EXHIBIT 10.3
LETTER OF CREDIT AGREEMENT
dated as of
August 13, 2004
among
KMART CORPORATION
BANK OF AMERICA, NATIONAL ASSOCIATION
FLEET NATIONAL BANK
as Issuing Banks
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TABLE OF CONTENTS
PAGE
1. Definitions.................................................................................................1
1.01 Defined Terms.........................................................................................1
1.02 Terms Generally.......................................................................................7
2. Letters of Credit...........................................................................................8
2.01 Issuance of Letters of Credit.........................................................................8
2.02 Reimbursement of Drawings.............................................................................8
2.03 Notice of Drawings....................................................................................8
2.04 Interest on Overdue Amounts...........................................................................8
2.05 Procedures for Issuance...............................................................................9
2.06 Unconditional Obligations.............................................................................9
2.07 Unused Fee...........................................................................................10
2.08 Letter of Credit Fees................................................................................10
2.09 Closing Fees.........................................................................................11
2.10 Nature of Fees.......................................................................................11
2.11 Termination or Reduction of Commitments..............................................................11
2.12 Maintenance of Loan Account; Statements of Account...................................................11
2.13 Increased Costs......................................................................................11
2.14 Payments.............................................................................................12
2.15 Taxes................................................................................................13
2.16 Transfer to Existing Financing Agreement.............................................................14
3. Representations and Warranties.............................................................................14
3.01 Organization; Powers.................................................................................14
3.02 Authorization; Enforceability........................................................................14
3.03 Governmental Approvals; No Conflicts.................................................................15
3.04 Litigation...........................................................................................15
3.05 No Default...........................................................................................15
3.06 Security Documents...................................................................................15
3.07 Federal Reserve Regulations..........................................................................15
3.08 Solvency.............................................................................................15
3.09 Home Depot Sale......................................................................................15
4. Conditions.................................................................................................16
4.01 Closing Date.........................................................................................16
4.02 Conditions Precedent to Each Letter of Credit........................................................17
5. Affirmative Covenants......................................................................................18
5.01 Financial Statements and Other Information...........................................................18
5.02 Existence; Conduct of Business.......................................................................19
5.03 Compliance with Laws.................................................................................19
5.04 Use of Letters of Credit.............................................................................19
5.05 Maintenance of Excluded Account......................................................................19
(i)
5.06 Cash Collateralization of Letter of Credit Outstandings..............................................19
5.07 Perfection of Mortgage; Release of Lien..............................................................19
5.08 Books and Records....................................................................................20
5.09 Further Assurances...................................................................................20
5.10 Mortgage.............................................................................................20
6. Covenants..................................................................................................20
6.01 Liens, Collateral Dispositions.......................................................................20
6.02 Fundamental Changes..................................................................................20
7. Events of Default..........................................................................................20
7.01 Events of Default....................................................................................20
7.02 Remedies on Default..................................................................................23
8. Miscellaneous..............................................................................................23
8.01 Notices..............................................................................................23
8.02 Waivers; Amendments..................................................................................23
8.03 Expenses; Indemnity; Damage Waiver...................................................................24
8.04 Successors and Assigns...............................................................................25
8.05 Survival.............................................................................................25
8.06 Counterparts; Integration............................................................................26
8.07 Severability.........................................................................................26
8.08 Right of Setoff......................................................................................26
8.09 Governing Law; Jurisdiction; Consent to Service of Process...........................................26
8.10 WAIVER OF JURY TRIAL.................................................................................28
8.11 Headings.............................................................................................28
8.12 Interest Rate Limitation.............................................................................28
8.13 Additional Waivers...................................................................................28
8.14 Other Collateral.....................................................................................30
8.15 Confidentiality......................................................................................30
(ii)
LETTER OF CREDIT AGREEMENT dated as of August 13, 2004 among
KMART CORPORATION, ("Kmart")a Michigan corporation, having a place of
business at ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇; and
BANK OF AMERICA, NATIONAL ASSOCIATION and FLEET NATIONAL BANK, as
Issuing Banks, each a national banking association having a place of
business at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇;
in consideration of the mutual covenants herein contained and benefits to be
derived herefrom.
1. DEFINITIONS.
1.01 Defined Terms.
As used in this Agreement, the following terms have the meanings
specified below:
"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 or is a
director or officer of such Person.
"Agreement" means this Letter of Credit Agreement, as modified,
amended, supplemented or restated, and in effect from time to time.
"Applicable Law" means as to any Person: (i) all laws, statutes, rules,
regulations, orders, or other requirements having the force of law and (ii) all
court orders and injunctions, and/or similar rulings, in each instance ((i) and
(ii)) of or by any Governmental Authority, or court, or tribunal which has
jurisdiction over such Person, or any property of such Person, or of any other
Person for whose conduct such Person would be responsible.
"Availability" means, at any time of determination, (i) prior to
January 7, 2005, $200,000,000, and (ii) on and after January 7, 2005, an amount
equal to the difference between the amounts on deposit in the Cash Collateral
Account and 100.5% of the Letter of Credit Outstandings.
"Bank of America" means Bank of America, National Association.
"Board" means the Board of Governors of the Federal Reserve System of
the United States of America.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banks in Boston, Massachusetts, Charlotte, North
Carolina, or Detroit, Michigan are authorized or required by law to remain
closed.
"Cash Collateral Account" shall mean an account established by Kmart
with an Issuing Bank under the sole and exclusive dominion and control of the
Issuing Bank designated as the "Kmart Cash Collateral Account", in which account
the Issuing Banks have been granted a Lien pursuant to the Pledge and Security
Agreement.
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"Change in Control" means, at any time, (a) the board of directors of
Holdings shall cease to consist of a majority of the Continuing Directors, (b)
any person or group (within the meaning of Sections 13(d) and 14(d) of the
Securities and Exchange Act of 1934, as amended) (i) other than Third Avenue and
ESL and their respective Affiliates shall acquire Control of Holdings, or (ii)
shall acquire more than the percentage of the then issued and outstanding shares
of capital stock of Holdings having the right to vote for the election of
directors of Holdings under ordinary circumstances owned directly or indirectly
by ESL, Third Avenue and their respective Affiliates or (c) Holdings ceases to
own and control directly or indirectly all of the economic and voting rights
associated with all of the outstanding capital stock of Kmart or Kmart HQ.
"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 Issuing Bank (or by
such 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.
"Charges" has the meaning provided therefor in Section 8.12.
"Closing Date" means the date on which the conditions specified in
Section 4.02 are satisfied or waived.
"Code" means the Internal Revenue Code of 1986 and the Treasury
regulations promulgated thereunder, as amended from time to time.
"Collateral" means (i) the Mortgaged Property, and (ii) any and all
"Collateral" as defined in the Pledge and Security Agreement.
"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 services by Kmart or any Subsidiary Credit
Parties in the ordinary course of business of Kmart or such Subsidiary Credit
Parties.
"Commitment" means (i) prior to January 7, 2005, $200,000,000, and (ii)
on and after January 7, 2005, $600,000,000, or, in each case, such lesser amount
on account of a reduction thereof in accordance with the provisions of Section
2.11 hereof.
"Continuing Directors" means directors of Holdings who are in office on
the Closing Date and each other director, if, in each case (a) commencing on the
Closing Date and ending on May 6, 2005, such director's nomination for election
to the board of directors of Holdings is recommended by (i) in the case of the
directors nominated by the Financial Institutions Committee (as defined in the
Plan of Reorganization), a majority of directors elected by the Financial
Institutions Committee, (ii) in the case of the directors nominated by the
Unsecured Creditors Committee (as defined in the Plan of Reorganization), a
majority of directors elected by the Unsecured Creditors Committee, and (iii) in
the case of the directors nominated by the Plan Investors (as defined in the
Plan of Reorganization), a majority of directors elected by the
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Plan Investors, and (b) after May 6, 2005, such other director's nomination for
election to the Board of Directors of Holdings is recommended by a majority of
the then Continuing Directors.
"Control" 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 Documents" means this Agreement, the Letters of Credit, each
letter of credit application, the Mortgage, and the Pledge and Security
Agreement, and any other instrument or agreement now or hereafter executed and
delivered in connection herewith or therewith, each as amended and in effect
from time to time.
"Credit Request" means a request by Kmart for the issuance of a Letter
of Credit in accordance with Section 2.05.
"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.
"dollars" or "$" refers to lawful money of the United States of
America.
"ESL" means ESL Investments, Inc., a Delaware corporation.
"Event of Default" has the meaning assigned to such term in Section
7.01.
"Excluded Account" means a deposit or investment account established by
Kmart with Bank of America having a balance at all relevant times of at least
$250,000,000, less any amounts deposited in the Cash Collateral Account.
"Excluded Taxes" means, with respect to any Issuing Bank or any other
recipient of any payment to be made by or on account of any obligation of Kmart
or any Subsidiary Credit Party hereunder, (a) income or franchise Taxes imposed
on (or measured by) its gross or 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, and (b) any branch profits Taxes imposed
by the United States of America or any similar Tax imposed by any other
jurisdiction in which Kmart or such Subsidiary Credit Party is located.
"Existing Financing Agreement" means the Credit Agreement dated as of
May 6, 2003 between, among others, Kmart, the other Credit Parties thereto, the
Lenders party thereto, General Electric Capital Corporation, as Administrative
Agent and Co-Collateral Agent, and Fleet Retail Group, Inc. (f/k/a Fleet Retail
Finance Inc.) as Co-Syndication Agent and Co-Collateral Agent, as amended and in
effect.
"Existing L/Cs" means the letters of credit issued by Fleet and Bank of
America under the Existing Financing 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
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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 Bank of
America from three Federal funds brokers of recognized standing selected by it.
"Fleet" means Fleet National Bank, a national banking association.
"GAAP" means generally accepted accounting principles of the United
States of America, consistently applied.
"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.
"Holdings" means Kmart Holding Corporation, a Delaware corporation.
"Home Depot Sale" means the sale of certain real property leases and
related assets of Kmart pursuant to a Purchase and Sale Agreement between Kmart
and Home Depot U.S.A., Inc. dated as of June 3, 2004.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Indemnitee" has the meaning provided therefor in Section 8.03(b).
"Issuing Bank" means Fleet, Bank of America or their respective
Affiliates, in their capacities as the issuers of Letters of Credit hereunder.
"Kmart" is defined in the Preamble hereto.
"Kmart HQ" means Kmart Management Corporation, a Michigan corporation.
"L/C Disbursement" means a payment made by an Issuing Bank pursuant to
a Letter of Credit.
"Letter of Credit" shall mean a letter of credit that is (i) issued
pursuant to this Agreement for the account of Kmart or any Subsidiary Credit
Parties, (ii) a Standby Letter of Credit or Commercial Letter of Credit, (iii)
issued for purposes for which Kmart or any Subsidiary Credit Party has
historically obtained letters of credit, or for any other purpose that is
reasonably acceptable to the applicable Issuing Bank, and (iv) in form
reasonably satisfactory to the applicable Issuing Bank. The Existing L/Cs shall,
for all purposes be deemed Letters of Credit under this Agreement.
"Letter of Credit Fees" shall mean the fees payable in respect of
Letters of Credit pursuant to Section 2.08.
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"Letter of Credit Outstandings" shall mean, at any time, the sum of (a)
with respect to Letters of Credit outstanding at such time, the aggregate
maximum amount that then is or at any time thereafter may become available for
drawing or payment thereunder plus (b) all amounts theretofore drawn or paid
under Letters of Credit for which any Issuing Bank has not then been reimbursed.
"Lien" means, with respect to any asset, any mortgage, deed of trust,
lien, pledge, hypothecation, encumbrance, charge or security interest in, on or
of such asset.
"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, or financial condition of Holdings and
its Subsidiaries taken as a whole, (b) the ability of Kmart or any Subsidiary
Credit Party to perform any material obligation or to pay any Obligations under
this Agreement or any of the other Credit Documents, or (c) the validity or
enforceability of this Agreement or any of the other Credit Documents or any of
the material rights or remedies of the Issuing Banks hereunder or thereunder. In
determining whether any individual event would result in a Material Adverse
Effect, notwithstanding that such event in and of itself does not have such
effect, a Material Adverse Effect shall be deemed to have occurred if the
cumulative effect of such event and all other then existing events would result
in a Material Adverse Effect.
"Maximum Rate" has the meaning provided therefor in Section 8.12.
"Mortgage" means that certain Leasehold Mortgage of even date herewith
from Kmart in favor of the Issuing Banks granting the Issuing Banks a Lien on
the Mortgaged Property.
"Mortgaged Property" means those leasehold interests and related assets
which are the subject of Purchase and Sale Agreement between Kmart and Home
Depot U.S.A., Inc. dated as of June 3, 2004 and listed on Exhibit A to the
Mortgage.
"Obligations" means the due and punctual payment by Kmart and each
Subsidiary Credit Party of (i) each payment required to be made by Kmart or any
Subsidiary Credit Party under this Agreement in respect of any Letter of Credit,
when and as due, including payments in respect of reimbursement of disbursements
and interest thereon (including all interest that accrues after the commencement
of any case or proceeding by or against Kmart or any Subsidiary Credit Party
under any federal or state bankruptcy, insolvency, receivership or similar law,
whether or not allowed in such case or proceeding) and (ii) all other monetary
obligations, including fees, costs, expenses and indemnities, whether primary,
secondary, direct, contingent, fixed or otherwise, of Kmart or any Subsidiary
Credit Party to any Issuing Banks under this Agreement and the other Credit
Documents.
"Organizational Document" means, relative to any Person, its limited
partnership agreement, its certificate of incorporation, formation or limited
partnership, its operating agreement, its by-laws and all material shareholder
or equity holder agreements, voting trusts and similar arrangements to which
such Person is a party or which is applicable to its capital stock or its
limited partnership agreement.
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"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 Credit Document or from the execution, delivery
or enforcement of, or otherwise with respect to, any Credit Document.
"Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Plan of Reorganization" means that certain Joint Plan of
Reorganization of Kmart Corporation and certain of its Affiliates filed on
January 24, 2003, together with all schedules and exhibits thereto, and all
amendments, modifications, or supplements filed after such date, as the same is
in effect on the Closing Date.
"Pledge and Security Agreement" means the Pledge and Security Agreement
among Kmart and the Issuing Banks, as amended and in effect from time to time
and as executed hereafter.
"Prime Rate" shall mean, for any day, the higher of (a) the variable
annual rate of interest then most recently announced by Bank of America at its
head office in Charlotte, North Carolina as its "Prime Rate" and (b) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1% (0.50%) per annum. The
Prime Rate is a reference rate and does not necessarily represent the lowest or
best rate being charged to any customer. If for any reason any Issuing Bank
shall have determined (which determination shall be conclusive absent manifest
error) that it is unable to ascertain the Federal Funds Effective Rate for any
reason, including the inability or failure of any Issuing Bank to obtain
sufficient quotations thereof in accordance with the terms hereof, the Prime
Rate shall be determined without regard to clause (b) of the first sentence of
this definition, until the circumstances giving rise to such inability no longer
exist. Any change in the Prime Rate due to a change in Bank of America's Prime
Rate or the Federal Funds Effective Rate shall be effective on the effective
date of such change in Bank of America's Prime Rate or the Federal Funds
Effective Rate, respectively.
"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.
"Responsible Officer" means Holdings' Treasurer, Assistant Treasurer or
Treasury Manager.
"Security Documents" means the Pledge and Security Agreement and the
Mortgage.
"Solvent" means, with respect to any Person on a particular date, that
on such date (a) at fair valuations, all of the properties and assets of such
Person are greater than the sum of the
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debts, including contingent liabilities, of such Person, (b) the present fair
saleable value of the properties and assets of such Person is not less than the
amount that would be required to pay the probable liability of such Person on
its debts as they become absolute and matured, (c) such Person is able to
realize upon its properties and assets and pay its debts and other liabilities,
contingent obligations and other commitments as they mature in the normal course
of business, (d) such Person does not intend to, and does not believe that it
will, incur debts beyond such Person's ability to pay as such debts mature, and
(e) such Person is not engaged in a business or a transaction, and is not about
to engage in a business or transaction, for which such Person's properties and
assets would constitute unreasonably small capital after giving due
consideration to the prevailing practices in the industry in which such Person
is engaged.
"Standby Letter of Credit" means any Letter of Credit other than a
Commercial Letter of Credit.
"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 Credit Parties" means any Subsidiary of Kmart for whose
account a Letter of Credit is issued by an Issuing Bank.
"Taxes" means any and all current or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Termination Date" shall mean the earliest to occur of (i) August 13,
2007 or (ii) the date of the occurrence of any Event of Default pursuant to
Section 7.01(g) or 7.01(h), or (iii) the date on which the commitments of the
Issuing Bank are terminated pursuant to clause (i) of the final paragraph of
Section 7.01 or Section 2.11 hereof.
"Third Avenue" means Third Avenue Trust, on behalf of certain of its
investment series.
"Transfer Notice" has the meaning set forth in Section 2.16 hereof.
"Unused Commitment" shall mean, on any day, (a) the balance in the Cash
Collateral Account divided by 100.5% minus (b) the then Letter of Credit
Outstandings.
"Unused Fees" has the meaning set forth in Section 2.07.
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",
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"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 (i) 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),
(ii) any reference herein to any Person shall be construed to include such
Person's successors and assigns, (iii) 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, and (iv)
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.
2. LETTERS OF CREDIT.
2.01 Issuance of Letters of Credit.
(a) Upon the terms and subject to the conditions herein set
forth, Kmart may request an Issuing Bank, at any time and from time to time
after the date hereof and prior to the Termination Date, to issue, and subject
to the terms and conditions contained herein, the applicable Issuing Bank shall
issue, for the account of Kmart or any of its Subsidiary Credit Parties one or
more Letters of Credit; provided that no Letter of Credit shall be issued if
after giving effect to such issuance (i) the aggregate Letter of Credit
Outstandings shall exceed the Commitment, or (ii) Availability would be less
than zero.
(b) Each Letter of Credit shall expire at or prior to the
close of business on the earlier of (i) the date one (1) year after the date of
the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one (1) year after such renewal or extension) and (ii) the
date that is five (5) Business Days prior to August 13, 2007.
2.02 Reimbursement of Drawings. Drafts drawn under each Letter of
Credit shall be reimbursed by Kmart or the applicable Subsidiary Credit Party in
dollars by paying to the applicable Issuing Bank an amount equal to such drawing
not later than 4:00 p.m., Boston time, on (i) the date that Kmart shall have
received notice of such drawing, if such notice is received prior to 12:00 noon,
Boston time, on such date, or (ii) the Business Day immediately following the
day that Kmart receive such notice, if such notice is received after 12:00 noon,
Boston time, on the day of drawing,
2.03 Notice of Drawings. An Issuing Bank shall, promptly following its
receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. The applicable Issuing Bank shall promptly
notify Kmart by telephone (confirmed by telecopy) of such demand for payment and
whether such Issuing Bank has made or will make payment thereunder, provided
that any failure to give or delay in giving such notice shall not relieve Kmart
or any Subsidiary Credit Party of its obligation to reimburse such Issuing Bank
with respect to any such payment.
2.04 Interest on Overdue Amounts. If an Issuing Bank shall make any L/C
Disbursement, then, unless Kmart or a Subsidiary Credit Party shall reimburse
the Issuing Bank
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in full at the time required herein, the unpaid amount thereof shall bear
interest, for each day from and including the date such payment is made to but
excluding the date that Kmart or a Subsidiary Credit Party reimburses such
Issuing Bank therefor, at the rate per annum equal to the Prime Rate. Interest
shall be calculated on the basis of a 360 day year and actual days elapsed.
2.05 Procedures for Issuance. Whenever Kmart or a Subsidiary Credit
Party desires that an Issuing Bank issue a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), Kmart, through a
Responsible Officer, shall give to the Issuing Bank at least two (2) Business
Days' prior written notice (or such shorter period as may be agreed upon in
writing by the Issuing Bank and Kmart) specifying the date on which the proposed
Letter of Credit is to be issued, amended, renewed or extended (which shall be a
Business Day), the stated amount of the Letter of Credit so requested, the
expiration date of such Letter of Credit, the name and address of the
beneficiary thereof, and the provisions thereof. If requested by the Issuing
Bank, the applicable Subsidiary Credit Party shall also submit a letter of
credit application on the Issuing Bank's standard form in connection with any
request for the issuance, amendment, renewal or extension of a Letter of Credit.
In the event of an inconsistency between any such letter of credit application
and this Agreement, the terms of this Agreement shall control.
2.06 Unconditional Obligations. The obligations of Kmart and the
Subsidiary Credit Parties to reimburse the Issuing Bank for any L/C Disbursement
shall be unconditional and irrevocable and shall be paid strictly in accordance
with the terms of this Agreement under all circumstances, including, without
limitation: (i) any lack of validity or enforceability of any Letter of Credit;
(ii) the existence of any claim, setoff, defense or other right which Kmart or
any Subsidiary Credit Party may have at any time against a beneficiary of any
Letter of Credit or against the Issuing Bank, whether in connection with this
Agreement, the transactions contemplated herein or any unrelated transaction;
(iii) any draft, demand, certificate or other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect;
(iv) payment by an Issuing Bank of any Letter of Credit against presentation of
a demand, draft or certificate or other document which does not comply with the
terms of such Letter of Credit; (v) any other circumstance or happening
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, Kmart's of the Subsidiary Credit Parties'
obligations hereunder; or (vi) the fact that any Event of Default shall have
occurred and be continuing. Neither the Issuing Banks nor any of their
Affiliates 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 Banks, provided that the foregoing provisions of this Section 2.06 shall
not be construed to excuse the Issuing Banks from liability to Kmart or any
Subsidiary Credit Parties to the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are hereby waived by Kmart and
the Subsidiary Credit Parties to the extent permitted by Applicable Law)
suffered by Kmart or the Subsidiary Credit Parties that are caused by the
Issuing Banks' failure to exercise
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care when determining whether drafts and other documents presented under a
Letter of Credit comply with the terms thereof or by the Issuing Bank's gross
negligence, willful misconduct or bad faith. The parties hereto expressly agree
that, in the absence of gross negligence, willful misconduct or bad faith on the
part of the Issuing Banks (as finally determined by a court of competent
jurisdiction), the Issuing Banks 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 Banks may, in their 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.
2.07 Unused Fee. Kmart or the Subsidiary Credit Parties shall pay to
the Issuing Banks, an unused fee (the "Unused Fee") equal to (i) prior to
January 7, 2005, 0.125% per annum (on the basis of actual days elapsed in a year
of 360 days) of the difference between Availability and the average daily
balance of the then Letter of Credit Outstandings, for each day commencing on
and including the Closing Date; and (ii) on and after January 7, 2005, 0.125%
per annum (on the basis of actual days elapsed in a year of 360 days) of the
average daily balance of the Unused Commitment for each day and ending on but
excluding the Termination Date. The Unused Fee so accrued in any calendar month
shall be payable on the first Business Day of the immediately succeeding
calendar month, except that all Unused Fees so accrued and unpaid as of the
Termination Date shall be payable on the Termination Date.
2.08 Letter of Credit Fees.
(a) Kmart and the Subsidiary Credit Parties shall pay the
applicable Issuing Bank on the first day of each calendar quarter, in arrears, a
fee (each, a "Letter of Credit Fee") equal to the following per annum
percentages of the average daily face amount of the following categories of
Letters of Credit outstanding during the immediately preceding calendar quarter:
(i) Standby Letters of Credit:At a per annum
rate equal to 0.20%.
(ii) Commercial Letters of Credit: At a per
annum rate equal to 0%.
(iii) If Kmart or the Subsidiary Credit Parties fail
to comply with Section 5.06, below, the Letter of Credit Fees shall be
increased by an amount equal to two percent (2.00%) per annum.
(iv) After the occurrence and during the continuance
of an Event of Default, at the option of the Issuing Banks exercised by
written notice to Kmart, the Letter of Credit Fees shall be further
increased by an amount equal to one-half of one percent (0.50%) per
annum.
(v) Upon the occurrence of an Event of Default, Kmart
and the Subsidiary Parties shall pay to the Issuing Banks a make whole
fee in the amount of .75% of the maximum amount of the Commitment.
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(vi) Kmart and the Subsidiary Credit Parties shall
pay to the Issuing Bank, in addition to all Letter of Credit Fees
otherwise provided for hereunder, such other reasonable fees and
charges in connection with the issuance, negotiation, settlement,
amendment and processing of each Letter of Credit issued by the Issuing
Banks as are customarily imposed by the Issuing Banks from time to time
in connection with letter of credit transactions.
(vii) All Letter of Credit Fees shall be calculated
on the basis of a 360-day year and actual days elapsed.
2.09 Closing Fees. In addition to any other fees payable hereunder,
Kmart and the Subsidiary Credit Parties shall pay to the Issuing Banks (a) an
upfront fee in the sum of $600,000, fully earned on the Closing Date, of which
$200,000 shall be payable on the Closing Date and $400,000 shall be payable on
January 7, 2005, and (b) a structuring fee in the sum of $150,000 payable on the
Closing Date.
2.10 Nature of Fees
All fees shall be paid on the dates due, in immediately available
funds, to the Issuing Banks as provided herein. All fees shall be fully earned
on the date when due (or on the Closing Date if specifically indicated as such)
and shall not be refundable under any circumstances.
2.11 Termination or Reduction of Commitments.
Upon at least three (3) Business Days' prior written notice to the
Issuing Banks Kmart may, at any time, in whole permanently terminate, or from
time to time in part permanently reduce, the Commitments. Each such reduction
shall be in the principal amount of $5,000,000 or any integral multiple of
$1,000,000 in excess thereof. Each such reduction or termination shall be
irrevocable when given. No reduction in the Commitments shall result in the
Commitments being less than the then Letter of Credit Outstandings.
2.12 Maintenance of Loan Account; Statements of Account.
(a) The Issuing Banks shall maintain an account on its books
in the name of Kmart (the "Loan Account") which will reflect all Letter of
Credit Outstandings, L/C Disbursements, fees and interest that have become
payable as herein set forth.
(b) After the end of each calendar month, the Issuing Banks
shall send to Kmart a statement accounting for the transactions occurring among
and between the Issuing Banks and Kmart during that month. The monthly
statements shall, absent manifest error, be final, conclusive and binding on
Kmart and each Subsidiary Credit Party, unless otherwise objected to in writing
by Kmart within forty-five (45) days after receipt of the monthly statement.
2.13 Increased Costs.
(a) If any Change in Law shall:
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(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, the Issuing Banks; or
(ii) impose on any Issuing Bank any other condition
affecting this Agreement or any Letter of Credit;
and the result of any of the foregoing shall be to increase the cost to such
Issuing Bank of issuing or maintaining any Letter of Credit by an amount deemed
material by such Issuing Bank or to reduce the amount of any sum received or
receivable by such Issuing Bank hereunder by an amount deemed material by such
Issuing Bank, then Kmart and the Subsidiary Credit Parties will pay to such
Issuing Bank, such additional amount or amounts as will compensate such Issuing
Bank for such additional costs incurred or reduction suffered.
(b) If any Issuing Bank reasonably determines that any Change
in Law regarding capital requirements has or would have the effect of reducing
the rate of return on such Issuing Bank's capital or on the capital of such
Issuing Bank's holding company, if any, as a consequence of this Agreement or
the Letters of Credit issued by the Issuing Bank, to a level below that which
such Issuing Bank or such Issuing Bank's holding company could have achieved but
for such Change in Law (taking into consideration such Issuing Bank's policies
and the policies of such Issuing Bank's holding company with respect to capital
adequacy), then from time to time Kmart and the Subsidiary Credit Parties will
pay to such Issuing Bank such additional amount or amounts as will compensate
such Issuing Bank or such Issuing Bank's holding company for any such reduction
suffered deemed to be material by such Issuing Bank.
(c) A certificate of the Issuing Bank setting forth the amount
or amounts necessary to compensate such Issuing Bank or its holding company, as
the case may be, as specified in paragraph (a) or (b) of this Section and
setting forth in reasonable detail the manner in which such amount or amounts
were determined shall be delivered to Kmart and shall be conclusive absent
manifest error. Kmart and the Subsidiary Credit Parties shall pay such Issuing
Bank the amount shown as due on any such certificate within ten (10) Business
Days after receipt thereof.
(d) Delay on the part of any Issuing Bank to demand
compensation pursuant to this Section within ninety (90) days after such right
to compensation has been incurred shall not constitute a waiver of such Issuing
Bank's right to demand such compensation.
2.14 Payments
Kmart and each Subsidiary Credit Party shall make each payment required
to be made by it hereunder or under any other Credit Document (whether of
interest, fees or reimbursement of drawings under Letters of Credit, or of
amounts payable under Sections 2.12 or 2.15, or otherwise) prior to 4:00 p.m.,
Boston 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 Issuing Bank, 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 Issuing Banks at their offices at ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇. If any payment under any
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Credit 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 Credit Document shall be made
in dollars. After the occurrence and during the continuance of an Event of
Default, the Issuing Banks, without the request of Kmart or any Subsidiary
Credit Party, may apply any amounts in the Cash Collateral Account towards any
payment due under this Agreement. In addition, for the convenience of the
parties, Kmart and each Subsidiary Credit Party authorize the Issuing Bank to
charge any account maintained by Kmart or any Subsidiary Credit Party for any
payment due under this Agreement, as and when such payment is due and payable,
and whether or not an Event of Default has occurred or is continuing. The
Issuing Bank acknowledges and agrees that notwithstanding such authorization,
neither Kmart nor any Subsidiary Credit Party has granted, directly or
indirectly, any lien or security interest in any such account or the proceeds
thereof to the Issuing Bank, except as provided in the Pledge and Security
Agreement.
2.15 Taxes
(a) Any and all payments by or on account of any obligation of
Kmart or the Subsidiary Credit Parties hereunder or under any other Credit
Document shall be made free and clear of and without deduction for any
Indemnified Taxes, provided that if Kmart or a Subsidiary Credit Party shall be
required to deduct any Indemnified Taxes from such payments, then (i) the sum
payable shall be increased as necessary so that after making all required
deductions for Indemnified Taxes (including deductions for Indemnified Taxes
applicable to additional sums payable under this Section) the Issuing Banks
receive an amount equal to the sum they would have received had no such
deductions been made, (ii) Kmart and the Subsidiary Credit Parties shall make
such deductions, and (iii) Kmart and the Subsidiary Credit Parties shall pay the
full amount deducted to the relevant Governmental Authority in accordance with
Applicable Law.
(b) In addition, Kmart and the Subsidiary Credit Parties shall
pay any Other Taxes to the relevant Governmental Authority in accordance with
Applicable Law.
(c) Kmart and the Subsidiary Credit Parties shall indemnify
the Issuing Banks, within ten (10) Business Days after written demand therefor,
for the full amount of any Indemnified Taxes or Other Taxes paid by the Issuing
Banks on or with respect to any payment by or on account of any obligation of
Kmart or any Subsidiary Credit Party hereunder or under any other Credit
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. A certificate
as to the amount of such payment or liability delivered to Kmart by an Issuing
Bank setting forth in reasonable detail the manner in which such amount was
determined, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by Kmart or a Subsidiary Credit Party to a Governmental
Authority, Kmart shall deliver to the Issuing Banks 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 Issuing Banks.
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(e) Each of the Issuing Banks agrees that upon the occurrence
of any circumstances entitling such party to indemnification or additional
amounts pursuant hereto, such party shall use reasonable efforts to take any
action (including designating a new lending office and signing any prescribed
forms or other documentation appropriate in the circumstances) if such action
would reduce or eliminate any Tax (including penalties or interest, as
applicable) with respect to which such indemnification or additional amounts may
thereafter accrue.
(f) If any Issuing Bank reasonably determines that it has
actually and finally realized, by reason of a refund, deduction or credit of any
Taxes paid or reimbursed by Kmart or any Subsidiary Credit Party pursuant to
subsection (a) or (c) above in respect of payments under the Credit Documents, a
current monetary benefit that it would otherwise not have obtained and that
would result in the total payments under this Section 2.15 exceeding the amount
needed to make such Issuing Bank whole, such Issuing Bank shall pay to Kmart,
with reasonable promptness following the date upon which it actually realizes
such benefit, an amount equal to the lesser of the amount of such benefit or the
amount of such excess, in each case net of all out-of-pocket expenses incurred
in securing such refund, deduction or credit.
2.16 Transfer to Existing Financing Agreement Kmart may, upon three (3)
Business Days written notice (a "Transfer Notice") to the Issuing Banks, request
that any or all of the Letters of Credit issued under this Agreement be deemed
issued under the Existing Financing Agreement. As long as the issuance of such
Letters of Credit would be permitted under the Existing Financing Agreement and
all conditions precedent to such issuance would be satisfied (as if such Letters
of Credit were newly issued on the date set forth in the Transfer Notice) and
such issuance would not result in the occurrence of a Default or Event of
Default (as each of those terms is defined in the Existing Financing Agreement),
the Issuing Banks shall take such action, at the expense of Kmart, as may be
reasonably required to cause such Letters of Credit to become "Letters of
Credit" under the Existing Financing Agreement. Unless Kmart otherwise requests,
such transfer of any Letters of Credit shall not cause a reduction in the
Commitments of the Issuing Banks hereunder.
3. REPRESENTATIONS AND WARRANTIES
Kmart and the Subsidiary Credit Parties each represents and warrants to
the Issuing Banks that:
3.01 Organization; Powers. Kmart and each Subsidiary Credit Party is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, and has all requisite power and authority to
carry on its business as now conducted.
3.02 Authorization; Enforceability. The transactions contemplated
hereby and by the other Credit Documents to be entered into by Kmart and each
Subsidiary Credit Party are within Kmart's and such Subsidiary Credit Party's
corporate limited partnership, limited liability company and other powers and
have been duly authorized by all necessary action. This Agreement has been duly
executed and delivered by Kmart and constitutes, and each other Credit Document
to which Kmart or any Subsidiary Credit Party is a party, when executed and
delivered by Kmart or such Subsidiary Credit Party will constitute, a legal,
valid and binding obligation of Kmart and each such Subsidiary Credit Party (as
the case may be), enforceable in
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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.
3.03 Governmental Approvals; No Conflicts. The transactions to be
entered into and contemplated by the Credit Documents (a) do not require any
consent or approval of, registration or filing with, or any other action by, any
Governmental Authority, except for such as have been obtained or made and are in
full force and effect, (b) will not violate any Applicable Law or the
Organizational Documents of Kmart or any Subsidiary Credit Party or any order of
any Governmental Authority, (c) will not violate or result in a default under
any indenture, agreement or other instrument binding upon Kmart or any
Subsidiary Credit Party or its assets, or give rise to a right thereunder to
require any payment to be made by any Kmart or any Subsidiary Credit Party, and
(d) will not result in the creation or imposition of any Lien on any asset of
any Kmart or any Subsidiary Credit Party, except Liens created under the Credit
Documents.
3.04 Litigation. (a) There are no actions, suits or proceedings by or
before any arbitrator or Governmental Authority pending against or, to the
knowledge of Kmart, threatened against or affecting Kmart or any Subsidiary
Credit Party (i) that, if adversely determined, could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect under
clauses (b) and (c) of the definition thereof, or (ii) that involve the
Collateral or any of the Credit Documents.
3.05 No Default. No Default or Event of Default has occurred and
is continuing.
3.06 Security Documents. The Security Documents shall create in favor
of the Issuing Banks a legal, valid and enforceable security interest in the
Collateral, and the Security Documents, if properly filed, or upon other action
required for perfection, shall constitute the creation of a fully perfected
first priority Lien on, and security interest in, all right, title and interest
of the Kmart and the Subsidiary Credit Parties thereunder in such Collateral, in
each case prior and superior in right to any other Person.
3.07 Federal Reserve Regulations. (a) Neither Kmart nor any Subsidiary
Credit Party 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 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.
3.08 Solvency. To the best of the knowledge of Kmart, as of the Closing
Date, after giving effect to the transactions contemplated hereby, Kmart and
each Subsidiary Credit Party is, and will be, Solvent.
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3.09 Home Depot Sale.
(a) The Purchase and Sale Agreement between Kmart and Home
Depot U.S.A., Inc. dated as of June 3, 2004 has been duly executed and delivered
by all parties thereto and constitutes a legal, valid and binding obligation of
the parties thereto, 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 and
is in full force and effect.
(b) Kmart has received consents from the lessors of the leased
properties described on Exhibit A to the Mortgage which are subject to the
Purchase and Sale Agreement between Kmart and Home Depot U.S.A., Inc. dated as
of June 3, 2004.
(c) The allocated purchase prices for each of the Mortgaged
Properties which are subject to the Purchase and Sale Agreement between Kmart
and Home Depot U.S.A., Inc. dated as of June 3, 2004 are set forth on Exhibit A
to the Mortgage.
(d) To the best of Kmart's knowledge, there are no events or
circumstances presently existing which could impede or delay consummation of the
Home Depot Sale with respect to the Mortgaged Property consisting of the first 4
stores listed on Exhibit A to the Mortgage, on or before October 31, 2004.
4. CONDITIONS
4.01 Closing Date. The obligation of the Issuing Banks to issue
each Letter of Credit, on and after the Closing Date, is subject to the
following conditions precedent:
(a) The Issuing Banks (or their counsel) shall have received
from each party hereto either (i) a counterpart of this Agreement and
all other Credit Documents (other than the Pledge and Security
Agreement) signed on behalf of such party or (ii) written evidence
satisfactory to the Issuing Banks (which may include telecopy
transmission of a signed signature page of this Agreement) that such
party has signed a counterpart of this Agreement and all other Credit
Documents.
(b) The Issuing Banks shall have received a favorable written
opinion of Holdings' in-house counsel covering such matters relating to
Kmart and the Subsidiary Credit Parties, the Credit Documents or the
transactions contemplated thereby as the Issuing Banks shall reasonably
request.
(c) The Issuing Banks shall have received such documents and
certificates as the Issuing Banks or their counsel may reasonably
request relating to the organization, existence and good standing of
Kmart and each Subsidiary Credit Party, the authorization of the
transactions contemplated by the Credit Documents and any other legal
matters relating to Kmart and the Subsidiary Credit Parties, the Credit
Documents or the transactions contemplated thereby, all in form and
substance reasonably satisfactory to the Issuing Banks and their
counsel.
(d) All necessary consents and approvals to the transactions
contemplated hereby shall have been obtained and shall be satisfactory
to the Issuing Banks.
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(e) The Issuing Banks shall be reasonably satisfied that any
financial statements delivered to them fairly present the business and
financial condition of Holdings and its Subsidiaries, and that there
has been no material adverse change in the assets, business, financial
condition, or income of Holdings and its Subsidiaries since the date of
the most recent financial information delivered to the Issuing Banks.
(f) There shall not be pending any litigation or other
proceeding, the result of which could reasonably be expected to have a
Material Adverse Effect.
(g) There shall not have occurred any default of any material
contract or agreement of Kmart or any Subsidiary Credit Party which
could reasonably be expected to have a Material Adverse Effect.
(h) All fees due at or immediately after the Closing Date and
all costs and expenses incurred by the Issuing Banks in connection with
the establishment of the credit facility contemplated hereby (including
the fees and expenses of counsel to the Issuing Banks) shall have been
paid in full.
(i) The consummation of the transactions contemplated hereby
shall not violate any Applicable Law.
(j) The Excluded Account shall have been established and
funded.
(k) There shall have been delivered to the Issuing Banks such
additional instruments and documents as the Issuing Banks or counsel to
the Issuing Banks reasonably may require or request.
4.02 Conditions Precedent to Each Letter of Credit.
In addition to those conditions described in Section 4.01, the
obligation of the Issuing Banks to issue each Letter of Credit, is subject to
the following conditions precedent:
(a) Notice. The Issuing Banks shall have received a notice
with respect to such issuance as required by Section 2.05.
(b) Representations and Warranties. All representations and
warranties contained in this Agreement and the other Credit Documents
or otherwise made in writing in connection herewith or therewith shall
be true and correct in all material respects on and as of the date of
each issuance of each Letter of Credit hereunder with the same effect
as if made on and as of such date, other than representations and
warranties that relate solely to an earlier date.
(c) No Default. On the date of each issuance of each Letter of
Credit, and after giving effect thereto, (i) no Default or Event of
Default shall have occurred and be continuing, and (ii) Availability
shall not be less than zero.
The request by Kmart for, and the acceptance by Kmart and each Subsidiary Credit
Party of, each Letter of Credit hereunder shall be deemed to be a representation
and warranty by Kmart
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and each such Subsidiary Credit Party that the conditions specified in this
Section 4.02 have been satisfied at that time.
5. AFFIRMATIVE COVENANTS
Until (i) the Commitments have expired or been terminated, and (ii) all
Obligations payable hereunder shall have been paid in full, and (iii) all
Letters of Credit shall have expired or terminated, Kmart and each Subsidiary
Credit Party covenants and agrees with the Issuing Banks that:
5.01 Financial Statements and Other Information. Kmart will
furnish to the Issuing Banks,:
(a) promptly following any request therefor, such information
regarding the operations, business affairs and financial condition of
Kmart and the Subsidiary Credit Parties, or compliance with the terms
of any Credit Document, as the Issuing Banks may reasonably request,
provided that Kmart and the Subsidiary Credit Parties need not furnish
copies of any information if such information is available either on
▇▇▇▇▇ or on Kmart's web site.
(b) at least ten (10) days prior written notice of any change
(i) in any Kmart's or any Subsidiary Credit Party's corporate name,
(ii) in Kmart's or any Subsidiary Credit Party's corporate structure or
jurisdiction of incorporation or formation, or (iii) in Kmart's or any
Subsidiary Credit Party's Federal Taxpayer Identification Number or
organizational identification number assigned to it by its state of
organization.
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5.02 Existence; Conduct of Business. Kmart will, and will cause each of
the Subsidiary Credit Parties 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, and privileges, except where the failure to do so
would not reasonably be expected to result in a Material Adverse Effect,
provided that the foregoing shall not prohibit any merger, consolidation,
liquidation or dissolution permitted under Section 6.02.
5.03 Compliance with Laws. Kmart will, and will cause each of the
Subsidiary Credit Parties to, comply with all Applicable Laws applicable to the
transactions contemplated by this Agreement and the other Credit Documents,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
5.04 Use of Letters of Credit. The Letters of Credit issued hereunder
will be used only (a) to replace or collateralize letters of credit under the
Existing Financing Agreement, (b) to finance the acquisition of working capital
assets of Kmart and the Subsidiary Credit Parties, including the purchase of
Inventory, in the ordinary course of business, and (c) for general corporate
purposes. No part of any Letter of Credit 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.
5.05 Maintenance of Excluded Account. Kmart shall maintain the Excluded
Account with Bank of America until such time as the amounts on deposit in the
Cash Collateral Account are at least equal to 100.5% of the Letter of Credit
Outstandings.
5.06 Cash Collateralization of Letter of Credit Outstandings. Kmart
shall cause the amounts on deposit in the Cash Collateral Account to be at least
equal to (i) on and after receipt of the proceeds of the sale of the Mortgaged
Properties, unrestricted and free from escrow, the proceeds thereof (net of the
closing expenses), and (ii)100.5% of the Letter of Credit Outstandings on and
after January 7, 2005. Kmart shall cause all such net proceeds to be deposited
in the Cash Collateral Account within 2 Business Days of receipt by Kmart or any
Subsidiary Credit Party.
5.07 Perfection of Mortgage; Release of Lien. In the event that the
sale of the Mortgaged Properties is not consummated on or before January 7,
2005, at the request of the Issuing Banks, Kmart shall promptly cause the
Mortgage to be recorded, at its expense, in all applicable filing offices and
shall take all such other action as the Issuing Banks may reasonably require
(including, without limitation, obtaining lessor's consents to the Mortgage).
Upon consummation of the sale of the Mortgaged Properties and compliance with
the provisions of Section 5.06 hereof, the Issuing Banks shall execute and
deliver, at Kmart's expense, such documents as may be reasonably necessary to
release their Lien under the Mortgage.
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5.08 Books and Records Kmart will, and will cause each of the
Subsidiary Credit Parties to, permit any representatives designated by any
Issuing Bank, upon reasonable prior notice, to examine and make extracts from
its books and records applicable to the transactions contemplated by this
Agreement to the extent deemed reasonably necessary by the Issuing Banks to
administer and enforce this Agreement and the other Credit Documents.
5.09 Further Assurances. Kmart and each Subsidiary Credit Party will
execute any and all further documents, financing statements, agreements and
instruments, and take all such further actions that may be required under any
Applicable Law, or which any Issuing Bank may reasonably request, to effectuate
the transactions contemplated by the Credit Documents or to grant, preserve,
protect or perfect the Liens created or intended to be created by the Pledge and
Security Agreement or the validity or priority of any such Lien, all at the
expense of Kmart and the Subsidiary Credit Parties.
5.10 Mortgage. Notwithstanding any other provision of this Agreement
the Issuing Banks shall not, and Kmart shall have no obligation to, file or
otherwise record or perfect the security interest created by the Mortgage, other
than pursuant to Section 5.07 above.
6. COVENANTS
Until (i) the Commitments have expired or been terminated, and (ii) all
Obligations payable hereunder shall have been paid in full, and (iii) all
Letters of Credit shall have expired or terminated, Kmart and each Subsidiary
Credit Party covenants and agrees with the Issuing Banks that:
6.01 Liens, Collateral Dispositions. Kmart and the Subsidiary Credit
Parties will not create, incur, assume or permit to exist any Lien on any
Collateral or sell, transfer, assign or otherwise dispose of any Collateral.
(other than the Mortgaged Property (but not the proceeds therefrom) in
connection with the consummation of the Home Depot Sale)
6.02 Fundamental Changes. Kmart and the Subsidiary Credit Parties will
not 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 or
Event of Default shall have occurred and be continuing, (i) any Subsidiary
Credit Party may merge into any other Subsidiary Credit Party or into Kmart, and
(ii) any Subsidiary Credit Party may liquidate or dissolve voluntarily into
Kmart.
7. EVENTS OF DEFAULT
7.01 Events of Default. If any of the following events ("Events of
Default") shall occur:
(a) Kmart or the Subsidiary Credit Parties shall fail to pay any
reimbursement obligation in respect of any L/C Disbursement when and as
the same shall become due and payable;
(b) Kmart or the Subsidiary Credit Parties shall fail to pay any
fee or any other amount (other than an amount referred to in Section
7.01(a)) payable under this
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Agreement or any other Credit Document, when and as the same shall
become due and payable;
(c) any representation or warranty made or deemed made by or
on behalf of Kmart or any Subsidiary Credit Party in or in connection
with any Credit Document or in any report, certificate, financial
statement or other document furnished pursuant to or in connection with
any Credit Document shall prove to have been incorrect in any material
respect when made or deemed made;
(d) Kmart or the Subsidiary Credit Parties shall fail to
observe or perform any covenant, condition or agreement contained in
Sections 5.04, 5.05, 5.06, 5.07, 6.01 or 6.02;
(e) Kmart or the Subsidiary Credit Parties shall fail to
observe or perform any covenant, condition or agreement contained in
any Credit Document (other than those specified in Sections 7.01(a),
7.01(b), 7.01(c), or 7.01(d)), and such failure shall continue
unremedied for a period of thirty (30) days after notice thereof from
the Issuing Banks to Kmart;
(f) the occurrence and continuance of any material Event of
Default under the Existing Finance Agreement.
(g) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation,
reorganization or other relief in respect of Kmart or any Subsidiary
Credit Party, their respective debts, or of a substantial part of their
respective assets, under any federal or state 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 Kmart or any Subsidiary Credit
Party or for a substantial part of their respective assets, and, in any
such case, such proceeding or petition shall continue undismissed for
sixty (60) days or an order or decree approving or ordering any of the
foregoing shall be entered;
(h) Kmart or any Subsidiary Credit Party shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation,
reorganization or other relief under any federal or state 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 (g)
of this Section 7.01, (iii) apply for or consent to the appointment of
a receiver, trustee, custodian, sequestrator, conservator or similar
official for Kmart or any Subsidiary Credit Party or for a substantial
part of their respective 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;
(i) Kmart or any Subsidiary Credit Party shall become unable,
admit in writing its inability or fail generally to pay its debts as
they become due;
21
(j) any non-monetary judgment or order shall have been
rendered against Kmart or any Subsidiary Credit Parties that is
reasonably likely to have a Material Adverse Effect and there shall be
any period of twenty (20) consecutive days during which a stay of
enforcement of such judgment or other, by reason of a pending appeal or
otherwise, shall not be in effect;
(k) (i) any challenge by or on behalf of Kmart, any Subsidiary
Credit Party or any other Person to the validity of any Credit Document
or the applicability or enforceability of any Credit Document strictly
in accordance with the subject Credit Document's terms or which seeks
to void, avoid, limit, or otherwise adversely affect any security
interest created by or in any Credit Document or any payment made
pursuant thereto;
(ii) any Lien purported to be created under any Security
Document shall cease to be, or shall be asserted by Kmart, any
Subsidiary Credit Party or any other Person not to be, a valid and
perfected Lien on any Collateral, with the priority required by the
applicable Security Document;
(l) the indictment of, or institution of any legal process or
proceeding against, Kmart or any Subsidiary Credit Party, under any
federal, state, municipal, and other civil or criminal statute, rule,
regulation, order, or other requirement having the force of law, which
is reasonably likely to have a Material Adverse Effect ;
(m) the determination by Kmart or any Subsidiary Credit Party,
to suspend the operation of their business in the ordinary course,
liquidate all or substantially all of Kmart's or such Subsidiary Credit
Party's assets or employ an agent or other third party to conduct a
program of closings, liquidations or "Going-Out-Of-Business" sales of
all or substantially all of the business; or
(n) Any Change in Control
then, and in every such event (other than an event with respect to any Kmart
described in clause (g) or (h) of this Section 7.01), and at any time thereafter
during the continuance of such event, the Issuing Banks may by written notice to
Kmart, take either or both of the following actions, at the same or different
times: (i) terminate all or any portion of the Commitments, and thereupon all or
such portion of the Commitments shall terminate immediately, and (ii) declare
all Obligations then outstanding to be due and payable in whole and thereupon
the Obligations so declared to be due and payable shall become due and payable
immediately, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Kmart and the Subsidiary Credit Parties;
and in case of any event with respect to any Kmart or a Subsidiary Credit Party
described in clause (g) or (h) of this Article, the Commitments shall
automatically terminate and the Obligations then outstanding, shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by Kmart and the
Subsidiary Credit Parties.
22
7.02 Remedies on Default
In case any one or more of the Events of Default shall have occurred
and be continuing, the Issuing Banks may proceed to protect and enforce their
rights and remedies under this Agreement or any of the other Credit Documents by
suit in equity, action at law or other appropriate proceeding, whether for the
specific performance of any covenant or agreement contained in this Agreement
and the other Credit Documents or any instrument pursuant to which the
Obligations are evidenced, and proceed to enforce the payment thereof or any
other legal or equitable right of the Issuing Banks. No remedy herein is
intended to be exclusive of any other remedy and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or any other provision
of law.
8. MISCELLANEOUS
8.01 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 Kmart or any Subsidiary Credit Party to it at ▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇,
Vice President, Treasurer, Financial Planning and Analysis (Telecopy
No. (▇▇▇) ▇▇▇-▇▇▇▇), with a copy to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Senior Vice
President, Deputy General Counsel and Chief Compliance Officer
(Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇);
(b) if to the Issuing Banks, to Fleet Retail Group, Inc., ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
(Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇), with a copy to ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇, LLP,
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Esquire (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.
8.02 Waivers; Amendments. (a) No failure or delay by the Issuing Banks
in exercising any right or power hereunder or under any other Credit 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 Issuing
Banks hereunder and under the other Credit Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of any Credit Document or consent to any departure by any Kmart or
any Subsidiary Credit 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 issuance
of a
23
Letter of Credit shall not be construed as a waiver of any Default or Event
of Default, regardless of whether the Issuing Banks may have had notice or
knowledge of such Default or Event of Default at the time.
(b) Neither this Agreement nor any other Credit Document nor any
provision hereof or thereof may be waived, amended or modified except pursuant
to an agreement or agreements in writing entered into by the Kmart and the
Issuing Banks.
8.03 Expenses; Indemnity; Damage Waiver. (a) Kmart and the Subsidiary
Credit Parties shall jointly and severally pay (i) all actual reasonable
out-of-pocket expenses incurred by the Issuing Banks and their Affiliates,
including the actual reasonable fees, charges and disbursements of counsel for
the Issuing Banks, for the preparation and administration of the Credit
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 out-of-pocket expenses incurred by the Issuing
Banks in connection with the issuance, amendment, renewal or extension of any
Letter of Credit or any demand for payment thereunder, and (iii) all reasonable
out-of-pocket expenses incurred by the Issuing Banks, including the reasonable
fees, charges and disbursements of any counsel for the Issuing Banks in
connection with the enforcement or protection of its rights in connection with
the Credit Documents, including its rights under this Section, or in connection
with the Letters of Credit issued hereunder, including all such out-of-pocket
expenses incurred during any workout, restructuring or negotiations in respect
of such Letters of Credit.
(b) Kmart and the Subsidiary Credit Parties shall, jointly and
severally, indemnify the Issuing Banks 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 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 Credit Document or any other agreement or
instrument contemplated hereby, the performance by the parties to the Credit
Documents of their respective obligations thereunder or the consummation of the
transactions contemplated by the Credit Documents or any other transactions
contemplated hereby, (ii) any 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), or
(iii) 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, willful misconduct or bad faith of such Indemnitee. In
connection with any indemnified claim hereunder, the Indemnitees shall be
entitled to select a single counsel for themselves (absent conflicts of
interest) and Kmart and the Subsidiary Credit Parties shall promptly pay the
reasonable fees and expenses of such counsel.
(c) To the extent permitted by Applicable Law, neither Kmart nor
any Subsidiary Credit Party shall assert, and each hereby waives, any claim
against any Indemnitee,
24
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 contemplated by the Credit Documents, any
Letter of Credit or the use of the proceeds thereof. Kmart and the Subsidiary
Credit Parties further agree that no Indemnitee shall have any liability to
Kmart or such Subsidiary Credit Parties, any Person asserting claims by or on
behalf of Kmart, such Subsidiary Credit Parties or any other Person in
connection with this Agreement or the other Credit Documents except (i) for
breach of the Indemnitee's obligations under this Agreement and the other Credit
Documents, or (ii) the Indemnitee's gross negligence, willful misconduct or bad
faith.
(d) All amounts due under this Section shall be payable promptly
after written demand therefor.
8.04 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 Banks that issues any Letter of Credit), except that Kmart and the
Subsidiary Credit Parties may not assign or otherwise transfer any of their
rights or obligations hereunder without the prior written consent of each
Issuing Bank (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 Banks that issues any Letter of Credit) and, to the extent expressly
contemplated hereby, the Related Parties of each of the Issuing Banks) any legal
or equitable right, remedy or claim under or by reason of this Agreement.
(b) Any Issuing Bank 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 Issuing Bank, including any pledge or assignment to secure
obligations to any of the twelve Federal Reserve Banks organized under Section 4
of the Federal Reserve Act, 12 U.S.C. Section 341, 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 an Issuing Bank
from any of its obligations hereunder or substitute any such pledgee or assignee
for such Issuing Bank as a party hereto.
8.05 Survival. All covenants, agreements, representations and
warranties made by Kmart and the Subsidiary Credit Parties in the Credit
Documents and in the certificates or other instruments delivered in connection
with or pursuant to this Agreement or any other Credit Document shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of the Credit Documents and the issuance of
any Letters of Credit, regardless of any investigation made by any such other
party or on its behalf and notwithstanding that the Issuing Banks 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 any Obligations are 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 2.13, 2.15 and 8.03 shall survive and
remain in full force and effect regardless of the consummation of the
transactions contemplated hereby, the repayment of the
25
Obligations, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.
8.06 Counterparts; Integration. 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 and the other Credit
Documents constitute the entire contract among the parties relating to the
subject matter hereof and supersede any and all contemporaneous or 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 Issuing Banks and Kmart and
when the Issuing Bank 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.
8.07 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.
8.08 Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Issuing Bank and each of its Affiliates 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 obligations at any time owing
by such Issuing Bank or Affiliate or for the credit or the account of the Kmart
and the Subsidiary Credit Parties against any of and all the obligations of
Kmart and the Subsidiary Credit Parties now or hereafter existing under this
Agreement held by such Issuing Bank, irrespective of whether or not such Issuing
Bank shall have made any demand under this Agreement and although such
obligations may be unmatured; provided, that each Issuing Bank hereby waives any
and all rights of set-off, banker's lien or counterclaim of any kind or nature
until the termination of the Existing Financing Agreement. The rights of each
Issuing Bank under this Section are in addition to other rights and remedies
(including other rights of setoff) that such Issuing Bank may have under the
Security Documents or otherwise.
8.09 Governing Law; Jurisdiction; Consent to Service of Process
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
(b) Kmart and the Subsidiary Credit Parties agree that any suit
for the enforcement of this Agreement or any other Credit Document may be
brought in any Massachusetts state or federal court sitting in the County of
Suffolk as any Issuing Bank may elect in its sole discretion and consent to the
non-exclusive jurisdiction of such courts. Kmart and the Subsidiary Credit
Parties hereby waive any objection which they may now or hereafter
26
have to the venue of any such suit or any such court or that such suit is
brought in an inconvenient forum. Kmart and the Subsidiary Credit Parties agree
that any action commenced by any of them asserting any claim or counterclaim
arising under or in connection with this Agreement or any other Credit Document
shall be brought solely in any Massachusetts state or federal court sitting in
the County of Suffolk as any Issuing Bank may elect in its sole discretion and
consent to the exclusive jurisdiction of such courts with respect to any such
action.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 8.01. Nothing in this
Agreement or any other Credit Document will affect the right of any party to
this Agreement to serve process in any other manner permitted by law.
27
8.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A JURY IN ANY TRIAL OF
ANY CASE OR CONTROVERSY IN WHICH KMART, ANY SUBSIDIARY CREDIT PARTY, OR ANY
ISSUING BANK, IS OR BECOMES A PARTY (WHETHER SUCH CASE OR CONTROVERSY IS
INITIATED BY OR AGAINST KMART, ANY SUBSIDIARY CREDIT PARTY OR ANY ISSUING BANK,
OR IN WHICH KMART, ANY SUBSIDIARY CREDIT PARTY OR ANY ISSUING BANK IS JOINED AS
A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT OF,
ANY RELATIONSHIP AMONGST OR BETWEEN KMART, ANY SUBSIDIARY CREDIT PARTY OR ANY
OTHER PERSON AND THE ISSUING BANKS.. 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.
8.11 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.
8.12 Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate, together with all fees, charges and
other amounts that are treated as interest on such Letter of Credit or L/C
Disbursement 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 Issuing Banks in accordance with Applicable
Law, the rate of interest payable, together with all Charges payable, shall be
limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable but were not payable as a result of the operation
of this Section shall be cumulated and the interest and Charges payable to such
Issuing Bank in respect of other 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 Issuing Bank.
8.13 Additional Waivers.
(a) The Obligations are the joint and several obligations of Kmart
and each Subsidiary Credit Party. Kmart and each Subsidiary Credit Party hereby
assumes, guarantees, and agrees to discharge all Obligations of all other
obligors. In that regard, any Subsidiary Credit Party for whose account a Letter
of Credit is to be issued shall, prior to the date of issuance, execute and
deliver to the Issuing Banks a joinder to, and assumption of obligations under,
this Agreement (in addition to any letter of credit application or other
documents required by the Issuing Banks).
(b) To the fullest extent permitted by Applicable Law, the
obligations of Kmart and each Subsidiary Credit Party hereunder shall not be
affected by (i) the failure of any
28
Issuing Bank to assert any claim or demand or to enforce or exercise any right
or remedy against any other obligor under the provisions of this Agreement, any
other Credit Document or otherwise, (ii) any rescission, waiver, amendment or
modification of, or any release from any of the terms or provisions of, this
Agreement, any other Credit Document, or any other agreement, including with
respect to any other obligor, or (iii) the failure to perfect any security
interest in, or the release of, any of the security held by or on behalf of the
Issuing Banks.
(c) To the fullest extent permitted by Applicable Law, the
obligations of Kmart and each Subsidiary Credit Party 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 obligor hereunder shall
not be discharged or impaired or otherwise affected by any default, failure or
delay, willful 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 obligor or that would otherwise operate as a discharge of any
obligor as a matter of law or equity (other than the indefeasible payment in
full in cash of all the Obligations).
(d) To the fullest extent permitted by Applicable Law, each obligor
waives any defense based on or arising out of any defense of any other obligor
or the unenforceability of the Obligations or any part thereof from any cause,
or the cessation from any cause of the liability of any other obligor, other
than the indefeasible payment in full in cash of all the Obligations. The
Issuing Banks 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 any other obligor, or
exercise any other right or remedy available to them against any other obligor,
without affecting or impairing in any way the liability of any obligor hereunder
except to the extent that all the Obligations have been indefeasibly paid in
full in cash. Pursuant to Applicable Law, each obligor 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 obligor against any other obligor,
as the case may be, or any security.
29
8.14 Other Collateral. The Issuing Banks agree at the request of Kmart
to negotiate in good faith appropriate market based pricing terms, structuring,
due diligence requirements and possible syndication requirements that would
apply in the event Kmart elects to substitute different real or personal
property collateral for the cash required to be deposited in the Cash Collateral
Account subsequent to January 7, 2005.
8.15 Confidentiality. The Issuing Banks agree to keep confidential and
not to disclose to any third party any information in respect of the Home Depot
Sale and the allocation of prices to Kmart stores in conjunction therewith to
the extent such information has not otherwise been made public.
[SIGNATURE PAGES FOLLOW]
30
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as a sealed instrument as
of the day and year first above written.
KMART CORPORATION
By:_________________________
Name:
Title:
S-31
BANK OF AMERICA, NATIONAL
ASSOCIATION, as Issuing Bank
By:________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
Address:
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
FLEET NATIONAL BANK,
as Issuing Bank
By:________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
Address:
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
S-32
