EXHIBIT 4-A
EXECUTION COPY
THIRD AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT ("Third Amendment")
is made as of the 6th day of May, 2005 by and among True Value Company, a
Delaware corporation (f/k/a TruServ Corporation and herein "True Value" or
"TruServ"), TruServ Acceptance Company, an Illinois corporation ("TruServ
Acceptance"), TruServ Logistics Company, an Illinois corporation ("TruServ
Logistics"), General Paint & Manufacturing Company ("General Paint") and True
Value.com Corporation, a Delaware corporation ("True Value.com") and Congress
Financial Corporation (Central), Merrill Lynch Capital, a Division of Merrill
Lynch Business Financial Services, Inc., and LaSalle Business Credit, LLC as
Co-Documentation Agents ("Co-Documentation Agents"), the lenders who are
signatories hereto ("Lenders"), and Fleet Capital Corporation, a Rhode Island
corporation ("FCC"), as agent for Lenders hereunder (FCC, in such capacity,
being "Agent"). True Value, TruServ Acceptance, TruServ Logistics, General Paint
and True Value.com are sometimes hereinafter referred to individually as a
"Borrower" and collectively as "Borrowers."
WITNESSETH:
WHEREAS, Borrowers, Bank of America, N.A., as Syndication Agent (Bank
of America, N.A. has assigned all of its interests to FCC), Co-Documentation
Agents, Agent and Lenders entered into a certain Loan and Security Agreement
dated as of August 29, 2003, as amended by a certain First Amendment to Loan and
Security Agreement by and among Borrowers, Bank of America, N.A., as Syndication
Agent, Co-Documentation Agents, Agent and Lenders dated as of March 19, 2004 and
by a certain Second Amendment to Loan and Security Agreement by and among
Borrowers, Syndication Agent, Co-Documentation Agents, Agents and Lenders dated
as of October 26, 2004 (said Loan and Security Agreement, as so amended, is
hereinafter referred to as the "Loan Agreement"); and
WHEREAS, Borrowers desire to amend and modify certain provisions of the
Loan Agreement and, subject to the terms hereof, Agent and Lenders are willing
to agree to such amendments and modifications;
NOW THEREFORE, in consideration of the premises, the mutual covenants
and agreements herein contained, and any extension of credit heretofore, now or
hereafter made by Agent and Lenders to Borrowers, the parties hereto hereby
agree as follows:
1. Definitions. All capitalized terms used herein without definition
shall have the meaning given to them in the Loan Agreement.
2. Added Definitions. Appendix A of the Loan Agreement is hereby
amended to insert the following new definitions of "Blackhawk Capital
Expenditures," "Blackhawk Facility," "Third Amendment," and "Third Amendment
Effective Date" in their appropriate alphabetical order:
"Blackhawk Capital Expenditures - Capital Expenditures up to
an amount not to exceed $6,000,000 incurred between the Third Amendment
Effective Date and the first anniversary thereof in connection with the
consolidation of Borrowers' paint manufacturing facilities, provided
that at all times during such period the Borrowers are using
commercially reasonable efforts to sell such property to an independent
third party or have consummated such sale.
Blackhawk Facility - the real Property and buildings and
fixtures located thereon commonly known as 823 W. Blackhawk St.,
Chicago, Illinois 60622.
Third Amendment - that certain Third Amendment to Loan and
Security Agreement dated as of May __, 2005 by and among Agent,
Borrowers, Co-Documentation Agents and the Lenders party thereto.
Third Amendment Effective Date - shall have the meaning
contained in Section 12 of the Third Amendment."
3. Amended Definitions. The definitions of "Applicable Margin" and
"Restricted Investment" and "Restricted Subsidiary" contained in Appendix A to
the Loan Agreement are hereby deleted and the following are inserted in their
stead:
"Applicable Margin - from the Third Amendment Effective Date
to, but not including, the first Adjustment Date (as hereinafter
defined) the percentages set forth below with respect to the Base Rate
Revolving Portion, the LIBOR Revolving Portion, and the Unused Line
Fee:
<Table>
Base Rate Revolving Portion 0%
LIBOR Revolving Portion 1.50%
Unused Line Fee 0.375%
</Table>
The percentages set forth above will be adjusted on the first
day of the month following delivery by Borrowers to Agent of the
financial statements required to be delivered pursuant to subsection
8.1.3(ii) of the Agreement for TruServ's fiscal quarters ending closest
to the last day of March, June, September and December within the Term
hereof, commencing with the fiscal quarter ending in March, 2005 (each
such date an "Adjustment Date"), effective prospectively, by reference
to the applicable "Financial Measurement" (as defined below) for the
Applicable Margin Period most recently ending in accordance with the
following:
2
<Table>
<Caption>
Base Rate Revolving LIBOR Revolving Unused Line
Financial Measurement Portion Portion Fee
- --------------------- ------------------- --------------- -----------
> or = to 1.75 to 1 0% 1.50% 0.375%
<1.75 to 1, but > or = to 1.25 to 1 0.25% 1.75% 0.375%
<1.25 to 1 0.50% 2.0% 0.375%
</Table>
provided that, (i) if TruServ's audited financial statements for any
fiscal year delivered pursuant to subsection 8.1.3(i) of the Agreement
reflect a Financial Measurement that yields a higher Applicable Margin
than that yielded by the monthly financial statements previously
delivered pursuant to subsection 8.1.3(ii) of the Agreement for the
last month of such fiscal year, the Applicable Margin shall be
readjusted retroactively for the period that was incorrectly calculated
and (ii) if Borrowers fail to deliver the financial statements required
to be delivered pursuant to subsection 8.1.3(i) or subsection 8.1.3(ii)
of the Agreement on or before the due date thereof, the Applicable
Margin shall automatically adjust to the highest Applicable Margin set
forth above, effective prospectively from such due date until the
earlier of the date on which the applicable financial statements are
delivered or the next Adjustment Date. For purposes hereof, "Financial
Measurement" shall mean the Fixed Charge Coverage Ratio.
* * *
Restricted Investment -any investment made in cash or by
delivery of Property to any Person, whether by acquisition of stock,
Indebtedness or other obligation or Security, or by loan, advance or
capital contribution, or otherwise, or in any Property except the
following:
(i) investments by a Borrower, to the extent existing
on the Closing Date, in one or more Subsidiaries of such Borrower;
(ii) Property to be used in the ordinary course of
business;
(iii) Current Assets arising from the sale of goods
and services in the ordinary course of business of any Borrower or any
of its Subsidiaries;
(iv) investments in direct obligations of the United
States of America, or any agency thereof or obligations guaranteed by
the United States of America; provided that such obligations mature
within one year from the date of acquisition thereof;
(v) investments in certificates of deposit maturing
within one year from the date of acquisition and fully insured by the
Federal Deposit Insurance Corporation;
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(vi) investments in commercial paper given the
highest rating by a national credit rating agency and maturing not more
than 270 days from the date of creation thereof;
(vii) investments in money market, mutual or similar
funds having assets in excess of $100,000,000 and the investments of
which are limited to investment grade securities;
(viii) loans and advances permitted under subsection
8.2.2 of the Agreement;
(ix) investments in Cash Equivalents;
(x) investments consisting of Equity Interests,
instruments or notes received in settlement of debts in the ordinary
course of business;
(xi) investments existing on the date hereof and
listed on Exhibit 8.2.12 hereto;
(xii) investments in TruServ Specialty Company LLC
not to exceed an aggregate amount of $1,500,000 at any one time, or, so
long as Borrowers are in compliance with subsection 8.1.12, in any
greater amount;
(xiii) TruServ Equity Interests acquired prior to the
Closing Date or after the Closing Date if such purchase or acquisition
was permitted by the terms hereof;
(xiv) investments consisting of any escrow, holdback
or similar arrangement in connection with any sale, lease or transfer
or other disposition of any asset not prohibited hereunder;
(xv) investments in a Subsidiary of a Borrower
organized under the laws of the territory of Hong Kong (the "Hong Kong
Subsidiary") so long as the amount of any such investment does not
exceed $100,000 at any point in time (it being understood that
notwithstanding any other provision of this Agreement or any other Loan
Document that so long as the limitations of this Section have been
complied with, the Hong Kong Subsidiary shall not be a Borrower,
Guarantor or Restricted Subsidiary hereunder, and the Borrowers shall
not be required to pledge the Equity Interests in such Hong Kong
Subsidiary;
(xvi) investments in other Persons or assets so long
as the amount of any such investment does not exceed $500,000 and Agent
has given prior written approval of any such investment;
(xvii) investments in real Property adjacent to
Borrowers' facility in Cary, Illinois so long as the amount of any such
investment does not exceed $400,000; and
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(xviii) investments otherwise expressly permitted or
required pursuant to the Agreement.
* * *
Restricted Subsidiary - (i) any Subsidiary of TruServ (other
than TruServ Specialty Company LLC, Advocate Services, Inc., Advocate
Retail Services, Inc. and Servistar Paint Company) that is incorporated
under the laws of the United States of America, any state thereof or
the District of Columbia unless any such Subsidiary has no on-going
business operations and has liabilities and assets (determined
separately) of less than $50,000, (ii) if Borrowers are not in
compliance with subsection 8.1.12 of the Agreement, TruServ Specialty
Company LLC, and (iii) Advocate Services, Inc., Advocate Retail
Services, Inc. and Servistar Paint Company, in each case, if (x) such
Subsidiary has assets in excess of $50,000, (y) appropriate documents
filed to effect the dissolution of any such Subsidiary cease to be on
file with the Secretary of the Commonwealth of Pennsylvania and (z)
such dissolution is no longer being pursued by appropriate action."
4. Term. Section 4.1 of the Loan Agreement is hereby deleted and the
following is inserted in its stead:
"SECTION 4. TERM AND TERMINATION
4.1 Term of Agreement. Subject to the right of Lenders to
cease making Loans (other than Agent Loans pursuant to subsection
1.1.5) to Borrowers during the continuance of any Default or Event of
Default, this Agreement shall be in effect through and including August
28, 2008 (the "Term"), unless terminated as provided in Section 4.2
hereof."
5. Distributions. Subsection 8.2.7 of the Loan Agreement is hereby
deleted and the following is inserts in its stead:
"8.2.7 Distributions. Declare or make, or permit any
Subsidiary of any Borrower to declare or make, any Distributions,
except for:
(i) Distributions by any Subsidiary of a Borrower to
a Borrower;
(ii) Distributions paid solely in Equity Interests of
a Borrower or any of its Subsidiaries;
(iii) annual Distributions in the form of cash
patronage dividends to its Members in an amount not to exceed
20% of the amount of the patronage source income included in
the net margin as set forth in TruServ's Consolidated
financial statements for the preceding fiscal year or such
greater percentage as required by applicable tax law or IRS
regulations;
(iv) so long as (x) no Default or Event of Default
exists at the time of or would be caused by the making of such
Distributions and (y) after giving effect
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to any such Distribution, Availability on an average basis for
the 60 days immediately prior to the date of the proposed
Distribution and on the date of the proposed Distribution
exceeds $15,000,000, TruServ may make annual Distributions in
the form of cash patronage dividends which, when aggregated
with Distributions made within such fiscal year as permitted
pursuant to clause (iii) of this subsection 8.2.7, do not
exceed 33% of the patronage source income included in the net
margin as set forth in TruServ's consolidated financial
statement for the preceding fiscal year;
(v) so long as (x) no Default or Event of Default
exists at the time or would be caused by the making of such
Distribution and (y) the Fixed Charge Ratio for the most
recently ended twelve-month period determined on a pro forma
basis after giving effect to any such Distribution, and any
Restricted Subordinated Debt Payment made that does not
violate subsection 10.1.15 in the same month as the
contemplated Distributions, exceeds (x) 1.00 for any twelve
month period ending on or prior to August 31, 2006, (y) 1.05
for any twelve month period ending September 30, October 31
and November 30, 2006 and (z) 1.10 for twelve month fiscal
periods ending on or after December 31, 2006, TruServ may make
Distributions (in cash or otherwise) in the form of patronage
cash dividends;
(vi) Distributions by TruServ in the form of
patronage dividends payable in the form of Member Notes;
(vii) So long as no Default or Event of Default
exists at the time or would be caused by the making of such
Distribution, TruServ may make Distributions in amounts equal
to or less than the remaining amount of the Deferred
Redemption Reserve; and
(viii) Distributions (in cash or otherwise) in the
form of redemption or acquisition of Equity Interests of its
Members and amortization payments on its Member equity
accounts in the ordinary course of business and in accordance
with and as required by membership agreements."
6. Capital Expenditures. Subsection 8.2.8 of the Loan Agreement is
hereby deleted and the following is inserted in its stead:
"8.2.8 Capital Expenditures. At the time when the Fixed Charge
Coverage Ratio for the most recently ended twelve month period is less
than 1.00 to 1.00, make any Capital Expenditures (including, without
limitation, by way of capitalized leases but, subject to the last
sentence of this subsection 8.2.8, excluding Blackhawk Capital
Expenditures) which, in the aggregate, as to Borrowers and all of their
Restricted Subsidiaries, exceed $20,000,000 during any fiscal year of
Borrowers, except that 50% of the unused portion of the Capital
Expenditure allowance for any fiscal year may be carried over to the
immediately succeeding fiscal year only, to be used in such succeeding
fiscal year after all of the Capital Expenditure allowance for that
year has been used. The foregoing notwithstanding, in the event that
the Blackhawk Facility is not sold to an independent third party on or
prior to the first anniversary of the Third
6
Amendment Effective Date, then from and after such date, Blackhawk
Capital Expenditures shall be included within tested Capital
Expenditures for purposes of determining compliance with this
subsection 8.2.8, including for periods from the first anniversary date
of the Third Amendment Effective Date."
7. Restricted Subsidiaries. Subsection 8.2.13 of the Loan Agreement is
hereby deleted and the following is inserted in its stead:
"8.2.13 Restricted Subsidiaries and Joint Ventures. Create,
acquire or otherwise suffer to exist, or permit any Restricted
Subsidiary of any Borrower to create, acquire or otherwise suffer to
exist, any Restricted Subsidiary or joint venture arrangement not in
existence as of the date hereof, except for Restricted Subsidiaries
that comply with subsection 8.1.8 hereof."
8. Leases. Section 8.2.18 of the Loan Agreement is hereby deleted and
the following is inserted in its stead:
"8.2.18 Leases. (a) Except for leases entered into in
connection with a sale and leaseback transaction in which the proceeds
of the sale are used to repay the Revolving Credit Loans, leases that
are listed on Exhibit 7.1.22 (as amended by the Third Amendment) and
extensions, renewals and replacements thereof (collectively "Excluded
Leases"), become, or permit any of their Restricted Subsidiaries to
become, a lessee under any operating lease (other than a lease under
which a Borrower or any of its Restricted Subsidiaries is lessor) of
Property is the aggregate Rentals payable during any current or future
period of twelve (12) consecutive months under the lease in question
and all other leases under which Borrowers or any of their Restricted
Subsidiaries is then lessee (other than Excluded Leases) would exceed
$6,000,000. The term "Rentals" means, as of nay date of determination,
all scheduled rental payments.
(b) Exhibit 7.1.22 to the Loan Agreement is hereby deleted and
replaced with the new Exhibit 7.1.22 attached to this Third Amendment."
9. Financial Covenants. Upon the Third Amendment Effective Date,
Exhibit 8.3 of the Loan Agreement is hereby deleted and replaced with the new
Exhibit 8.3 attached to this Third Amendment.
10. Payment on Subordinated Debt and Certain Equity Interests.
Subsection 10.1.15 is hereby deleted and the following is inserted in its stead:
"10.1.15 Payment on Subordinated Debt and Certain Equity
Interests. Any Borrower shall make, or shall permit any Subsidiary to
make, any Restricted Subordinated Debt Payment, any redemption or
acquisition of Equity Interests of its Members or any amortization
payments on its Members' equity accounts unless at the time of such
payment and after giving effect thereto (x) no Event of Default has
occurred and is continuing or would result from such payment and (y)
the Fixed Charge Coverage Ratio for the most recently ended
twelve-month period determined on a pro forma basis after giving effect
to any such payment exceeds (x) 1.00 for any twelve-month period ending
on or prior to August 31, 2006, (y) 1.05 for any twelve-month period
ending
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September 30, October 31 and November 30, 2006 and (z) 1.10 for
twelve-month fiscal periods ending on or after December 31, 2006."
11. Amendment Fee. In order to induce Agent and Lenders to enter into
this Third Amendment, Borrowers agree to pay Agent, for the ratable benefit of
Lenders, an amendment fee equal to $62,500. Said amendment fee shall be payable
and deemed fully earned and non-refundable on the Third Amendment Effective
Date.
12. Third Amendment Effective Date. This Third Amendment shall become
effective when (i) Borrowers, Agent and each Lender shall have executed and
delivered to each other this Third Amendment and (ii) Borrowers shall have paid
to Agent, for the ratable benefit of Lenders, the amendment fee referred to in
Section 10 of the Third Amendment. The date on which such foregoing condition
precedent is satisfied shall be referred to as the "Third Amendment Effective
Date."
13. Execution in Counterparts. This Third Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
14. Continuing Effect. Except as otherwise specifically set out herein,
the provisions of the Loan Agreement shall remain in full force and effect.
15. Successors and Assigns. This Third Amendment shall be binding upon
and inure to the benefit of the successors and assigns of each Borrower, Agent
and each Lender permitted under Section 11.9 of the Loan Agreement.
16. Governing Law. This Third Amendment shall be governed by and
construed in accordance with the laws of the State of Illinois.
(SIGNATURE PAGE FOLLOWS)
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(SIGNATURE PAGE TO THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT)
IN WITNESS WHEREOF, this Third Amendment has been duly executed as of
the day and year specified at the beginning hereof.
TRUE VALUE COMPANY, as a Borrower
By: /s/ BARBARA L. WAGNER
-----------------------------------
Name: Barbara L. Wagner
Title: Vice President and Treasurer
TRUSERV ACCEPTANCE COMPANY, as a
Borrower
By: /s/ BARBARA L. WAGNER
-----------------------------------
Name: Barbara L. Wagner
Title: Vice President and Treasurer
TRUSERV LOGISTICS COMPANY, as a
Borrower
By: /s/ BARBARA L. WAGNER
-----------------------------------
Name: Barbara L. Wagner
Title: Vice President and Treasurer
GENERAL PAINT & MANUFACTURING
COMPANY, as a Borrower
By: /s/ BARBARA L. WAGNER
-----------------------------------
Name: Barbara L. Wagner
Title: Vice President and Treasurer
(SIGNATURE PAGE TO THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT)
TRUE VALUE.COM CORPORATION, as
a Borrower
By: /s/ BARBARA L. WAGNER
-----------------------------------
Name: Barbara L. Wagner
Title: Vice President and Treasurer
(SIGNATURE PAGE TO THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT)
FLEET CAPITAL CORPORATION, as Agent and as
a Lender
By: /s/ DEBRA A. RATHBERGER
---------------------------------------
Name: Debra A. Rathberger
---------------------------------
Title: Senior Vice President
--------------------------------
(SIGNATURE PAGE TO THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT)
WACHOVIA CAPITAL FINANCE
CORPORATION (CENTRAL) (FORMERLY
KNOWN AS CONGRESS FINANCIAL CORPORATION
(CENTRAL)), as Co-Documentation Agent and
as a Lender
By: /s/ ANTHONY VIZGIRDA
--------------------------------------
Name: Anthony Vizgirda
--------------------------------
Title: Vice President
-------------------------------
(SIGNATURE PAGE TO THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT)
MERRILL LYNCH CAPITAL, a Division of Merrill
Lynch Business Financial Services, Inc., as
Co-Documentation Agent and as a Lender
By: /s/ EDWARD SHUSTER
-----------------------------------------
Name: Edward Shuster
------------------------------------
Title: Assistant Vice President
-----------------------------------
(SIGNATURE PAGE TO THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT)
LASALLE BUSINESS CREDIT, LLC, as
Co-Documentation Agent and as a Lender
By: /s/ SUSAN HAMILTON
-----------------------------------
Name: Susan Hamilton
------------------------------
Title: Vice President
-----------------------------
(SIGNATURE PAGE TO THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT)
THE CIT GROUP/BUSINESS CREDIT, INC.,
as a Lender
By: /s/ JUAN R. RAMIREZ
----------------------------------
Name: Juan R. Ramirez
-----------------------------
Title: Assistant Vice President
----------------------------
(SIGNATURE PAGE TO THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT)
M & I MARSHALL & ILSLEY BANK, as
a Lender
By: /s/ RONALD J. CAREY
-----------------------------------
Name: Ronald J. Carey
------------------------------
Title: Vice President
-----------------------------
By: /s/ JAMES R. MILLER
-----------------------------------
Name: James R. Miller
------------------------------
Title: Vice President
-----------------------------
EXHIBIT 8.3
FINANCIAL COVENANTS
DEFINITIONS
CONSOLIDATED NET INCOME (LOSS) - with respect to any period,
the net income (or loss) of Borrowers determined in accordance with GAAP on a
Consolidated basis; provided, however, Consolidated Net Income shall not
include: (a) the income (or loss) of any Person (other than a subsidiary of a
Borrower) in which such Borrower or any of its wholly-owned subsidiaries has an
ownership interest unless received in a cash distribution or requiring the
payment of cash; (b) the income (or loss) of any Person accrued prior to the
date it became a Subsidiary of a Borrower or is merged into or consolidated with
a Borrower; (c) all amounts included in determining net income (or loss) in
respect of the write-up of assets on or after the Closing Date, including the
subsequent amortization or expensing of the written-up portion of the assets;
(d) extraordinary gains as defined under GAAP; (e) gains from asset dispositions
(other than sales of Inventory and other than such immaterial gains as Agent
determines may be included in the determination of Consolidated Net Income
(Loss)); (f) losses (not requiring a net expenditure of money) incurred in
connection with the disposition of Borrowers' fixed assets located in Butler,
Pennsylvania, non-cash losses incurred as a result of the write-off or
accelerated amortization of goodwill; (g) any non-cash gain amortization
resulting from Borrowers' sale and leaseback transaction; and (h) any revenue
realized from any sale where the sales proceeds are paid with notes, instruments
or Equity Interests, to the extent such sales proceeds have not been written off
as a bad debt expense; and provided, further, that rent expense for any period
shall be adjusted to reflect the actual cash rent paid within the applicable
period.
EBITDA - with respect to any period, the sum of Consolidated
Net Income (Loss) before Interest Expense, income taxes, depreciation and
amortization (to the extent not already excluded from Consolidated Net Income
(Loss)) for such period (but excluding any extraordinary gains for such period),
all as determined for Borrowers and their Subsidiaries on a Consolidated basis
and in accordance with GAAP.
FIXED CHARGE COVERAGE RATIO - with respect to any period, the
ratio of (i) EBITDA for such period minus the sum of (a) any provision for
income taxes payable in cash and included in the determination of net earnings
for such period plus (b) Capital Expenditures (excluding Blackhawk Capital
Expenditures unless the Blackhawk Facility has not been sold to an independent
third party on or prior to the first anniversary date of the First Amendment
Effective Date in which case including Blackhawk Capital Expenditures) during
such period, to (ii) Fixed Charges for such period, all as determined for
Borrowers and their Subsidiaries on a Consolidated basis and in accordance with
GAAP.
FIXED CHARGES - with respect to any period, the sum of: (i)
scheduled principal payments required to be made during such period in respect
of Indebtedness for Money Borrowed (excluding the principal portion of
Capitalized Lease Obligations to the extent such amounts are included in the
determination of Capital Expenditures and otherwise including such amounts),
plus (ii) Retail Store Incentive Program Payments incurred within such period,
plus
Exhibit 8.3 - Page 1
(iii) Interest Expense for such period, plus (iv) Distributions made by TruServ
within such period (net of contributions received from Members within such
period), all as determined for Borrowers and their Subsidiaries on a
Consolidated basis and in accordance with GAAP; provided that Fixed Charges
shall not include interest or principal payments made with respect to Member
Notes or Redeemable Subordinated Notes or cash patronage dividends to the extent
that such interest or principal payments or Distributions reduce on a
dollar-for-dollar basis the Deferred Redemption Reserve, and provided further
that with respect to fiscal quarters ending on or prior to the last week of
August, 2004, the amounts of scheduled principal payments required to be made
within the applicable fiscal period in respect of Indebtedness for Money
Borrowed (including the principal portion of Capitalized Lease Obligations) and
the amount of Distributions made by TruServ within such period (net of
contributions received from Members within such period) shall be computed by (i)
multiplying the actual amount of such principal payments or Distributions made
within the applicable period by number of months elapsed since September 1, 2003
and the last day of the month in which the applicable fiscal period ends and
(ii) dividing the product obtained in clause (ii) above by twelve. By way any of
example, assume that between September 1, 2003 and the last day of the fiscal
quarter ending in the last week of March 2004, Borrowers make $16,000,000 in
scheduled principal payments and $10,000,000 in Distributions. The amount of
scheduled principal payments and Distributions to be used in this definition of
Fixed Changes and subsequent definition of Fixed Change Coverage Ratio for the
twelve month period ending on the last day of the fiscal quarter ending in the
last week of March 2004 would then be (x) $9,333,333.33 (7 x $16,000,000) / 12)
and (y) $5,833,333.33 (7 x $10,000,000 / 12), respectively. In determining the
amount of any scheduled principal payment required to be made during the
applicable period in respect of Indebtedness for Money Borrowed, consensual or
permitted deferred amounts and repayments of Member Notes made in connection
with the transfer and assignment of a Member Note from one Member to another
shall be disregarded.
INTEREST EXPENSE - with respect to any period, cash interest
expense paid for such period, including without limitation the interest portion
of Capitalized Lease Obligations, the Letter of Credit and LC Guaranty fees
owing for such period and the Unused Line Fee owing for such period, all as
determined for Borrowers and their Subsidiaries on a Consolidated basis and in
accordance with GAAP.
RETAIL STORE INCENTIVE PROGRAM PAYMENTS - amounts paid in cash
and capitalized by Borrowers to Members to reimburse Members for expenses,
charges or capital expenditures related to store modernization, branch store
expansion and conversion costs.
COVENANTS
1. AVAILABILITY. At all times maintain Availability of at
least $15,000,000.
2. FIXED CHARGE COVERAGE RATIO. If as of the last date of any
fiscal quarter, commencing with the fiscal quarter ending March 31, 2005,
average Availability for the 60 consecutive day period then ended is less than
$35,000,000, then Borrowers shall not permit the Fixed Charge Coverage Ratio for
the twelve consecutive months ending on the last day of such fiscal quarter to
be less than the amount set forth opposite the last day of the applicable fiscal
quarter as set forth in the following schedule:
Exhibit 8.3 - Page 2
<Table>
<Caption>
TWELVE CONSECUTIVE MONTHS ENDING REQUIRED FIXED CHARGE COVERAGE RATIO
- -------------------------------- ------------------------------------
March 31, 2005 through June 30, 2006 1.00 to 1
September 30, 2006 1.05 to 1
December 31, 2006 and the last day of each
subsequent fiscal quarter 1.10 to 1
</Table>
3. RETAIL STORE INCENTIVE PROGRAM PAYMENTS. Make Retail Store
Incentive Program Payments within any fiscal year which exceed the amount set
forth opposite such fiscal year in the following schedule:
<Table>
<Caption>
FISCAL YEAR MAXIMUM AMOUNT
- -------------------------------- --------------
December 31, 2005 $17,000,000
December 31, 2006 and each subsequent fiscal year $20,000,000
</Table>
Exhibit 8.3 - Page 3