lender may assign its rights or obligations hereunder. The rights and
obligations of any Lender under this Agreement shall be assigned automatically
(without the need for the execution of any document or any other action) to,
and, subject to Section 2(h), the term "Lender" as used in this Agreement shall
include, any assignee, transferee or successor of such Lender under the Credit
Agreement in accordance with the terms of and upon the effectiveness of an
assignment pursuant to Section 9.04 of the Credit Agreement, and any such
assignee, transferee or successor shall automatically become a party to this
Agreement. Each of the Lenders agrees that it shall deliver a complete copy of
this Agreement to any potential assignee, transferee or successor of such Lender
prior to the execution of any such assignment or transfer. The Purchaser shall
not have the right to assign its rights or obligations hereunder or any interest
herein (and any such attempted assignment shall be void).
SECTION 7. Waivers; Amendment. (a) No failure or delay of the Agent
or a Lender in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Agent hereunder and of the other
Secured Parties under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver
of any provision of this Agreement or consent to any departure by the Purchaser
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice or
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6
demand on the Purchaser in any case shall entitle the Purchaser to any other
or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered into between
the Purchaser and the Agent, with the prior written consent of the Required
Lenders (except as otherwise provided in the Credit Agreement).
SECTION 8. GOVERNING LAW. (A) THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
(B) EACH PARTY HERETO HEREBY AGREES WITH THE OTHER PARTIES HERETO AS
SET FORTH IN SECTION 9.10 OF THE CREDIT AGREEMENT AS IF SUCH SECTION WERE SET
FORTH IN FULL HEREIN.
SECTION 9. Notices. All communications and notices hereunder shall
be in writing and given as provided in Section 9.01 of the Credit Agreement,
except that notices to the Purchaser shall be given as provided in Section 5.01
of the Intercreditor Agreement.
SECTION 10. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made by the Purchaser herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement shall be considered to have been relied upon by
the Agent and the Lenders and shall survive the making by the Lenders of the
Loans and the issuance of the Letters of Credit by the Issuing Bank regardless
of any investigation made by the Secured Parties on their behalf, and shall
continue in full force and effect until this Agreement terminates as provided in
Section 5.
(b) In the event any one or more of the provisions contained in this
Agreement or in any other Loan Document should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The parties
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 11. Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement shall become
effective as to the Purchaser when a counterpart hereof executed on behalf of
the Purchaser shall have been delivered to the Agent, and a counterpart hereof
shall have been executed on behalf of the Agent. Delivery of an executed
signature page to this Agreement by facsimile transmission shall be effective as
delivery of a manually executed counterpart of this Agreement.
SECTION 12. Loan Document. This Agreement shall constitute a Loan
Document for all purposes.
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7
SECTION 13. Expenses; Indemnity; Intercreditor Agreement. The
Borrower hereby agrees with the other parties hereto as set forth in Section
9.03 of the Credit Agreement as if such Section were set forth in full herein
and the Purchaser shall be deemed to be a Lender and indemnitee thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Purchase
Agreement to be duly executed by their duly authorized officers, all as of the
date and year first above written.
KMART CORPORATION,
by
---------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as Agent,
by
---------------------------
Name:
Title:
224
8
SIGNATURE PAGE TO
LOAN PURCHASE AGREEMENT
DATED AS OF DECEMBER 31, 1998
THE CHASE MANHATTAN BANK,
by
-------------------
Name:
Title:
225
9
Acknowledged and Agreed to
as of December 31, 1998,
HECHINGER INVESTMENT COMPANY
OF DELAWARE, INC.,
by
-----------------------------
Name:
Title:
226
SCHEDULE I
Lenders
The Chase Manhattan Bank