EXECUTION COPY
U.S. $4,000,000,000
FIVE-YEAR CREDIT AGREEMENT
Dated as of February 22, 2005
Among
SEARS HOLDINGS CORPORATION
and
SEARS ROEBUCK ACCEPTANCE CORP.
and
KMART CORPORATION,
as Borrowers
and
THE INITIAL LENDERS NAMED HEREIN,
as Initial Lenders
and
CITICORP USA, INC.
and
BANK OF AMERICA, N.A.,
as Syndication Agents
and
BARCLAYS BANK PLC,
LEHMAN COMMERCIAL PAPER INC.,
HSBC BANK USA,
MERRILL LYNCH BANK USA,
MORGAN STANLEY BANK,
THE ROYAL BANK OF SCOTLAND, PLC
AND
WACHOVIA BANK NATIONAL ASSOCIATION,
as Documentation Agents
and
J.P. MORGAN SECURITIES INC.,
CITIGROUP GLOBAL MARKETS INC.
and
BANC OF AMERICA SECURITIES LLC,
as Lead Arrangers and Joint Bookrunners
and
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms............................................................................ 1
SECTION 1.02. Computation of Time Periods...................................................................... 19
SECTION 1.03. Accounting Terms................................................................................. 19
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Revolving Advances........................................................................... 19
SECTION 2.02. Making the Revolving Advances.................................................................... 19
SECTION 2.03. The Swingline Advances........................................................................... 20
SECTION 2.04. Making the Swingline Advances.................................................................... 21
SECTION 2.05. Fees............................................................................................. 22
SECTION 2.06. Optional Termination or Reduction of the Commitments............................................. 22
SECTION 2.07. Repayment of Advances............................................................................ 22
SECTION 2.08. Interest on Advances............................................................................. 22
SECTION 2.09. Interest Rate Determination...................................................................... 23
SECTION 2.10. Optional Conversion of Revolving Advances........................................................ 23
SECTION 2.11. Optional and Mandatory Prepayments of Advances................................................... 23
SECTION 2.12. Increased Costs.................................................................................. 24
SECTION 2.13. Illegality....................................................................................... 25
SECTION 2.14. Payments and Computations........................................................................ 25
SECTION 2.15. Taxes............................................................................................ 25
SECTION 2.16. Sharing of Payments, Etc......................................................................... 27
SECTION 2.17. Use of Proceeds of Advances...................................................................... 28
ARTICLE III
AMOUNT AND TERMS OF THE LETTERS OF CREDIT
SECTION 3.01. L/C Commitment................................................................................... 28
SECTION 3.02. Procedure for Issuance of Letter of Credit....................................................... 28
SECTION 3.03. Fees and Other Charges........................................................................... 28
SECTION 3.04. Letter of Credit Participations.................................................................. 29
SECTION 3.05. Reimbursement Obligation of the Borrowers........................................................ 29
SECTION 3.06. Obligations Absolute............................................................................. 30
SECTION 3.07. Letter of Credit Payments........................................................................ 30
SECTION 3.08. Applications..................................................................................... 30
SECTION 3.09. Use of Letters of Credit......................................................................... 30
ARTICLE IV
CONDITIONS TO EFFECTIVENESS
SECTION 4.01. Conditions Precedent to Effectiveness............................................................ 30
SECTION 4.02. Conditions Precedent to Each Extension of Credit................................................. 32
SECTION 4.03. Effective Date................................................................................... 32
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties of the Borrowers.................................................. 32
ARTICLE VI
COVENANTS
SECTION 6.01. Affirmative Covenants............................................................................ 35
SECTION 6.02. Negative Covenants............................................................................... 38
SECTION 6.03. Financial Covenant............................................................................... 41
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01. Events of Default................................................................................ 41
RTICLE VIII
THE AGENT
SECTION 8.01. Appointment...................................................................................... 43
SECTION 8.02. Delegation of Duties............................................................................. 43
SECTION 8.03. Exculpatory Provisions........................................................................... 43
SECTION 8.04. Reliance by Agent................................................................................ 44
SECTION 8.05. Notice of Default................................................................................ 44
SECTION 8.06. Non-Reliance on Agents and Other Lenders......................................................... 44
SECTION 8.07. Indemnification.................................................................................. 44
SECTION 8.08. Agent in Its Individual Capacity................................................................. 45
SECTION 8.09. Successor Agent.................................................................................. 45
SECTION 8.10. Documentation Agents and Syndication Agents...................................................... 45
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc.................................................................................. 45
SECTION 9.02. Notices, Etc..................................................................................... 46
SECTION 9.03. No Waiver; Remedies.............................................................................. 47
SECTION 9.04. Costs and Expenses............................................................................... 47
SECTION 9.05. Right of Set-off................................................................................. 48
SECTION 9.06. Binding Effect; Effectiveness.................................................................... 48
SECTION 9.07. Assignments and Participations................................................................... 48
SECTION 9.08. Confidentiality.................................................................................. 50
SECTION 9.09. Governing Law.................................................................................... 50
SECTION 9.10. Execution in Counterparts........................................................................ 50
SECTION 9.11. Jurisdiction, Etc................................................................................ 51
SECTION 9.12. WAIVER OF JURY TRIAL............................................................................. 51
SECTION 9.13. Release of Collateral............................................................................ 51
SECTION 9.14. USA PATRIOT Act Notice........................................................................... 52
SECTION 9.15. Integration...................................................................................... 52
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Schedules
Schedule IA - Pricing Grid
Schedule 5.01(r) -UCC Filing Jurisdictions
Schedule 6.02(a) -Existing Liens
Exhibits
Exhibit A - Form of Notice of Borrowing
Exhibit B - Form of Assignment and Acceptance
Exhibit C - Form of Borrowing Base Certificate
Exhibit D - Form of Guarantee and Collateral Agreement
Exhibit E-1 - Form of Opinion of Counsel for the Borrowers (Sears Law
Department)
Exhibit E-2 - Form of Opinion of Counsel for the Borrowers (Kmart Law
Department)
Exhibit E-3 - Form of Opinion of Special Counsel for the Borrowers
(Wachtell, Lipton, Rosen & Katz)
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FIVE-YEAR CREDIT AGREEMENT
Dated as of February 22, 2005
SEARS HOLDINGS CORPORATION, a Delaware corporation ("Holdings"),
SEARS ROEBUCK ACCEPTANCE CORP., a Delaware corporation ("SRAC"), KMART
CORPORATION, a Michigan corporation ("Kmart Corp."), the banks, financial
institutions and other institutional lenders (the "Initial Lenders") listed on
the signature pages hereof, CITICORP USA, INC. and BANK OF AMERICA, N.A., as
syndication agents, BARCLAYS BANK PLC, LEHMAN COMMERCIAL PAPER INC., HSBC BANK
USA, MERRILL LYNCH BANK USA, MORGAN STANLEY BANK, THE ROYAL BANK OF SCOTLAND,
PLC and WACHOVIA BANK NATIONAL ASSOCIATION, as documentation agents, J.P. MORGAN
SECURITIES INC., CITIGROUP GLOBAL MARKETS INC. and BANC OF AMERICA SECURITIES
LLC, as lead arrangers and joint bookrunners (the "Lead Arrangers"), and
JPMORGAN CHASE BANK, N.A. ("JPMorgan Chase Bank"), as administrative agent (the
"Agent") for the Lenders (as hereinafter defined), agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Adjustment Date" has the meaning set forth in the Pricing Grid.
"Advance" means any advance by a Lender to any Borrower as part of a
Borrowing.
"Affiliate" means, as to any Person, any other Person that, directly
or indirectly, controls, is controlled by or is under common control with
such Person or is a director or officer of such Person. For purposes of
this definition, the term "control" (including the terms "controlling",
"controlled by" and "under common control with") of a Person means the
possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of such Person by contract or
otherwise.
"Agent's Account" means the account of the Agent maintained by the
Agent at JPMorgan Chase Bank at its office at 270 Park Avenue, New York,
New York 10017, Account No. 304288446, Attention: Bank Loan Syndications.
"Applicable Lending Office" means, with respect to each Lender, such
Lender's Domestic Lending Office in the case of a Base Rate Advance and
such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate
Advance.
"Applicable Margin" means, initially, (a) 0.875% per annum for
Eurodollar Rate Advances and (b) 0% per annum for Base Rate Advances;
provided, that on and after the first Adjustment Date occurring after the
Effective Date, the Applicable Margin will be determined pursuant to the
Pricing Grid.
"Application" means an application, in such form as the Issuing
Lender may specify from time to time, requesting the Issuing Lender to
open a Letter of Credit.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by the
Agent, in substantially the form of Exhibit B hereto.
"Authorized Officer" means, as to Holdings or any Borrower, its
president, chief executive officer, chief financial officer, vice
president and controller, vice president and treasurer, vice president,
finance,
executive vice president, finance or any other person designated by it and
acceptable to the Required Lenders.
"Available Cash" means, on any date, (a) the aggregate amount of
cash and Cash Equivalents of Holdings and its Subsidiaries on such date
(determined on a Consolidated basis and in accordance with GAAP) minus (b)
$125,000,000.
"Available Commitment" means as to any Lender at any time, an amount
equal to the excess, if any, of (a) such Lender's Commitment then in
effect over (b) such Lender's Extensions of Credit then outstanding;
provided, that in calculating any Lender's Extensions of Credit for the
purpose of determining such Lender's Available Commitment pursuant to
Section 2.05(a), the aggregate principal amount of Swingline Advances then
outstanding shall be deemed to be zero.
"Base Rate" means a fluctuating interest rate per annum in effect
from time to time, which rate per annum shall at all times be equal to the
higher of:
(a) the rate of interest announced publicly by JPMorgan
Chase Bank in New York, New York, from time to time, as its prime
rate; and
(b) 1/2 of one percent per annum above the Federal Funds
Rate.
"Base Rate Advance" means an Advance that bears interest as provided
in Section 2.08(a)(i).
"Borrower Information" has the meaning specified in Section 9.08.
"Borrowers" means, collectively, SRAC and Kmart Corp.; provided that
in the event SRAC is dissolved, merged with and into Holdings or any
Subsidiary of Holdings or otherwise ceases to exist in accordance with
Section 6.01(d), then Sears shall designate that Sears or a direct wholly
owned Domestic Subsidiary of Sears become a Borrower for all purposes of
the Loan Documents.
"Borrowing" means a borrowing consisting of simultaneous Advances of
the same Type made by each of the applicable Lenders pursuant to Section
2.01 or Section 2.03.
"Borrowing Base" means, at any time, an amount equal to (a) 85% of
the aggregate outstanding Eligible Credit Card Accounts Receivable at such
time plus (b) the lesser of (i) 70% of the Net Eligible Inventory at such
time minus 100% of Other Borrowing Base Reserves and (ii) 85% of the Net
Orderly Liquidation Value at such time. The Agent may, in its Permitted
Discretion and with 5 days notice to the Borrowers, reduce the advance
rates set forth above or adjust one or more of the other elements used in
computing the Borrowing Base.
"Borrowing Base Certificate" means a certificate, signed by an
Authorized Officer of Holdings, in the form of Exhibit C or another form
which is acceptable to the Agent in its Permitted Discretion.
"Business Day" means a day of the year on which banks are not
required or authorized by law to close in New York, New York or, in the
case of matters relating to SRAC, Greenville, Delaware or, in the case of
matters relating to Kmart Corp., Detroit, Michigan, and, if the applicable
Business Day relates to any Eurodollar Rate Advances, a day of the year on
which dealings are carried on in the London interbank market.
"Cash Equivalents" means investments of Holdings and its
Subsidiaries recorded as cash or cash equivalents in accordance with GAAP.
"Collateral" means all property of the Loan Parties, now owned or
hereafter acquired, upon which a Lien is purported to be created by any
Security Document.
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"Collateral Release Date" means the date on which the Collateral is
released from the Liens of the Agent pursuant to Section 9.13(c).
"Commercial L/C" means a commercial documentary Letter of Credit
under which the Issuing Lender agrees to make payments in Dollars for the
account of any Borrower, on behalf of any Group Member, in respect of
obligations of such Group Member in connection with the purchase of goods
or services in the ordinary course of business.
"Commitment" means, as to any Lender, the obligation of such Lender
to make Revolving Advances and participate in Swingline Advances and
Letters of Credit in an aggregate principal amount and/or face amount up
to (a) the amount set forth opposite such Lender's name on the signature
pages hereof or (b) if such Lender has entered into any Assignment and
Acceptance, the amount set forth for such Lender in the Register
maintained by the Agent pursuant to Section 9.07(d), as such amount may be
reduced pursuant to Section 2.06.
"Commitment Fee Rate" means, initially, 0.175% per annum; provided,
that on and after the first Adjustment Date occurring after the Effective
Date, the Commitment Fee Rate will be determined pursuant to the Pricing
Grid.
"Commitment Percentage" means, as to any Lender at any time, the
percentage which such Lender's Commitment then constitutes of the
aggregate Commitments of all Lenders or, at any time after the Commitments
shall have expired or terminated, the percentage which the aggregate
principal amount of such Lender's Advances then outstanding constitutes of
the aggregate principal amount of the Advances then outstanding, provided,
that, in the event that the Advances are paid in full prior to the
reduction to zero of the Total Extensions of Credit, the Commitment
Percentage shall be determined in a manner designed to ensure that the
other outstanding Extensions of Credit shall be held by the Lenders on a
comparable basis.
"Commonly Controlled Entity" means an entity, whether or not
incorporated, that is under common control with any Borrower within the
meaning of Section 4001 of ERISA or is part of a group that includes any
Borrower and that is treated as a single employer under Section 414 of the
Internal Revenue Code.
"Consolidated" refers to the consolidation of accounts of Holdings,
excluding Sears Canada, in accordance with GAAP and as presented on a GAAP
basis.
"Consolidated Adjusted Leverage Ratio" means, as of any given day,
the ratio of (a) the sum of (i) Consolidated Average Net Debt on such day
and (ii) the product of Consolidated Rent Expense for the four immediately
preceding fiscal quarters for which financial statements are available and
6 to (b) Consolidated EBITDAR for the four immediately preceding fiscal
quarters for which financial statements are available.
"Consolidated Average Net Debt" means, as of the last day of any
period, (a) the sum of (i) Consolidated Net Debt as of such day and (ii)
the sum of Consolidated Net Debt as of the end of each of the three
immediately preceding fiscal quarters divided by (b) 4.
"Consolidated EBITDA" means for any period, Consolidated Net Income
for such period plus, without duplication and to the extent reflected as a
charge in the statement of such Consolidated Net Income for such period,
the sum of (a) provision for income taxes, (b) interest expense, (c)
depreciation and amortization expense, (d) results attributable to the
minority interest owned by any Person in a non-wholly owned Subsidiary of
Holdings to the extent such Subsidiary is a Loan Party, (e) expenses
relating to the Kmart Corp. bankruptcy case in an amount not to exceed
$12,000,000 in any twelve month period, (f) the impact of conforming
accounting policies as a result of the Merger through the first full
fiscal year following the Merger, (g) all non-recurring expenses and
special charges related to the Merger incurred within twelve months after
the date of the Merger, (h) non-cash charges arising from share-based
payments (as defined in accordance with GAAP) to employees or directors
and (i) any extraordinary or other non-
3
recurring non-cash expenses or losses, and minus, to the extent included
in the statement of such Consolidated Net Income for such period, any cash
payments made during such period in respect of items added back pursuant
to clause (i) above subsequent to the fiscal quarter in which the relevant
non-cash expenses or losses were reflected as a charge in the statement of
Consolidated Net Income, all as determined on a Consolidated basis. For
the purposes of calculating Consolidated EBITDA for any fiscal quarter
pursuant to any determination of the Consolidated Adjusted Leverage Ratio
or the Consolidated Leverage Ratio, (i) if at any time during such fiscal
quarter Holdings or any of its Subsidiaries (other than Sears Canada)
shall have made any Material Disposition, the Consolidated EBITDA for such
fiscal quarter shall be reduced by an amount equal to the Consolidated
EBITDA (if positive) attributable to the property that is the subject of
such Material Disposition for such fiscal quarter or increased by an
amount equal to the Consolidated EBITDA (if negative) attributable thereto
for such fiscal quarter and (ii) if during such fiscal quarter Holdings or
any of its Subsidiaries (other than Sears Canada) shall have made a
Material Acquisition, Consolidated EBITDA for such fiscal quarter shall be
calculated after giving pro forma effect thereto as if such Material
Acquisition occurred on the first day of such fiscal quarter. As used in
this definition, "Material Acquisition" means any acquisition of property
or series of related acquisitions of property that (a) constitutes assets
comprising all or substantially all of an operating unit of a business or
constitutes all or substantially all of the common stock of a Person and
(b) involves the payment of consideration by Holdings and its Subsidiaries
(other than Sears Canada) in excess of $100,000,000; and "Material
Disposition" means any Disposition of property or series of related
Dispositions of property that yields gross proceeds to Holdings or any of
its Subsidiaries in excess of $100,000,000.
"Consolidated EBITDAR" means, for any period, the sum of (a)
Consolidated EBITDA for such period plus (b) Consolidated Rent Expense for
such period.
"Consolidated Inventory Coverage Ratio" means, as of the last day of
any period, the ratio of (a) Gross Domestic Inventory on such day to (b)
Total Net Extensions of Credit on such day.
"Consolidated Leverage Ratio" means, as of any given day, the ratio
of (a) Consolidated Average Net Debt on such day to (b) Consolidated
EBITDA for the four immediately preceding fiscal quarters for which
financial statements are available. For purposes of determining the
Consolidated Leverage Ratio as of the end of the first four fiscal
quarters following the Effective Date, Consolidated Average Net Debt and
Consolidated EBITDA shall be calculated to give pro forma effect to the
Merger as if the Merger had occurred on the first day of the relevant
period of four consecutive fiscal quarters.
"Consolidated Net Debt" means, on any date, Consolidated Total Debt
minus Available Cash.
"Consolidated Net Income" means, for any period, the consolidated
net income (or loss) of Holdings and its Subsidiaries, determined on a
Consolidated basis in accordance with GAAP; provided that there shall be
excluded (a) the income (or deficit) of any Person accrued prior to the
date it becomes a Subsidiary of Holdings or is merged into or consolidated
with Holdings or any of its Subsidiaries, (b) the income (or deficit) of
any Person (other than a Subsidiary of Holdings) in which Holdings or any
of its Subsidiaries has an ownership interest, except to the extent that
any such income is actually received by Holdings or such Subsidiary in the
form of dividends or similar distributions and (c) the undistributed
earnings of any Subsidiary of Holdings (other than a Loan Party) to the
extent that the declaration or payment of dividends or similar
distributions by such Subsidiary is not at the time permitted by the terms
of any contractual obligation (other than under any Loan Document) or
Requirement of Law applicable to such Subsidiary.
"Consolidated Rent Expense" means, for any period, the aggregate
amount of fixed and contingent rentals payable by Holdings and its
Subsidiaries for such period with respect to operating leases of real
estate, determined on a Consolidated basis in accordance with GAAP.
"Consolidated Total Debt" means, at any date, the aggregate
principal amount of all Debt of Holdings and its Subsidiaries at such
date, determined on a Consolidated basis in accordance with GAAP,
4
but excluding (i) issued but not funded letters of credit, (ii)
reimbursement obligations which are characterized as trade payables and
are not overdue with respect to trade letters of credit (other than
Letters of Credit issued hereunder) and (iii) contingent obligations.
"Convert", "Conversion" and "Converted" each refers to a conversion
of Advances of one Type into Advances of the other Type pursuant to
Section 2.09 or 2.10.
"Credit Card Accounts Receivable" means each "Account" (as defined
in the UCC) together with all income, payments and proceeds thereof, owed
by an issuer of credit cards to a Loan Party resulting from charges by a
customer of a Group Member (other than Sears Canada) on credit cards
issued by such issuer in connection with the sale of goods by a Group
Member (other than Sears Canada), or services performed by a Group Member
(other than Sears Canada), in each case in the ordinary course of its
business.
"DC" means any distribution center owned or leased and operated by
any Loan Party.
"Debt" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money (excluding interest payable
thereon unless such interest is to be accrued and added to the principal
amount of such indebtedness), (b) all obligations of such Person for the
deferred purchase price of property or services (other than (i) trade
payables incurred in the ordinary course of such Person's business and
(ii) any such obligations which are due less than twelve months from the
date of incurrence), (c) all obligations of such Person evidenced by
notes, bonds, debentures or other similar instruments (other than
performance, surety and appeals bonds arising in the ordinary course of
business and other than the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business) or in respect of acceptances or letters of credit, (d) all
obligations of such Person created or arising under any conditional sale
or other title retention agreement with respect to property acquired by
such Person (even though the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession
or sale of such property), (e) all obligations of such Person as lessee
under leases that have been or should be, in accordance with GAAP,
recorded as capital leases, (f) all direct recourse payment obligations of
such Person in respect of any accounts receivable sold by such Person, (g)
all Debt of others referred to in clauses (a) through (f) above or clause
(h) below and other payment obligations guaranteed directly or indirectly
in any manner by such Person, or in effect guaranteed directly or
indirectly by such Person through an agreement (1) to pay or purchase such
Debt or to advance or supply funds for the payment or purchase of such
Debt, (2) to purchase, sell or lease (as lessee or lessor) property, or to
purchase or sell services, primarily for the purpose of enabling the
debtor to make payment of such Debt or to assure the holder of such Debt
against loss, (3) to supply funds to or in any other manner invest in the
debtor (including any agreement to pay for property or services
irrespective of whether such property is received or such services are
rendered) or (4) otherwise to assure a creditor against loss, and (h) all
Debt referred to in clauses (a) through (g) above secured by (or for which
the holder of such Debt has an existing right, contingent or otherwise, to
be secured by) any Lien on property (including accounts and contract
rights) owned by such Person, even though such Person has not assumed or
become liable for the payment of such Debt.
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"Disposition" means any sale of property other than goods held for
sale in the ordinary course of business.
"Dollars" and "$" refers to lawful money of the United States.
"Domestic Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Domestic Lending Office" on the
signature pages hereof or in the Assignment and Acceptance pursuant to
which it became a Lender, or such other office of such Lender as such
Lender may from time to time specify to the Borrowers and the Agent.
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"Domestic Subsidiary" means any Subsidiary organized under the laws
of any jurisdiction within the United States.
"Effective Date" means the date on which the conditions precedent
set forth in Section 4.01 shall have been satisfied.
"Eligible Assignee" means any Person approved by the Agent, the
Issuing Lender and, unless (a) an Event of Default has occurred and is
continuing at the time any assignment is effected in accordance with
Section 9.07 or (b) the assignee is an existing Lender or an Affiliate of
an existing Lender, the Borrowers, in each case such approval not to be
unreasonably withheld or delayed; provided that neither the Borrowers nor
an Affiliate of the Borrowers shall qualify as an Eligible Assignee.
"Eligible Credit Card Accounts Receivable" means at the time of any
determination thereof, each Credit Card Accounts Receivable that satisfies
the following criteria at the time of creation and continues to meet the
same at the time of such determination: such Credit Card Account
Receivable (i) has been earned and represents the bona fide amounts due to
a Loan Party from a credit card payment processor and/or credit card
issuer, and in each case originated in the ordinary course of business of
the applicable Loan Party and (ii) is not ineligible for inclusion in the
calculation of the Borrowing Base pursuant to any of clauses (a) through
(i) below. Without limiting the foregoing, to qualify as an Eligible
Credit Card Account Receivable, an Account shall indicate no person other
than a Loan Party as payee or remittance party. In determining the amount
to be so included, the face amount of an Account shall be reduced by,
without duplication, to the extent not reflected in such face amount, (i)
the amount of all accrued and actual discounts, claims, credits or credits
pending, promotional program allowances, price adjustments, finance
charges, credit card processor fees or other allowances (including any
amount that the applicable Loan Party may be obligated to rebate to a
customer, a credit card payment processor, or credit card issuer pursuant
to the terms of any agreement or understanding (written or oral)) and (ii)
the aggregate amount of all cash received in respect of such Account but
not yet applied by the applicable Loan Party to reduce the amount of such
Credit Card Account Receivable. Unless otherwise approved from time to
time in writing by the Agent, no Credit Card Accounts Receivable shall be
Eligible Credit Card Accounts Receivable if, without duplication:
(a) such Credit Card Accounts Receivable are not
owned by a Loan Party and such Loan Party does not have
good or marketable title to such Credit Card Accounts
Receivable free and clear of any Lien of any Person other
than the Agent;
(b) such Credit Card Accounts Receivable do not
constitute "Accounts" (as defined in the UCC) or such
Credit Card Accounts Receivable have been outstanding for
more than seven (7) business days;
(c) the issuer or payment processor of the
applicable credit card with respect to such Credit Card
Accounts Receivable is the subject of any bankruptcy or
insolvency proceedings;
(d) such Credit Card Accounts Receivable are not
valid, legally enforceable obligations of the applicable
issuer with respect thereto;
(e) such Credit Card Accounts Receivable are not
subject to a properly perfected security interest in favor
of the Agent, or are not in form and substance reasonably
satisfactory to the Agent, or are subject to any Lien
whatsoever other than Permitted Liens contemplated by the
processor agreements and for which appropriate reserves
(as determined by the Agent) have been established or
maintained by the Loan Parties;
6
(f) the Credit Card Accounts Receivable do not
conform to all representations, warranties or other
provisions in the Loan Documents relating to Credit Card
Accounts Receivable;
(g) such Credit Card Accounts Receivable are
subject to risk of set-off, non-collection or not being
processed due to unpaid and/or accrued credit card
processor fee balances, limited to the lesser of the
balance of Credit Card Accounts Receivable or unpaid
credit card processor fees;
(h) such Credit Card Accounts Receivable are
evidenced by "chattel paper" or an "instrument" of any
kind unless such "chattel paper" or "instrument" is in the
possession of the Agent, and to the extent necessary or
appropriate, endorsed to the Agent; or
(i) such Credit Card Accounts Receivable do not
meet such other usual and customary eligibility criteria
for Credit Card Accounts Receivable as the Agent may
determine from time to time in its Permitted Discretion.
"Eligible Inventory" means, at any time, the Inventory of any Loan
Party held for sale to third party customers that is not ineligible for
inclusion in the calculation of the Borrowing Base pursuant to any of
clauses (a) through (s) below. Without limiting the foregoing, to qualify
as "Eligible Inventory" no Person other than the Loan Parties shall have
any direct or indirect ownership, interest or title to such Inventory and
no Person other than the Loan Parties shall be indicated on any purchase
order or invoice with respect to such Inventory as having or purporting to
have an interest therein. Unless otherwise from time to time approved in
writing by the Agent, no Inventory shall be deemed Eligible Inventory if,
without duplication:
(a) the Loan Parties do not have sole and good,
valid and unencumbered title thereto (except for Liens of
the type described in clauses (a), (b), (c) and (e) of the
definition of Permitted Liens); or
(b) it is not located in the United States, Puerto
Rico or U.S. Virgin Islands; or
(c) it is not located at property owned or leased
by the Loan Parties (except to the extent such Inventory
is in transit between such locations or is located at a
dealer's store or is deemed eligible pursuant to clause
(h)) or is located at a third party warehouse or is
located at a closed Store (except pursuant to clause (f))
or is located at a closed DC; or
(d) it is identified as accrued Inventory without
a receiver in the applicable Loan Party's stockledger; or
(e) it is not subject to a valid and perfected
first priority Lien in favor of the Agent for the benefit
of the Agent and the Lenders; or
(f) it is Inventory located at a Store which is
being closed; provided however that such Inventory will be
deemed eligible for the first four (4) weeks after the
commencement of the Store Closure Sale for that Store; or
(g) it is consigned from a vendor or is at a
customer location but still accounted for in the
applicable Loan Party's inventory balance; or
(h) it is in-transit from a vendor and has not yet
been received into a DC or Store; provided that in-transit
inventory purchased under "private label"
7
letters of credit issued by SRAC or Letters of Credit
issued hereunder shall be deemed Eligible Inventory,
subject to a 25% reserve, if (i) the relevant Loan Party
has sole title (including Inventory delivered on a FOB
shipping point basis and whether or not payment has been
made to the letter of credit beneficiary and/or the issuer
of such letter of credit), (ii) the relevant Loan Party
has possession or control over title documents relating to
such Inventory, (iii) the Inventory is fully insured and
(iv) the Inventory would not be deemed ineligible pursuant
to any other provision of this definition; or
(i) it is considered perishable goods or is
identified in the stockledger of the applicable Loan Party
as any of the following departments or consists of
Inventory which is ordinarily classified by such Loan
Party consistent with its historical practices as the
following: bakery; dairy; deli; floral; gasoline; live
plants; meat; miscellaneous or other as classified on the
Loan Party's stockledger; produce; books; magazines;
restaurant operations; or seafood; or it is identified per
the applicable Loan Party's stockledger as candy, provided
that it will only be considered ineligible to the extent
that the Inventory Value thereof is greater than 2% of
Gross Inventory Value; or
(j) it is Inventory that is packed-away and stored
at a DC or a Store for future sale, including merchandise
of Sears and its Subsidiaries that has been carried over
for more than 9 months as currently reported as XOM status
per the RIM merchandising system; or
(k) from and after the delivery by Holdings of the
first monthly Borrowing Base Certificate after a specified
holiday or event has occurred, any Inventory (other than
seasonal apparel) identified as seasonal per the Loan
Parties' stockledger for sale for such specific holiday or
event; or
(l) it is identified as wholesaler freight fees;
or
(m) from and after any date that is more than four
(4) weeks past a specified selling season, any Inventory
that is seasonal apparel and that the Loan Parties have
identified, in accordance in all material respects with
the Loan Parties' current or historical accounting
practices, as related to such specific selling season,
including merchandise of Sears and its Subsidiaries that
is currently reported by the SAMS database; or
(n) it is Inventory which is ordinarily classified
by such Loan Party consistent with its historical
practices as repair services, provided that 50% of the
value of such Inventory shall constitute Eligible
Inventory; or
(o) it is Inventory on layaway or is Inventory
which has been sold but not delivered or as to which any
Loan Party has accepted a deposit from a third party; or
(p) it is identified per the Loan Parties'
stockledger as Inventory that is in a leased department,
including digital imaging, photofinishing and 1 hour lab;
or
(q) it is otherwise deemed ineligible by the Agent
in its Permitted Discretion on at least five (5) Business
Days' notice to Holdings; or
8
(r) it is operating supplies, packaging or
\ shipping materials, cartons, labels or other such
materials not considered used for sale in the ordinary
course of business by the Agent in its Permitted
Discretion; or
(s) it is Inventory which exhibits, includes or is
identified by any trademark, tradename or other
Intellectual Property right which trademark, tradename or
other Intellectual Property right (i) is subject to a
restriction that could reasonably be expected to adversely
affect the Agent's ability to liquidate such Inventory or
(ii) the relevant Loan Party does not have the right to
use in connection with the sale of such Inventory, either
through direct ownership or through a written license or
sublicense.
"Environmental Action" means any action, suit, demand, demand
letter, claim, notice of non-compliance or violation, notice of liability
or potential liability, investigation, proceeding, consent order or
consent agreement relating in any way to any Environmental Law,
Environmental Permit or Hazardous Materials or arising from alleged injury
or threat of injury to health, safety or the environment, including (a) by
any governmental or regulatory authority for enforcement, cleanup,
removal, response, remedial or other actions or damages and (b) by any
governmental or regulatory authority or any third party for damages,
contribution, indemnification, cost recovery, compensation or injunctive
relief.
"Environmental Law" means any federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, judgment, decree
or judicial or agency interpretation, policy or guidance relating to
pollution or protection of the environment, health, safety or natural
resources, including those relating to the use, handling, transportation,
treatment, storage, disposal, release or discharge of Hazardous Materials.
"Environmental Liability" means any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of the Borrowers or any of
their Subsidiaries directly or indirectly resulting from or based upon (a)
violation of any Environmental Law, (b) the generation, use, handling,
transportation, storage, treatment or disposal of any Hazardous Materials,
(c) exposure to any Hazardous Materials, (d) the release or threatened
release of any Hazardous Materials into the environment or (e) any
contract, agreement or other consensual arrangement pursuant to which
liability is assumed or imposed with respect to any of the foregoing.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under any Environmental
Law.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title IV of
ERISA is a member of any Borrower's controlled group, or under common
control with such Borrower, within the meaning of Section 414 of the
Internal Revenue Code.
"ERISA Event" means (a) (i) the occurrence of a reportable event,
within the meaning of Section 4043 of ERISA, with respect to any Plan
unless the 30-day notice requirement with respect to such event has been
waived by the PBGC, or (ii) the requirements of subsection (1) of Section
4043(b) of ERISA (without regard to subsection (2) of such Section) are
met with respect to a contributing sponsor, as defined in Section
4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9),
(10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably
expected to occur with respect to such Plan within the following 30 days;
(b) the application for a minimum funding waiver with respect to a Plan;
(c) the provision by the administrator of any Plan of a notice of intent
to terminate such Plan pursuant to Section 4041(a)(2) of ERISA (including
any such notice with respect to a plan amendment referred to in Section
4041(e) of ERISA); (d) the cessation of operations at a facility of any
Borrower or any ERISA Affiliate in the circumstances described in Section
4062(e) of ERISA; (e) the withdrawal by any Borrower
9
or any ERISA Affiliate from a Multiple Employer Plan during a plan year
for which it was a substantial employer, as defined in Section 4001(a)(2)
of ERISA; (f) the conditions for the imposition of a lien under Section
302(f) of ERISA shall have been met with respect to any Plan; (g) the
adoption of an amendment to a Plan requiring the provision of security to
such Plan pursuant to Section 307 of ERISA; or (h) the institution by the
PBGC of proceedings to terminate a Plan pursuant to Section 4042 of ERISA,
or the occurrence of any event or condition described in Section 4042 of
ERISA that constitutes grounds for the termination of, or the appointment
of a trustee to administer, a Plan.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as
in effect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Eurodollar Lending Office" on the
signature pages hereof or in the Assignment and Acceptance pursuant to
which it became a Lender (or, if no such office is specified, its Domestic
Lending Office), or such other office of such Lender as such Lender may
from time to time specify to the Borrowers and the Agent.
"Eurodollar Rate" means, for any Interest Period for each Eurodollar
Rate Advance comprising part of the same Borrowing, the rate per annum
determined on the basis of the rate for deposits in Dollars for a period
equal to such Interest Period commencing on the first day of such Interest
Period appearing on Page 3750 of the Telerate screen as of 11:00 A.M.,
London time, two Business Days prior to the beginning of such Interest
Period. In the event that such rate does not appear on Page 3750 of the
Telerate screen (or otherwise on such screen), the "Eurodollar Rate" shall
be determined by reference to such other comparable publicly available
service for displaying eurodollar rates as may be selected by the Agent
or, in the absence of such availability, by reference to the rate at which
the Agent is offered Dollar deposits at or about 11:00 A.M., New York City
time, two Business Days prior to the beginning of such Interest Period in
the interbank eurodollar market where its eurodollar and foreign currency
and exchange operations are then being conducted for delivery on the first
day of such Interest Period for the number of days comprised therein.
"Eurodollar Rate Advance" means an Advance that bears interest as
provided in Section 2.08(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period for a
Eurodollar Rate Advance by any Lender means the reserve percentage
applicable to such Lender two Business Days before the first day of such
Interest Period under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) for determining
the maximum reserve requirement (including any emergency, supplemental or
other marginal reserve requirement) with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities (or with respect to
any other category of liabilities that includes deposits by reference to
which the interest rate on Eurodollar Rate Advances is determined) having
a term equal to such Interest Period.
"Events of Default" has the meaning specified in Section 7.01.
"Extensions of Credit" means as to any Lender at any time, an amount
equal to the sum of (a) the aggregate principal amount of all Revolving
Advances held by such Lender then outstanding, (b) such Lender's
Commitment Percentage of the aggregate principal amount of Swingline
Advances then outstanding and (c) such Lender's Commitment Percentage of
the L/C Obligations then outstanding.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the
next preceding 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 of the
10
quotations for such day on such transactions received by the Agent from
three Federal funds brokers of recognized standing reasonably selected by
it.
"GAAP" has the meaning specified in Section 1.03.
"Gift Card Liability Reserve" shall mean, at any fiscal month end,
as the case may be, a reserve equal to the total value of all gift cards
outstanding.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof, any agency, authority,
instrumentality, regulatory body, court, central bank or other entity
exercising executive, legislative, judicial, taxing, regulatory or
administrative functions of or pertaining to government, any securities
exchange and any self-regulatory organization (including the National
Association of Insurance Commissioners).
"Gross Domestic Inventory" means, on any day, the cost of all
Inventory of Holdings and its Subsidiaries (determined on a
first-in-first-out basis either under the retail or average cost method)
located in the United States, Puerto Rico or U.S. Virgin Islands on such
day (other than consignment Inventory (including Inventory subject to
"sale or return" arrangements) and import Inventory that is in transit
from a location outside of the United States) less reserves taken in
accordance with GAAP, determined on a consolidated basis in accordance
with GAAP; provided that, until the Collateral Release Date, Inventory
shall only be included in the calculation of Gross Domestic Inventory if
such Inventory is subject to a perfected first-priority Lien in favor of
the Agent pursuant to the terms of the Security Documents.
"Gross Inventory Value" shall mean, at any month end, the Inventory
Value of the domestic Inventory for Stores and DCs per the Loan Parties'
stockledger as calculated in Exhibit C hereto under the heading of
"Inventory Subject to Net Recovery Rate".
"Group Members" means, collectively, Holdings, the Borrowers and
their respective Subsidiaries.
"Guarantee and Collateral Agreement" means the Guarantee and
Collateral Agreement to be executed and delivered by Holdings, Sears,
Kmart, Kmart Management Corporation, the Borrowers and each Subsidiary
Guarantor, substantially in the form of Exhibit D.
"Hazardous Materials" means (a) petroleum and petroleum products,
byproducts or breakdown products, radioactive materials,
asbestos-containing materials, polychlorinated biphenyls and radon gas and
(b) any other chemicals, materials or substances designated, classified or
regulated as hazardous or toxic or as a pollutant or contaminant under any
Environmental Law.
"Information Memorandum" means the information memorandum dated
January 2005, as amended or supplemented from time to time, used by the
Agent in connection with the syndication of the Commitments.
"Insolvency" means with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245
of ERISA.
"Insolvent" means pertaining to a condition of Insolvency.
"Intellectual Property" means the collective reference to all
rights, priorities and privileges relating to intellectual property,
whether arising under United States, multinational or foreign laws or
otherwise, including copyrights, copyright licenses, patents, patent
licenses, trademarks, trademark licenses, technology, know-how and
processes, and all rights to sue at law or in equity for any infringement
or other impairment thereof, including the right to receive all proceeds
and damages therefrom.
11
"Interest Period" means, for each Eurodollar Rate Advance comprising
part of the same Borrowing of Revolving Advances, the period commencing on
the date of such Eurodollar Rate Advance or the date of the Conversion of
any Base Rate Advance into such Eurodollar Rate Advance and ending on the
last day of the period selected by the applicable Borrower pursuant to the
provisions below and, thereafter, each subsequent period commencing on the
last day of the immediately preceding Interest Period and ending on the
last day of the period selected by the applicable Borrower pursuant to the
provisions below. The duration of each such Interest Period shall be one,
two, three or six months, or, subject to clause (c) of this definition, 7
days or nine or twelve months, as the applicable Borrower may, upon notice
received by the Agent not later than 12:00 noon on the third Business Day
prior to the first day of such Interest Period, select; provided, however,
that:
(a) a Borrower may not select any Interest Period that ends
after the Termination Date;
(b) Interest Periods commencing on the same date for
Eurodollar Rate Advances comprising part of the same Borrowing shall
be of the same duration;
(c) in the case of any such Borrowing, a Borrower shall not
be entitled to select an Interest Period having duration of 7 days
or nine or twelve months unless, by 2:00 P.M. on the third Business
Day prior to the first day of such Interest Period, each Lender
notifies the Agent that such Lender will be providing funding for
such Borrowing with such Interest Period (the failure of any Lender
to so respond by such time being deemed for all purposes of this
Agreement as an objection by such Lender to the requested duration
of such Interest Period); provided that, if any or all of the
Lenders object to the requested duration of such Interest Period,
the duration of the Interest Period for such Borrowing shall be one,
two, three or six months, as specified by the applicable Borrower in
the applicable Notice of Borrowing as the desired alternative to an
Interest Period of 7 days or nine or twelve months;
(d) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next
succeeding Business Day, provided, however, that, if such extension
would cause the last day of such Interest Period of one month or
longer to occur in the next following calendar month, the last day
of such Interest Period shall occur on the next preceding Business
Day; and
(e) whenever the first day of any Interest Period of one
month or longer occurs on a day of an initial calendar month for
which there is no numerically corresponding day in the calendar
month that succeeds such initial calendar month by the number of
months equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"Inventory" as defined in the Uniform Commercial Code as from time
to time in effect in the State of New York.
"Inventory Reserves" means the following:
(a) a reserve for shrink, or discrepancies that arise
between Inventory quantities on hand per the Loan Parties' unit
inventory system, and physical counts of the Inventory which will be
equal to the greater of (i) the mathematical average of the
historical shrink results expressed as a percent of sales,
multiplied by sales for the relevant year-to-date period and
adjusted for the cost complement for the relevant year-to-date
period, but only to the extent such amount exceeds reserves already
netted out of the Gross Inventory Value per the stockledger; or (ii)
an amount
12
determined by the Agent in its Permitted Discretion on five (5)
Business Days' notice to Holdings; and
(b) a reserve for intracompany profit, equal to the most
recent three (3) fiscal months of capitalized cost of the foreign
buying offices owned and operated by any Loan Party, with the time
frame subject to change on five (5) Business Days' notice to
Holdings based on Inventory performance, or the Agent's Permitted
Discretion; and
(c) to the extent not already netted out of the Gross
Inventory Value per the stockledger or not treated as ineligible
pursuant to the definition of Eligible Inventory, a reserve for (i)
hard (permanent) markdowns, (ii) seasonal merchandise, (iii)
discontinued and clearance merchandise, (iv) change in product mix
of merchandise, (v) change in pricing strategy or markon
percentages, (vi) damaged merchandise, (vii) price changes, or
(viii) other adjustments as deemed appropriate; and
(d) a reserve for Inventory returned (other than as a result
of reclamations) to either the return goods center ("RGC"), the
vendor, given to charity, or otherwise considered non-saleable,
whether defective or non-defective. This reserve is to be calculated
as the monthly average for the most recent rolling 12 fiscal month
period of return (other than as a result of reclamations) activity
to the vendors, the RGC, given to charity, or otherwise considered
non-saleable, whether defective or non-defective, both from the
Stores and DCs, and is subject to change on five (5) Business Days'
notice to Holdings at the Agent's Permitted Discretion; and such
reserve to be recalculated by the 10th day after each month-end and
to be reflected on each Borrowing Base Certificate delivered by
Holdings after such date until the amount of such reserve is
recalculated pursuant hereto.
"Inventory Value" shall mean, with respect to any Inventory of the
Loan Parties, the value of such Inventory valued at cost on a basis
consistent with the Loan Parties' current and historical accounting
practice per the stockledger (without giving effect to LIFO reserves and
general ledger reserves for discontinued inventory, markdowns,
intercompany profit, rebates and discounts, any cut off adjustments,
revaluation adjustments, purchase price adjustments or adjustments with
respect to the capitalization of buying, occupancy, distribution and other
overhead costs reflected on the balance sheet of the Loan Parties in
respect of Inventory). The value of the Inventory as set forth above will,
without duplication for any Inventory Reserves, be calculated net of the
reserve established by the Loan Parties on a basis consistent with the
Loan Parties' current and historical practice in respect of lost,
misplaced or stolen Inventory at such time.
"Investment Grade Ratings" shall consist of ratings of at least (i)
Baa3 from Moody's, (ii) BBB- from S&P or (iii) BBB- from Fitch Ratings;
provided that solely in the case that the rating at issue is the minimum
rating provided under this definition, such rating shall, in addition,
have a stable or better outlook.
"Issuing Lender" means, collectively, JPMorgan Chase Bank, Bank of
America, N.A. or Fleet National Bank, Citibank, N.A. (provided that any
reimbursement or payment on account of a Letter of Credit issued by
Citibank, N.A. hereunder shall be made to Citicorp USA, Inc.), and any
other Lender which at the request of any Borrower and with the consent of
the Agent, not to be unreasonably withheld, agrees to become an Issuing
Lender, it being understood that with the consent of the requesting
Borrower (not to be unreasonably withheld) the Issuing Lender may arrange
for one or more Letters of Credit to be issued by affiliates of such
Issuing Lender, in which case the term "Issuing Lender" shall include any
such affiliate with respect to Letters of Credit issued by such affiliate.
Each reference herein to "the Issuing Lender" shall be deemed to be a
reference to the relevant Issuing Lender with respect to the relevant
Letter of Credit.
"Kmart" means Kmart Holding Corporation, a Delaware corporation.
13
"L/C Commitment" means $1,500,000,000.
"L/C Obligations" means at any time, an amount equal to the sum of
(a) the aggregate then undrawn and unexpired amount of the then
outstanding Letters of Credit and (b) the aggregate amount of drawings
under Letters of Credit that have not then been reimbursed or discharged
pursuant to Section 3.05 (after giving effect to the proviso thereof).
"Lenders" means the Initial Lenders and each Person that shall
become a party hereto pursuant to Section 9.07.
"Letters of Credit" means the collective reference to Commercial
L/Cs and Standby L/Cs; individually, a "Letter of Credit".
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including the lien or retained security title of a conditional vendor and
any easement, right of way or other encumbrance on title to real property,
but excluding consignments or bailments of goods of third parties and the
interests of lessors under operating leases.
"Loan Documents" means this Agreement, the Security Documents, the
Notes, any Application and any amendment, waiver, supplement or other
modification to any of the foregoing.
"Loan Parties" means each Group Member that is a party to a Loan
Document.
"Martha Stewart Reserve" shall mean, at any fiscal month end, a
reserve equal to the then current accrued and unpaid royalty in excess of
$25,000,000 earned for Martha Stewart merchandise sold as reflected on the
most recent Borrowing Base Certificate.
"Material Adverse Change" means a material adverse change in the
business, condition (financial or otherwise) or operations of Holdings and
its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, condition (financial or otherwise) or operations of Holdings and
its Subsidiaries taken as a whole or (b) the validity or enforceability of
any of the Loan Documents or the rights and remedies of the Agent and the
Lenders thereunder.
"Merger" has the meaning specified in Section 4.01(a).
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which Holdings or any ERISA Affiliate is
making or accruing an obligation to make contributions, or has within any
of the preceding five plan years made or accrued an obligation to make
contributions.
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of
Holdings or any ERISA Affiliate and at least one Person other than
Holdings and the ERISA Affiliates or (b) was so maintained and in respect
of which Holdings or any ERISA Affiliate could have liability under
Section 4064 or 4069 of ERISA in the event such plan has been or were to
be terminated.
"Net Eligible Inventory" means, at any time, an amount equal to the
Inventory Value of Eligible Inventory less Inventory Reserves.
"Net Orderly Liquidation Value" means the product of (i) Net
Recovery Rate and (ii) the Gross Inventory Value.
14
"Net Recovery Rate" means the quotient of (x) the estimated net
income, payments and proceeds (net of expenses) which could reasonably be
realized in connection with an orderly liquidation of each Loan Party's
Inventory given a reasonable period of time for soliciting offers for the
sale of such Inventory on an "as is, where is" basis based on an appraisal
provided by an independent third party appraiser retained or approved by
the Agent in consultation with the Borrowers and (y) the Gross Inventory
Value as of the effective date of the estimate provided pursuant to clause
(x) of this definition
"Note" means a promissory note of any Borrower payable to the order
of any Lender evidencing the Commitment of such Lender.
"Notice of Borrowing" has the meaning specified in Section 2.02(a).
"Other Borrowing Base Reserves" means, to the extent that relevant
merchandise is not treated as ineligible pursuant to the definition of
Eligible Inventory, the following:
(a) a reserve in an amount to be determined by the Agent in
its Permitted Discretion for rent expense at leased Store and DC
locations;
(b) a reserve for royalties payable to non-Loan Parties in
respect of licensed merchandise (other than the Martha Stewart
Reserve);
(c) the Martha Stewart Reserve;
(d) the Gift Card Liability Reserve;
(e) PACA Liability Reserves; and
(f) PASA Liability Reserves.
"Other Taxes" has the meaning specified in Section 2.15.
"PACA" means the Perishable Agricultural Commodities Act of 1930, as
amended.
"PACA Liability Reserve" means an amount calculated on a monthly
basis by the Agent to provide for vendor liabilities pursuant to PACA.
"PASA" means the Packers and Stockyards Act of 1921, as amended.
"PASA Liability Reserve" means the liability for vendor liabilities
pursuant to PASA.
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor).
"Permitted Discretion" means a determination made in good faith and
in the exercise of commercially reasonable business judgment.
"Permitted Holder" means ESL Investments, Inc. and any of its
Affiliates other than a Group Member.
"Permitted Liens" means: (a) Liens for taxes, assessments and
governmental charges or levies to the extent such taxes, assessments or
governmental charges are being contested in good faith and by proper
proceedings and as to which appropriate reserves are being maintained; (b)
Liens imposed by law, such as materialmen's, mechanics', carriers',
workmen's and repairmen's Liens and other similar Liens arising in the
ordinary course of business securing obligations that are not overdue for
a period of more than 30 days or that are being contested in good faith by
appropriate proceedings and as to which appropriate reserves
15
are being maintained; (c) landlords' Liens arising in the ordinary course
of business securing (i) rents not yet due and payable, (ii) rent for
Stores in an amount not to exceed the monthly base rent due for the
immediately preceding calendar month and (iii) rents for Stores in excess
of the amount set forth in the preceding clause (ii) so long as such
amounts are being contested in good faith by appropriate proceedings and
as to which appropriate reserves are being maintained; (d) any attachment
or judgment lien not constituting an Event of Default under Section
7.01(f); (e) Liens presently existing or hereafter created in favor of the
Agent, on behalf of the Lenders; (f) Liens arising by the terms of
commercial letters of credit entered into in the ordinary course of
business to secure reimbursement obligations thereunder, provided that
such Liens only encumber the title documents and underlying goods relating
to such letters of credit; (g) consignments and claims under PACA and
PASA; and (h) Liens in favor of issuers of credit cards arising in the
ordinary course of business securing the obligation to pay customary fees
and expenses in connection with credit card arrangements.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture, limited liability company or other entity, or a government
or any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
"Pricing Grid" means the pricing grid set forth on Schedule IA.
"Pro Forma Financial Information" means the pro forma financial data
of Holdings contained in the Registration Statement.
"Refunded Swingline Advances" has the meaning specified in Section
2.04(b).
"Register" has the meaning specified in Section 9.07(d).
"Registration Statement" means the Registration Statement of
Holdings on Form S-4 filed with the SEC (Registration No. 333-120954) and
declared effective on February 18, 2005.
"Reimbursement Obligation" means the obligation of the Borrowers to
reimburse the Issuing Lender pursuant to Section 3.05 for amounts drawn
under Letters of Credit.
"Related Intellectual Property" means such rights with respect to
the Intellectual Property of the Borrowers and their Subsidiaries (other
than Sears Canada) as are reasonably necessary to permit the Agent to
enforce its remedies under the Loan Documents with respect to the
Collateral.
"Reorganization" means with respect to any Multiemployer Plan, the
condition that such Plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Reportable Event" means any of the events set forth in Section
4043(c) of ERISA, other than (i) those events as to which the thirty day
notice period is waived under subsections .27, .28, .29, .30, .31, .32,
.34 or .35 of PBGC Reg. Section 4043 and (ii) any event that must be
reported solely as a result of the bankruptcy filing by Kmart Corp. and
certain of its Subsidiaries on January 22, 2002 in the Bankruptcy Court
for the Northern District of Illinois, Eastern Division.
"Required Lenders" means, at any time, the holders of more than 50%
of the Commitments then in effect or, if the Commitments have been
terminated, the holders of more than 50% of the Total Extensions of Credit
then outstanding.
"Requirements of Law" means as to any Person, the Certificate of
Incorporation and By Laws or other organizational or governing documents
of such Person, and any law, treaty, rule or regulation or
16
determination of an arbitrator or a court or other Governmental Authority,
in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
"Restricted Payment" means any dividend or other distribution
(whether in cash, securities or other property) with respect to any equity
interests in Holdings or any Subsidiary of Holdings, or any payment
(whether in cash, securities or other property), including any sinking
fund or similar deposit, on account of the purchase, redemption,
retirement, acquisition, cancellation or termination of any such equity
interests in Holdings or any Subsidiary of Holdings or any option, warrant
or other right to acquire any such equity interests in Holdings or any
Subsidiary of Holdings.
"Revolving Advance" has the meaning specified in Section 2.01. A
Revolving Advance may be a Base Rate Advance or a Eurodollar Rate Advance
(each of which shall be a "Type" of Revolving Advance).
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
"Sears" means Sears, Roebuck and Co., a New York corporation.
"Sears Canada" means the collective reference to Sears Canada Inc.,
a Canadian corporation, and its Subsidiaries.
"SEC" means the Securities and Exchange Commission.
"Security Documents" means the collective reference to the Guarantee
and Collateral Agreement, and all other security documents hereafter
delivered to the Agent granting a Lien on any property of any Person to
secure the obligations and liabilities of any Loan Party under any Loan
Document.
"Single Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any
Borrower or any ERISA Affiliate and no Person other than such Borrower and
the ERISA Affiliates or (b) was so maintained and in respect of which any
Borrower or any ERISA Affiliate could have liability under Section 4069 of
ERISA in the event such plan has been or were to be terminated.
"Solvent" means, when used with respect to any Person, that, as of
any date of determination, (a) the amount of the "present fair saleable
value" of the assets of such Person will, as of such date, exceed the
amount of all "liabilities of such Person, contingent or otherwise", as of
such date, as such quoted terms are determined in accordance with
applicable federal and state laws governing determinations of the
insolvency of debtors, (b) the present fair saleable value of the assets
of such Person will, as of such date, be greater than the amount that will
be required to pay the liability of such Person on its debts as such debts
become absolute and matured, (c) such Person will not have, as of such
date, an unreasonably small amount of capital with which to conduct its
business, and (d) such Person will be able to pay its debts as they
mature. For purposes of this definition, (i) "debt" means liability on a
"claim", and (ii) "claim" means any (x) right to payment, whether or not
such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured or (y) right to an equitable remedy for breach of
performance if such breach gives rise to a right to payment, whether or
not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured or unmatured, disputed, undisputed, secured or
unsecured.
"Standby L/C" means an irrevocable letter of credit under which the
Issuing Lender agrees to make payments in Dollars for the account of any
Borrower, on behalf of any Group Member in respect of obligations of such
Group Member incurred pursuant to contracts made or performances
undertaken or to be undertaken or like matters relating to contracts to
which such Group Member is or proposes to become a party, including,
without limiting the foregoing, for insurance purposes or in respect of
advance payments
17
or as bid or performance bonds or for any other purpose for which a
standby letter of credit might be issued.
"Store" means any store owned or leased and operated by any Loan
Party.
"Store Closure Sale" means a store closure sale that is properly
advertised and professionally managed over a defined period that is
anticipated by the Borrowers not to exceed 12 weeks (on average) from the
date of the same commencement.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, limited liability company, trust or estate of which (or in which)
more than 50% of (a) the issued and outstanding capital stock having
ordinary voting power to elect a majority of the Board of Directors of
such corporation (irrespective of whether at the time capital stock of any
other class or classes of such corporation shall or might have voting
power upon the occurrence of any contingency), (b) the interest in the
capital or profits of such limited liability company, partnership or joint
venture or (c) the beneficial interest in such trust or estate is at the
time directly or indirectly owned or controlled by such Person, by such
Person and one or more of its other Subsidiaries or by one or more of such
Person's other Subsidiaries.
"Subsidiary Guarantor" means each Domestic Subsidiary of Holdings
which owns Inventory or Credit Card Accounts Receivable.
"Supermajority Lenders" means, at any time, the holders of 66-2/3%
or more of Commitments then in effect or, if the Commitments have been
terminated, the holders of 66-2/3% or more of the Total Extensions of
Credit then outstanding.
"Swingline Advances" has the meaning specified in Section 2.03.
"Swingline Commitment" means the obligation of the Swingline Lender
to make Swingline Advances pursuant to Section 2.03 in an aggregate
principal amount at any one time outstanding not to exceed $100,000,000.
"Swingline Lender" means JPMorgan Chase Bank, in its capacity as the
lender of Swingline Advances.
"Swingline Participation Amount" has the meaning specified in
Section 2.04(c).
"Taxes" has the meaning specified in Section 2.15.
"Termination Date" means the earlier of (a) the date that is five
years after the Effective Date and (b) the date of termination in whole of
the Commitments pursuant to Section 2.06 or 7.01.
"Total Availability" means the amount at any time by which (a) the
lesser of (i) aggregate Commitments or (ii) the Borrowing Base, if
applicable, exceeds (b) the Total Extensions of Credit at such time.
"Total Extensions of Credit" means at any time, the aggregate amount
of the Extensions of Credit of the Lenders outstanding at such time.
"Total Net Extensions of Credit" means, on any day, (a) Total
Extensions of Credit on such day less (b) Available Cash on such day.
"Type" means either a Base Rate Advance or a Eurodollar Rate
Advance.
18
"UCC" means the Uniform Commercial Code as from time to time in
effect in the State of New York.
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the happening
of such a contingency.
SECTION 1.02. Computation of Time Periods. In this Agreement (a) in
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding" (b) "including" means "including without
limitation"; and (c) unless otherwise specified, any reference to a time of day
means such time in New York City.
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein or in the other Loan Documents shall be construed in
accordance with U.S. generally accepted accounting principles ("GAAP") which for
purposes of Section 6.03 shall be consistently applied. If at any time any
change in U.S. generally accepted accounting principles would affect the
computation of any financial ratio or requirement set forth herein, and either
the Borrowers or the Required Lenders shall so request, the Agent, the Lenders
and the Borrowers shall negotiate in good faith to amend such ratio or
requirement to preserve the original intent thereof in light of such change in
U.S. generally accepted accounting principles (subject to the approval of the
Required Lenders which shall not be unreasonably withheld), provided that, until
so amended, (i) such ratio or requirement shall continue to be computed in
accordance with U.S. generally accepted accounting principles prior to such
change in principles and (ii) the Borrowers shall provide to the Agent and the
Lenders financial statements and other documents required under this Agreement
or as reasonably requested hereunder setting forth a reconciliation between
calculations of such ratio or requirement made before and after giving effect to
such change in U.S. generally accepted accounting principles. For the avoidance
of doubt, no retroactive change in U.S. generally accepted accounting principles
shall apply to the construction of accounting terms under this Agreement in the
absence of an amendment hereto in accordance with the terms of this Section
1.03.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Revolving Advances. Each Lender severally agrees,
on the terms and conditions hereinafter set forth, to make revolving advances
(the "Revolving Advances") to the Borrowers from time to time on any Business
Day during the period from the Effective Date until the Termination Date in an
aggregate amount at any one time outstanding which, when added to such Lender's
Commitment Percentage of the sum of (i) the aggregate principal amount of the
Swingline Advances then outstanding and (ii) the L/C Obligations then
outstanding, equals the amount of such Lender's Commitment; provided, that the
aggregate principal amount of any Borrowing made at any time shall not exceed
the Total Availability at such time. Each Borrowing under this Section 2.01
shall be in an aggregate amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof (provided, that the Swingline Lender may request,
on behalf of the applicable Borrower, Borrowings that are Base Rate Advances in
other amounts pursuant to Section 2.04(b)) and shall consist of Revolving
Advances of the same Type made on the same day by the Lenders ratably according
to their respective Commitments. Within the limits set forth in this Section
2.01, the Borrowers may borrow under this Section 2.01, prepay pursuant to
Section 2.11 and reborrow under this Section 2.01.
SECTION 2.02. Making the Revolving Advances. (a) Each Borrowing
under Section 2.01 shall be made on notice, given not later than (x) 12:00 noon
on the third Business Day prior to the date of the proposed Borrowing in the
case of a Borrowing consisting of Eurodollar Rate Advances or (y) 12:00 noon on
the date of the proposed Borrowing in the case of a Borrowing consisting of Base
Rate Advances, by the applicable Borrower to the Agent, which shall give to each
Lender prompt notice thereof by telecopier. Each such notice of a Borrowing (a
"Notice of Borrowing") shall be by telephone, confirmed immediately in writing,
by email attachment or by telecopier, in substantially the form of Exhibit A
hereto, specifying therein the requested (i) date of such Borrowing, (ii) Type
of Revolving Advances comprising such Borrowing, (iii) aggregate amount of such
Borrowing, and (iv) in
19
the case of a Borrowing consisting of Eurodollar Rate Advances, initial Interest
Period for each such Revolving Advance. Each Lender shall, before 1:00 P.M. on
the date of such Borrowing make available for the account of its Applicable
Lending Office to the Agent at the Agent's Account, in same day funds, such
Lender's ratable (in accordance with its Commitment Percentage) portion of such
Borrowing. After the Agent's receipt of such funds and upon fulfillment of the
applicable conditions set forth in Article IV, the Agent will make such funds
available to the Borrower requesting such Borrowing at the Agent's address
referred to in Section 9.02.
(b) Anything in subsection (a) above to the contrary
notwithstanding, (i) a Borrower may not select Eurodollar Rate Advances for any
Borrowing if the aggregate amount of such Borrowing is less than $5,000,000 or
if the obligation of the Lenders to make Eurodollar Rate Advances shall then be
suspended pursuant to Section 2.09 or 2.13 and (ii) the Eurodollar Rate Advances
may not be outstanding as part of more than ten separate Borrowings.
(c) Each Notice of Borrowing shall be irrevocable and binding on the
applicable Borrower. In the case of any Borrowing that the related Notice of
Borrowing specifies is to be comprised of Eurodollar Rate Advances, the
applicable Borrower shall indemnify each Lender against any loss, cost or
expense incurred by such Lender as a result of any failure to fulfill on or
before the date specified in such Notice of Borrowing for such Borrowing the
applicable conditions set forth in Article IV, including any loss (including
loss of anticipated profits), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to fund the Revolving Advance to be made by such Lender as part of such
Borrowing when such Revolving Advance, as a result of such failure, is not made
on such date.
(d) Unless the Agent shall have received notice from a Lender prior
to the time of any Borrowing that such Lender will not make available to the
Agent such Lender's ratable portion of such Borrowing, the Agent may assume that
such Lender has made such portion available to the Agent on the date of such
Borrowing in accordance with subsection (a) of this Section 2.02 and the Agent
may, in reliance upon such assumption, make available to the applicable Borrower
on such date a corresponding amount. If and to the extent that such Lender shall
not have so made such ratable portion available to the Agent, such Lender and
the applicable Borrower severally agree to repay to the Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to such Borrower until the date such
amount is repaid to the Agent, at (i) in the case of such Borrower, the interest
rate applicable at the time to Revolving Advances comprising such Borrowing and
(ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall
repay to the Agent such corresponding amount, such amount so repaid shall be
made available to the applicable Borrower and shall constitute such Lender's
Revolving Advance as part of such Borrowing for purposes of this Agreement.
(e) The failure of any Lender to make the Revolving Advance to be
made by it as part of any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Revolving Advance on the date of such
Borrowing, but no Lender shall be responsible for the failure of any other
Lender to make the Revolving Advance to be made by such other Lender on the date
of any Borrowing.
SECTION 2.03. The Swingline Advances. (a) Subject to the terms and
conditions hereof, the Swingline Lender agrees to make a portion of the credit
otherwise available to the Borrowers under the Commitments from time to time
during the period from the Effective Date until the Termination Date by making
swing line advances ("Swingline Advances") to the Borrowers; provided that (i)
the aggregate principal amount of Swingline Advances outstanding at any time
shall not exceed the Swingline Commitment then in effect (notwithstanding that
the Swingline Advances outstanding at any time, when aggregated with the
Swingline Lender's other outstanding Revolving Advances, may exceed the
Swingline Commitment then in effect) and (ii) the amount of any Swingline
Advance made at any time shall not exceed the Total Availability at such time.
During the period from the Effective Date until the Termination Date, the
Borrowers may use the Swingline Commitment by borrowing, repaying and
reborrowing, all in accordance with the terms and conditions hereof. Swingline
Advances shall be available as Base Rate Advances only.
(b) Each Borrower shall repay to the Swingline Lender the then
unpaid principal amount of each Swingline Advance made to it on the earlier of
the Termination Date and the first date after such Swingline Advance is made
that is the 15th or last day of a calendar month and is at least two Business
Days after such Swingline
20
Advance is made; provided that on each date that a Revolving Advance is borrowed
by a Borrower, such Borrower shall repay all Swingline Advances then
outstanding, if any, and may use all or a portion of such Revolving Advance to
fund such repayment.
SECTION 2.04. Making the Swingline Advances. (a) Each Borrowing
under Section 2.03 shall be made on notice, given not later than 1:00 P.M. on
the date of the proposed Borrowing, by the applicable Borrower to the Agent and
Swingline Lender. Each such Notice of a Borrowing shall be by telephone,
confirmed immediately in writing, by email attachment or by telecopier, in
substantially the form of Exhibit A hereto, specifying therein the requested (i)
date of such Borrowing and (ii) aggregate amount of such Borrowing. Each
Borrowing under the Swingline Commitment shall be in an amount equal to $500,000
or a whole multiple of $100,000 in excess thereof. Not later than 3:00 P.M. on
the date of the proposed Borrowing, the Swingline Lender shall make available to
the Agent at the Agent's Account an amount in immediately available funds equal
to the amount of the Swingline Advance to be made by the Swingline Lender. Upon
fulfillment of the applicable conditions set forth in Article IV, the Agent
shall make the proceeds of such Swingline Advance available to the Borrower
requesting such Borrowing at the Agent's address referred to in Section 9.02.
(b) The Swingline Lender, at any time and from time to time in its
sole and absolute discretion may, on behalf of the Borrowers (which hereby
irrevocably direct the Swingline Lender to act on their behalf), by notice given
by the Swingline Lender no later than 12:00 noon, request each Lender to make,
and each Lender hereby agrees to make, a Revolving Advance, in an amount equal
to such Lender's Commitment Percentage of the aggregate amount of the Swingline
Advances (the "Refunded Swingline Advances") outstanding on the date of such
notice, to repay the Swingline Lender. Each Lender shall make the amount of such
Revolving Advance available to the Agent at the Agent's Account in same day
funds, not later than 1:00 P.M. on the date of such notice. The proceeds of such
Revolving Advances shall be immediately made available by the Agent to the
Swingline Lender for application by the Swingline Lender to the repayment of the
Refunded Swingline Advances. Each Borrower irrevocably authorizes the Swingline
Lender to charge such Borrower's accounts with the Agent (up to the amount
available in each such account) in order to immediately pay the amount of such
Refunded Swingline Advances to the extent amounts received from the Lenders are
not sufficient to repay in full such Refunded Swingline Advances.
(c) If prior to the time a Revolving Advance would have otherwise
been made pursuant to Section 2.04(b), one of the events described in Section
7.01 shall have occurred and be continuing or if for any other reason, as
determined by the Swingline Lender in its sole discretion, Revolving Advances
may not be made as contemplated by Section 2.04(b), each Lender shall, on the
date such Revolving Advance was to have been made pursuant to the notice
referred to in Section 2.04(b), purchase for cash an undivided participating
interest in the then outstanding Swingline Advances by paying to the Swingline
Lender an amount (the "Swingline Participation Amount") equal to (i) such
Lender's Commitment Percentage multiplied by (ii) the sum of the aggregate
principal amount of Swingline Advances then outstanding that were to have been
repaid with such Revolving Advances.
(d) Whenever, at any time after the Swingline Lender has received
from any Lender such Lender's Swingline Participation Amount, the Swingline
Lender receives any payment on account of the Swingline Advances, the Swingline
Lender will distribute to such Lender its Swingline Participation Amount
(appropriately adjusted, in the case of interest payments, to reflect the period
of time during which such Lender's participating interest was outstanding and
funded and, in the case of principal and interest payments, to reflect such
Lender's pro rata portion of such payment if such payment is not sufficient to
pay the principal of and interest on all Swingline Advances then due); provided,
however, that in the event that such payment received by the Swingline Lender is
required to be returned, such Lender will return to the Swingline Lender any
portion thereof previously distributed to it by the Swingline Lender.
(e) Each Lender's obligation to make the Advances referred to in
Section 2.04(b) and to purchase participating interests pursuant to Section
2.04(c) shall be absolute and unconditional and shall not be affected by any
circumstance, including (i) any set-off, counterclaim, recoupment, defense or
other right that such Lender or any Borrower may have against the Swingline
Lender, any Borrower or any other Person for any reason whatsoever, (ii) the
occurrence or continuance of a Default or an Event of Default or the failure to
satisfy any of the other conditions specified in Article IV, (iii) any adverse
change in the condition (financial or otherwise) of any Borrower, (iv) any
breach of this Agreement or any other Loan Document by any Borrower, any other
Loan Party or any other Lender or (v) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing.
21
SECTION 2.05. Fees. (a) Commitment Fee. The Borrowers jointly and
severally agree to pay to the Agent for the account of each Lender a commitment
fee commencing on the Effective Date on the average daily amount of the
Available Commitment of such Lender during the period for which payment is made
at a rate per annum equal to the Commitment Fee Rate in effect from time to
time, payable in arrears quarterly on the 5th day subsequent to the last day of
each April, July, October and January, commencing April 30, 2005, and on the
Termination Date.
(b) Agent's Fees. The Borrowers shall pay to the Agent for its own
account such fees as may from time to time be agreed between the Borrowers and
the Agent.
SECTION 2.06. Optional Termination or Reduction of the Commitments.
The Borrowers shall have the right, without penalty or premium and upon at least
three Business Days' notice to the Agent, to permanently terminate in whole or
permanently reduce ratably in part the unused portions of the respective
Commitments of the Lenders, provided that no such termination or reduction of
the Commitments shall be permitted if, after giving effect thereof and to any
prepayments of the Advances made on the effective date thereof, the Total
Extensions of Credit would exceed the aggregate amount of the Commitments as so
reduced. Any partial reduction of the Commitments shall be in the aggregate
amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof.
SECTION 2.07. Repayment of Advances. Each Borrower shall repay to
the Agent for the ratable account of the Lenders on the Termination Date the
aggregate principal amount of the Advances made to it then outstanding.
SECTION 2.08. Interest on Advances. (a) Scheduled Interest. Each
Borrower shall pay interest on the unpaid principal amount of each Advance made
to it and owing to each Lender from the date of such Advance until such
principal amount shall be paid in full, at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is a
Base Rate Advance, a rate per annum equal at all times to the sum of (x)
the Base Rate in effect from time to time plus (y) the Applicable Margin
in effect from time to time, payable (I) in the case of any Base Rate
Advance other than a Swingline Advance, in arrears quarterly on the 5th
day subsequent to the last day of each April, July, October and January
during such periods and on the date such Base Rate Advance shall be
Converted or paid in full and (II) in the case of any Swingline Advance,
on the date that such Swingline Advance is required to be repaid.
(ii) Eurodollar Rate Advances. During such periods as such Advance
is a Eurodollar Rate Advance, a rate per annum equal at all times during
each Interest Period for such Advance to the sum of (x) the Eurodollar
Rate for such Interest Period for such Advance plus (y) the Applicable
Margin in effect from time to time, payable in arrears on the last day of
such Interest Period and, if such Interest Period has a duration of more
than three months, on each day that occurs during such Interest Period
every three months from the first day of such Interest Period and on the
date such Eurodollar Rate Advance shall be Converted or paid in full.
(b) Default Interest. Upon the occurrence and during the
continuance of an Event of Default under Section 7.01(a) in respect of principal
amounts, the Borrowers shall pay interest on the unpaid principal amount of each
Advance and Reimbursement Obligation owing to each Lender, payable in arrears on
the dates referred to in clause (a)(i) or (a)(ii) above, at a rate per annum
equal to 2% per annum above the rate per annum required to be paid on such
Advance or Reimbursement Obligation pursuant to clause (a)(i) or (a)(ii) above.
Further, the Borrowers shall pay interest, to the fullest extent permitted by
law, on the amount of any interest, fee or other amount (other than principal)
payable hereunder that is not paid when due, from the date such amount shall be
due until such amount shall be paid in full, payable in arrears on the date such
amount shall be paid in full and on demand, at a rate per annum equal to 2% per
annum above the rate per annum required to be paid on Base Rate Advances
pursuant to clause (a)(i) above.
(c) Regulation D Compensation. Each Lender that is subject to
reserve requirements of the Board of Governors of the Federal Reserve System (or
any successor) may require the Borrowers to pay,
22
contemporaneously with each payment of interest on the Eurodollar Rate Advances,
additional interest on the related Eurodollar Rate Advances of such Lender at
the rate per annum equal to the excess of (i) (A) the applicable Eurodollar Rate
divided by (B) one minus the Eurodollar Rate Reserve Percentage over (ii) the
applicable Eurodollar Rate. Any Lender wishing to require payment of such
additional interest (x) shall so notify the Agent and the Borrowers, in which
case such additional interest on the Eurodollar Rate Advances of such Lender
shall be payable to such Lender at the place indicated in such notice with
respect to each Interest Period commencing at least five Business Days after the
giving of such notice and (y) shall notify the Agent and the Borrowers at least
five Business Days prior to each date on which interest is payable on the amount
then due it under this Section. Each such notification shall be accompanied by
such information as the Borrowers may reasonably request.
SECTION 2.09. Interest Rate Determination. (a) The Agent shall give
prompt notice to the Borrowers and the Lenders of the applicable interest rate
determined by the Agent for purposes of Section 2.08(a)(i) or (ii).
(b) If, with respect to any Eurodollar Rate Advances, the Required
Lenders notify the Agent at least one Business Day before the date of any
proposed Eurodollar Rate Advance that the Eurodollar Rate for any Interest
Period for such Advances will not adequately reflect the cost to such Required
Lenders of making, funding or maintaining their respective Eurodollar Rate
Advances for such Interest Period, the Agent shall forthwith so notify the
Borrowers and the Lenders, whereupon (i) each Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Base Rate Advance, and (ii) the obligation of the Lenders to
make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended
until the Agent shall notify the Borrowers and the Lenders that the
circumstances causing such suspension no longer exist.
(c) If any Borrower shall fail to select the duration of any
Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Agent will forthwith so notify such Borrower and the Lenders and such Advances
will automatically, on the last day of the then existing Interest Period
therefor, Convert into Base Rate Advances.
(d) On the date on which the aggregate unpaid principal amount of
Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment
or prepayment or otherwise, to less than $5,000,000, such Advances shall
automatically Convert into Base Rate Advances.
(e) Upon the occurrence and during the continuance of any Event of
Default under Section 7.01(a), (i) each Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make,
or to Convert Revolving Advances into, Eurodollar Rate Advances shall be
suspended.
SECTION 2.10. Optional Conversion of Revolving Advances. The
Borrowers may on any Business Day, upon notice given to the Agent not later than
12:00 noon on the third Business Day prior to the date of the proposed
Conversion and subject to the provisions of Sections 2.09 and 2.13, Convert all
Revolving Advances of one Type comprising the same Borrowing into Revolving
Advances of the other Type; provided, however, that any Conversion of Eurodollar
Rate Advances into Base Rate Advances shall be made only on the last day of an
Interest Period for such Eurodollar Rate Advances, any Conversion of Base Rate
Advances into Eurodollar Rate Advances shall be in an amount not less than the
minimum amount specified in Section 2.02(b) and no Conversion of any Revolving
Advances shall result in more separate Borrowings than permitted under Section
2.02(b). Each such notice of a Conversion shall, within the restrictions
specified above, specify (i) the date of such Conversion, (ii) the Revolving
Advances to be Converted, and (iii) if such Conversion is into Eurodollar Rate
Advances, the duration of the initial Interest Period for each such Revolving
Advance. Each notice of Conversion shall be irrevocable and binding on the
applicable Borrower.
SECTION 2.11. Optional and Mandatory Prepayments of Advances. (a)
Any Borrower may, without penalty or premium and upon notice given not later
than 12:00 noon on the date of such prepayment to the Agent stating the proposed
date and aggregate principal amount of the prepayment, and if such notice is
given such Borrower shall, prepay the outstanding principal amount of the
Advances comprising part of the same Borrowing in whole or ratably in part,
together with accrued interest to the date of such prepayment on the principal
amount prepaid; provided, however, that (x) each partial prepayment shall be in
an aggregate principal amount of
23
$5,000,000 or an integral multiple of $1,000,000 in excess thereof (or, in the
case of partial prepayments of Swingline Advances, $100,000 or a whole multiple
thereof) and (y) in the event of any such prepayment of a Eurodollar Rate
Advance, the applicable Borrower shall be obligated to reimburse the Lenders in
respect thereof pursuant to Section 9.04(c).
(b) On the date of delivery of any Borrowing Base Certificate, if
the amount described in clause (b) of the definition of Total Availability
exceeds the amount described in clause (a) of such definition, the Borrowers
shall prepay Advances in an amount equal to such excess, provided that if the
aggregate principal amount of Advances then outstanding is less than the amount
of such excess (because L/C Obligations constitute a portion thereof), the
Borrowers shall, to the extent of the balance of such excess, replace
outstanding Letters of Credit and/or deposit an amount in cash in a cash
collateral account established with the Agent for the benefit of the Lenders on
terms and conditions satisfactory to the Agent. Any prepayment of Loans pursuant
to this Section 2.11(b) shall be applied, first, to any Base Rate Advances then
outstanding and the balance of such prepayment, if any, to the Eurodollar Rate
Advances then outstanding.
SECTION 2.12. Increased Costs. (a) If, due to either (i) after the
date of this Agreement the introduction of or any change in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law) made or issued after the date of this
Agreement, there shall be any increase in the cost to any Lender of agreeing to
make or making, funding or maintaining Eurodollar Rate Advances or issuing or
participating in Letters of Credit (excluding for purposes of this Section 2.12
any such increased costs resulting from (i) Taxes or Other Taxes (as to which
Section 2.15 shall govern) and (ii) changes in the basis of taxation of overall
net income or overall gross income by the United States or by the foreign
jurisdiction or state under the laws of which such Lender is organized or has
its Applicable Lending Office or any political subdivision thereof), then the
Borrowers shall from time to time, upon demand by such Lender (with a copy of
such demand to the Agent), pay to the Agent for the account of such Lender
additional amounts sufficient to compensate such Lender for such increased cost;
provided that a Lender claiming additional amounts under this Section 2.12(a)
agrees to use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions) to designate a different Applicable Lending Office
and/or take other commercially reasonable action if the making of such a
designation or the taking of such actions would avoid the need for, or reduce
the amount of, such increased cost that may thereafter accrue and would not, in
the reasonable judgment of such Lender, be otherwise disadvantageous to such
Lender. A certificate as to the amount of such increased cost, submitted to the
Borrowers and the Agent by such Lender, shall be entitled to a presumption of
correctness. If any Borrower so notifies the Agent after any Lender notifies the
Borrowers of any increased cost pursuant to the foregoing provisions of this
Section 2.12(a), such Borrower may, upon payment of such increased cost to such
Lender, replace such Lender with a Person that is an Eligible Assignee in
accordance with the terms of Section 9.07 (and the Lender being so replaced
shall take all action as may be necessary to assign its rights and obligations
under this Agreement to such Eligible Assignee).
(b) If any Lender determines that compliance with any change after
the date of this Agreement in law or regulation or any guideline or request
after the date of this Agreement from any central bank or other governmental
authority (whether or not having the force of law) affects or would affect the
amount of capital required or expected to be maintained by such Lender or any
entity controlling such Lender and that the amount of such capital is increased
by or based upon the existence of such Lender's commitment to lend hereunder and
other commitments of this type, then, upon demand by such Lender (with a copy of
such demand to the Agent), the Borrowers shall pay to the Agent for the account
of such Lender, from time to time as specified by such Lender, additional
amounts sufficient to compensate such Lender or such entity in the light of such
circumstances, to the extent that such Lender reasonably determines such
increase in capital to be allocable to the existence of such Lender's commitment
to lend hereunder. A certificate as to such amounts submitted to the Borrowers
and the Agent by such Lender shall be entitled to a presumption of correctness.
(c) The Borrowers shall not be required to compensate a Lender
pursuant to this Section for any increased costs or capital or reserve
requirement or pursuant to Section 2.15 for any taxes incurred more than six
months prior to the date that such Lender notifies the Borrowers of the change
or issuance giving rise to such increased costs or capital or reserve
requirement or tax and of such Lender's intention to claim compensation
therefor; provided that if the change or issuance giving rise to such increased
costs or capital or reserve requirement
24
or tax is retroactive, then the six-month period referred to above shall be
extended to include the period of retroactive effect thereof.
SECTION 2.13. Illegality. Notwithstanding any other provision of
this Agreement, if any Lender shall notify the Agent that the introduction of or
any change in or in the interpretation of any law or regulation makes it
unlawful, or any central bank or other governmental authority asserts that it is
unlawful, for any Lender or its Eurodollar Lending Office to perform its
obligations hereunder to make Eurodollar Rate Advances or to fund or maintain
Eurodollar Rate Advances hereunder, (a) each Eurodollar Rate Advance will
automatically, upon such demand, Convert into a Base Rate Advance or an Advance
that bears interest at the rate set forth in Section 2.08(a)(i), as the case may
be, and (b) the obligation of the Lenders to make Eurodollar Rate Advances or to
Convert Advances into Eurodollar Rate Advances shall be suspended until the
Agent shall notify the Borrowers and the Lenders that the circumstances causing
such suspension no longer exist.
SECTION 2.14. Payments and Computations. (a) The Borrowers shall
make each payment hereunder and under the other Loan Documents, without any
right of counterclaim or set-off, not later than 1:00 P.M. on the day when due
in U.S. dollars to the Agent at the Agent's Account in same day funds. The Agent
will promptly thereafter cause to be distributed like funds relating to the
payment of principal or interest or commitment fees ratably (other than amounts
payable pursuant to Section 2.12, 2.15 or 10.04(c)) to the Lenders for the
account of their respective Applicable Lending Offices, and like funds relating
to the payment of any other amount payable to any Lender to such Lender for the
account of its Applicable Lending Office, in each case to be applied in
accordance with the terms of this Agreement. Upon its acceptance of an
Assignment and Acceptance and recording of the information contained therein in
the Register pursuant to Section 9.07(c), from and after the effective date
specified in such Assignment and Acceptance, the Agent shall make all payments
hereunder and under the other Loan Documents in respect of the interest assigned
thereby to the Lender assignee thereunder, and the parties to such Assignment
and Acceptance shall make all appropriate adjustments in such payments for
periods prior to such effective date directly between themselves.
(b) Each Borrower hereby authorizes each Lender, if and to the
extent payment owed by it to such Lender is not made when due hereunder or under
the other Loan Documents, to charge from time to time against any or all of such
Borrower's accounts with such Lender any amount so due.
(c) All computations of interest based on the Base Rate shall be
made by the Agent on the basis of a year of 365 or 366 days, as the case may be,
and all computations of interest based on the Eurodollar Rate or the Federal
Funds Rate and of commitment fees shall be made by the Agent on the basis of a
year of 360 days, in each case for the actual number of days (including the
first day but excluding the last day) occurring in the period for which such
interest or commitment fees are payable. Each determination by the Agent of an
interest rate hereunder shall be conclusive and binding for all purposes, absent
manifest error.
(d) Whenever any payment hereunder or under the other Loan Documents
shall be stated to be due on a day other than a Business Day, such payment shall
be made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest or commitment
fee, as the case may be; provided, however, that, if such extension would cause
payment of interest on or principal of Eurodollar Rate Advances to be made in
the next following calendar month, such payment shall be made on the next
preceding Business Day.
(e) Unless the Agent shall have received notice from any Borrower
prior to the date on which any payment is due by it to the Lenders hereunder
that such Borrower will not make such payment in full, the Agent may assume that
the applicable Borrower has made such payment in full to the Agent on such date
and the Agent may, in reliance upon such assumption, cause to be distributed to
each Lender on such due date an amount equal to the amount then due such Lender.
If and to the extent such Borrower shall not have so made such payment in full
to the Agent, each Lender shall repay to the Agent forthwith on demand such
amount distributed to such Lender together with interest thereon, for each day
from the date such amount is distributed to such Lender until the date such
Lender repays such amount to the Agent, at the Federal Funds Rate.
SECTION 2.15. Taxes. (a) Any and all payments by the Borrowers to or
for the account of any Lender or the Agent hereunder or under the other Loan
Documents or any other documents to be delivered
25
hereunder shall be made, in accordance with Section 2.14 or the applicable
provisions of such other documents, free and clear of and without deduction for
any and all present or future withholding taxes, including levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Lender and the Agent, taxes imposed on its
overall net income, and franchise taxes imposed on it in lieu of net income
taxes, and branch profits taxes, by the jurisdiction under the laws of which
such Lender or the Agent (as the case may be) is organized or any political
subdivision thereof and, in the case of each Lender, taxes imposed on its
overall net income, and franchise taxes imposed on it in lieu of net income
taxes, and branch profits taxes, by the jurisdiction of such Lender's Applicable
Lending Office or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities in
respect of payments hereunder or under the other Loan Documents being
hereinafter referred to as "Taxes"). If the Borrowers shall be required by law
to deduct any Taxes from or in respect of any sum payable hereunder or under any
other Loan Document or any other documents to be delivered hereunder to any
Lender or the Agent, (i) the sum payable shall be increased as may be necessary
so that after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.15) such Lender or the Agent (as
the case may be) receives an amount equal to the sum it would have received had
no such deductions been made, (ii) the Borrowers shall make such deductions and
(iii) the Borrowers shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) In addition, the Borrowers shall pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or under the other Loan
Documents or from the execution, delivery or registration of, performing under,
or otherwise with respect to, this Agreement or the other Loan Documents or any
other documents to be delivered hereunder, but excluding all other United States
federal taxes other than withholding taxes (hereinafter referred to as "Other
Taxes").
(c) The Borrowers shall indemnify each Lender and the Agent for and
hold it harmless against the full amount of Taxes or Other Taxes (including
taxes of any kind imposed or asserted by any jurisdiction on amounts payable
under this Section 2.15) imposed on or paid by such Lender or the Agent (as the
case may be) and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto. This indemnification shall be made
within 30 days from the date such Lender or the Agent (as the case may be) makes
written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Borrowers shall furnish to the Agent, at its address referred to in Section
9.02, the original or a certified copy of a receipt evidencing such payment to
the extent such a receipt is issued therefor, or other written proof of payment
thereof that is reasonably satisfactory to the Agent. In the case of any payment
hereunder or under the other Loan Documents or any other documents to be
delivered hereunder by or on behalf of the Borrowers through an account or
branch outside the United States or by or on behalf of the Borrowers by a payor
that is not a United States person, if the Borrowers determine that no Taxes are
payable in respect thereof, the Borrowers shall furnish, or shall cause such
payor to furnish, to the Agent, at such address, an opinion of counsel
acceptable to the Agent stating that such payment is exempt from Taxes. For
purposes of this subsection (d) and subsection (e), the terms "United States"
and "United States person" shall have the meanings specified in Section 7701 of
the Internal Revenue Code.
(e) Each Lender organized under the laws of a jurisdiction outside
the United States, and each other Lender that is not a domestic corporation
within the meaning of Section 7701(a)(30) of the Internal Revenue Code (i)
represents that all payments to be made to it under this Agreement or any other
Loan Document are exempt from United States withholding tax (including backup
withholding tax) under an applicable statute or tax treaty and (ii) on or prior
to the date of its execution and delivery of this Agreement in the case of each
Initial Lender and on the date of the Assignment and Acceptance pursuant to
which it becomes a Lender in the case of each other Lender, and from time to
time thereafter as reasonably requested in writing by the Borrowers (but only so
long as such Lender remains lawfully able to do so), shall provide each of the
Agent and the Borrowers with two original Internal Revenue Service forms W-8BEN
or W-8ECI, as appropriate, or any successor or other form prescribed by the
Internal Revenue Service, certifying that such Lender is exempt from or entitled
to a reduced rate of United States withholding tax on payments pursuant to this
Agreement or the other Loan Documents. If the form provided by a Lender at the
time such Lender first becomes a party to this Agreement indicates a United
States interest withholding tax rate in excess of zero, withholding tax at such
rate shall be considered excluded from Taxes unless
26
and until such Lender provides the appropriate forms certifying that a lesser
rate applies, whereupon withholding tax at such lesser rate only shall be
considered excluded from Taxes for periods governed by such form; provided,
however, that, if at the date of the Assignment and Acceptance pursuant to which
a Lender assignee becomes a party to this Agreement, the Lender assignor was
entitled to payments under subsection (a) in respect of United States
withholding tax with respect to interest paid at such date, then, to such
extent, the term Taxes shall include (in addition to withholding taxes that may
be imposed in the future or other amounts otherwise includable in Taxes) United
States withholding tax, if any, applicable with respect to the Lender assignee
on such date. If any form or document referred to in this subsection (e)
requires the disclosure of information, other than information necessary to
compute the tax payable and information required on the date hereof by Internal
Revenue Service form W-8BEN or W-8ECI, that the Lender reasonably considers to
be confidential, the Lender shall give notice thereof to the Borrowers and shall
not be obligated to include in such form or document such confidential
information.
(f) For any period with respect to which a Lender has failed to
provide the Borrowers with the appropriate form, certificate or other document
described in Section 2.15(e) (other than if such failure is due to a change in
law, or in the interpretation or application thereof, occurring subsequent to
the date on which a form, certificate or other document originally was required
to be provided, or if such form, certificate or other document otherwise is not
required under subsection (e) above), such Lender shall not be entitled to
indemnification under Section 2.15(a) or (c) with respect to Taxes imposed by
the United States by reason of such failure; provided, however, that should a
Lender become subject to Taxes because of its failure to deliver a form,
certificate or other document required hereunder, the Borrowers shall take such
steps as the Lender shall reasonably request to assist the Lender to recover
such Taxes.
(g) Any Lender claiming any additional amounts payable pursuant to
this Section 2.15 agrees to use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
Eurodollar Lending Office if the making of such a change would avoid the need
for, or reduce the amount of, any such additional amounts that may thereafter
accrue and would not, in the reasonable judgment of such Lender, be otherwise
disadvantageous to such Lender.
(h) If any Lender determines, in its sole discretion, that it has
actually and finally realized, by reason of a refund, deduction or credit of any
Taxes paid or reimbursed by the Borrowers pursuant to subsection (a) or (c)
above in respect of payments under the Credit Agreement or the other Loan
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 Lender whole, such Lender shall pay to the
Borrowers, with reasonable promptness following the date on which it actually
realizes such benefit, an amount equal to the amount of such excess, net of all
out-of-pocket expenses reasonably allocable in securing such refund, deduction
or credit, provided that the Borrowers, upon the request of such Lender, agree
to repay the amount paid over to the Borrowers to such Lender in the event such
Lender is required to repay such refund to such jurisdiction. Nothing in this
subsection (h) shall be construed to require any Lender to make available to the
Borrowers or any other Person its tax returns or any confidential tax
information.
(i) If Agent or any Lender, as the case may be, shall become aware
that it is entitled to claim a refund from a Governmental Authority in respect
of Taxes or Other Taxes paid by Borrower pursuant to this Section 2.15,
including Taxes or Other Taxes as to which it has been indemnified by Borrower,
or with respect to which Borrower or a Group Member that is a signatory hereto
has paid additional amounts pursuant to this Section 2.15, it shall notify
Borrower of the availability of such refund claim and, if Agent or such Lender,
as the case may be, determines in good faith that making a claim for refund will
not have any adverse consequence to its taxes or business operations, shall,
after receipt of a request by Borrower, make a claim to such Governmental
Authority for such refund at Borrower's expense.
SECTION 2.16. Sharing of Payments, Etc. If any Lender shall obtain
any payment (whether voluntary, involuntary, through the exercise of any right
of set-off, or otherwise) on account of the Advances or other amounts owing to
it (other than pursuant to Section 2.12, 2.15 or 10.04(c)) in excess of its
ratable share, such Lender shall forthwith purchase from the other Lenders such
participations in the Advances or other amounts owing to them as shall be
necessary to cause such purchasing Lender to share the excess payment ratably
with each of them; provided, however, that if all or any portion of such excess
payment is thereafter recovered from such purchasing Lender, such purchase from
each Lender shall be rescinded and such Lender shall repay to the
27
purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (i) the amount of such Lender's required repayment to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
The Borrowers agree that any Lender so purchasing a participation from another
Lender pursuant to this Section 2.16 may, to the fullest extent permitted by
law, exercise all its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrowers in the amount of such participation.
SECTION 2.17. Use of Proceeds of Advances. The proceeds of the
Advances shall be available (and each Borrower agrees that it shall use such
proceeds) for general corporate purposes of Holdings and its Subsidiaries,
including liquidity support for commercial paper, acquisitions, capital
expenditures, cash dividends and stock and bond repurchases.
ARTICLE III
AMOUNT AND TERMS OF THE LETTERS OF CREDIT
SECTION 3.01. L/C Commitment. (a) Subject to the terms and
conditions hereof, each Issuing Lender, in reliance on the agreements of the
other Lenders set forth in Section 3.04(a), agrees to issue Commercial L/Cs and
Standby L/Cs for the account of any Borrower on any Business Day during the
period from the Effective Date until the Termination Date in such form as may be
approved from time to time by such Issuing Lender; provided that no Issuing
Lender shall have any obligation to issue any Letter of Credit if (i) after
giving effect to such issuance, the L/C Obligations would exceed the L/C
Commitment or (ii) the face amount of the requested Letter of Credit exceeds the
Total Availability at such time; provided further that each Issuing Lender may,
but shall not be required to, issue Letters of Credit such that the aggregate
L/C Obligations attributable to all such Letters of Credit issued by such
Issuing Lender exceed $500,000,000. Each Letter of Credit shall (i) be
denominated in Dollars and (ii) expire no later than the earlier of (x) the
first anniversary of its date of issuance and (y) the date that is five Business
Days prior to the Termination Date, provided that any Letter of Credit with a
one-year term may provide for the renewal thereof for additional one-year
periods (which shall in no event extend beyond the date referred to in clause
(y) above). Each Application and each Letter of Credit shall be subject to the
International Standby Practices (ISP 98) of the International Chamber of
Commerce (in the case of Standby L/Cs) or the Uniform Customs and Practice for
Documentary Credits as most recently published by the International Chamber of
Commerce (in the case of Commercial L/Cs) and, to the extent not inconsistent
therewith, the laws of the State of New York.
(b) The Issuing Lender shall not at any time be obligated to issue
any Letter of Credit if such issuance would conflict with, or cause the Issuing
Lender or any Lender to exceed any limits imposed by, any applicable Requirement
of Law.
SECTION 3.02. Procedure for Issuance of Letter of Credit. Any
Borrower may from time to time request that the Issuing Lender issue a
Commercial L/C or Standby L/C for its account by delivering to the Issuing
Lender at its address for notices specified herein an Application therefor,
completed to the satisfaction of the Issuing Lender, and such other
certificates, documents and other papers and information as the Issuing Lender
may reasonably request. Upon receipt of any Application, the Issuing Lender will
process such Application and the certificates, documents and other papers and
information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event shall the Issuing Lender be required to issue any
Letter of Credit earlier than three Business Days after its receipt of the
Application therefor and all such other certificates, documents and other papers
and information relating thereto) by issuing the original of such Letter of
Credit to the beneficiary thereof or as otherwise may be agreed to by the
Issuing Lender and the applicable Borrower. The Issuing Lender shall furnish a
copy of such Letter of Credit to the applicable Borrower promptly following the
issuance thereof. The Issuing Lender shall promptly notify the Agent of the
issuance, extension or amendment of Letters of Credit and any drawings or other
payments under Letters of Credit.
SECTION 3.03. Fees and Other Charges. (a) The Borrowers will pay a
fee on all outstanding Letters of Credit at a per annum rate equal to (i) in the
case of Standby L/Cs, the Applicable Margin then in effect
28
with respect to Eurodollar Rate Advances and (ii) in the case of Commercial
L/Cs, 50% of the Applicable Margin then in effect with respect to Eurodollar
Rate Advances, in each case shared ratably among the Lenders and payable
quarterly in arrears the 5th day subsequent to the last day of each April, July,
October and January after the issuance date. In addition, the Borrowers shall
pay to the Issuing Lender for its own account a fronting fee in an amount to be
agreed upon by the applicable Issuing Lender and the Borrowers (but in no event
to exceed 0.125% per annum) on the undrawn and unexpired amount of each Letter
of Credit, payable quarterly in arrears on the 5th day subsequent to the last
day of each April, July, October and January after the issuance date.
(b) In addition to the foregoing fees, the Borrowers shall pay or
reimburse the Issuing Lender for such normal and customary costs and expenses as
are incurred or charged by the Issuing Lender in issuing, negotiating, effecting
payment under, amending or otherwise administering any Letter of Credit, unless
otherwise agreed.
SECTION 3.04. Letter of Credit Participations. (a) The Issuing
Lender irrevocably agrees to grant and hereby grants to each Lender, and, to
induce the Issuing Lender to issue Letters of Credit, each Lender irrevocably
agrees to accept and purchase and hereby accepts and purchases from the Issuing
Lender, on the terms and conditions set forth below, for such Lender's own
account and risk an undivided interest equal to such Lender's Commitment
Percentage in the Issuing Lender's obligations and rights under and in respect
of each Letter of Credit and the amount of each draft paid by the Issuing Lender
thereunder. Each Lender agrees with the Issuing Lender that, if a draft is paid
under any Letter of Credit for which the Issuing Lender is not reimbursed in
full by the Borrowers in accordance with the terms of this Agreement, such
Lender shall pay to the Issuing Lender upon demand at the Issuing Lender's
address for notices specified herein an amount equal to such Lender's Commitment
Percentage of the amount of such draft, or any part thereof, that is not so
reimbursed. Each Lender's obligation to pay such amount shall be absolute and
unconditional and shall not be affected by any circumstance, including (i) any
set-off, counterclaim, recoupment, defense or other right that such Lender may
have against the Issuing Lender, the Borrowers or any other Person for any
reason whatsoever, (ii) the occurrence or continuance of a Default or an Event
of Default or the failure to satisfy any of the other conditions specified in
Article IV, (iii) any adverse change in the condition (financial or otherwise)
of the Borrowers, (iv) any breach of this Agreement or any other Loan Document
by the Borrowers, any other Loan Party or any other Lender or (v) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing.
(b) If any amount required to be paid by any Lender to the Issuing
Lender pursuant to Section 3.04(a) in respect of any unreimbursed portion of any
payment made by the Issuing Lender under any Letter of Credit is paid to the
Issuing Lender within three Business Days after the date such payment is due,
such Lender shall pay to the Issuing Lender on demand an amount equal to the
product of (i) such amount, times (ii) the daily average Federal Funds Rate
during the period from and including the date such payment is required to the
date on which such payment is immediately available to the Issuing Lender, times
(iii) a fraction the numerator of which is the number of days that elapse during
such period and the denominator of which is 360. If any such amount required to
be paid by any Lender pursuant to Section 3.04(a) is not made available to the
Issuing Lender by such Lender within three Business Days after the date such
payment is due, the Issuing Lender shall be entitled to recover from such
Lender, on demand, such amount with interest thereon calculated from such due
date at the rate per annum applicable to Base Rate Advances. A certificate of
the Issuing Lender submitted to any Lender with respect to any amounts owing
under this Section shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Lender has made
payment under any Letter of Credit and has received from any Lender its pro rata
share of such payment in accordance with Section 3.04(a), the Issuing Lender
receives any payment related to such Letter of Credit (whether directly from the
applicable Borrower or otherwise, including proceeds of collateral applied
thereto by the Issuing Lender), or any payment of interest on account thereof,
the Issuing Lender will distribute to such Lender its pro rata share thereof;
provided, however, that in the event that any such payment received by the
Issuing Lender shall be required to be returned by the Issuing Lender, such
Lender shall return to the Issuing Lender the portion thereof previously
distributed by the Issuing Lender to it.
SECTION 3.05. Reimbursement Obligation of the Borrowers. If any
draft is paid under any Letter of Credit, the applicable Borrower shall
reimburse the Issuing Lender for the amount of (a) the draft so paid and (b) any
taxes, fees, charges or other costs or expenses incurred by the Issuing Lender
in connection with such
29
payment, not later than 12:00 Noon on (i) the Business Day that the applicable
Borrower receives notice of such draft, if such notice is received on such day
prior to 10:00 A.M. or (ii) if clause (i) above does not apply, the Business Day
immediately following the day that the applicable Borrower receives such notice;
provided, that if the total reimbursement amount set forth in subsections (a)
and (b) above is not less than $5,000,000 or $500,000, as the case may be, the
applicable Borrower may, subject to the conditions to borrowing set forth
herein, request that such reimbursement be financed with a Base Rate Advance or
Swingline Advance in an equivalent amount and, to the extent so financed, the
Borrower's obligation to make such payment shall be discharged and replaced by
the resulting Advance. Each such payment shall be made to the Issuing Lender at
its address for notices referred to herein in Dollars and in immediately
available funds. Interest shall be payable on any such amounts from the date on
which the relevant draft is paid until payment in full at the rate set forth in
(x) until the Business Day next succeeding the date of the relevant notice,
Section 2.08(a)(i) and (y) thereafter, Section 2.08(b).
SECTION 3.06. Obligations Absolute. Each Borrower's obligations
under this Article III shall be absolute and unconditional under any and all
circumstances and irrespective of any set-off, counterclaim or defense to
payment that any Borrower may have or have had against the Issuing Lender, any
beneficiary of a Letter of Credit or any other Person. Each Borrower also agrees
with the Issuing Lender that the Issuing Lender shall not be responsible for,
and such Borrower's Reimbursement Obligations under Section 3.05 shall not be
affected by, among other things, the validity or genuineness of documents or of
any endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or any dispute between or among such Borrower and
any beneficiary of any Letter of Credit or any other party to which such Letter
of Credit may be transferred or any claims whatsoever of such Borrower against
any beneficiary of such Letter of Credit or any such transferee. The Issuing
Lender shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit, except for errors or
omissions found by a final and nonappealable decision of a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct of
the Issuing Lender. Each Borrower agrees that any action taken or omitted by the
Issuing Lender under or in connection with any Letter of Credit or the related
drafts or documents, if done in the absence of gross negligence or willful
misconduct, shall be binding on such Borrower and shall not result in any
liability of the Issuing Lender to such Borrower.
SECTION 3.07. Letter of Credit Payments. If any draft shall be
presented for payment under any Letter of Credit, the Issuing Lender shall
promptly notify the applicable Borrower of the date and amount thereof. The
responsibility of the Issuing Lender to the Borrowers in connection with any
draft presented for payment under any Letter of Credit shall, in addition to any
payment obligation expressly provided for in such Letter of Credit, be limited
to determining that the documents (including each draft) delivered under such
Letter of Credit in connection with such presentment are substantially in
conformity with such Letter of Credit.
SECTION 3.08. Applications. To the extent that any provision of any
Application related to any Letter of Credit is inconsistent with the provisions
of this Article III, the provisions of this Article III shall apply.
SECTION 3.09. Use of Letters of Credit. The Letters of Credit shall
be available (and each Borrower agrees that it shall use such Letters of Credit)
for general corporate purposes of Holdings and its Subsidiaries.
ARTICLE IV
CONDITIONS TO EFFECTIVENESS
SECTION 4.01. Conditions Precedent to Effectiveness. This Agreement
shall become effective on and as of the first date on which each of the
following conditions precedent have been satisfied:
(a) The merger of Sears and Kmart (the "Merger") shall have been
consummated substantially on the terms disclosed by Holdings in its
Registration Statement or on such other terms reasonably satisfactory to
the Lead Arrangers and the Agent.
(b) There shall have occurred no Material Adverse Change since the
date the Registration Statement was declared effective by the SEC.
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(c) All governmental and third party consents and approvals
necessary in connection with the Merger and the transactions contemplated
hereby shall have been obtained (without the imposition of any conditions
that are not acceptable to the Lenders) and shall remain in effect, and no
law or regulation shall be applicable in the reasonable judgment of the
Lenders that restrains, prevents or imposes materially adverse conditions
upon the transactions contemplated hereby.
(d) The Lenders shall have received projections for Holdings
through January 2006.
(e) All actions and documents required to establish the Agent's
security interest in the Collateral with the priority required herein
(including lien searches and Uniform Commercial Code financing statements)
shall have been completed in a manner satisfactory to the Agent.
(f) The Borrowers shall have notified each Lender and the Agent in
writing as to the proposed Effective Date.
(g) The Borrowers shall have paid all accrued fees and expenses of
the Agent, the Lead Arrangers and the Lenders payable hereunder for which
invoices have been presented (including the accrued fees and expenses of
one counsel to the Agent and Lead Arrangers).
(h) On the Effective Date, the following statements shall be true
and the Agent shall have received for the account of each Lender a
certificate signed by duly authorized officers of the Borrowers, dated the
Effective Date, stating that:
(i) The representations and warranties contained in each
Loan Document are correct on and as of the Effective Date, and
(ii) No event has occurred and is continuing that constitutes
a Default or an Event of Default.
(i) The Agent shall have received on or before the Effective Date
the following, each dated such day, in form and substance satisfactory to
the Agent:
(i) The Guarantee and Collateral Agreement, duly executed by
Holdings, Sears, Kmart, the Borrowers and each Subsidiary Guarantor.
(ii) A Borrowing Base Certificate, duly completed and
executed by Holdings and dated (i) in the event the Effective Date
occurs on or before the 15th of the month, as of the end of the
second fiscal month immediately preceding the month in which the
Effective Date occurs (it being understood that a Borrowing Base
Certificate with respect to the immediately preceding fiscal month
shall be delivered in accordance with Section 6.01(j)(iii)) or (ii)
in the event the Effective Date occurs after the 15th of the month,
as of the end of the fiscal month immediately preceding the month in
which the Effective Date occurs.
(iii) Certified copies of the resolutions of the Board of
Directors of each Loan Party approving each Loan Document to which
it is a party, and of all documents evidencing other necessary
corporate action and governmental approvals, if any, with respect to
this Agreement and each Loan Document to which it is a party.
(iv) A certificate of the Secretary or an Assistant Secretary
of each Loan Party, each certifying the names and true signatures of
the officers of such Loan Party authorized to sign this Agreement
and each Loan Document to which it is a party, and the other
documents to be delivered hereunder or thereunder.
(v) A favorable opinion of in-house counsel to Sears, of
in-house counsel to Kmart and of Wachtell, Lipton, Rosen & Katz,
special counsel for the Borrowers, substantially in the
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form of Exhibit E-1, E-2 and E-3 hereto, respectively, and as to
such other matters as any Lender through the Agent may reasonably
request.
(vi) A favorable opinion of local counsel to the Borrowers
with respect to the perfection of the Agent's security interest in
the Collateral of each Loan Party organized under the laws of the
state of Delaware or Michigan in form and substance reasonably
satisfactory to the Agent.
(j) Holdings and its Subsidiaries shall have terminated the
commitments and paid in full all of the Debt, interest, fees and other
amounts outstanding under (i) the Three-Year Credit Agreement, dated as of
May 17, 2004, among SRAC, the lenders parties thereto, Citibank, N.A., as
administrative agent, and the other agents named therein and (ii) the
Credit Agreement, dated as of May 6, 2003, as amended and restated as of
October 7, 2004, among Kmart Corporation, the lenders parties thereto,
General Electric Capital Corporation, as administrative agent, and the
other agents named therein, and reasonably satisfactory arrangements shall
have been made for the termination of all Liens granted thereunder. By
execution of this Agreement, each of the Lenders that is a lender under
such credit agreements hereby waives any requirement set forth in such
credit agreements of prior notice of the termination of the commitments
thereunder.
(k) The Registration Statement shall have been declared effective.
SECTION 4.02. Conditions Precedent to Each Extension of Credit. The
obligation of each Lender to make an Extension of Credit on any date shall be
subject to the conditions precedent that the Effective Date shall have occurred
and on the date of such Extension of Credit the following statements shall be
true (and each of the giving of the applicable Notice of Borrowing or
Application for a Letter of Credit, as the case may be, and the acceptance by
the applicable Borrower of the proceeds of such Borrowing or the issuance of
such Letter of Credit, as applicable, shall constitute a representation and
warranty by the applicable Borrower that on the date of such Borrowing or Letter
of Credit issuance such statements are true):
(i) the representations and warranties made by each Loan Party in
or pursuant to the Loan Documents (except the representations set forth in
subsections (g), (h), (i) and, from and after the Collateral Release Date,
(r) of Section 5.01 of this Agreement) are correct on and as of such date,
before and after giving effect to such Extension of Credit and to the
application of the proceeds therefrom, as though made on and as of such
date;
(ii) no event has occurred and is continuing, or would result from
such Extension of Credit or from the application of the proceeds
therefrom, that constitutes a Default or an Event of Default; and
(iii) after giving effect to such Extension of Credit, the Total
Extensions of Credit will not exceed the lesser of the aggregate
Commitments or Borrowing Base then in effect.
SECTION 4.03. Effective Date. The Agent shall promptly notify the
Lenders and the Borrowers of the occurrence of the Effective Date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties of the Borrowers.
Holdings and the Borrowers hereby jointly and severally represent and warrant as
follows:
(a) Each Group Member (a) is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization
and (b) is in compliance with all Requirements of Law except to the extent
that the failure to comply therewith could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.
32
(b) The execution, delivery and performance by each Loan Party of
the Loan Documents to which it is a party, and the consummation of the
transactions contemplated hereby or thereby, are within such Loan Party's
powers, have been duly authorized by all necessary organizational action,
and do not contravene (i) the charter or by-laws or other organizational
or governing documents of such Loan Party or (ii) law or any contractual
restriction binding on or affecting the Loan Party, except, for purposes
of this clause (ii), to the extent such contravention would not reasonably
be expected to have a Material Adverse Effect.
(c) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body or any
other third party is required for the due execution, delivery and
performance by any Loan Party of any Loan Document to which it is a party.
(d) Each Loan Document has been duly executed and delivered by
each Loan Party party thereto. This Agreement constitutes, and each other
Loan Document will constitute upon execution, the legal, valid and binding
obligation of each Loan Party party thereto enforceable against such Loan
Party in accordance with its respective terms subject to the effect of any
applicable bankruptcy, insolvency, reorganization or moratorium or similar
laws affecting the rights of creditors generally and subject to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(e) The consolidated balance sheet of Sears and its Subsidiaries
as at January 3, 2004, as amended, and the related consolidated statements
of income and cash flows of Sears and its Subsidiaries for the fiscal year
then ended, accompanied by an opinion of Deloitte & Touche LLP,
independent public accountants, copies of which have been furnished to the
Agent, fairly present the consolidated financial condition of Sears and
its Subsidiaries as at such date and the consolidated results of the
operations of Sears and its Subsidiaries for the period ended on such
date, all in accordance with GAAP consistently applied. The unaudited
consolidated balance sheet of Sears and its Subsidiaries as at October 2,
2004, as amended, and the related consolidated statements of income and
cash flows of Sears and its Subsidiaries for the nine-month period then
ended, copies of which have been furnished to the Agent, fairly present
the consolidated financial condition of Sears and its Subsidiaries as at
such date and the consolidated results of the operations of Sears and its
Subsidiaries for the nine-month period ended on such date, all in
accordance with GAAP consistently applied (subject to year-end audit
adjustments). Except as reflected in the most recent financial statements
referred to in this paragraph, or in the notes thereto, neither Sears nor
any of its Subsidiaries has, as of the date of such financial statements,
any liabilities (whether absolute, accrued, contingent and whether or not
due) which would reasonably be expected to be material to the Borrowers
and their Subsidiaries, taken as a whole.
(f) The consolidated balance sheet of Kmart and its Subsidiaries
as at January 28, 2004, as amended, and the related consolidated
statements of income and cash flows of Kmart and its Subsidiaries for the
fiscal year then ended, accompanied by an opinion of BDO Seidman, LLP,
independent public accountants, copies of which have been furnished to the
Agent, fairly present the consolidated financial condition of Kmart and
its Subsidiaries as at such date and the consolidated results of the
operations of Kmart and its Subsidiaries for the period ended on such
date, all in accordance with GAAP consistently applied. The unaudited
consolidated balance sheet of Kmart and its Subsidiaries as at October 27,
2004, as amended, and the related consolidated statements of income and
cash flows of Kmart and its Subsidiaries for the nine-month period then
ended, copies of which have been furnished to the Agent, fairly present
the consolidated financial condition of Kmart and its Subsidiaries as at
such date and the consolidated results of the operations of Kmart and its
Subsidiaries for the nine-month period ended on such date, all in
accordance with GAAP consistently applied (subject to year-end audit
adjustments). Except as reflected in the most recent financial statements
referred to in this paragraph, or in the notes thereto, neither Kmart nor
any of its Subsidiaries has, as of the date of such financial statements,
any liabilities (whether absolute, accrued, contingent and whether or not
due) which would reasonably be expected to be material to the Borrowers
and their Subsidiaries, taken as a whole.
(g) Since the date the Registration Statement was declared
effective by the SEC, there has been no Material Adverse Change.
33
(h) The Pro Forma Financial Information has been prepared in
accordance with GAAP, with appropriate pro forma adjustments made in
accordance with Regulation S-X promulgated by the SEC.
(i) There is no action, suit, investigation, litigation or
proceeding, including any Environmental Action, which is pending or, to
Holdings or any Borrower's knowledge, threatened affecting Holdings, the
Borrowers or any of their respective Subsidiaries before any court,
governmental agency or arbitrator that would reasonably be expected to
have a Material Adverse Effect other than as reported in filings with the
SEC made prior to the date hereof.
(j) Following application of the proceeds of each Advance and the
issuance of each Letter of Credit, not more than 25 percent of the value
of the assets of the Borrowers and their respective Subsidiaries on a
consolidated basis will be margin stock (within the meaning of Regulation
U issued by the Board of Governors of the Federal Reserve System).
(k) No Loan Party is an "investment company", or a company
"controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
(l) All United States Federal income tax returns and all other
material tax returns which are required to be filed have been filed by or
on behalf of Holdings, the Borrowers and their respective Subsidiaries,
and all taxes due with respect to Holdings, the Borrowers and their
respective Subsidiaries pursuant to such returns or pursuant to any
assessment received by Holdings, the Borrowers or any Subsidiary have been
paid except to the extent permitted in Section 6.01(b). The charges,
accruals and reserves on the books of Holdings, the Borrowers and their
Subsidiaries in respect of taxes or other governmental charges have been
made in accordance with, and to the extent required by, GAAP.
(m) All written factual information heretofore furnished by
Holdings, the Borrowers or their Subsidiaries to the Agent or any Lender
(including the Information Memorandum) for purposes of or in connection
with this Agreement or any other Loan Document, taken as a whole, was true
and correct in all material respects on the date as of which such
information was stated or certified, provided that Holdings and the
Borrowers make no representations or warranties with respect to any
projections or other non-factual information contained in such
information.
(n) (i) Each Group Member has title in fee simple to, or a valid
leasehold interest in, all its real property, and good title to, or a
valid leasehold interest in, all its other property except as, in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect, and (ii) no Inventory, Credit Card Account Receivable or Related
Intellectual Property is subject to any Lien except as permitted by
Section 6.02(a).
(o) Except as, in the aggregate, would not reasonably be expected
to have a Material Adverse Effect: (i) each Group Member owns, or is
licensed to use, all Intellectual Property necessary for the conduct of
its business as currently conducted; (ii) no material claim has been
asserted and is pending by any Person challenging or questioning the use
of any Intellectual Property or the validity or effectiveness of any
Intellectual Property, nor do Holdings or the Borrowers know of any valid
basis for any such claim; and (iii) the use of Intellectual Property by
each Group Member does not infringe on the rights of any Person in any
material respect.
(p) Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Internal Revenue
Code or Section 302 of ERISA) has occurred during the five year period
prior to the date on which this representation is made or deemed made with
respect to any Plan, and each Plan has complied in all material respects
with the applicable provisions of ERISA and the Internal Revenue Code. No
termination of a Single Employer Plan has occurred, and no Lien in favor
of the PBGC or a Plan has arisen, during such five-year period. The
present value of all accrued benefits under each Single Employer Plan
(based on those assumptions used to fund such Plans) did not, as of the
last annual valuation date prior to the date on which this representation
is made or deemed made, exceed the value of the assets of such Plan
allocable to such accrued benefits by an amount that would reasonably be
expected to have a Material Adverse Effect. Neither Holdings, the
Borrowers nor any Commonly Controlled Entity
34
has had a complete or partial withdrawal from any Multiemployer Plan that
has resulted or could reasonably be expected to result in a material
liability under ERISA, and neither the Borrowers nor any Commonly
Controlled Entity may reasonably be expected to become subject to any
material liability under ERISA if Holdings, any Borrower or any such
Commonly Controlled Entity were to withdraw completely from all
Multiemployer Plans as of the valuation date most closely preceding the
date on which this representation is made or deemed made. No such
Multiemployer Plan is in Reorganization or Insolvent except as would not
reasonably be expected to result in aggregate liability to Holdings and
its Subsidiaries of $100,000,000 or more.
(q) Except as, individually or in the aggregate, would not
reasonably be expected to result in a Material Adverse Effect, no Group
Member (i) has failed to comply with any Environmental Law or to obtain,
maintain or comply with any permit, license or other approval required
under any Environmental Law, (ii) has become subject to any Environmental
Liability, (iii) has received notice of any claim with respect to any
Environmental Liability or (iv) knows of any basis for any Environmental
Liability.
(r) The Guarantee and Collateral Agreement is effective to create
in favor of the Agent, for the benefit of the Lenders, a legal, valid and
enforceable security interest in the Collateral described therein and
proceeds thereof. When financing statements and other filings specified on
Schedule 5.01(r) in appropriate form are filed in the offices specified on
Schedule 5.01(r), the Guarantee and Collateral Agreement shall constitute
a fully perfected Lien on, and security interest in, all right, title and
interest of the Loan Parties in such Collateral and the proceeds thereof,
as security for the Obligations (as defined in the Guarantee and
Collateral Agreement), in each case prior and superior in right to the
Lien or claim of any other Person (except Liens permitted by Section
6.02(a)).
(s) Each Loan Party is, and after giving effect to the Merger and
the incurrence of all indebtedness and obligations being incurred in
connection herewith and therewith will be and will continue to be,
Solvent.
ARTICLE VI
COVENANTS
SECTION 6.01. Affirmative Covenants. So long as any Advance shall
remain unpaid, any Letter of Credit shall remain outstanding or any Lender shall
have any Commitment hereunder, each of Holdings and the Borrowers will, and will
cause each of their Subsidiaries (which for all purposes of this Section 6.01
(other than Section 6.01(j)(i) and (ii)) shall be deemed to exclude Sears
Canada) to:
(a) Compliance with Laws, Etc. Comply in all respects with all
applicable Requirements of Law, such compliance to include compliance with
ERISA and Environmental Laws, except for such noncompliance as would not
reasonably be expected to have a Material Adverse Effect.
(b) Payment of Taxes, Etc. Pay and discharge before the same shall
become delinquent, (i) all taxes, assessments and governmental charges or
levies imposed upon it or upon its property and (ii) all lawful claims
that, if unpaid, might by law become a Lien upon its property; provided
that neither Holdings, the Borrowers nor any of their Subsidiaries shall
be required to pay or discharge any such tax, assessment, charge or claim
(x) that is being contested in good faith and by proper proceedings and as
to which appropriate reserves are being maintained, unless and until any
Lien resulting therefrom attaches to its property and becomes enforceable
against its other creditors or (y) if such non-payments, either
individually or in the aggregate, would not be reasonably expected to have
a Material Adverse Effect.
(c) Maintenance of Insurance. Maintain insurance with responsible
and reputable insurance companies or associations in such amounts and
covering such risks as is consistent with prudent business practice;
provided that Holdings, the Borrowers and their Subsidiaries may self
insure to the extent consistent with prudent business practice.
35
(d) Preservation of Corporate Existence, Etc. Preserve and
maintain its corporate existence, rights (charter and statutory) and
franchises; provided that (i) Holdings, the Borrowers and their
Subsidiaries may consummate any merger or consolidation permitted under
Section 6.02(b); (ii) neither Holdings nor the Borrowers nor any of their
Subsidiaries shall be required to preserve or maintain the corporate
existence of any Subsidiary (other than SRAC and Kmart Corp.) if the Board
of Directors of the parent of such Subsidiary, or an executive officer of
such parent to whom such Board of Directors has delegated the requisite
authority, shall determine that the preservation and maintenance thereof
is no longer desirable in the conduct of the business of such parent and
that the loss thereof is not disadvantageous in any material respect to
the Borrowers, such parent or the Lenders; (iii) Sears shall not be
required to preserve or maintain the corporate existence of SRAC, provided
that in the event SRAC is dissolved, merged with or into Holdings or any
Subsidiary of Holdings or otherwise ceases to exist, then Sears shall, or
shall cause a direct wholly owned Domestic Subsidiary of Sears to, execute
and deliver to the Agent an assumption agreement with respect to SRAC's
obligations under the Loan Documents in form and substance reasonably
satisfactory to the Agent and such other officer certificates, legal
opinions, financing statements (if applicable) and documentation as the
Agent reasonably requests; and (iv) neither Holdings, the Borrowers nor
any of their Subsidiaries shall be required to preserve any right or
franchise if the Board of Directors of Holdings, such Borrower or such
Subsidiary shall determine that the preservation thereof is no longer
desirable in the conduct of its business and that the loss thereof is not
disadvantageous in any material respect to Holdings, the Borrowers, such
Subsidiary or the Lenders.
(e) Inspection Rights. Subject to reasonable confidentiality
limitations and requirements imposed by Holdings or the Borrowers due to
competitive concerns or otherwise, at any reasonable time and from time to
time (but no more than twice a year unless a Default or an Event of
Default has occurred and is continuing), permit the Agent or any of the
Lenders or any agents or representatives thereof, at the Lenders' expense,
to examine and make copies of and abstracts from the records and books of
account of, and visit the properties of, Holdings, the Borrowers and any
of their Subsidiaries, and to discuss the affairs, finances and accounts
of Holdings, the Borrowers and any of their Subsidiaries, as the case may
be, with any of their officers or directors and with their independent
certified public accountants.
(f) Keeping of Books. Keep proper books of record and account, in
which full and correct entries shall be made of all financial transactions
and the assets and business of Holdings, the Borrowers and each such
Subsidiary in accordance with GAAP in effect from time to time.
(g) Maintenance of Properties, Etc. Except as otherwise permitted
pursuant to Section 6.02(b), or where the failure to do so, either
individually or in the aggregate, would not be reasonably expected to have
a Material Adverse Effect, maintain and preserve all of its properties
that are used or useful in the conduct of its business in good working
order and condition, ordinary wear and tear excepted.
(h) Transactions with Affiliates. Conduct all transactions
otherwise permitted under this Agreement with any of their Affiliates on
terms that are fair and reasonable and no less favorable to Holdings, the
applicable Borrower or such Subsidiary than it would obtain in a
comparable arm's-length transaction with a Person not an Affiliate other
than (i) as required by any applicable Requirement of Law, (ii) so long as
no Default or Event of Default has occurred and is continuing,
transactions between or among the Loan Parties and any of their
Subsidiaries or (iii) if a Default or Event of Default has occurred and is
continuing, transactions in the ordinary course of business between or
among the Loan Parties and any of their Subsidiaries and transactions
between or among Loan Parties; provided, that the foregoing shall not
prohibit any Loan Party or any Subsidiary thereof from entering into
employment arrangements with its officers and retention and other
agreements with officers and directors pursuant to the reasonable
requirements of its business.
(i) Further Assurances. (i) With respect to any Inventory and
Credit Card Accounts Receivable acquired after the Effective Date and
prior to the Collateral Release Date by any Group Member (other than such
property acquired by any Subsidiary organized outside of the United
States) as to which the Agent, for the benefit of the Lenders, does not
have a perfected Lien, promptly (i) execute and deliver to the Agent such
amendments to the Guarantee and Collateral Agreement or such other
documents as the Agent may reasonably request in order to grant to the
Agent, for the benefit of the Lenders, a security
36
interest in such property and (ii) take all actions as the Agent may
reasonably request to grant to the Agent, for the benefit of the Lenders,
a perfected security interest in such property with the priority required
herein, including the filing of Uniform Commercial Code financing
statements in such jurisdictions as may be required by the Guarantee and
Collateral Agreement or by law or as may be requested by the Agent.
(ii) With respect to any new Domestic Subsidiary which is
created or acquired after the Effective Date by any Group Member and
which owns Inventory or Credit Card Accounts Receivable, promptly
cause such new Domestic Subsidiary to (i) become a party to the
Guarantee and Collateral Agreement, (ii) prior to the Collateral
Release Date take such actions as the Agent may reasonably request
to grant to the Agent for the benefit of the Lenders a perfected
security interest, with the priority required herein, in the
Collateral described in the Guarantee and Collateral Agreement with
respect to such new Domestic Subsidiary, including the filing of
Uniform Commercial Code financing statements in such jurisdictions
as may be required by the Guarantee and Collateral Agreement or by
law or as may be requested by the Agent, (iii) if requested by the
Agent, deliver to the Agent an officer certificate with respect to
such Domestic Subsidiary in form and substance reasonably
satisfactory to the Agent and (iv) if requested by the Agent,
deliver to the Agent legal opinions relating to the matters
described above, which opinions shall be in form and substance, and
from counsel, reasonably satisfactory to the Agent.
(j) Reporting Requirements. Furnish to the Agent:
(i) as soon as available and in any event within 50 days
after the end of each of the first three quarters of each fiscal
year of Holdings, (a) the consolidated balance sheet of Holdings and
its Subsidiaries as of the end of such quarter and consolidated
statements of income and cash flows of Holdings and its Subsidiaries
for the period commencing at the end of the previous fiscal year and
ending with the end of such quarter, duly certified (subject to
year-end audit adjustments) by an Authorized Officer of Holdings as
having been prepared in accordance with GAAP and (b) a certificate
of an Authorized Officer of Holdings as to compliance with the terms
of this Agreement and the other Loan Documents and, from and after
the Collateral Release Date, setting forth in reasonable detail the
calculations necessary to demonstrate compliance with Section 6.03,
provided that in the event of any change in GAAP used in the
preparation of such financial statements, subject to Section 1.03,
the Borrowers shall also provide, if necessary for the determination
of compliance with Section 6.03, a statement of reconciliation
conforming such financial statements to GAAP (the Borrowers being
permitted to satisfy the requirements of clause (i)(a) by delivery,
in the manner provided in Section 9.02(b), of its quarterly report
on form 10-Q (or any successor form), as filed with the SEC);
(ii) as soon as available and in any event within 95 days
after the end of each fiscal year of Holdings, (a) a copy of the
annual audit report for such year for Holdings and its Subsidiaries,
containing the consolidated balance sheet of Holdings and its
Subsidiaries as of the end of such fiscal year and consolidated
statements of income and cash flows of Holdings and its Subsidiaries
for such fiscal year, in each case reported on without a "going
concern" or like qualification or exception, or qualification
arising out of the scope of the audit, by its Board-appointed
auditor of national standing and (b) a certificate of an Authorized
Officer of Holdings as to compliance with the terms of this
Agreement and the other Loan Documents and, from and after the
Collateral Release Date, setting forth in reasonable detail the
calculations necessary to demonstrate compliance with Section 6.03,
provided that in the event of any change in GAAP used in the
preparation of such financial statements, the Borrowers shall also
provide, if necessary for the determination of compliance with
Section 6.03, a statement of reconciliation conforming such
financial statements to GAAP (the Borrowers being permitted to
satisfy the requirements of clause (ii)(a) by delivery, in the
manner provided in Section 9.02(b), of its annual report on form
10-K (or any successor form), as filed with the SEC);
(iii) as soon as available and in any event within 10 Business
Days of the end of each fiscal month ended prior to the Collateral
Release Date, a Borrowing Base Certificate as of the end
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of the preceding fiscal month and supporting information
satisfactory to the Agent in its Permitted Discretion with respect
to the determination of the Borrowing Base;
(iv) promptly and in any event within five days after any
officer of Holdings or any Borrower knows or should have had
knowledge of the occurrence of each Default or Event of Default
continuing on the date of such statement, a statement of an
Authorized Officer of Holdings or such Borrower setting forth
details of such Default or Event of Default and the action that
Holdings or such Borrower has taken and proposes to take with
respect thereto;
(v) promptly after the sending or filing thereof, copies of
all quarterly and annual reports and proxy solicitations that
Holdings sends to its public security holders generally, and copies
of all reports on form 8-K (or its equivalent) and registration
statements for the public offering (other than pursuant to employee
Plans) of securities that Holdings or any of its Subsidiaries files
with the SEC or any national securities exchange;
(vi) promptly after the commencement thereof, notice of all
actions and proceedings before any court, governmental agency or
arbitrator affecting Holdings, the Borrowers or any of their
Subsidiaries of the type described in Section 5.01(i); and
(vii) such other information respecting Holdings, the
Borrowers or any of their Subsidiaries as any Lender through the
Agent may from time to time reasonably request.
Reports and financial statements required to be delivered by the
Borrowers pursuant to clauses (i)(a), (ii)(a) and (v) of this subsection
(j) shall be deemed to have been delivered on the date on which Holdings
causes such reports, or reports containing such financial statements, to
be posted on the Internet at www.sec.gov or at such other website
identified by the Borrowers in a notice to the Agent and the Lenders and
that is accessible by the Lenders without charge.
(k) Collateral Monitoring and Review. At any time prior to the
Collateral Release Date, upon the request of the Required Lenders and upon
reasonable notice, permit the Agent or professionals (including
consultants, accountants and/or appraisers) retained by the Agent to
conduct evaluations and/or appraisals of (i) the Loan Parties' practices
in the computation of the Borrowing Base and (ii) the assets included in
the Borrowing Base, and pay the reasonable fees and expenses in connection
therewith (including the reasonable and customary fees and expenses
associated with the Agent's IB ABL Portfolio Management Group), provided
that if no Default or Event of Default shall exist and be continuing, the
Borrowers shall only be required to pay the fees and expenses associated
with one such evaluation and one such appraisal per fiscal year. In
connection with any collateral monitoring or review and appraisals
relating to the computation of the Borrowing Base, Holdings shall make
such adjustments to the calculation of the Borrowing Base as the Agent
shall, on 5 days notice, reasonably require in its Permitted Discretion
based upon the terms of this Agreement and the results of such collateral
monitoring, review and appraisal.
(l) Landlord Waivers. To the extent required by the terms of any
lease agreement with any third party relating to a leased Store or DC
which is material to the conduct of the business of the Loan Parties, (i)
provide notice of the Merger to such third party and (ii) use commercially
reasonable efforts to obtain any necessary consent, approval or waiver
from such third party with respect thereto.
SECTION 6.02. Negative Covenants. So long as any Advance shall
remain unpaid, any Letter of Credit shall remain outstanding or any Lender shall
have any Commitment hereunder, each of Holdings and the Borrowers will not, and
will not permit any of their Subsidiaries (which for all purposes of this
Section 6.02 shall be deemed to exclude Sears Canada) to:
(a) Liens, Etc. Create or suffer to exist any Lien on the Inventory,
Credit Card Accounts Receivable or Related Intellectual Property of
Holdings, the Borrowers or any of their Domestic Subsidiaries other than:
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(i) Permitted Liens,
(ii) the Liens existing on the Effective Date and described
on Schedule 6.02(a) hereto,
(iii) the replacement, extension or renewal of any Lien
permitted by clause (ii) above upon or in the same property
theretofore subject thereto (and in any additions to any such
property and in any property taken in replacement or substitution
for any such property), or the replacement, extension or renewal
(without increase in the amount) of the Debt secured thereby,
(iv) to the extent any Liens permitted by clause (ii) above
are terminated (and not replaced, extended or renewed in accordance
with clause (iii) above), Liens not otherwise permitted by clause
(iii) above securing Debt in an amount up to the amount of Debt
secured by such terminated Liens, and
(v) any Lien on Related Intellectual Property which would
not reasonably be expected to impair the Agent's ability to enforce
its remedies under the Loan Documents with respect to the
Collateral.
(b) Fundamental Changes. Merge into or consolidate with any other
Person, or permit any other Person to merge into or consolidate with it,
or sell, transfer, lease or otherwise dispose of (in one transaction or in
a series of transactions) all or substantially all of its assets (in each
case, whether now owned or hereafter acquired), 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 of any Borrower may merge into such Borrower
in a transaction in which such Borrower is the surviving entity, (ii) any
Subsidiary of Holdings may merge into Holdings or any other Subsidiary of
Holdings (provided that (A) if Kmart Corp. is a party to such merger, such
merger shall be with Holdings, Kmart or a direct Subsidiary of Kmart Corp.
and Kmart Corp. shall be the continuing or surviving entity, (B) if any
Subsidiary Guarantor is a party to such merger (other than with a Borrower
or Holdings), such Subsidiary Guarantor shall be the continuing or
surviving entity or the continuing or surviving entity shall become a
Subsidiary Guarantor and (C) if SRAC is a party to such merger, then Sears
shall comply with the requirements of Section 6.01(d)), (iii) any
Subsidiary of Holdings other than the Borrowers may sell, transfer, lease
or otherwise dispose of its assets to any Borrower, to Holdings or to a
Subsidiary of Holdings (provided that if such sale or transfer includes
Inventory, Credit Card Accounts Receivable or Related Intellectual
Property and the transferee is not the Borrower or Holdings, the
transferee shall be a Subsidiary Guarantor), (iv) any Subsidiary of
Holdings other than the Borrowers may sell, transfer, lease or otherwise
dispose of its assets to a Person that is not a Subsidiary through
transactions which are undertaken in the ordinary course of its business
or determined by Holdings or the Borrowers in good faith to be in the best
interests of Holdings, the Borrowers and their Subsidiaries, (v) any
Subsidiary of Holdings other than the Borrowers (except, in the case of
SRAC, as provided in Section 6.01(d)) may liquidate or dissolve if
Holdings and the Borrowers determine in good faith that such liquidation
or dissolution is in the best interests of Holdings, the Borrowers and
their Subsidiaries and is not materially disadvantageous to the Lenders
and (vi) Holdings or any Subsidiary of Holdings may merge with a Person
that is not a Subsidiary of Holdings immediately prior to such merger if,
in the case of any merger involving Holdings, a Borrower or a Subsidiary
Guarantor, Holdings, such Borrower or such Subsidiary Guarantor, as
applicable, is the continuing or surviving entity or, in the case of any
merger involving a Subsidiary Guarantor, the continuing or surviving
entity shall become a Subsidiary Guarantor in accordance with Section
6.01(i)(ii).
(c) Acquisitions. Purchase or acquire (including pursuant to any
merger with any Person that was not a wholly-owned Subsidiary prior to
such merger) the equity interests, voting equity interests or assets of
any Person unless (i) at the time thereof and immediately after giving
effect thereto, no Default or Event of Default shall have occurred and be
continuing, (ii) immediately after giving effect thereto, Holdings and the
Borrowers shall comply with Section 6.01(i) to the extent applicable and
(iii) at least 5 Business Days prior to consummating any acquisition
subsequent to the Collateral Release Date in which the aggregate amount of
consideration to be paid in connection therewith exceeds $50,000,000,
Holdings shall have delivered to the Agent a certificate of an Authorized
Officer of Holdings setting forth in
39
reasonable detail the calculations necessary to demonstrate Holdings'
compliance, on a pro forma basis after giving effect to such acquisition,
with the covenants set forth in Section 6.03.
(d) Restricted Payments. Declare or make, or agree to pay or make,
directly or indirectly, any Restricted Payment if at the date of the
declaration thereof (either before or immediately after giving effect
thereto and to the payment thereof) a Default or Event of Default shall
have occurred and be continuing, except that at any time which a Default
or Event of Default shall exist and be continuing (a) Holdings may declare
and pay dividends with respect to its equity interests payable solely in
additional shares of its common stock and (b) Subsidiaries of Holdings may
declare and pay dividends to Holdings, the Borrowers or another
wholly-owned Subsidiary of any Borrower.
(e) Negative Pledge Clauses. Enter into or suffer to exist or
become effective any agreement that prohibits or limits the ability of
Holdings or any Subsidiary of Holdings to create, incur, assume or suffer
to exist any Lien upon any of its property or revenues, whether now owned
or hereafter acquired, other than (i) this Agreement and the other Loan
Documents and (ii) any agreements governing any Lien not prohibited by
Section 6.02(a) (in which case any prohibition or limitation shall only be
effective against the assets subject to the relevant Lien).
(f) Clauses Restricting Subsidiary Distributions. Enter into or
suffer to exist or become effective any consensual encumbrance
or restriction on the ability of any Subsidiary of Holdings other than a
Loan Party to (a) make Restricted Payments in respect of any equity
interests of such Subsidiary held by, or pay any indebtedness owed to,
Holdings or any other Subsidiary of Holdings, (b) make loans or advances
to, or other investments in, Holdings or any other Subsidiary of Holdings
or (c) transfer any of its assets to Holdings or any other Subsidiary of
Holdings, except for such encumbrances or restrictions existing under or
by reason of (i) any restrictions existing under this Agreement and the
other Loan Documents; (ii) any restrictions with respect to a Subsidiary
imposed pursuant to an agreement that has been entered into in connection
with the disposition of all or any portion of the equity interests or
assets of such Subsidiary; (iii) the provisions contained in any existing
indebtedness (and in any refinancing of such indebtedness so long as no
more restrictive than those contained in the respective existing
indebtedness so refinanced); (iv) customary provisions restricting
subletting or assignment of any lease governing a leasehold interest of
any Borrower or a Subsidiary of any Borrower entered into in the ordinary
course of business, (v) customary restrictions and conditions contained in
the documents relating to any Lien, so long as such Lien is not prohibited
hereunder and such restrictions or conditions relate only to the specific
asset subject to such Lien; (vi) customary provisions restricting
assignment of any contract entered into by any Borrower or any Subsidiary
of any Borrower in the ordinary course of business, (vii) any agreement or
instrument governing acquired debt, which restriction is not applicable to
any Person or the properties or assets of any Person, other than the
Person or the properties or assets of the Person acquired pursuant to the
respective acquisition and so long as the respective encumbrances or
restrictions were not created (or made more restrictive) in connection
with or in anticipation of the respective acquisition; (viii) customary
provisions restricting the assignment of licensing agreements, management
agreements or franchise agreements entered into by any Borrower or any of
its Subsidiaries in the ordinary course of business; (ix) restrictions on
the transfer of assets securing purchase money obligations and capitalized
lease obligations; (x) customary net worth provisions contained in real
property leases entered into by Subsidiaries of any Borrower, so long as
the applicable Borrower has determined in good faith that such net worth
provisions could not reasonably be expected to impair the ability of the
Borrowers and their Subsidiaries to meet their ongoing obligations.
(g) Accounting Changes. Make or permit any change in accounting
policies or reporting practices, except as required or permitted by GAAP.
(h) Circumvention of Covenants. Circumvent any of the covenants
set forth in Section 6.02 by causing Sears Canada to undertake a
transaction for the benefit of Holdings or any of its Subsidiaries which
Holdings or any of its Subsidiaries would not be permitted to undertake
directly.
40
SECTION 6.03. Financial Covenant. From and after the Collateral
Release Date, so long as any Advance shall remain unpaid, any Letter of Credit
remains outstanding or any Lender shall have any Commitment hereunder, each of
Holdings and the Borrowers:
(a) Will not permit the Consolidated Adjusted Leverage Ratio as of
the last day of any period of four consecutive fiscal quarters of Holdings
to exceed 3.00 to 1.0.
(b) Will not permit the Consolidated Inventory Coverage Ratio as
of the last day of any fiscal quarter of Holdings to be less than 1.40 to
1.0.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) Any Borrower shall fail to pay any principal of any Advance or
Reimbursement Obligation when the same becomes due and payable; or any
Borrower shall fail to pay any interest on any Advance or Reimbursement
Obligation or make any other payment of fees or other amounts payable
under this Agreement or any other Loan Document within five Business Days
after the same becomes due and payable; or
(b) Any representation or warranty made by any Loan Party herein
or in any other Loan Document shall prove to have been incorrect in any
material respect when made; or
(c) (i) Any Loan Party shall fail to perform or observe any term,
covenant or agreement contained in Section 6.01(d), (e), (h), (j) (other
than 6.01(j)(vii)) or (k), 6.02 or 6.03 of this Agreement or (ii) any Loan
Party shall fail to perform or observe any other term, covenant or
agreement contained in this Agreement or any other Loan Document if such
failure shall remain unremedied for 30 days after written notice thereof
shall have been given to Holdings or the Borrowers by the Agent or any
Lender; or
(d) Any Group Member (excluding Sears Canada for so long as the
Loan Parties do not collectively own, directly or indirectly, more than
60% of the voting or economic interests in Sears Canada) shall fail to pay
principal of at least $100,000,000 on any Debt that is outstanding (but
excluding Debt outstanding hereunder) when the same becomes due and
payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after the applicable
grace period, if any, specified in the agreement or instrument relating to
such Debt; or any other event shall occur or condition shall exist under
any agreement or instrument relating to any Debt that is outstanding in a
principal amount of at least $100,000,000 and shall continue after the
applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate the
maturity of such Debt; or any such Debt shall be declared to be due and
payable, or required to be prepaid or redeemed, purchased or defeased, or
an offer to prepay, redeem, purchase or defease such Debt shall be
required to be made and is accepted in an amount of at least $100,000,000
(in each case other than (i) a scheduled prepayment, redemption or
purchase or (ii) a mandatory prepayment, redemption or purchase or a
required offer to prepay, redeem or purchase that results from the
voluntary sale or transfer of property or assets), in each case prior to
the stated maturity thereof; or
(e) Any Group Member shall generally not pay its debts as such
debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against any Group
Member seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors,
or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for it or for any
substantial part of its property and, in
41
the case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain undismissed or
unstayed for a period of 90 days, or any of the actions sought in such
proceeding (including the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official
for, it or for any substantial part of its property) shall occur; or any
Group Member shall take any corporate action to authorize any of the
actions set forth above in this subsection (e); or
(f) A judgment or order for the payment of money in excess of
$100,000,000 (net of any portion of such judgment to be paid by a
third-party insurer as to which coverage has not been disputed) shall be
rendered against any Group Member (excluding Sears Canada for so long as
the Loan Parties do not collectively own, directly or indirectly, more
than 60% of the voting or economic interests in Sears Canada) and either
(i) enforcement proceedings shall have been commenced by any creditor upon
such judgment or order or (ii) there shall be any period of 10 consecutive
days during which a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect; or
(g) (i) Any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but
excluding any employee benefit plan of such person or its Subsidiaries,
and any Person or entity acting in its capacity as trustee, agent or other
fiduciary or administrator of any such plan) other than a Permitted Holder
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Securities Exchange Act of 1934, except that a person or group shall
be deemed to have "beneficial ownership" of all securities that such
person or group has the right to acquire (such right, an "option right"),
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of 35% or more of the equity securities of
Holdings entitled to vote for members of the Board of Directors of
Holdings on a fully-diluted basis (and taking into account all such
securities that such person or group has the right to acquire pursuant to
any option right) and such "person" or "group" shall beneficially own (as
such term is used herein) a greater percentage of the equity Securities of
Holdings entitled to vote for members of the Board of Directors than the
Permitted Holders shall, collectively, beneficially own; or (ii) during
any period of 12 consecutive months, a majority of the members of the
Board of Directors or other equivalent governing body of Holdings cease to
be composed of individuals (x) who were members of that board or
equivalent governing body on the first day of such period, (y) whose
election or nomination to that board or equivalent governing body was
approved by individuals referred to in clause (x) above constituting at
the time of such election or nomination at least a majority of that board
or equivalent governing body or (z) whose election or nomination to that
board or other equivalent governing body was approved by individuals
referred to in clauses (x) and (y) above constituting at the time of such
election or nomination at least a majority of that board or equivalent
governing body (excluding, in the case of both clause (y) and clause (z),
any individual whose initial nomination for, or assumption of office as, a
member of that board or equivalent governing body occurs as a result of an
actual or threatened solicitation of proxies or consents for the election
or removal of one or more directors by any person or group other than a
solicitation for the election of one or more directors by or on behalf of
the Board of Directors); or (iii) Holdings shall cease for any reason to
own, directly or indirectly, 100% of the Voting Stock of Sears and Kmart;
or
(h) Any Borrower or any of its ERISA Affiliates shall incur, or
shall be reasonably likely to incur liability in excess of $100,000,000 in
the aggregate as a result of one or more of the following: (i) the
occurrence of any ERISA Event; (ii) the partial or complete withdrawal of
such Borrower or any of its ERISA Affiliates from a Multiemployer Plan; or
(iii) the reorganization or termination of a Multiemployer Plan; or
(i) Any of the Security Documents shall, prior to the Collateral
Release Date, cease, for any reason, to be in full force and effect, or
any Loan Party shall so state in writing, or, prior to the Collateral
Release Date, any Lien created by any of the Security Documents shall
cease to be enforceable and of the same effect and priority purported to
be created thereby, including as a result of the failure to comply with
Section 5.4 of the Guarantee and Collateral Agreement; or
(j) The guarantee contained in Section 2 of the Guarantee and
Collateral Agreement shall cease, for any reason, to be in full force and
effect or any Loan Party shall so state in writing;
42
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrowers, declare the
Commitment of each Lender to be terminated, whereupon the same shall forthwith
terminate, and (ii) shall at the request, or may with the consent, of the
Required Lenders, by notice to the Borrowers, declare the Advances, all interest
thereon and all other amounts payable under this Agreement and the other Loan
Documents (including all amounts of the L/C Obligations, whether or not the
beneficiaries of the then outstanding Letters of Credit shall have presented the
documents required thereunder) to be forthwith due and payable, whereupon the
Advances, all such interest and all such amounts shall become and be forthwith
due and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrowers; provided,
however, that in the event of an actual or deemed entry of an order for relief
with respect to any Borrower under the United States Bankruptcy Code, (A) the
Commitment of each Lender shall automatically be terminated and (B) the
Advances, all such interest and all such amounts shall automatically become and
be due and payable, without presentment, demand, protest or any notice of any
kind, all of which are hereby expressly waived by the Borrowers. With respect to
all Letters of Credit with respect to which presentment for honor shall not have
occurred at the time of an acceleration pursuant to this paragraph, the
Borrowers shall at such time deposit in a cash collateral account opened by the
Agent an amount equal to 101% of the aggregate then undrawn and unexpired amount
of such Letters of Credit. Amounts held in such cash collateral account shall be
applied by the Agent to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay other
obligations of the Borrowers hereunder and under the other Loan Documents. After
all such Letters of Credit shall have expired or been fully drawn upon, all
Reimbursement Obligations shall have been satisfied and all other obligations of
the Borrowers hereunder and under the other Loan Documents shall have been paid
in full, the balance, if any, in such cash collateral account shall be returned
to the Borrowers (or such other Person as may be lawfully entitled thereto).
ARTICLE VIII
THE AGENT
SECTION 8.01. Appointment. Each Lender hereby irrevocably designates
and appoints the Agent as the agent of such Lender under this Agreement and the
other Loan Documents, and each such Lender irrevocably authorizes the Agent, in
such capacity, to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
SECTION 8.02. Delegation of Duties. The Agent may execute any of its
duties under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys in-fact selected by it with
reasonable care.
SECTION 8.03. Exculpatory Provisions. Neither any Agent (for
purposes of this Article VIII, "Agents" shall mean the collective reference to
the Agent and any other Lender designated as an "Agent" for purposes of this
Agreement, including the syndication agents and the documentation agents) nor
any of their respective officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be (i) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
this Agreement or any other Loan Document (except to the extent that any of the
foregoing are found by a final and nonappealable decision of a court of
competent jurisdiction to have resulted from its or such Person's own gross
negligence or willful misconduct) or (ii) responsible in any manner to any of
the Lenders for any recitals, statements, representations or warranties made by
any Loan Party or any officer thereof contained in this Agreement or any other
Loan Document or in any certificate, report, statement or other document
referred to or provided for in, or received by the Agents under or in connection
with, this Agreement or any other Loan Document or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document or for any failure of any Loan Party a party thereto to
perform its obligations hereunder or thereunder. The Agents shall not be under
any
43
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of any Loan Party.
SECTION 8.04. Reliance by Agent. The Agent shall be entitled
to rely, and shall be fully protected in relying, upon any instrument, writing,
resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including
counsel to Holdings or the Borrowers), independent accountants and other experts
selected by the Agent. The Agent may deem and treat the payee of any Note as the
owner thereof for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the Agent. The Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such advice
or concurrence of the Required Lenders (or, if so specified by this Agreement,
the Supermajority Lenders or all Lenders) as it deems appropriate or it shall
first be indemnified to its satisfaction by the Lenders against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
other Loan Documents in accordance with a request of the Required Lenders (or,
if so specified by this Agreement, the Supermajority Lenders or all Lenders),
and such request and any action taken or failure to act pursuant thereto shall
be binding upon all the Lenders and all future holders of the Advances.
SECTION 8.05. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default unless
the Agent has received notice from a Lender, Holdings or a Borrower referring to
this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default". In the event that the Agent receives such
a notice, the Agent shall give notice thereof to the Lenders. The Agent shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders (or, if so specified by this
Agreement, the Supermajority Lenders or all Lenders); provided that unless and
until the Agent shall have received such directions, the Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders.
SECTION 8.06. Non-Reliance on Agents and Other Lenders. Each Lender
expressly acknowledges that neither the Agents nor any of their respective
officers, directors, employees, agents, attorneys-in-fact or affiliates have
made any representations or warranties to it and that no act by any Agent
hereafter taken, including any review of the affairs of a Loan Party or any
affiliate of a Loan Party, shall be deemed to constitute any representation or
warranty by any Agent to any Lender. Each Lender represents to the Agents that
it has, independently and without reliance upon any Agent or any other Lender,
and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Loan Parties and their
affiliates and made its own decision to make its Advances hereunder and enter
into this Agreement. Each Lender also represents that it will, independently and
without reliance upon any Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Loan Parties and their affiliates. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
any Loan Party or any affiliate of a Loan Party that may come into the
possession of the Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
SECTION 8.07. Indemnification. The Lenders agree to indemnify each
Agent in its capacity as such (to the extent not reimbursed by Holdings or the
Borrowers and without limiting the obligation of Holdings or the Borrowers to do
so), ratably according to their respective Commitment Percentages in effect on
the date on which indemnification is sought under this Section (or, if
indemnification is sought after the date upon which the Commitments shall have
terminated and the Advances shall have been paid in full, ratably in accordance
with such Commitment Percentages immediately prior to such date), from and
against any and all liabilities, obligations,
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losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever that may at any time (whether before or
after the payment of the Advances) be imposed on, incurred by or asserted
against such Agent in any way relating to or arising out of, the Commitments,
this Agreement, any of the other Loan Documents or any documents contemplated by
or referred to herein or therein or the transactions contemplated hereby or
thereby or any action taken or omitted by such Agent under or in connection with
any of the foregoing; provided that no Lender shall be liable for the payment of
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements that are found by a
final and nonappealable decision of a court of competent jurisdiction to have
resulted from such Agent's gross negligence or willful misconduct. The
agreements in this Section shall survive the payment of the Advances and all
other amounts payable hereunder.
SECTION 8.08. Agent in Its Individual Capacity. Each Agent and its
affiliates may make loans to, accept deposits from and generally engage in any
kind of business with any Loan Party as though such Agent were not an Agent.
With respect to its Advances made or renewed by it and with respect to any
Letter of Credit issued or participated in by it, each Agent shall have the same
rights and powers under this Agreement and the other Loan Documents as any
Lender and may exercise the same as though it were not an Agent, and the terms
"Lender" and "Lenders" shall include each Agent in its individual capacity.
SECTION 8.09. Successor Agent. The Agent may resign as Agent upon 30
days' notice to the Lenders and the Borrowers. If the Agent shall resign as
Agent under this Agreement and the other Loan Documents, then the Required
Lenders shall appoint from among the Lenders a successor agent for the Lenders,
which successor agent shall (unless an Event of Default under Section 7.01(a) or
Section 7.01(e) with respect to any Borrower shall have occurred and be
continuing) be subject to approval by the Borrowers (which approval shall not be
unreasonably withheld or delayed), whereupon such successor agent shall succeed
to the rights, powers and duties of the Agent, and the term "Agent" shall mean
such successor agent effective upon such appointment and approval, and the
former Agent's rights, powers and duties as Agent shall be terminated, without
any other or further act or deed on the part of such former Agent or any of the
parties to this Agreement or any holders of the Advances. If no successor agent
has accepted appointment as Agent by the date that is 30 days following a
retiring Agent's notice of resignation, the retiring Agent's resignation shall
nevertheless thereupon become effective, and the Lenders shall assume and
perform all of the duties of the Agent hereunder until such time, if any, as the
Required Lenders appoint a successor agent as provided for above. After any
retiring Agent's resignation as Agent, the provisions of this Article VIII shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement and the other Loan Documents.
SECTION 8.10. Documentation Agents and Syndication Agents. None of the
documentation agents, syndication agents or any other Lender designated as an
"Agent" for purposes of this Agreement (other than JPMorgan Chase Bank in its
capacity as Agent) shall have any duties or responsibilities hereunder in its
capacity as such.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment or waiver of any provision
of this Agreement or any other Loan Document, nor consent to any departure by
any Borrower or any Loan Party therefrom, shall in any event be effective unless
the same shall be in writing and signed by the Required Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver
or consent shall (a) unless in writing and signed by each Lender directly
affected thereby, do any of the following: (i) increase the amount or extend the
expiration date of any Lender's Commitment, (ii) reduce the principal of, or
interest on, the Advances or any fees or other amounts payable hereunder or
(iii) postpone any date fixed for any payment of principal of, or interest on,
the Advances or any fees or other amounts payable hereunder; (b) unless in
writing and signed by all of the Lenders, do any of the following: (i) change
the percentage of the Commitments or of the aggregate unpaid principal amount of
the Advances, or the number of Lenders, that shall be required for the Lenders
or any of them to take any action hereunder, (ii) other than in accordance with
Section 9.13, release all or substantially all of the Collateral or release all
or substantially all of the guarantors from their obligations under the
Guarantee and Collateral Agreement, (iii)
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amend Section 9.13(c), (iv) amend this Section 9.01 or (v) other than in
accordance with Section 6.01(d), release either Borrower from all of its
obligations hereunder; (c) unless in writing and signed by the Supermajority
Lenders, increase any advance rate percentage set forth in the definition of
"Borrowing Base"; (d) unless in writing and signed by the Agent (in addition to
the Lenders required above to take such action), amend, modify or waive any
provision of Article VIII or affect the rights or duties of the Agent under this
Agreement or any other Loan Document; (e) unless in writing and signed by the
Swingline Lender (in addition to the Lenders required above to take such
action), amend, modify or waive any provision of Section 2.03 or 2.04; or (f)
unless in writing and signed by each Issuing Lender (in addition to the Lenders
required above to take such action), amend, modify or waive any provision of
Article III.
SECTION 9.02. Notices, Etc. (a) All notices and other communications
provided for hereunder shall be in writing (including telecopier communication)
and mailed, telecopied or delivered, if to Holdings, at its address at 3333
Beverly Road, Hoffman Estates, Illinois 60179, Attention: President/CEO, with a
copy to Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York
10019, Attention: Scott Charles; if to SRAC, at its address at 3711 Kennett
Pike, Greenville, Delaware 19807, Attention: President, with a copy to Wachtell,
Lipton, Rosen & Katz at its address set forth above; if to Kmart Corp., at its
address at 3100 West Big Beaver Road, Troy, Michigan 48084, Attentions: Chief
Financial Officer and General Counsel, with a copy to Wachtell, Lipton, Rosen &
Katz at its address set forth above; if to any Lender, at its address set forth
in its completed administrative questionnaire delivered to the Agent; and if to
the Agent, the Swingline Lender or the Issuing Lender, at its address at 1111
Fannin Street, Houston, Texas 77002, Attention: Erin M. Merritt, JPMorgan Loan
Services - Deal Management; or, as to any Borrower, the Agent, the Swingline
Lender or any Issuing Lender, at such other address as shall be designated by
such party in a written notice to the other parties and, as to each other party,
at such other address as shall be designated by such party in a written notice
to the Borrowers and the Agent; provided that notices required to be delivered
pursuant to Section 6.01(j)(i), (ii), (iii) and (v) shall be delivered to the
Agent and the Lenders as specified in Section 9.02(b). All such notices and
communications shall, when mailed, telecopied, telegraphed or emailed, be
effective when deposited in the mails, telecopied, delivered to the telegraph
company or confirmed by email, respectively, except that notices and
communications to the Agent pursuant to Article II, III or VIII shall not be
effective until received by the Agent. Delivery by telecopier of an executed
counterpart of any amendment or waiver of any provision of this Agreement or any
Loan Document or of any exhibit hereto or thereto to be executed and delivered
hereunder shall be effective as delivery of a manually executed counterpart
thereof.
(b) So long as JPMorgan Chase Bank or any of its Affiliates is the
Agent, materials required to be delivered pursuant to Sections 6.01(j)(i), (ii),
(iii) and (v) shall be delivered to the Agent in an electronic medium in a
format acceptable to the Agent by e-mail at erin.m.merritt@jpmorgan.com.
Holdings and the Borrowers agree that the Agent may make such materials, as well
as any other written information, documents, instruments and other material
relating to Holdings, the Borrowers, any of their Subsidiaries or any other
materials or matters relating to this Agreement, the Loan Documents or any of
the transactions contemplated hereby (collectively, the "Communications")
available to the Lenders by posting such notices on Intralinks or a
substantially similar electronic system (the "Platform"). Holdings and the
Borrowers acknowledge that (i) the distribution of material through an
electronic medium is not necessarily secure and that there are confidentiality
and other risks associated with such distribution, (ii) the Platform is provided
"as is" and "as available" and (iii) neither the Agent nor any of its Affiliates
warrants the accuracy, adequacy or completeness of the Communications or the
Platform and each expressly disclaims liability for errors or omissions in the
Communications or the Platform. No warranty of any kind, express, implied or
statutory, including any warranty of merchantability, fitness for a particular
purpose, non-infringement of third party rights or freedom from viruses or other
code defects, is made by the Agent or any of its Affiliates in connection with
the Platform.
(c) Each Lender agrees that notice to it (as provided in the next
sentence) (a "Notice") specifying that any Communications have been posted to
the Platform shall constitute effective delivery of such information, documents
or other materials to such Lender for purposes of this Agreement; provided that
if requested by any Lender the Agent shall deliver a copy of the Communications
to such Lender by email or telecopier. Each Lender agrees (i) to notify the
Agent in writing of such Lender's e-mail address to which a Notice may be sent
by electronic transmission (including by electronic communication) on or before
the date such Lender becomes a party to this Agreement (and from time to time
thereafter to ensure that the Agent has on record an effective e-mail address
for such Lender) and (ii) that any Notice may be sent to such e-mail address.
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SECTION 9.03. No Waiver; Remedies. No failure on the part of any Lender
or the Agent to exercise, and no delay in exercising, any right hereunder or
under any other Loan Document shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 9.04. Costs and Expenses. (a) Holdings and the Borrowers
jointly and severally agree to pay promptly all reasonable costs and expenses of
the Agent in connection with the preparation, execution, delivery, distribution
(including via the internet or through a service such as Intralinks),
administration, modification and amendment of this Agreement, the other Loan
Documents and the other documents to be delivered hereunder, including, (A) all
due diligence, syndication (including printing, distribution and bank meetings),
transportation, computer, duplication, appraisal, consultant, and audit
expenses, (B) subject to Section 6.01(k), all expenses incurred in connection
with inspections, verifications, examinations and appraisals relating to the
Borrowing Base and the Collateral, and (C) the reasonable fees and expenses of
counsel for the Agent with respect thereto and with respect to advising the
Agent as to its rights and responsibilities under this Agreement and the other
Loan Documents. Holdings and the Borrowers further jointly and severally agree
to pay on demand all costs and expenses of the Agent and the Lenders, if any
(including reasonable counsel fees and expenses), in connection with the
enforcement (whether through negotiations, legal proceedings or otherwise) of
this Agreement, the other Loan Documents and the other documents to be delivered
hereunder, including reasonable fees and expenses of one counsel for the Agent
and one counsel for the Lenders in connection with the enforcement of rights
under this Section 9.04(a).
(b) Holdings and the Borrowers jointly and severally agree to indemnify
and hold harmless the Agent and each Lender and each of their Affiliates and
their officers, directors, employees, agents and advisors (each, an "Indemnified
Party") from and against any and all claims, damages, losses, liabilities and
expenses (including reasonable fees and expenses of counsel) incurred by or
asserted or awarded against any Indemnified Party, in each case arising out of
or in connection with or by reason of (including in connection with any
investigation, litigation or proceeding or preparation of a defense in
connection therewith) (i) this Agreement, the other Loan Documents, any of the
transactions contemplated herein or the actual or proposed use of the Letters of
Credit or the proceeds of the Advances, (ii) the actual or alleged presence of
Hazardous Materials on any property of the Borrowers or any of their
Subsidiaries or any Environmental Action relating in any way to the Borrowers or
any of their Subsidiaries, except to the extent such claim, damage, loss,
liability or expense is found in a final, non-appealable judgment by a court of
competent jurisdiction to have resulted from such Indemnified Party's gross
negligence or willful misconduct. In the case of an investigation, litigation or
other proceeding to which the indemnity in this Section 9.04(b) applies, such
indemnity shall be effective whether or not such investigation, litigation or
proceeding is brought by Holdings, any Borrower, its directors, equityholders or
creditors or an Indemnified Party or any other Person, whether or not any
Indemnified Party is otherwise a party thereto and whether or not the
transactions contemplated hereby are consummated. Holdings and the Borrowers
also agree not to assert any claim for special, indirect, consequential or
punitive damages against the Agent, any Lender, any of their Affiliates, or any
of their respective directors, officers, employees, attorneys and agents, on any
theory of liability, arising out of or otherwise relating to this Agreement, the
other Loan Documents, any of the transactions contemplated herein or the actual
or proposed use of the Letters of Credit or the proceeds of the Advances.
(c) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance is made by any Borrower to or for the account of a Lender other
than on the last day of the Interest Period for such Advance, as a result of a
payment or Conversion pursuant to Section 2.09(d) or (e), 2.11 or 2.13,
acceleration of the maturity of the Advances pursuant to Section 7.01 or for any
other reason, or by an Eligible Assignee to a Lender other than on the last day
of the Interest Period for such Advance upon an assignment of rights and
obligations under this Agreement pursuant to Section 9.07 as a result of a
demand by any Borrower pursuant to Section 9.07(a), the applicable Borrower
shall, promptly after notice by such Lender setting forth in reasonable detail
the calculations used to quantify such amount (with a copy of such notice to the
Agent), pay to the Agent for the account of such Lender any amounts required to
compensate such Lender for any additional losses, costs or expenses that it may
reasonably incur as a result of such payment or Conversion, including any loss
(including loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by any
Lender to fund or maintain such Advance.
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(d) Without prejudice to the survival of any other agreement of
Holdings or any Borrower hereunder, the agreements and obligations of Holdings
and the Borrowers contained in Sections 2.12, 2.15 and 9.04 shall survive the
payment in full of principal, interest and all other amounts payable hereunder
and under the other Loan Documents.
SECTION 9.05. Right of Set-off. Upon (i) the occurrence and during the
continuance of any Event of Default and (ii) the making of the request or the
granting of the consent specified by Section 7.01 to authorize the Agent to
declare the Extensions of Credit due and payable pursuant to the provisions of
Section 7.01, each Lender 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 indebtedness at any time owing by such
Lender or such Affiliate to or for the credit or the account of Holdings or any
Borrower against any and all of the obligations of Holdings and the Borrowers
now or hereafter existing under this Agreement and the Extensions of Credit of
such Lender, whether or not such Lender shall have made any demand under this
Agreement. Each Lender agrees promptly to notify Holdings or the applicable
Borrower after any such set-off and application, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
The rights of each Lender and its Affiliate under this Section are in addition
to other rights and remedies (including other rights of set-off) that such
Lender and its Affiliate may have.
SECTION 9.06. Binding Effect; Effectiveness. When this Agreement has
been executed by Holdings, the Borrowers and the Agent and when the Agent shall
have been notified by each Initial Lender that such Initial Lender has executed
it, this Agreement shall thereafter be binding upon and inure to the benefit of
Holdings, the Borrowers, the Agent and each Lender and their respective
successors and assigns; provided that, except with respect to Sections 9.07 and
9.08, this Agreement shall only become effective upon satisfaction of the
conditions precedent set forth in Section 4.01 and none of the provisions of
this Agreement other than Sections 9.07 and 9.08, including without limitation
provisions in respect of Advances and Letters of Credit to be made by or issued
by any Lender, and in respect of any covenant, fee, indemnity, default, and
expense reimbursement made by any Loan Party or for which any Loan Party is
liable hereunder, shall become effective, nor shall any representation herein be
deemed to be made, until the satisfaction of such conditions. In the event the
agreement between Sears and Kmart in respect of the Merger is terminated, then
upon termination of such agreement this Agreement shall immediately and
automatically be terminated and be rendered null and void without giving effect
to any provision herein.
SECTION 9.07. Assignments and Participations. (a) Each Lender may, upon
notice to the Borrowers and the Agent and with the consent, not to be
unreasonably withheld, of the Agent, the Issuing Lender, and, unless an Event of
Default has occurred and is continuing, the Borrowers, and if demanded by any
Borrower (following a demand by such Lender pursuant to Section 2.12 or 2.15)
upon at least five Business Days' notice to such Lender and the Agent and the
Issuing Lender will, assign to one or more Persons all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Commitment, the Advances and other amounts owing to it and any Note or Notes
held by it); provided, however, that (i) each such assignment shall be of a
constant, and not a varying, percentage of all rights and obligations under this
Agreement, (ii) except in the case of an assignment to a Person that,
immediately prior to such assignment, was a Lender or an assignment of all of a
Lender's rights and obligations under this Agreement, the amount of the
Commitment of the assigning Lender being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than $10,000,000 (unless
an Event of Default has occurred and is continuing, in which case not less than
$5,000,000) or an integral multiple of $1,000,000 in excess thereof unless the
Borrowers and the Agent otherwise agree, (iii) each such assignment shall be to
an Eligible Assignee, (iv) each such assignment made as a result of a demand by
any Borrower pursuant to this Section 9.07(a) shall be arranged by such Borrower
after consultation with and subject to the consent, not to be unreasonably
withheld, of the Agent and the Issuing Lender and shall be either an assignment
of all of the rights and obligations of the assigning Lender under this
Agreement or an assignment of a portion of such rights and obligations made
concurrently with another such assignment or other such assignments that
together cover all of the rights and obligations of the assigning Lender under
this Agreement, (v) no Lender shall be obligated to make any such assignment as
a result of a demand by any Borrower pursuant to this Section 9.07(a) unless and
until such Lender shall have received one or more payments from either the
Borrowers or one or more Eligible Assignees in an aggregate amount at least
equal to the aggregate outstanding principal amount of the Advances owing to
such Lender, together with accrued interest thereon to the date of payment of
such principal amount and all other amounts payable to such Lender under this
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Agreement, and (vi) the parties to each such assignment shall execute and
deliver to the Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, and the parties to such assignment (other than the
Borrowers, the Agent and the Issuing Lender) shall deliver together therewith
any Note subject to such assignment and a processing and recordation fee of
$3,500, provided, however, that in the case of each assignment made as a result
of a demand by any Borrower, such recordation fee shall be payable by the
Borrowers, and (vii) any Lender may, without the approval of the Borrowers, but
with notice to the Borrowers, assign all or a portion of its rights and
obligations to any of its Affiliates or to another Lender. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Assignment and Acceptance, (x) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder and (y) the Lender assignor thereunder shall,
to the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights (other than
its rights under Section 2.12, 2.15 and 9.04 to the extent any claim thereunder
relates to an event arising prior such assignment) and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the other Loan Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or the other Loan Documents
or any other instrument or document furnished pursuant hereto or thereto; (ii)
such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrowers or the
performance or observance by the Borrowers of any of their obligations under
this Agreement or any other instrument or document furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy of this Agreement,
together with copies of the financial statements referred to in Section 5.01 and
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Assignment and Acceptance;
(iv) such assignee will, independently and without reliance upon the Agent, such
assigning Lender or any other Lender and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement and the other Loan
Documents; (v) such assignee confirms that it is an Eligible Assignee; (vi) such
assignee appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers and discretion under this Agreement and the
other Loan Documents as are delegated to the Agent by the terms hereof and
thereof, together with such powers and discretion as are reasonably incidental
thereto; and (vii) such assignee agrees that it will perform in accordance with
their terms all of the obligations that by the terms of this Agreement are
required to be performed by it as a Lender.
(c) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee representing that it is an Eligible Assignee,
together with any Note or Notes subject to such assignment, the Agent shall, if
such Assignment and Acceptance has been completed and is in substantially the
form of Exhibit B hereto, (i) accept such Assignment and Acceptance, (ii) record
the information contained therein in the Register and (iii) give prompt notice
thereof to the Borrowers.
(d) The Agent shall maintain at its address referred to in Section 9.02
a copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Lenders and the
Commitment of, and principal amount of the Advances and L/C Obligations owing
to, each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrowers, the Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrowers or
any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Each Lender may sell participations to one or more banks or other
entities (other than the Borrowers or any of their Affiliates) in or to all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment, the Advances owing to it and any Note or Notes held
by it); provided, however, that (i) such Lender's obligations under this
Agreement (including its Commitment to the Borrowers and
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its obligations to the Swingline Lender and the Issuing Lender hereunder) shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) such Lender shall
remain the holder of any such Note for all purposes of this Agreement, (iv) the
Borrowers, the Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and (v) no participant under any such
participation shall have any right to approve any amendment or waiver of any
provision of this Agreement or any Loan Document, or consent to any departure by
any Borrower therefrom, except to the extent that such amendment, waiver or
consent would require the affirmative vote of the Lender from which it purchased
its participation pursuant to Section 9.01(a).
(f) Any Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 9.07, disclose
to the assignee or participant or proposed assignee or participant, any
information relating to Holdings, the Borrowers or their Subsidiaries furnished
to such Lender by or on behalf of the Borrowers; provided that, prior to any
such disclosure, the assignee or participant or proposed assignee or participant
shall agree to preserve the confidentiality of any Borrower Information relating
to Holdings, the Borrowers or their Subsidiaries received by it from such Lender
in accordance with Section 9.08.
(g) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time create a security interest in all or any portion of
its rights under this Agreement (including the Advances owing to it and any
Notes held by it) in favor of any Federal Reserve Bank in accordance with
Regulation A of the Board of Governors of the Federal Reserve System.
(h) The Borrowers, upon receipt of written notice from the relevant
Lender, agree to issue Notes to any Lender to facilitate transactions of the
type described in paragraph (g) above.
(i) Neither Holdings nor any Borrower shall have the right to assign
its rights hereunder or any interest herein without the prior written consent of
each of the Lenders (except, in the case of SRAC, pursuant to Section 6.01(d)).
SECTION 9.08. Confidentiality. Neither the Agent nor any Lender may
disclose to any Person any confidential, proprietary or non-public information
of Holdings or the Borrowers furnished to the Agent or the Lenders by Holdings
or the Borrowers (such information being referred to collectively herein as the
"Borrower Information"), except that each of the Agent and each of the Lenders
may disclose Borrower Information (i) to its and its affiliates' employees,
officers, directors, agents and advisors to whom disclosure is required to
enable the Agent or such Lender to perform its obligations under this Agreement
or in connection with the administration or monitoring of this Agreement by the
Agent or such Lender (it being understood that the Persons to whom such
disclosure is made will be informed of the confidential nature of such Borrower
Information and instructed to keep such Borrower Information confidential on
substantially the same terms as provided herein), (ii) to the extent requested
by any regulatory authority, (iii) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (iv) to any other party
to this Agreement, (v) in connection with the exercise of any remedies hereunder
or any suit, action or proceeding relating to this Agreement or the enforcement
of rights hereunder or thereunder, (vi) subject to an agreement containing
provisions substantially the same as those of this Section 9.08, to any assignee
or participant, or any prospective assignee or participant, (vii) to the extent
such Borrower Information (A) is or becomes generally available to the public on
a non-confidential basis other than as a result of a breach of this Section 9.08
by the Agent or such Lender, as the case may be, or (B) is or becomes available
to the Agent or such Lender on a non-confidential basis from a source other than
Holdings, the Borrowers or any of their Subsidiaries and (viii) with the consent
of the Borrowers.
SECTION 9.09. Governing Law. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 9.10. Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of
this Agreement.
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SECTION 9.11. Jurisdiction, Etc. (a) Each of the parties hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court or federal court of the
United States of America sitting in New York City, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in any such New York State court or, to the extent permitted by
law, in such federal court. Holdings and each of the Borrowers hereby
irrevocably consents to the service of process in any action or proceeding in
such courts by the mailing thereof by any parties hereto by registered or
certified mail, postage prepaid, to Holdings or such Borrower at its address
specified pursuant to Section 9.02. Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that any party
may otherwise have to bring any action or proceeding relating to this Agreement
or the other Loan Documents in the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection that
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents in any New York State or federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
SECTION 9.12. WAIVER OF JURY TRIAL. EACH OF HOLDINGS, THE BORROWERS,
THE AGENT, THE ISSUING LENDER AND THE LENDERS HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED
ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE OTHER LOAN DOCUMENTS OR THE ACTIONS OF THE AGENT OR ANY LENDER IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
SECTION 9.13. Release of Collateral. (a) Notwithstanding anything to
the contrary contained herein or in any other Loan Document, the Agent is hereby
irrevocably authorized by each Lender (without requirement of consent of or,
except as set forth in paragraph (c) below, notice to any Lender) to take, and
hereby agrees to take, any action requested by the Borrowers having the effect
of releasing any Collateral or guarantee obligations (i) to the extent necessary
to permit consummation of any transaction not prohibited by any Loan Document or
that has been consented to in accordance with Section 9.01 or (ii) under the
circumstances described in paragraph (b) or (c) below.
(b) At such time as the Advances, the Reimbursement Obligations and the
other obligations under the Loan Documents shall have been paid in full, the
Commitments have been terminated and no Letter of Credit shall be outstanding,
the Collateral shall be released from the Liens created by the Security
Documents, and the Security Documents and all obligations (other than those
expressly stated to survive such termination) of the Agent and each Loan Party
under the Security Documents shall terminate, all without delivery of any
instrument or performance of any act by any Person.
(c) On any date on or after the second anniversary of the Effective
Date on which (i) the Consolidated Adjusted Leverage Ratio for each of the four
quarter periods of Holdings ending as of the dates of the three most recently
completed fiscal quarters of Holdings is less than 2.25 to 1.0 or (ii) any class
of non-credit enhanced long term senior unsecured debt of Holdings has at least
two Investment Grade Ratings, then so long as no Default or Event of Default
exists on such date, the Borrowers may, by written notice to the Agent (which
notice shall (x) attach a certificate of an Authorized Officer of Holdings
setting forth in reasonable detail the calculations necessary to demonstrate
Holdings' satisfaction of the condition set forth in clause (i) of this
paragraph (c) and compliance with the covenants set forth in Section 6.03 as of
the end of the most recently completed fiscal quarter for which financial
statements are available and (y) promptly be distributed by the Agent to the
Lenders), request that all Collateral be released from the Liens created by the
Security Document, and upon the Agent's receipt of such written request all
Collateral shall be released from such Liens (all such released Collateral being
the "Released Collateral"), all without delivery of any instrument or
performance of any act by any party, and all rights to the Released Collateral
shall revert to the Loan Parties. At the request and sole expense of any Loan
Party following
51
any such release, the Agent shall deliver to such Loan Party any Released
Collateral held by the Agent under any Security Document, and execute and
deliver to such Loan Party such documents as such Loan Party shall reasonably
request to evidence such release.
SECTION 9.14. USA PATRIOT Act Notice. Each Lender that is subject to
the Act (as hereinafter defined) and the Agent (for itself and not on behalf of
any Lender) hereby notifies each Borrower that pursuant to the requirements of
the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the "Act"), it is required to obtain, verify and record information that
identifies each Borrower, which information includes the name and address of
such Borrower and other information that will allow such Lender or the Agent, as
applicable, to identify such Borrower in accordance with the Act. Each Borrower
hereby agrees to provide such information promptly upon the request of any
Lender or the Agent.
SECTION 9.15. Integration. This Agreement and the other Loan Documents
represent the agreement of the Holdings, the Borrowers, the Agent and the
Lenders with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Agent or any Lender
relative to subject matter hereof and thereof not expressly set forth or
referred to herein or in the other Loan Documents.
52
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
SEARS HOLDINGS CORPORATION
By: /s/ Allen R. Ravas
----------------------------------------
Name: Allen R. Ravas
Title: VP Assistant Treasurer
SEARS ROEBUCK ACCEPTANCE CORP.
By: /s/ Keith Trost
----------------------------------------
Name: Keith Trost
Title: President
KMART CORPORATION
By: /s/ Allen R. Ravas
----------------------------------------
Name: Allen R. Ravas
Title: Treasurer
53
JPMORGAN CHASE BANK, N.A.,
as Agent, Swingline Lender and Issuing Lender
By: /s/Teri Streusand
----------------------------------------
Name: Teri Streusand
Title: Vice President
CITICORP USA, INC.,
as a Syndication Agent and Issuing Lender
By: /s/ Carolyn Kee
----------------------------------------
Name: Carolyn Kee
Title: Vice President
BANK OF AMERICA, N.A.,
as a Syndication Agent and Issuing Lender
By: /s/ Daniel Platt
----------------------------------------
Name: Daniel Platt
Title: Director
BARCLAYS BANK PLC, as a Documentation Agent
By: /s/ Nicholas Bell
----------------------------------------
Name: Nicholas Bell
Title: Director
LEHMAN COMMERCIAL PAPER INC., as a
Documentation Agent
By: /s/ Janine M. Shugan
----------------------------------------
Name: Janine Shugan
Title: Authorized Signatory
HSBC BANK USA, as a Documentation Agent
By: /s/ John Lyons
----------------------------------------
Name: John Lyons
Title: Senior Vice President
54
MERRILL LYNCH BANK USA, as a Documentation
Agent
By: /s/ Louis Alder
----------------------------------------
Name: Louis Alder
Title: Director
MORGAN STANLEY BANK, as a Documentation Agent
By: /s/ Daniel Twenge
----------------------------------------
Name: Daniel Twenge
Title: Vice President
THE ROYAL BANK OF SCOTLAND, PLC, as a
Documentation Agent
By: /s/ Charlotte Sohn Fuiks
----------------------------------------
Name: Charlotte Sohn Fuiks
Title: Senior Vice President
WACHOVIA BANK NATIONAL ASSOCIATION, as a
Documentation Agent
By: /s/ Thomas Grabosky
----------------------------------------
Name: Thomas Grabosky
Title: First Vice President
J.P. MORGAN SECURITIES INC., as Lead Arranger
By: /s/ Bruce S. Borden
----------------------------------------
Name: Bruce S. Borden
Title: Vice President
BANC OF AMERICA SECURITIES LLC, as Lead
Arranger
By: /s/ Jeffrey McLand
----------------------------------------
Name: Jeffrey McLand
Title: Vice President
CITIGROUP GLOBAL MARKETS INC., as Lead Arranger
By: /s/ Jeffrey Nitz
----------------------------------------
Name: Jeffrey Nitz
Title: Director
55
By: /s/ Jeffrey Nitz
----------------------------------
Name: Jeffrey Nitz
Title: Director
56
Commitment: $230,200,000.00 JPMorgan Chase Bank, N.A.
---------------------------------
Name of Lender
By: /s/ Teri Streusand
----------------------------------
Name: Teri Streusand
Title: Vice President
Domestic Lending Office:
Address: 1111 Fannin Street
Houston, TX 77002
Attention: Erin M. Merritt
Phone: 713-750-2119
Facsimile: 713-750-2782
Eurodollar Lending Office:
Address: 1111 Fannin Street
Houston, TX 77002
Attention: Erin M. Merritt
Phone: 713-750-2119
Facsimile: 713-750-2782
57
Commitment: $230,200,000.00 Citicorp USA, Inc.
-----------------
Name of Lender
By: /s/ Carolyn Kee
----------------------------------
Name: Carolyn Kee
Title: Vice President
Domestic Lending Office:
Address: Citicorp USA, Inc.
399 Park Avenue 16th Floor
New York, NY
Attention: Alex Iannelli
Phone: 302-894-6058
Facsimile: 212-994-0847
Eurodollar Lending Office:
Address: Citicorp USA, Inc.
399 Park Avenue 16th Floor
New York, NY
Attention: Alex Iannelli
Phone: 302-894-6058
Facsimile: 212-994-0847
58
Commitment: $230,200,000.00 Bank of America, N.A.
---------------------
Name of Lender
By: /s/ Daniel Platt
----------------------------------
Name: Daniel Platt
Title: Director
Domestic Lending Office:
Address: 40 Broad St. 10th Floor
Boston, MA 02110
Attention: Daniel Platt
Phone: 617-434-4190
Facsimile: 617-434-4312
Eurodollar Lending Office:
Address: 40 Broad St. 10th Floor
Boston, MA 02110
Attention: Daniel Platt
Phone: 617-434-4190
Facsimile: 617-434-4312
59
Commitment: $217,200,000.00 Barclays Bank PLC
-----------------
Name of Lender
By: /s/ Nicholas Bell
----------------------------------
Name: Nicholas Bell
Title: Director
Domestic Lending Office:
Address: 200 Park Avenue,
New York, NY 10166
Attention: Nicholas Bell
Phone: 212-412-4029
Facsimile: 212-412-7600
Eurodollar Lending Office:
Address: 200 Park Avenue,
New York, NY 10166
Attention: Nicholas Bell
Phone: 212-412-4029
Facsimile: 212-412-7600
60
Commitment: $217,200,000 Lehman Brothers Bank, FSB
-------------------------
Name of Lender
By: /s/ Janine M. Shugan
----------------------------------
Name: Janine M. Shugan
Title: Authorized Signatory
Domestic Lending Office:
Address: 745 Seventh Avenue, 16th Floor
New York, NY 10019
Attention: Joseph Lo
Phone: 212-526-6560
Facsimile: 212-520-0450
Eurodollar Lending Office:
Address: 745 Seventh Avenue, 16th Floor
New York, NY 10019
Attention: Joseph Lo
Phone: 212-526-6560
Facsimile: 212-520-0450
61
Commitment: $217,200,000.00 Wachovia Bank, N.A.
-------------------
Name of Lender
By: /s/ Thomas Grabosky
----------------------------------
Name: Thomas Grabosky
Title: First Vice President
Domestic Lending Office:
Address: 1133 Avenue of the Americas
New York, NY 10036
Attention: Dave Hill
Phone: 212-545-4418
Facsimile: 212-545-4283
Eurodollar Lending Office:
Address: 1133 Ave of the Americas
New York, NY 10036
Attention: Sam Ho
Phone: 212-545-4468
Facsimile: 212-545-4246
62
Commitment: $217,200,000.00 Morgan Stanley Bank
-------------------
Name of Lender
By: /s/ Daniel Twenge
----------------------------------
Name: Daniel Twenge
Title: Vice President
Morgan Stanley Bank
Domestic Lending Office:
Address: 1633 Broadway, 25th Fl
New York, NY 10019
Attention: Larry Benison
Phone: 212-537-1439
Facsimile: 212-537-1867
Eurodollar Lending Office:
Address: 1633 Broadway, 25th Fl
New York, NY 10019
Attention: Larry Benison
Phone: 212-537-1439
Facsimile: 212-537-1867
63
Commitment: $217,200,000.00 HSBC Bank USA
-------------
Name of Lender
By: /s/ John Lyons
----------------------------------
Name: John Lyons
Title: Senior Vice President
Domestic Lending Office:
Address: 452 Fifth Avenue, 5th Fl.
New York, NY 10018
Attention: Robert Corder, S.V.P.
Phone: 212-525-2602
Facsimile: 212 525-2479
Eurodollar Lending Office:
Address: 452 Fifth Avenue, 5th Fl.
New York, NY 10018
Attention: Robert Corder, S.V.P.
Phone: 212-525-2602
Facsimile: 212 525-2479
64
Commitment: $217,200,000.00 Merrill Lynch Bank, USA
-----------------------
Name of Lender
By: /s/ Louis Alder
----------------------------------
Name: Louis Alder
Title: Director
Domestic Lending Office:
Address: Merrill Lynch Bank USA
15 W. South Temple St. STE 300
Sale Lake City, UT 84101
Attention: Julie Young
Phone: 801-526-8331
Facsimile: 801-359-4667
Eurodollar Lending Office:
Address: Merrill Lynch Bank USA
15 W. South Temple St. STE 300
Sale Lake City, UT 84101
Attention: Julie Young
Phone: 801-526-8331
Facsimile: 801-359-4667
65
Commitment: $217,200,000.00 The Royal Bank of Scotland plc
------------------------------
Name of Lender
By: /s/ Charlotte Sohn Fuiks
----------------------------------
Name: Charlotte Sohn Fuiks
Title: Senior Vice President
Domestic Lending Office:
Address: 101 Park Avenue
New York, NY 10178
Attention: Charlotte Sohn Fuiks
Phone: 212-401-3703
Facsimile: 212-401-3456
Eurodollar Lending Office:
Address: 101 Park Avenue
New York, NY 10178
Attention: Charlotte Sohn Fuiks
Phone: 212-401-3703
Facsimile: 212-401-3456
66
Commitment: $197,400,000.00 Goldman Sachs Credit Partners, L.P.
-----------------------------------
Name of Lender
By: /s/ Tom Connolly
----------------------------------
Name: Tom Connolly
Title: Authorized Signatory
Domestic Lending Office:
Address: 30 Hudson Street, 17th Fl
Jersey City, NJ 07302
Attention: Philip.Green@gs.com
Phone: 212-357-7570
Facsimile: 212-357-4597
Eurodollar Lending Office:
Address: Goldman Sachs International
Peterborough Court
133 Fleet Street, London EC4 A 2BB
Attention: Katherine.Gillespie@gs.com
Phone: 44(20) 7774-6457
*The London Office is only needed for same day borrowing. New York will
otherwise fund both in US Dollars and Euros.
67
Commitment: $197,400,000.00 Harris Nesbitt Financing, Inc.
------------------------------
Name of Lender
By: /s/ Joseph W. Linder
----------------------------------
Name: Joseph W. Linder
Title: Vice President
Domestic Lending Office:
Address: 115 LaSalle Street; 17W
Chicago, IL 60603-3868
Attention: Ellen Dancer
Client Service Officer
Phone: 312-461-2587
Facsimile: 312-293-5283
Eurodollar Lending Office:
Address: 115 LaSalle Street; 17W
Chicago, IL 60603-3868
Attention: Ellen Dancer
Client Service Officer
Phone: 312-461-2587
Facsimile: 312-293-5283
68
Commitment: $197,400,000.00 CREDIT SUISSE FIRST BOSTON, acting
through its Cayman Islands Branch
-----------------------------------
Name of Lender
By: /s/ Phillip Ho
----------------------------------
Name: Phillip Ho
Title: Director
By: /s/ Cassandra Droogan
----------------------------------
Name: Cassandra Droogan
Title: Associate
Domestic Lending Office:
Address: Eleven Madison Avenue
New York, NY 10010
Attention: Cassandra Droogan
Phone: 212-325-2949
Facsimile: 212-325-8319
Eurodollar Lending Office:
Address: Eleven Madison Avenue
New York, NY 10010
Attention: Cassandra Droogan
Phone: 212-325-2949
Facsimile: 212-325-8319
69
Commitment: $197,400,000.00 The Bank of Nova Scotia
-----------------------
Name of Lender
By: /s/ V. Gibson
----------------------------------
Name: V. Gibson
Title: Assistant Agent
Domestic Lending Office:
Address: 600 Peachtree St., N.E.
Suite 2700
Atlanta, GA 30308
Attention: George Wong
Phone: 404-877-1556
Facsimile: 404-888-8998
Eurodollar Lending Office:
Address: 600 Peachtree St., N.E.
Suite 2700
Atlanta, GA 30308
Attention: George Wong
Phone: 404-877-1556
Facsimile: 404-888-8998
70
Commitment: $197,400,000.00 Bear Stearns Corporate Lending Inc.
-----------------------------------
Name of Lender
By: /s/ Victor Bulzacchelli
----------------------------------
Name: Victor Bulzacchelli
Title: Vice President
Domestic Lending Office:
Address: Bear, Stearns & Co., Inc.
383 Madison Avenue
New York, NY 10179
Attention: Randall Trombley
Phone: 212-272-8871
Facsimile: 212-272-9184
E-Mail: rtrombley@bear.com
Eurodollar Lending Office
N/A
Commitment: $100,000,000.00 The CIT Group/Business Credit, Inc.
-----------------------------------
Name of Lender
By: /s/ Christopher J. Esposito
----------------------------------
Name: Christopher J. Esposito
Title: Vice President
Domestic Lending Office:
Address: 300 South Grand Avenue, 3rd,
Floor
Los Angeles, CA 90071
Attention: Becky Martin
Phone: 213-613-2510
Facsimile: 213-613-2599
Eurodollar Lending Office:
Address: 300 South Grand Avenue, 3rd,
Floor
Los Angeles, CA 90071
Attention: Becky Martin
Phone: 213-613-2510
Facsimile: 213-613-2599
Commitment: $100,000,000.00 Royal Bank of Canada
--------------------
Name of Lender
By: /s/ Howard Lee
----------------------------------
Name: Howard Lee
Title: Authorized Signatory
Domestic Lending Office:
Address: Royal Bank of Canada
New York Branch
One Liberty Plaza - 4th Floor
New York, NY 10006
Attention: Linda Joannou
Phone: 212-428-6212
Facsimile: 212-428-2372
Eurodollar Lending Office:
Address: Royal Bank of Canada
New York Branch
One Liberty Plaza - 4th Floor
New York, NY 10006
Attention: Linda Joannou
Phone: 212-428-6212
Facsimile: 212-428-2372
Commitment: $75,000,000.00 National City Bank
------------------
Name of Lender
By: /s/ Brian T. Strayton
----------------------------------
Name: Brian T. Strayton
Title: Senior Vice President
Domestic Lending Office:
Address: National City Park
1900 East Ninth Street
Cleveland, Oh 44114
Attention: David Gregory
Phone: 216-488-7087
Facsimile: 216-488-7110
Eurodollar Lending Office:
Address: National City Bank
1900 East Ninth Street
Cleveland, OH 44114
Attention: David Gregory
Phone: 216-488-7087
Facsimile: 216-488-7110
Commitment: $75,000,000.00 The Bank of New York
--------------------
Name of Lender
By: /s/ Lucille Madden
----------------------------------
Name: Lucille Madden
Title: Vice President
Domestic Lending Office:
Address: One Wall Street, 8th Floor
New York, NY 10286
Attention: Laina Chan
Phone: 212-635-1366
Facsimile: 212-635-1483
Eurodollar Lending Office:
Address: One Wall Street, 8th Floor
New York, NY 10286
Attention: Laina Chan
Phone: 212-635-1366
Facsimile: 212-635-1483
2
Commitment: $70,000,000.00 Banco Popular de Puerto Rico
By: /s/ Hector J. Gonzalez
----------------------
Name: Hector J. Gonzalez
Title: Vice President
Domestic Lending Office:
Address: 7 West 51st Street
New York, NY 10019
Attention: Hector J. Gonzalez
Phone: 212-445-1988
Facsimile: 212-245-4677
Eurodollar Lending Office:
Address: 7 West 51st Street
New York, NY 10019
Attention: Hector J. Gonzalez
Phone: 212-445-1988
Facsimile: 212-245-4677
3
Commitment: $50,000,000.00 CIBC, Inc.
By: /s/ Dominic J. Sorresso
-----------------------
Name: Dominic J. Sorresso
Title: Executive Director
CIBC World Markets Corp., as Agent
Domestic Lending Office:
Address: 40 Dundas Street, 5th Floor
Toronto, Ontario
Canada M5G 2C2
Attention: Asanka de Silva
Phone: 416-542-4465
Facsimile: 416-542-4558
Eurodollar Lending Office:
Address: 40 Dundas Street, 5th Floor
Toronto, Ontario
Canada M5G 2C2
Attention: Asanka de Silva
Phone: 416-542-4465
Facsimile: 416-542-4558
4
Commitment: $50,000,000.00 Mizuho Corporate Bank
---------------------
Name of Lender
By: /s/ Betram H. Tang
------------------
Name: Betram H. Tang
Title: Senior Vice President & Team Leader
Domestic Lending Office:
Address: Harborside Financial Center
1800 Plaza Ten
Jersey City, NJ 07311
Attention: Frank Lehaf
Phone: 201-626-9303
Facsimile: 201-626-9913/9935
Eurodollar Lending Office:
Address: Harborside Financial Center
1800 Plaza Ten
Jersey City, NJ 07311
Attention: Frank Lehaf
Phone: 201-626-9303
Facsimile: 201-626-9913/9935
5
Commitment: $50,000,000.00 The Northern Trust Company
--------------------------
Name of Lender
By: /s/ David C. Fisher
-------------------
Name: David C. Fisher
Title: Vice President
Domestic Lending Office:
Address: 50 S. LaSalle
Chicago, IL 60675
Attention: Ms. Sharon Jackson
Phone: 312-630-1609
Facsimile: 312-630-1566
Eurodollar Lending Office:
Address: 50 S. LaSalle
Chicago, IL 60675
Attention: Ms. Sharon Jackson
Phone: 312-630-1609
Facsimile: 312-630-1566
6
Commitment: $35,000,000.00 Banca di Roma, Chicago Branch
-----------------------------
Name of Lender
By: /s/ Aurora Pensa
----------------
Name: Aurora Pensa
Title: Vice President
By: /s/ Enrico Verdoscia
--------------------
Name: Enrico Verdoscia
Title: Sr. Vice President
Domestic Lending Office:
Address: 225 West Washington St.
Suite 1200
Chicago, IL 60606
Attention: James Semonchik
Phone: 312-704-2629
Facsimile: 312-726-3058
Eurodollar Lending Office:
Address: 225 West Washington St.
Suite 1200
Chicago, IL 60606
Attention: James Semonchik
Phone: 312-704-2629
Facsimile: 312-726-3058
7
Commitment: $25,000,000.00 Branch Banking and Trust Company
--------------------------------
Name of Lender
By: /s/ John G. Reeves
------------------
Name: John G. Reeves
Title: Assistant Vice President
Domestic Lending Office:
Address: 200 West Second Street
16th Floor
Winston-Salem, NC 27101
Attention: Robert A. Bass
Phone: 336-733-2734
Facsimile: 336-733-2740
Eurodollar Lending Office:
Address: 200 West Second Street
16th Floor
Winston-Salem, NC 27101
Attention: Robert A. Bass
Phone: 336-733-2734
Facsimile: 336-733-2740
8
Commitment: $25,000,000.00 First Hawaiian Bank
-------------------
Name of Lender
By: /s/ Ronald C.M. Chang
---------------------
Name: Ronald C.M. Chang
Title: Vice President
Domestic Lending Office:
Address: 999 Bishop Street, 11th Floor
Honolulu, Hawaii 96813
Attention: Corporate National Division
Phone: 808-525-5194
Facsimile: 808-525-6372
Eurodollar Lending Office:
Address: 999 Bishop Street, 11th Floor
Honolulu, Hawaii 96813
Attention: Corporate National Division
Phone: 808-525-5194
Facsimile: 808-525-6372
9
Commitment: $25,000,000.00 KeyBank National Association
----------------------------
Name of Lender
By: /s/ Michael J. Vegh
-------------------
Name: Michael J. Vegh
Title: Assistant Vice President
Domestic Lending Office:
Address: 127 Public Square
6th Floor
Cleveland, OH 44114
Attention: Michael J. Vegh
Phone: 216-689-7759
Facsimile: 216-689-4981
Eurodollar Lending Office:
Address: 127 Public Square
6th Floor
Cleveland, OH 44114
Attention: Michael J. Vegh
Phone: 216-689-7759
Facsimile: 216-689-4981
10
Commitment: $25,000,000.00 United Overseas Bank Limited, New York Agency
---------------------------------------------
Name of Lender
By: /s/ Kwong Yew Wong
------------------
Name: Kwong Yew Wong
Title: FVP & General Manager
By: /s/ Phillip Cheong
------------------
Name: Phillip Cheong
Title: VP & Deputy General Manager
Domestic Lending Office:
Address: 592 Fifth Avenue, 10th Floor
New York, NY 10036
Attention: Kwong Yew Wong
Phone: 212-382-0088
Facsimile: 212-382-1881
Eurodollar Lending Office:
Address: 592 Fifth Avenue, 10th Floor
New York, NY 10036
Attention: Kwong Yew Wong
Phone: 212-382-0088
Facsimile: 212-382-1881
11
Commitment: $25,000,000.00 U.S. Bank National Association
------------------------------
Name of Lender
By: /s/ John Franceschi
-------------------
Name: John Franceschi
Title: Vice President
Domestic Lending Office:
Address: 777 E. Wisconsin Ave.
Mail Code: MK-WI-TGCB
Milwaukee, WI 53202
Attention: John Franceschi
Phone: 414-765-5656
Facsimile: 414-765-5367
Eurodollar Lending Office:
Address: 777 E. Wisconsin Ave.
Mail Code: MK-WI-TGCB
Milwaukee, WI 53202
Attention: John Franceschi
Phone: 414-765-5656
Facsimile: 414-765-5367
12
Commitment: $17,000,000.00 Siemens Financial Services, Inc.
--------------------------------
Name of Lender
By: /s/ Michael Coiley
------------------
Name: Michael Coiley
Title: Senior Vice President
Domestic Lending Office:
Address: 170 Wood Avenue South
Iselin, NJ 08830
Attention: Victor Alarcon
Phone: 732-590-6622
Facsimile: 732-590-6648
Eurodollar Lending Office:
N/A
13
Commitment: $15,000,000.00 First Tennessee Bank National Association
-----------------------------------------
Name of Lender
By: /s/ Malcolm Koch
----------------
Name: Malcolm Koch
Title: Vice President
Domestic Lending Office:
Address: 165 Madison Ave.
National Department
Memphis, TN 38103
Attention: Jim Moore
Phone: 901-523-4108
Facsimile: 901-523-4267
Eurodollar Lending Office:
N/A
14
Commitment: $15,000,000.00 The International Commercial Bank of China
------------------------------------------
Name of Lender
By: /s/ Nae-Yee Lung
----------------
Name: Nae-Yee Lung
Title: EVP & General Manager
Domestic Lending Office:
Address: 65 Liberty Street
New York, NY 10005
Attention: Louis Wen-Luh Chang
Phone: 212-815-9168
Facsimile: 212-766-5006
Eurodollar Lending Office:
Address: 65 Liberty Street
New York, NY 10005
Attention: Louis Wen-Luh Chang
Phone: 212-815-9168
Facsimile: 212-766-5006
15
Commitment: $15,000,000.00 Malayan Banking Berhad
----------------------
Name of Lender
By: /s/ Wan Fadzmi Othman
---------------------
Name: Wan Fadzmi Othman
Title: General Manager
Domestic Lending Office:
Address: 400 Park Avenue
New York, NY 10022
Attention: P.C. Kim
Phone: 212-303-1305
Facsimile: 212-308-0109
Eurodollar Lending Office:
N/A
16
Commitment: $10,000,000.00 Bank of Oklahoma
----------------
Name of Lender
By: /s/ Holly M. Byrne
------------------
Name: Holly M. Byrne
Title: Assistant Vice President
Domestic Lending Office:
Address: One Williams Center
8th Floor
Tulsa, OK 74172
Attention: Holly Byrne
Phone: 918-588-6493
Facsimile: 918-280-3368
Eurodollar Lending Office:
N/A
17