Exhibit 10.40
SECOND AMENDMENT TO
LETTER OF CREDIT AGREEMENT
This Second Amendment to Letter of Credit Agreement (the "Amendment") is
made as of the 10th day of November, 2006 by and between:
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC., a Maryland corporation (the
"Company"); and
BANK OF AMERICA, N.A., as Issuing Bank (the "Issuing Bank").
In consideration of the mutual covenants herein contained and benefits to be
derived herefrom, the parties hereto agree as follows:
WITNESSETH
WHEREAS, the Company and the Issuing Bank are parties to a Letter of Credit
Agreement dated as of October 14, 2005, as amended by the First Amendment to
Letter of Credit Agreement dated as of October 13, 2006 (the "Letter of Credit
Agreement"); and
WHEREAS, the Company has advised the Issuing Bank that the Company desires
to amend the Letter of Credit Agreement as provided herein.
NOW THEREFORE, it is hereby agreed as follows:
1. Definitions: All capitalized terms used herein and not otherwise defined
shall have the same meaning herein as in the Letter of Credit Agreement.
2. Amendment of the Letter of Credit Agreement. The Letter of Credit Agreement
is hereby amended as follows:
a. Section 1.01 of the Letter of Credit Agreement is hereby amended by the
addition of the following new definitions, inserted in appropriate
alphabetical order:
"L/C Fee Rate" shall mean, as of any date of determination, the per annum
rate, determined by reference to the average daily percentage of
Availability attributable to the Collateral consisting of Cash and Cash
Equivalents and Additional Collateral during the immediately preceding
calendar quarter, as set forth in the following grid:
Collateral consisting of Cash and Cash Equivalents and
Additional Collateral L/C Fee Rate
- ------------------------------------------------------ ------------
< 60% 62.5 bps
> 60% and < 100% 37.5 bps
100% 15.0 bps
"Metro Inc. Securities Availability Cap" means $75,000,000.
"Metro Inc. Securities Collateral" means the shares of capital stock of
Metro Inc., a Quebec corporation, specified on Schedule 2 hereto.
"Metro Inc. Securities Collateral Account" means that certain account now
or hereafter established by the Company with Bank of America, N.A. or any
of its Affiliates under the sole and exclusive dominion and control of the
Issuing Bank designated as the "A&P Letter of Credit Metro Inc. Securities
Collateral Account" containing investments constituting the Metro Inc.
Securities Collateral, and in which account the Issuing Bank has been
granted a Lien pursuant to the Pledge and Security Agreement.
"Revolving Credit Facility" means the revolving credit facility maintained
by the Company pursuant to the Credit Agreement, dated as of November 15,
2005, by and among the Company, the other borrowers thereto, Bank of
America, N.A., as Administrative Agent and Collateral Agent, and the other
Lenders party thereto.
b. The definition of "Account" in Section 1.01 of the Letter of Credit
Agreement is hereby is deleted in its entirety and the following is
substituted in its stead:
""Account" means each of the Cash Collateral Account, the Additional
Collateral Account and the Metro Inc. Securities Collateral Account."
c. The definition of "Availability" in Section 1.01 of the Letter of Credit
Agreement is hereby is deleted in its entirety and the following is
substituted in its stead:
""Availability" means, at any time of determination, the lesser of (i)
$150,000,000, and (ii) an amount equal to the difference between (a) the
sum of (1) 100% of the Cash and Cash Equivalents on deposit in the Cash
Collateral Account and (2) as to the Metro Inc. Securities Collateral on
deposit in the Metro Inc. Securities Collateral Account, the lesser of (A)
50% of the market value of such Metro Inc. Securities Collateral (as
determined by reference to the price of Metro Inc. stock as listed on the
Toronto Stock Exchange) and (B) the Metro Inc. Securities Availability Cap
and (3) as to each item of Additional Collateral on deposit in the
Additional Collateral Account, the amount of such Additional Collateral
multiplied by the Applicable Advance Rate applicable to such Additional
Collateral and (b) the aggregate Letter of Credit Outstandings. In
determining Availability, the Metro Inc. Securities Collateral shall be
valued daily at the US Dollar equivalent of the value of such Metro Inc.
Securities Collateral in Canadian Dollars."
d. The definition of "Commitment" in Section 1.01 of the Letter of Credit
Agreement is hereby deleted in its entirety and the following is
substituted in its stead:
""Commitment" means $150,000,000 or such lesser amount on account of a
reduction thereof in accordance with the provisions of Section 2.09
hereof."
e. The definition of "Pledge and Security Agreement" in Section 1.01 of the
Letter of Credit Agreement is hereby deleted in its entirety and the
following is substituted in its stead:
""Pledge and Security Agreement" means the Amended and Restated Pledge and
Security Agreement, dated as of November 10, 2006, between the Company and
the Issuing Bank, as amended and in effect from time to time."
f. Section 2.07(a) of the Letter of Credit Agreement is hereby amended in its
entirety to read as follows:
"(a) The Company and the Subsidiary Credit Parties shall pay the Issuing
Bank promptly after the commencement of each calendar quarter (but in no
event later than the tenth day of each calendar quarter), in arrears, a fee
(each, a "Letter of Credit Fee") equal to the L/C Fee Rate (on the basis of
actual number of days elapsed in a year of 360 days) of the average daily
face amount of the Letters of Credit outstanding during the immediately
preceding calendar quarter."
g. Section 5.05 of the Letter of Credit Agreement is hereby amended in its
entirety to read as follows:
"Collateralization of Letter of Credit Outstandings. The Company shall
cause the sum of (i) 100% of the Cash and Cash Equivalents on deposit in
the Cash Collateral Account, (ii) as to the Metro Inc. Securities
Collateral on deposit in the Metro Inc. Securities Collateral Account, the
lesser of (a) 50% of the market value of such Metro Inc. Securities
Collateral (as determined by reference to the price of Metro Inc. stock as
listed on the Toronto Stock Exchange) and (b) the Metro Inc. Securities
Availability Cap, and (iii) as to each item of Additional Collateral on
deposit in the Additional Collateral Account, the amount of such Additional
Collateral multiplied by the Applicable Advance Rate, to be at least equal
to the Letter of Credit Outstandings. If at any time Letter of Credit
Outstandings exceed Availability, the Borrower shall deposit with the
Issuing Bank Cash and Cash Equivalents and/or Additional Collateral in an
amount sufficient to eliminate such excess and/or cause the Letter of
Credit Outstandings to be reduced by an amount sufficient to eliminate such
excess.
h. The Letter of Credit Agreement is hereby amended by the addition of
Schedule 2 attached hereto as "Schedule 2" to the Letter of Credit
Agreement.
i. Section 6.01 of the Letter of Credit Agreement is hereby amended in its
entirety to read as follows:
"6.01 Liens, Collateral Dispositions. The Company and the Subsidiary Credit
Parties will not create, incur, assume or permit to exist any Lien on any
Collateral (as defined in the Pledge and Security Agreement) or, except as
expressly permitted by the Pledge and Security Agreement, sell, transfer,
assign or otherwise dispose of any Collateral (as defined in the Pledge and
Security Agreement); provided that the Company may grant Liens on
Non-Primary Collateral (as defined in the Pledge and Security Agreement) to
the Revolving Agent (as defined in the Pledge and Security Agreement), to
secure the Company's obligations under the Revolving Credit Facility and
sell, transfer assign or otherwise dispose of Non-Primary Collateral to the
extent permitted by the Revolving Credit Agreement (as defined in the
Pledge and Security Agreement) or in connection with the Revolving Agent's
exercise of its remedies pursuant to the Revolving Credit Agreement."
j. Section 6 of the Letter of Credit Agreement is hereby amended by the
addition of a new Section 6.03 reading as follows:
"6.03 Minimum Availability. The Company shall cause "Borrowing Base
Availability" (as defined in the Revolving Credit Facility) to be at least
$25,000,000 at all times."
k. Section 7.01(j) of the Letter of Credit Agreement is hereby amended in its
entirety to read as follows:
"(j) The occurrence of an event of default on the part of the Company or
any Subsidiary Credit Party under the Revolving Credit Facility or any
other Material Indebtedness to which the Company or any Subsidiary Credit
Party is a party or any indenture or other agreement relating to the
Revolving Credit Facility or any other Material Indebtedness of the Company
or any Subsidiary Credit Party."
l. Exhibit A to the Letter of Credit Agreement is hereby amended in its
entirety to read as set forth in Exhibit A attached hereto.
3. Conditions to Effectiveness. This Amendment shall not be effective until
each of the following conditions precedent have been fulfilled to the
satisfaction of the Issuing Bank:
a. This Amendment shall have been duly executed and delivered by the Company
and the Issuing Bank.
b. The Company shall have established the Metro Inc. Securities Collateral
Account with the Issuing Bank and the Issuing Bank shall have a perfected
first priority security interest in such Metro Inc. Securities Collateral
Account and all Metro Inc. Securities Collateral on deposit therein.
c. The Company shall have executed any and all further documents, financing
statements, agreements and instruments and taken any other action that may
be required under Applicable Law or which the Issuing Bank may reasonably
request to grant, preserve, protect or perfect Liens on the Collateral for
the benefit of the Issuing Bank (including, without limitation, the
execution and delivery of an amended and restated the Pledge and Security
Agreement), or the validity or priority of any such Lien, all at the
expense of the Company.
d. All action on the part of the Company necessary for the valid execution,
delivery and performance by the Company of this Amendment shall have been
duly and effectively taken. The Issuing Bank shall have received from the
Company true copies of the resolutions authorizing the transactions
described herein, certified by its secretary or other appropriate officer
to be true and complete.
e. The Company shall reimburse the Issuing Bank for all expenses incurred in
connection with this Amendment, including, without limitation, reasonable
attorneys' fees, costs and expenses.
f. The Company shall have paid the Issuing Bank all fees due in connection
with this Amendment as set forth in the Fee Letter between the Company and
the Issuing Bank dated September 19, 2006.
g. No Default or Event of Default shall have occurred and be continuing.
h. The Company shall have provided such additional instruments, documents, and
opinions of counsel as the Issuing Bank and their counsel may have
reasonably requested.
4. Miscellaneous.
a. Except as provided herein, all terms and conditions of the Letter of Credit
Agreement remain in full force and effect. The Company hereby ratifies,
confirms, and reaffirms all of the representations, warranties and
covenants therein contained.
b. This Amendment may be executed in several counterparts and by each party on
a separate counterpart, each of which when so executed and delivered, each
shall be an original, and all of which together shall constitute one
instrument. Delivery of an executed counterpart of a signature page hereto
by telecopy shall be effective as delivery of a manually executed
counterpart hereof.
c. This Amendment expresses the entire understanding of the parties with
respect to the matters set forth herein and supersedes all prior
discussions or negotiations hereon. Any determination that any provision of
this Amendment or any application hereof is invalid, illegal or
unenforceable in any respect and in any instance shall not effect the
validity, legality, or enforceability of such provision in any other
instance, or the validity, legality or enforceability of any other
provisions of this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as the date first above written.
BANK OF AMERICA, N.A., as Issuing Bank
By: /s/ Alexis MacElhiney
------------------------------------
Name: Alexis MacElhiney
Title: Director
THE GREAT ATLANTIC & PACIFIC TEA
COMPANY, INC.
By: /s/ William J. Moss
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Name: William J. Moss
Title: Vice President, Treasurer