-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Konz5zS4WZRxEN/1yyOQkKEznjrk+qwACCHEaBXy871hx0dnn3ZYbBE9uonslkka 95XOyAdNrJHrVc7qR5mCBA== 0000950137-00-002455.txt : 20000517 0000950137-00-002455.hdr.sgml : 20000517 ACCESSION NUMBER: 0000950137-00-002455 CONFORMED SUBMISSION TYPE: POS AM PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20000516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRUSERV CORP CENTRAL INDEX KEY: 0000025095 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-HARDWARE [5072] IRS NUMBER: 362099896 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: POS AM SEC ACT: SEC FILE NUMBER: 333-18397 FILM NUMBER: 637804 BUSINESS ADDRESS: STREET 1: 8600 WEST BRYN MAWR AVE CITY: CHICAGO STATE: IL ZIP: 60631 BUSINESS PHONE: 773-695-5000 MAIL ADDRESS: STREET 1: 8600 W. BRYN MAWR AVENUE CITY: CHICAGO STATE: IL ZIP: 60631-3505 FORMER COMPANY: FORMER CONFORMED NAME: COTTER & CO DATE OF NAME CHANGE: 19920703 POS AM 1 POST-EFFECTIVE AMENDMENT #10 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON REGISTRATION NO. 333-18397 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ POST-EFFECTIVE AMENDMENT NO. 10 ON FORM S-2 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ TRUSERV CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 36-2099896 (State or other jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification No.)
8600 WEST BRYN MAWR AVENUE CHICAGO, IL 60631-3505 (773) 695-5000 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) DONALD J. HOYE President and Chief Executive Officer TruServ Corporation 8600 West Bryn Mawr Avenue Chicago, IL 60631-3505 (773) 695-5000 (Name, Address, including Zip Code, and Telephone Number, including Area Code, of Agent for Service) ------------------------ Copies to: LEONARD G. KUHR, Senior Vice President and Chief Financial Officer TruServ Corporation 8600 West Bryn Mawr Avenue Chicago, IL 60631-3505 (773) 695-5000 (773) 695-6563 (FAX) GEOFFREY R. MORGAN, ESQ. Michael, Best & Friedrich, LLP 100 E. Wisconsin Avenue Milwaukee, WI 53202 (414) 271-6560 (414) 277-0656 (FAX) ------------------------ If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X] If the Registrant elects to delivery its latest annual report to security holders, or a complete and legible facsimile thereof, pursuant to item II(a)(1) of this Form, check the following box. [X] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 TRUSERV CORPORATION 71,108 SHARES CLASS A COMMON STOCK, $100 PAR VALUE (IN UNITS OF SIXTY SHARES) THE COMMON STOCK IS OFFERED EXCLUSIVELY TO RETAILERS AND RENTERS OF HARDWARE, LUMBER AND RELATED PRODUCTS, WHEN THEY BECOME MEMBERS OF TRUSERV CORPORATION. THE COMMON STOCK CANNOT BE TRANSFERRED. WE RETAIN AN AUTOMATIC LIEN AGAINST THE COMMON STOCK AND ANY ACCRUED DIVIDENDS FOR ANY DEBTS THAT MEMBERS OWE US. THERE IS NO EXISTING MARKET FOR THIS COMMON STOCK AND WE DO NOT EXPECT THAT ONE WILL DEVELOP. CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 5 IN THIS PROSPECTUS ------------------ NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
PER UNIT TOTAL - ------------------------------------------------------------------------------------------------------ Public Price................................................ $6,000 $7,110,800 (1) Underwriting discounts...................................... none none) (2 Proceeds to TruServ......................................... $6,000 $7,110,800 (3)
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (1) The shares are offered in units of 60 shares each. The minimum purchase is 60 shares or one unit. You may not purchase more than 300 shares (5 units). (2) There are no underwriters. (3) There are no firm commitments for the sale of these securities. ------------------ THE DATE OF THIS PROSPECTUS IS , 2000. 3 WHERE YOU CAN FIND MORE INFORMATION We file annual. quarterly and special reports, proxy statements, and other information with the SEC. Our SEC filings are available over the Internet on the SEC's web site at http://www.sec.gov.. You may also read and copy any document we file at the SEC's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. REPORTS TO SECURITY HOLDERS Each year, we distribute an annual report containing consolidated financial statements reported upon by our independent auditors to our stockholder-members. We may, from time to time, also furnish to our stockholder-members interim reports, as determined by our management. DOCUMENTS INCLUDED AND INCORPORATED BY REFERENCE The SEC allows us to "incorporate by reference" information we file with them which means that we can disclose important information to you by referring you to those documents and delivering them to you with this prospectus. We are incorporating by reference our Annual Report on Form 10-K for the year ended December 31, 1999 and our Quarterly Report on Form 10-Q for the thirteen weeks ended April 1, 2000 which we filed with the SEC under Section 15(d) of the Securities Exchange Act of 1934. We also are including the Form 10-K with this prospectus for your information. 2 4 SUMMARY TruServ Corporation began as a Delaware corporation in 1953, and was the successor to the business activities of Cotter & Company, an Illinois corporation incorporated in 1948. Until July 1, 1997, when we merged with ServiStar Coast to Coast Corporation, our corporate name was Cotter & Company. Our corporate headquarters are located at 8600 West Bryn Mawr Avenue, Chicago, Illinois 60631-3505. Our telephone number is (773) 695-5000. We are a member-owned wholesaler of hardware, lumber/building materials and related merchandise, Our company is the largest member-owned wholesaler of these items in the United States. For financial reporting purposes, we operate in a single industry as a member-owned wholesaler cooperative. COMMON STOCK Our Class A common stock has a $100.00 par value. It is offered exclusively to you and other retailers of hardware, lumber/building and related merchandise, when you become a Member of our cooperative. The Class A common stock is the sole voting stock and is offered only in sixty-share units. You may not acquire more than five units at a rate of one unit per store. You must pay cash for all your stock purchases. Our Class B nonvoting common stock has a par value of $100 per share. It can be issued only as part of our patronage dividend. You cannot transfer the Class A common stock to someone else without first offering us the opportunity to repurchase the stock. We have ninety days to repurchase the stock, at par value, before you can otherwise dispose of the stock. We will retain an automatic lien on the Class A common stock and any dividends that might have accrued, if you have any debt payable to us. Either of us may terminate our membership agreement with sixty-days' written notice. If the agreement is terminated, we are obligated to repurchase your Class A stock, and you are obligated to sell the stock back to us. We cannot terminate any membership agreement unless two-thirds of our Board of Directors approves the termination. The only exceptions to this requirement are if you should do any of the following: 1) You become insolvent. 2) You commit any act of bankruptcy. 3) You file a voluntary petition in bankruptcy. 4) You are adjudicated as bankrupt 5) You commit a breach of any obligation under our agreement that is not corrected within ten days after we give you written notice. In view of current circumstances, the Company has initiated a moratorium on the redemption of its stock. The Board of Directors will review this matter from time to time in light of the then current financial circumstances of the Company. There is no existing market for our Class A common stock and we do not anticipate that any market will develop. FRANCHISES AND LICENSES We are continuing to review our franchised retail activities. These include Taylor Rental Centers, Party Central and Grand Rental Stations. We anticipate that additional licenses will be entered into with respect to these activities. We do not anticipate that we will have other retail programs that will be operated as franchises. 3 5 RETAIL CONVERSION FUNDS AGREEMENT For those members who were members at the time of our merger with Servistar Coast to Coast, we have made available $40,000,000 to assist them in defraying various conversion costs associated with the merger. As of April 1, 2000, we have paid out $27,200,203 from these funds. COMPARATIVE PER SHARE PRICES AND DIVIDEND POLICIES Our stock is not listed or traded on any national securities exchange or on the NASDAQ. It is offered exclusively to retailers or renters of hardware, lumber and related products, in connection with joining our cooperative as members. The purchase price of the stock is equal to its par value. Our stock is restricted as to transferability and there is no public market for it. We do not pay dividends with respect to the Class A common stock. COMPARATIVE PER SHARE DATA Because there is no public market for our stock and the sale or issuance of the stock is at par value, earnings per share is not applicable. The following table shows the book value of our stock on an historical basis. Book value per share as of: April 1, 2000.......................................... $ 29.76 December 31, 1999...................................... $ 35.40 April 3, 1999.......................................... $ 83.98 December 31, 1998...................................... $ 94.29
4 6 RISK FACTORS GENERAL Our business is subject to a number of risks. Foremost amongst these risks is the uncertain growth of the hardware, lumber/building materials, home center, do-it-yourself, rental and industrial/commercial supply industries. Widespread economic trends as well as seasonal and regional factors can affect our industry. Our markets are also subject to increasingly intense competition and changes. We expect continued competition from the so-called "Big Box" stores such as Home Depot, Menards and Lowes, as well as from additional emphasis on directly competitive lines of business by Home Depot and diversified retailers such as Sears. These competitors may have greater resources, larger market shares and more widespread presences than we do. We believe our cooperative structure best situates our Members to compete with the Big Boxes and other market competitors, but no assurances can be made that any Member or Members will be successful. VOLATILE PRICING OF MERCHANDISE/INVENTORY The price of merchandise and inventory in the lumber and building materials industry can change rapidly and such changes may affect our profit margins and competitive abilities adversely. We believe our cooperative structure creates the best opportunity for our Members to obtain lower prices and maximize their purchasing power, but such efficiencies cannot be assured. REGIONAL MARKET VARIATIONS We transact business nationwide. From time to time, significant variations in marketing opportunities may confront our Members due to economic conditions in the Member's specific geographic region. We are unable to predict any adverse regional economic conditions that may materially affect a Member or Members. ENVIRONMENTAL We engage in activities, such as the manufacture of paint and related products, which could have an environmental impact. These areas are subject to constant review and scrutiny by governmental authorities at the federal, state and local levels. We are unable to predict whether, or to what extent, such business activities and governmental scrutiny may result in future costs or liabilities. 5 7 YEAR 2000 In prior years, we discussed the nature and progress of our plans to become Year 2000 ready. In late 1999, we completed our remediation and testing of systems. As a result of those planning and implementation efforts, we experienced no significant disruptions in mission critical information technology and non-information technology systems and believe those systems successfully responded to the Year 2000 date change. We expensed approximately $3,800,000 during 1999 in connection with remediating its systems. We are not aware of any material problems resulting from Year 2000 issues, either with our products, our internal systems, or the products and services of third parties. We will continue to monitor our mission critical computer applications and those of our suppliers and vendors throughout the year 2000 to ensure that any latent Year 2000 matters that may arise are addressed promptly. 6 8 USE OF PROCEEDS We plan to use the proceeds from the offering of this stock for general working capital, including the purchase of merchandise for resale to our members. PLAN OF DISTRIBUTION We are offering the stock exclusively to retailers of hardware, lumber and related merchandise, in connection to becoming one of our members. To become a stockholder-member you must subscribe for sixty shares of our Class A common stock for each retail store you operate up to a maximum of 300 shares or $30,000 for five or more stores. All sales of our stock will be made for cash. Each share has a par value of $100. Sales of the stock are primarily made through our registered securities agent after your membership has been approved by our executive officers. 7 9 DISTRIBUTION OF PATRONAGE DIVIDENDS Information relating to the distribution of patronage dividends is included in our Annual Report on Form 10-K for the year ended December 31, 1999 in Part I, Item 1, and is incorporated by reference. DESCRIPTION OF COMMON STOCK DIVIDEND RIGHTS. We have not paid nor do we plan to pay in the future any dividends on our Class A common stock. Dividends, other than patronage dividends, on Class A common stock and Class B nonvoting common stock may be declared out of our gross margins, other than gross margins from operations with or for members and other patronage source income, after deducting expenses, reserves and provisions authorized by our Board of Directors. The dividends may be paid in cash, in property, or in shares of common stock. All dividends are subject to the provisions of our Certificate of Incorporation. VOTING RIGHTS. Our Class A common stock is the sole voting stock. It is offered only in sixty-share units, and no member may acquire more than five units. LIQUIDATION RIGHTS. If we should dissolve or liquidate the company, the assets will be divided ratably among all shareholders of Class A common stock and Class B nonvoting common stock in accordance with their holdings and without preference to class of stock. MEMBERSHIP. To become a member you must purchase sixty shares of Class A common stock for each store that you own up to maximum of 300 shares for five or more stores. You must own Class A common stock before any Class B nonvoting common stock can be issued or sold to you. REDEMPTION PROVISIONS. The membership agreement may be terminated by you or by the company on sixty-days' written notice. We cannot terminate your membership unless we receive approval by a two-thirds vote of the Board of Directors, except under the following conditions: 1) You become insolvent. 2) You commit any act of bankruptcy. 3) You file a voluntary petition in bankruptcy 4) You are adjudicated as bankrupt. 5) You commit a breach of any obligation under our agreement and have not corrected the breach within sixty days after written notice is received. If termination should occur, we will purchase and you are required to sell to us all of your Class A common stock and Class B nonvoting common stock at par value. Payment for the Class A common stock will be in cash. Payment for the Class B nonvoting common stock will be a note payable in five equal annual installments bearing an interest rate determined by our Board of Directors. In view of current circumstances, the Company has initiated a moratorium on the redemption of its stock. The Board of Directors will review this matter from time to time in light of the then current financial circumstances of the Company STOCKHOLDERS. On April 29, 2000 there were approximately 7,526 stockholders of Class A common stock and approximately 7,500 stockholders of Class B nonvoting common stock. OTHER RESTRICTIONS AND RIGHTS. (a) We have no conversion rights, sinking fund provisions or liability to further assessment in regard to the Class A common stock. 8 10 (b) We have an automatic lien to secure the payment of any indebtedness due us from any stockholder of record upon the Class A common stock, the Class B nonvoting common stock and any declared and unpaid dividends. (c) There is no existing market for the Class A common stock . We have the option, exercisable within ninety days following the date we receive written notice, to repurchase all shares at par value. Any disposition or attempted disposition or transfer, voluntary or involuntary, of our common stock is invalid. No rights are transferred unless and until we have been given the required notice and we have failed to exercise our option to purchase the stock within the specified time. LEGAL MATTERS The legality of the issuance of the Class A common stock offered has been passed upon for us by Messrs. Arnstein & Lehr, Chicago, Illinois. 9 11 --------------------------------------------------------- --------------------------------------------------------- THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE REGISTRATION STATEMENT, AND THE EXHIBITS AND SCHEDULES RELATING THERETO, WHICH THE COMPANY HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D. C. UNDER THE SECURITIES ACT OF 1933 AND TO WHICH REFERENCE IS HEREBY MADE FOR FURTHER INFORMATION WITH RESPECT TO THE COMPANY AND THE SECURITIES OFFERED HEREBY. TABLE OF CONTENTS
ITEM PAGE ---- ---- Where You Can Find More Information...... 2 Reports to Security Holders.............. 2 Documents Included and Incorporated by Reference........................... 2 Summary.................................. 3 Risk Factors............................. 5 Use of Proceeds.......................... 7 Plan of Distribution..................... 7 Distribution of Patronage Dividends...... 8 Description of Common Stock.............. 8 Legal Matters............................ 9
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. - --------------------------------------------------------- - --------------------------------------------------------- --------------------------------------------------------- --------------------------------------------------------- TRUSERV CORPORATION 71,108 SHARES CLASS A COMMON STOCK $100 PAR VALUE (IN UNITS OF 60 SHARES) ------------------ PROSPECTUS ------------------ DATED , 2000 - --------------------------------------------------------- - --------------------------------------------------------- 12 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following are the actual or estimated expenses in connection with the issuance and distribution of the Class A common stock being registered: Registration Fee............................................ $ 0 Printing of Registration Statement and Prospectus........... 4,000 Accounting Fees and Expenses................................ 10,000 Legal Fees.................................................. 10,000 Fees and Expenses for Qualifying Securities under "Blue Sky" Laws of Various States............................................ 15,000 ------- Total....................................................... $39,000 =======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS TruServ's Certificate of Incorporation, as amended, provides that TruServ shall indemnify, in accordance with and to the full extent permitted by the Delaware General Corporation Law, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including, without limitation, an action by or in the right of TruServ), by reason of the fact that such person is or was a director, officer, employee or agent of TruServ, or is or was serving at the request of TruServ as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, against any liability or expense actually and reasonably incurred by such person in respect thereof. Such indemnification is not exclusive of any other right of such director, officer, or employee to indemnification provided by law or otherwise. Additionally, pursuant to Section 145(a)-(g) of the Delaware General Corporation Law which empowers a corporation to indemnify its directors, officers, employees and agents, on July 23, 1973 the Board of Directors adopted a By-Law (Article XIII, Indemnification of Directors, Officers and Employees--Exhibit 2-A to Registration Statement on Form S-4 (No. 333-18397) and incorporated herein by reference) providing for such indemnification. The following is a summary of the most significant provisions of said By-Law: As against third parties, TruServ shall indemnify any director, officer, employee or agent for any expenses (including attorneys' fees, judgments, fines and amounts paid in settlement) actually and reasonably incurred in defending any threatened, pending or completed suit or proceeding, whether civil, criminal, administrative or investigative brought against such person by reason of the fact that he was or is a director, officer, employee or agent, if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of TruServ, and with respect to any criminal action or proceeding if he had no reasonable cause to believe his conduct unlawful. In any action or suit by or in the right of TruServ, TruServ shall indemnify any director, officer, employee or agent who is or was a party or threatened to be made a party to such threatened, pending or completed action or suit, for expenses (including attorney's fees and amounts paid in settlement) reasonably and actually incurred in connection with the defense or settlement of such suit or action, if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of TruServ, except that no indemnification shall be made if such person has been adjudged to be liable for negligence or misconduct in the performance of his duty to TruServ unless and only to the extent that the Court of Chancery of Delaware or the court where the suit was brought finds that in view of all the circumstances of the case, such person is entitled to indemnification. Any indemnification, unless ordered by a court, shall be made by TruServ only as authorized in the specific case upon a determination that indemnification is proper in the circumstances because the party to be indemnified has met the applicable standard of conduct. Such determination shall be made by the Board of Directors by a majority vote of a quorum, consisting of directors who were not parties of such action, suit or II-1 13 proceeding, or if such a quorum is not obtainable, or even if obtainable, if a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or by the stockholders. Additionally, the stockholders of TruServ have approved an amendment to the Certificate of Incorporation to eliminate personal liability of directors for monetary damages for breach of fiduciary duty of care. The amendment provides that a director of TruServ shall not be liable to TruServ or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the Delaware General Corporation Law as the same exists or may hereafter be amended. Insofar as indemnification for liabilities arising under the Securities Act of 1933 is concerned, see Item 17 "Undertakings" below. ITEM 16. EXHIBITS.
EXHIBIT NUMBER DESCRIPTION ------- ----------- 2-A Agreement and Plan of Merger dated as of December 9, 1996 between the Company and ServiStar Coast to Coast Corporation ("SCC"). Incorporated by reference on Exhibit 2-A to Registration Statement on Form S-4 (No. 333-18397). 4-A By-laws of the Company, effective April 7, 1998. Incorporated by reference on Exhibit 4-A to Post-Effective Amendment No. 8 to Registration Statement on Form S-2 to Form S-4 (No. 333-18397). 4-B Specimen certificate of Class A common stock. Incorporated by reference on Exhibit 4-B to Post-Effective Amendment No. 8 to Registration Statement on Form S-2 to Form S-4 (No. 333-18397). 4-C Specimen certificate of Class B common stock. Incorporated by reference on Exhibit 4-C to Post-Effective Amendment No. 8 to Registration Statement on Form S-2 to Form S-4 (No. 333-18397). 4-D Promissory (subordinated) note form effective for the year-ending December 31, 1986 and thereafter. Incorporated by reference--Exhibit 4-H to Registration Statement on Form S-2 (No. 33-20960). 4-E Installment note form. Incorporated by reference--Exhibit 4-F to Registration Statement on Form S-2 (No. 2-82836). 4-F Copy of Note Agreement with Prudential Insurance Company of America dated April 13, 1992 securing 8.60% Senior Notes in the principal sum of $50,000,000 with a maturity date of April 1, 2007. Incorporated by reference--Exhibit 4-J to Post-Effective Amendment No. 2 to Registration Statement on Form S-2 (No. 33-39477). 4-G Cotter & Company $50,000,000 Private Shelf Agreement with Prudential Insurance Company of America dated December 29, 1995 incorporating amendment on existing Note Agreement with Prudential Insurance Company of America dated April 13, 1992 securing 8.60% Senior Notes in the principal sum of $50,000,000 with a maturity date of April 1, 2007. Incorporated by reference--Exhibit 4-H to Post-Effective Amendment No. 5 to Registration Statement on Form S-2 (No. 33-39477). 4-H Trust Indenture between Cotter & Company and First Trust of Illinois (formerly Bank of America). Incorporated by reference--Exhibit T3C to Cotter & Company Form T-3 (No. 22-26210). 4-I Credit Agreement dated July 1, 1997 for $300,000,000 Revolving credit between TruServ Corporation, various financial institutions, and Bank of America. Incorporated by reference--Exhibit 4-J to Post-Effective Amendment No. 5 to Registration Statement on Form S-2 to Form S-4 (No. 333-18397). 4-J Third Amendment to Credit Agreement dated July 1, 1997 for $300,000,000 Revolving credit between TruServ Corporation, various Financial institutions, and Bank of America. Incorporated by reference on Exhibit 4-K to the registrant's Annual Report on Form 10-K for the Fiscal year ended December 31, 1999 (File No. 2-20910). 4-K* Amended and Restated Credit Agreement dated as of April 14, 2000 for $300,000,000 Revolving Credit between TruServ Corporation, various financial institutions, and Bank of America.
II-2 14
EXHIBIT NUMBER DESCRIPTION ------- ----------- 4-L Amended and Restated Private Shelf Agreement between TruServ Corporation and Prudential Insurance Company of America dated November 13, 1997 for $150,000,000. Incorporated by reference--Exhibit 4-K to Post-Effective Amendment No. 5 to Registration Statement on Form S-2 to Form S-4 (No. 333-18397). 4-M Amendment dated May 12, 1999 to the Amended and Restated Private Shelf Agreement between TruServ Corporation and Prudential Insurance Company of America dated November 13, 1997 for $150,000,000. Incorporated by reference on Exhibit 4-M to the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (File No. 2-20910). 4-N* Amendment dated April 14, 2000 to the Amended and Restated Private Shelf Agreement between TruServ Corporation and Prudential Insurance Company of America dated November 13, 1997 for $150,000,000. 4-O Credit Agreement dated September 10, 1998 for $105,000,000 Note Purchase Agreement between TruServ Corporation and various Purchasers. Incorporated by reference--Exhibit 4L to Post-Effective Amendment No. 6 to Registration Statement on Form S-4 (No. 333-18397). 4-P Amendment No. 1 to Credit Agreement dated September 10, 1998 for $105,000,000 Note Purchase Agreement between TruServ Corporation and various Purchasers. Incorporated by reference on Exhibit 4-O to the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (File No. 2-20910). 4-Q* Amended and Restatement dated April 14, 2000 to Credit Agreement dated September 10, 1998 for $105,000,000 Note Purchase Agreement between TruServ Corporation and various Purchasers. 4-R Participation Agreement dated April 30, 1998 for $40,000,000 between TruServ Corporation, various Financial institutions and Bank of Montreal. Incorporated by reference--Exhibit 4-M to Post-Effective Amendment No. 6 to Registration Statement on Form S-4 (No. 333-18397). 4-S Credit Agreement dated September 30, 1998 for $100,000,000 Revolving Credit between TruServ Corporation, various Financial institutions, and Bank of America. Incorporated by reference--Exhibit 4-N to Post-Effective Amendment No. 6 to Registration Statement on Form S-4 (No. 333-18397). 5 Opinion of Messrs. Arnstein & Lehr (previously filed). 10-A Current Form of Retail Member Agreement with TruServ Corporation between the Company and its Members that offer primarily hardware and related items. Incorporated by reference--Exhibit 2-A to the Company's Registration Statement on Form S-4 (No. 333-18397). 10-B Form of Subscription to Shares of TruServ Corporation. Incorporated by reference--Exhibit 10-B to Post-Effective Amendment No. 5 to Registration Statement on Form S-2 to Form S-4 (No. 333-18397). 10-C TruServ Defined Lump Sum Pension Plan (As Amended and Restated Effective As Of January 1, 1998). Incorporated by reference--Exhibit 10-C to the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (File No. 2-20910). 10-D Cotter & Company Employees' Savings and Compensation Deferral Plan (As Amended and Restated Effective April 1, 1994). Incorporated by reference--Exhibit 10-D to Post- Effective Amendment No. 4 to Registration Statement on Form S-2 (No. 33-39477). 10-E* TruServ Corporation Supplemental Retirement Plan between TruServ Corporation and selected executives of the Company (As Amended Effective July 24, 1998). 10-F Retail Conversion Funds Agreement dated as of December 9, 1996 between the Company and SCC. Incorporated by reference--Exhibit 10-L to Registration Statement on Form S-4 (No. 333-18397). 23-A Consent of Arnstein & Lehr--Incorporated by reference to Exhibit 23-A to Registration Statement on Form S-2 to Form S-4 (No. 333-18397). 23-B Consent of Ernst & Young LLP (included on page II-7).*
* Filed herewith. II-3 15 ITEM 17. UNDERTAKINGS. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any Prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the Prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions described in Item 15, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-4 16 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING THIS POST EFFECTIVE AMENDMENT NUMBER 10 TO THE FORM S-2 AND HAS DULY CAUSED THIS POST-EFFECTIVE AMENDMENT NO. 10 ON FORM S-2 TO REGISTRATION STATEMENT ON FORM S-4 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON MAY 16, 2000. TRUSERV CORPORATION By: /s/ LEONARD G. KUHR ------------------------------------ Leonard G. Kuhr Senior Vice President and Chief Financial Officer KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS BELOW, CONSTITUTES AND APPOINTS GEOFFREY R. MORGAN, LEONARD G. KUHR, AND DIANE T. NAUER, JOINTLY AND SEVERALLY, ATTORNEYS-IN-FACT AND AGENTS, EACH WITH FULL POWER OF SUBSTITUTION, FOR HIM OR HER IN ANY AND ALL CAPACITIES TO SIGN ANY AND ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO FILE THE SAME, AND ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, HEREBY SATISFYING AND CONFIRMING ALL THAT EACH OF SAID ATTORNEYS-IN-FACT AND AGENTS, OR HIS, HER OR THEIR SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS AMENDMENT TO REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- /s/ DONALD J. HOYE President, Chief Executive May 16, 2000 - ----------------------------------------------------- Officer and Director Donald J. Hoye /s/ LEONARD G. KUHR Senior Vice President and May 16, 2000 - ----------------------------------------------------- Chief Financial Officer Leonard G. Kuhr /s/ JOE W. BLAGG Director May 16, 2000 - ----------------------------------------------------- Joe W. Blagg /s/ JAMES D. BURNETT Director May 16, 2000 - ----------------------------------------------------- James D. Burnett /s/ JAY B. FEINSOD Director May 16, 2000 - ----------------------------------------------------- Jay B. Feinsod /s/ WILLIAM H. HOOD Director May 16, 2000 - ----------------------------------------------------- William H. Hood /s/ JAMES D. HOWENSTINE Director May 16, 2000 - ----------------------------------------------------- James Howenstine /s/ JERRALD T. KABELIN Director May 16, 2000 - ----------------------------------------------------- Jerrald T. Kabelin /s/ PETER G. KELLY Director May 16, 2000 - ----------------------------------------------------- Peter G. Kelly
II-5 17
SIGNATURE TITLE DATE --------- ----- ---- /s/ ROBERT J. LADNER Director May 16, 2000 - ----------------------------------------------------- Robert J. Ladner /s/ GEORGE V. SHEFFER Director May 16, 2000 - ----------------------------------------------------- George V. Sheffer /s/ DENNIS A. SWANSON Director May 16, 2000 - ----------------------------------------------------- Dennis A. Swanson /s/ JOHN B. WAKE, JR. Director May 16, 2000 - ----------------------------------------------------- John B. Wake, Jr. /s/ JOHN M. WEST, JR. Director May 16, 2000 - ----------------------------------------------------- John M. West, Jr. /s/ BARBARA B. WILKERSON Director May 16, 2000 - ----------------------------------------------------- Barbara B. Wilkerson
II-6 18 EXHIBIT 23-B CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in Post-Effective Amendment No. 10 on Form S-2 to the Registration Statement on Form S-4 (File No. 333-18397) and related Prospectus of TruServ Corporation for the registration of 71,108 shares of Class A common stock of our report dated April 14, 2000 with respect to the consolidated financial statements of TruServ Corporation included in its Annual Report (Form 10-K) for the year ended December 31, 1999, filed with the Securities and Exchange Commission. /s/ ERNST & YOUNG LLP Chicago, Illinois May 16, 2000 II-7 19 INDEX TO EXHIBITS FILED TO POST EFFECTIVE AMENDMENT NO. 10 TO REGISTRATION STATEMENT ON FORM S-4 OF TRUSERV CORPORATION
EXHIBIT NUMBER EXHIBIT - ------- ------- 4-K Amended and Restated Credit Agreement dated as of April 14, 2000 for $300,000,000 Revolving Credit between TruServ Corporation, various financial institutions and Bank of America. 4-N Amendment dated April 14, 2000 to the Amended and Restated Private Shelf Agreement between TruServ Corporation and Prudential Insurance Company of America dated November 13, 1997 for $150,000,000. 4-Q Amended and Restatement dated April 14, 2000 to Credit Agreement dated September 10, 1998 for $105,000,000 Note Purchase Agreement between TruServ Corporation and various Purchasers. 10-E TruServ Corporation Supplemental Retirement Plan between TruServ Corporation and selected executives of the Company (Amended Effective July 24, 1998). 23-B Consent of Ernst & Young LLP (included on page II-7).
Exhibits incorporated by reference are listed on Pages II-2 and II-3 of Post-Effective Amendment No. 10 to this Registration Statement on Form S-4 of TruServ Corporation. Supplemental Information to be Furnished with Reports Filed Pursuant to Section 15(d) of the Act by Registrants which have not Registered Securities Pursuant to Section 12 of the Act. II-8 EX-4.K 2 AMENDED AND RESTATED CREDIT AGREEMENT 1 EXHIBIT 4-K AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF APRIL 14, 2000 AMONG TRUSERV CORPORATION, VARIOUS FINANCIAL INSTITUTIONS, AND BANK OF AMERICA, N.A., AS AGENT ARRANGED BY BANC OF AMERICA SECURITIES LLC 2 TABLE OF CONTENTS
Section Page ARTICLE I DEFINITIONS 1.1 Certain Defined Terms......................................................... 1 1.2 Other Interpretive Provisions................................................. 20 1.3 Accounting Principles......................................................... 21 1.4 Currency Equivalents Generally................................................ 21 1.5 Introduction of Euro.......................................................... 21 ARTICLE II THE CREDITS 2.1 Amounts and Terms of Commitments.............................................. 22 2.2 Loan Accounts................................................................. 22 2.3 Procedure for Committed Borrowing............................................. 23 2.4 Conversion and Continuation Elections for Committed Borrowings................ 24 2.5 Utilization of Commitments in Offshore Currencies............................. 25 2.6 Bid Borrowings................................................................ 26 2.7 Procedure for Bid Borrowings.................................................. 27 2.8 Termination or Reduction of Commitments....................................... 29 2.8.1 Voluntary Termination or Reduction of Commitments....................... 29 2.8.2 Mandatory Reductions of Commitments..................................... 30 2.8.3 All Reductions of Commitments........................................... 30 2.9 Prepayments................................................................... 30 2.9.1 Optional Prepayments.......................................... 30 2.9.2 Mandatory Prepayments......................................... 31 2.10 Currency Exchange Fluctuations............................................ 31 2.11 Repayment................................................................. 31 2.12 Interest.................................................................. 31 2.13 Fees...................................................................... 32 (a) Certain Fees..................................................... 32 (b) Commitment Fees.................................................. 32 2.14 Computation of Fees and Interest.......................................... 32 2.15 Payments by the Company................................................... 33 2.16 Payments by the Lenders to the Agent...................................... 33 2.17 Sharing of Payments, Etc.................................................. 34 2.18 Swing Line Commitment..................................................... 35 2.19 Borrowing Procedures for Swing Line Loans................................. 35 2.20 Prepayment or Refunding of Swing Line Loans............................... 36 2.21 Participations in Swing Line Loans........................................ 36
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Section Page 2.22 Participation Obligations Unconditional................................... 37 2.23 Conditions to Swing Line Loans............................................ 37 2.24 BA Subfacility............................................................ 37 (a) Creation......................................................... 37 (b) Notice........................................................... 38 (c) Issuance Fee..................................................... 38 (d) Payment.......................................................... 38 (e) Participations in BAs............................................ 39 (f) Limitation of Liability.......................................... 39 ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 3.1 Taxes...................................................................... 40 3.2 Illegality................................................................. 41 3.3 Increased Costs and Reduction of Return.................................... 41 3.4 Funding Losses............................................................. 42 3.5 Inability to Determine Rates............................................... 43 3.6 Reserves on Offshore Rate Loans............................................ 43 3.7 Certificates of Lenders.................................................... 44 3.8 Substitution of Lenders.................................................... 44 3.9 Survival................................................................... 44 ARTICLE IV CONDITIONS PRECEDENT 4.1 Conditions to Effectiveness................................................ 44 (a) Agreement........................................................ 44 (b) Resolutions; Incumbency; Certificate of Incorporation; Bylaws.... 44 (c) Good Standing.................................................... 45 (d) Legal Opinion.................................................... 45 (e) Payment of Fees.................................................. 45 (f) Certificate...................................................... 45 (g) Guaranty......................................................... 46 (h) Security Agreement............................................... 46 (i) Pledge Agreement................................................. 46 (j) Intercreditor Agreement.......................................... 46 (k) Trademark Security Agreement..................................... 46 (l) Amendment of Certain Agreements.................................. 46 (m) Other Documents.................................................. 46 4.2 Conditions to All Credit Extensions........................................ 46 (a) Notice........................................................... 46 (b) Continuation of Representations and Warranties................... 46 (c) No Existing Default.............................................. 46
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Section Page ARTICLE V REPRESENTATIONS AND WARRANTIES 5.1 Organization; Subsidiary Preferred Stock................................... 47 5.2 Financial Statements....................................................... 47 5.3 Actions Pending............................................................ 47 5.4 Outstanding Debt........................................................... 47 5.5 Title to Properties........................................................ 47 5.6 Taxes...................................................................... 48 5.7 Conflicting Agreements and Other Matters................................... 48 5.8 Use of Proceeds............................................................ 48 5.9 ERISA...................................................................... 49 5.10 Governmental Consent....................................................... 49 5.11 Environmental Compliance................................................... 49 5.12 Disclosure................................................................. 49 5.13 Hostile Tender Offers...................................................... 50 5.14 Priority of Obligations.................................................... 50 5.15 Year 2000 Problem.......................................................... 50 ARTICLE VI AFFIRMATIVE COVENANTS 6.1 Financial Statements....................................................... 50 6.2 Certificates; Other Information............................................ 51 6.3 Notices.................................................................... 52 6.4 Preservation of Corporate Existence, Etc................................... 53 6.5 Maintenance of Property.................................................... 53 6.6 Insurance.................................................................. 53 6.7 Payment of Obligations..................................................... 53 6.8 Compliance with Laws....................................................... 54 6.9 Compliance with ERISA...................................................... 54 6.10 Inspection of Property and Books and Records............................... 54 6.11 Environmental Laws......................................................... 54 6.12 Use of Proceeds............................................................ 54 6.13 Covenant to Secure Obligations Equally..................................... 55 6.14 Cooperative Status......................................................... 55 6.15 Collateral/Accounting Systems Examination.................................. 55 6.16 Real Estate Documents...................................................... 55 6.17 Further Assurances......................................................... 56 6.18 Waiver of Negative Pledge.................................................. 56 ARTICLE VII NEGATIVE COVENANTS 7.1 Fixed Charge Coverage Ratio................................................ 57
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Section Page 7.2 Lien Restrictions.......................................................... 57 7.3 Debt Restrictions.......................................................... 58 7.4 Sale of Assets............................................................. 59 7.5 Merger..................................................................... 59 7.6 Restrictions on Transactions with Affiliates and Stockholders.............. 59 7.7 Issuance of Stock by Subsidiaries.......................................... 59 7.8 Compliance with ERISA...................................................... 59 7.9 No Change in Subordination Terms, etc...................................... 60 7.10 Nature of Business......................................................... 60 7.11 Restricted Investments..................................................... 60 7.12 Restricted Payments........................................................ 61 7.13 Use of Proceeds............................................................ 61 7.14 Ratio of Borrowing Base to Debt............................................ 62 7.15 Minimum EBITDA............................................................. 62 7.16 Inactive Subsidiaries...................................................... 62 7.17 Amendments to Financing Agreements......................................... 62 ARTICLE VIII EVENTS OF DEFAULT 8.1 Event of Default........................................................... 62 8.2 Remedies................................................................... 65 8.3 Rights Not Exclusive....................................................... 65 ARTICLE IX THE AGENT 9.1 Appointment and Authorization; "Agent"..................................... 66 9.2 Delegation of Duties....................................................... 66 9.3 Liability of Agent......................................................... 67 9.4 Reliance by Agent.......................................................... 67 9.5 Notice of Default.......................................................... 67 9.6 Credit Decision............................................................ 68 9.7 Indemnification of Agent................................................... 68 9.8 Agent in Individual Capacity............................................... 68 9.9 Successor Agent............................................................ 69 9.10 Withholding Tax............................................................ 69 9.11 Co-Agents.................................................................. 70 ARTICLE X MISCELLANEOUS 10.1 Amendments and Waivers.................................................... 71 10.2 Notices................................................................... 72 10.3 No Waiver; Cumulative Remedies............................................ 72 10.4 Costs and Expenses........................................................ 72
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Section Page 10.5 Company Indemnification................................................... 73 10.6 Payments Set Aside........................................................ 73 10.7 Successors and Assigns.................................................... 74 10.8 Assignments, Participations, etc.......................................... 74 10.9 Confidentiality........................................................... 75 10.10 Set-off................................................................... 76 10.11 Automatic Debits of Fees.................................................. 76 10.12 Notification of Addresses, Lending Offices, Etc........................... 76 10.13 Counterparts.............................................................. 76 10.14 Severability.............................................................. 77 10.15 No Third Parties Benefited................................................ 77 10.16 Governing Law and Jurisdiction............................................ 77 10.17 Waiver of Jury Trial...................................................... 77 10.18 Judgment.................................................................. 78 10.19 Entire Agreement.......................................................... 78 10.20 Amendment and Restatement................................................. 78 10.21 Bid Loan Option........................................................... 78 10.22 Intercreditor Agreement; Collateral Matters............................... 78 10.23 Waiver.................................................................... 79
SCHEDULES Schedule 1.1 Pricing Schedule Schedule 2.1 Commitments and Pro Rata Shares Schedule 5.7 Restrictive Agreements Schedule 6.16 Mortgaged Property Schedule 7.2 Liens Schedule 7.11 Investments Schedule 10.2 Offshore and Domestic Lending Offices; Addresses for Notices EXHIBITS Exhibit A Form of Notice of Borrowing Exhibit B Form of Notice of Conversion/Continuation Exhibit C [Intentionally Deleted] Exhibit D [Intentionally Deleted] Exhibit E Form of Compliance Certificate Exhibit F Form of Legal Opinion of Counsel to the Company Exhibit G Form of Assignment and Acceptance 7 Exhibit H Form of Note Exhibit I Form of Subordinated Note Exhibit J Form of Trademark Security Agreement Exhibit K Form of Guaranty Exhibit L Form of Pledge Agreement Exhibit M Form of Security Agreement Exhibit N Form of Intercreditor Agreement Exhibit O Form of Borrowing Base Certificate 8 AMENDED AND RESTATED CREDIT AGREEMENT This AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of April 14, 2000, among TRUSERV CORPORATION, a Delaware corporation (the "Company"), the several financial institutions from time to time party to this Agreement (collectively the "Lenders"; individually each a "Lender"), and BANK OF AMERICA, N.A. (in its individual capacity, "Bank of America"), as Accepting Lender, Swing Line Lender and Agent. WHEREAS, the Company, the Lenders and Bank of America (then known as Bank of America National Trust and Savings Association), as agent, are parties to a Credit Agreement dated as of July 1, 1997 (as amended prior to the date hereof, the "Original Agreement"); and WHEREAS, the parties hereto have agreed to amend and restate the Original Agreement to make various changes thereto; NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows: ARTICLE I DEFINITIONS 1.1 Certain Defined Terms. The following terms have the following meanings: Absolute Rate - see subsection 2.7(b)(ii)(D). Absolute Rate Auction means a solicitation of Competitive Bids setting forth Absolute Rates pursuant to Section 2.7. Absolute Rate Bid Loan means a Bid Loan that bears interest at a rate determined with reference to the Absolute Rate. Acceptance Documents means such documents and agreements as the Accepting Lender may reasonably require in connection with any BA hereunder. Accepting Lender means BofA in its capacity as accepting lender hereunder, together with any successor in such capacity. Affiliate means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person 9 shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, membership interests, by contract, or otherwise. Agent means BofA in its capacity as agent for the Lenders hereunder, and any successor agent arising under Section 9.9. Agent-Related Persons means the Agent and any successor thereto in such capacity hereunder, together with their respective Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. Agent's Payment Office means (i) in respect of payments in Dollars, the address for payments to the Agent set forth on Schedule 10.2 or such other address as the Agent may from time to time specify in accordance with Section 10.2 and (ii) in the case of payments in any Offshore Currency, such address as the Agent may from time to time specify in accordance with Section 10.2. Agreed Alternative Currency - see subsection 2.5(e). Agreement means this Amended and Restated Credit Agreement. Applicable Currency means, as to any particular payment or Loan, Dollars or the Offshore Currency in which it is denominated or is payable. Arranger means Banc of America Securities LLC. Asset Sale means the sale, lease, assignment or other transfer for value (each a "Disposition") by the Company or any Subsidiary to any Person (other than the Company or a Subsidiary) of any fixed asset of the Company or such Subsidiary. Assignee - see subsection 10.8(a). Attorney Costs means and includes all fees and charges of any law firm or other external counsel, and, without duplication, the allocated cost of internal legal services and all disbursements of internal counsel. BA means a draft drawn by the Company on, and accepted and discounted by, the Accepting Lender pursuant to Section 2.24 in the standard form for bankers' acceptances used by the Accepting Lender. BA Commission means the percentage set forth under the heading "BA Commission" on Schedule 1.1 opposite the applicable Fixed Charge Coverage Ratio. 10 BA Outstandings means at any time the sum of (a) the maximum aggregate amount which is, or at any time thereafter may become, payable by the Accepting Lender under all BAs which have been accepted plus (b) the aggregate amount of all payments made by the Accepting Lender under BAs and not previously reimbursed by the Company. Bankruptcy Code means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C.ss.101, et seq.). Bankruptcy Law - see subsection 8.1(h). Base Rate means, for any day, a per annum rate equal to the higher of: (a) the sum of 0.50% plus the latest Federal Funds Rate; and (b) the rate of interest in effect for such day as publicly announced from time to time by BofA in San Francisco, California, as its "reference rate." (The "reference rate" is a rate set by BofA based upon various factors including BofA's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.) Any change in the reference rate announced by BofA shall take effect at the opening of business on the day specified in the public announcement of such change. Base Rate Committed Loan means a Committed Loan that bears interest based on the Base Rate. Base Rate Margin means the percentage set forth under the heading "Base Rate Margin" on Schedule 1.1 opposite the applicable Total Senior Debt to EBITDA Ratio. Benefited Obligations has the meaning set forth in the Intercreditor Agreement. Benefited Parties has the meaning set forth in the Intercreditor Agreement. Bid Borrowing means a Borrowing hereunder consisting of one or more Bid Loans made to the Company on the same day by one or more Lenders. Bid Loan means a Loan in Dollars by a Lender to the Company under Section 2.6, which may be a LIBOR Bid Loan or an Absolute Rate Bid Loan. Bid Loan Lender means, in respect of any Bid Loan, the Lender making such Bid Loan to the Company. BofA means Bank of America, N.A., a national banking association. Borrowing means a borrowing hereunder consisting of Loans of the same Type 11 and in the same Applicable Currency made to the Company on the same day by one or more Lenders under Article II, and, other than in the case of Base Rate Committed Loans, having the same Interest Period. A Borrowing may be a Bid Borrowing or a Committed Borrowing. Borrowing Base means, as of the last day of any fiscal month, the total of (i) 85% of the remainder of (x) the daily average for such month of the amount of "Accounts and notes receivable, net" as would be shown on the Company's consolidated balance sheet minus (y) the sum of all Debt payable to Members and all Indebtedness secured by a Lien on such receivables (other than Liens in favor of the Collateral Agent) plus (ii) 50% of the remainder of (x) the amount, based on the lower of cost or market value, of "Inventories" as would be shown on the Company's consolidated balance sheet as of the last day of such month minus (y) all Indebtedness secured by a Lien on such Inventories (other than Liens in favor of the Collateral Agent) plus (iii) the remainder of (x) the Specified Percentage (as defined below) of the amount of "Properties, less accumulated depreciation" as would be shown on the Company's consolidated balance sheet as of the last day of such month minus (y) the then-outstanding amount of all Indebtedness secured by a Lien on any such properties (other than Liens in favor of the Collateral Agent); provided that the "Accounts and notes receivable, net" "Inventories" and "Properties, less accumulated depreciation" of Cotter Canada Hardware and Variety Company Inc. and of TruServ Canada Cooperative Inc. shall be excluded in determining amounts pursuant to clauses (i), (ii) and (iii) above; and provided, further that the amount determined pursuant to clause (ii) (the "Inventory Amount") shall be reduced by the amount (if any) necessary so that the Inventory Amount is not more than 45% of the total of clauses (i), (ii) and (iii). For purposes of the foregoing, "Specified Percentage" means (a) from January 1, 2000 through December 31, 2000, 40%, (b) from January 1, 2001 through December 31, 2001, 30%, and (c) thereafter, 20%. Borrowing Date means any date on which a Borrowing occurs under Section 2.3, 2.7 or 2.18. Business Day means any day other than a Saturday, Sunday or other day on which commercial banks in New York City, Chicago, Charlotte or San Francisco are authorized or required by law to close and (i) with respect to disbursements and payments in Dollars relating to Offshore Rate Loans, a day on which dealings are carried on in the applicable offshore Dollar interbank market and (ii) with respect to disbursements and payments in and calculations pertaining to any Offshore Currency, a day on which commercial banks are open for foreign exchange business in London, England, and on which dealings in the relevant Offshore Currency are carried on in the applicable offshore foreign exchange interbank market in which disbursement of or payment in such Offshore Currency will be made or received hereunder. Capital Adequacy Regulation means any guideline, request or directive of any 12 central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank. Capitalized Lease Obligation means any rental obligation which, under GAAP, is or will be required to be capitalized on the books of the Company or any Subsidiary, taken at the amount thereof accounted for as indebtedness (net of interest expense). Closing Date means the date on which all conditions precedent set forth in Section 4.1 are satisfied or waived by all Lenders (or, in the case of subsection 4.1(e), waived by the Person entitled to receive the applicable payment). Code means the Internal Revenue Code of 1986 and regulations promulgated thereunder. Collateral Agent means BofA in its capacity as collateral agent under the Intercreditor Agreement, together with any successor thereto in such capacity. Collateral Documents means the Security Agreement, the Trademark Security Agreement, the Pledge Agreement, each Mortgage and any other document or instrument pursuant to which the Company or any Guarantor grants to the Collateral Agent, for the benefit of the Benefited Parties, a security interest in any of its property to secure the payment of any of the Benefited Obligations. Commitment - see Section 2.1. Commitment Fee Rate means the percentage set forth under the heading "Commitment Fee Rate" on Schedule 1.1 opposite the applicable Total Senior Debt to EBITDA Ratio. Committed Borrowing means a Borrowing hereunder consisting of Committed Loans made by the Lenders ratably from time to time according to their respective Unused Commitment Shares. Committed Loan means a Loan by a Lender to the Company under Section 2.1, which may be an Offshore Rate Committed Loan or a Base Rate Committed Loan (each a "Type" of Committed Loan). Company - see the Preamble. Competitive Bid means an offer by a Lender to make a Bid Loan in accordance with Section 2.7. Competitive Bid Request - see subsection 2.7(a). 13 Compliance Certificate means a certificate substantially in the form of Exhibit E. Computation Date means any date on which the Agent determines the Dollar Equivalent amount of any Offshore Currency Loans pursuant to subsection 2.5(a). Consolidated Capitalization means, as of the time of any determination, the sum of (i) Consolidated Net Worth and (ii) Funded Debt. Consolidated Net Earnings means with respect to any period: (i) consolidated gross revenues of the Company and its Subsidiaries, minus (ii) all operating and non-operating expenses of the Company and its Subsidiaries including all charges of a proper character (including current and deferred taxes on income, provision for taxes on unremitted foreign earnings which are included in gross revenues, current additions to reserves and merger integration costs), but not including in gross revenues: (a) any extraordinary gains or losses (net of expenses and taxes applicable thereto) resulting from the sale, conversion or other disposition of capital assets (i.e., assets other than current assets); (b) any gains resulting from the appraised write-up of assets; (c) any equity of the Company or any Subsidiary in the unremitted earnings of any corporation which is not a Subsidiary; (d) any earnings of any Person acquired by the Company or any Subsidiary through purchase, merger or consolidation or otherwise for any year prior to the year of acquisition; or (e) any deferred credit representing the excess of equity in any Subsidiary at the date of acquisition over the cost of the investment in such Subsidiary; all determined in accordance with GAAP; provided that, to the extent that amounts are deducted from Consolidated Net Earnings during the Company's 1999 fiscal year as a result of SOP 98-5, "Reporting the Costs of Start-up Activities", issued by the American Institute of Certified Public Accountants ("SOP 98-5"), in excess of the amount that would have been deducted absent SOP 98-5, such excess shall be added back to Consolidated Net Earnings. 14 Consolidated Net Worth means, as of any date of determination, the sum of (i) the par value (or value stated on the books of the Company) of the capital stock of all classes of the Company, plus (or minus in the case of a surplus deficit) (ii) the amount of the consolidated surplus, whether capital or earned, of the Company and its Subsidiaries, all determined in accordance with GAAP. Contractual Obligation means, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its property is bound. Conversion/Continuation Date means any date on which, under Section 2.4, the Company (a) converts Committed Loans of one Type to another Type or (b) continues as Committed Loans of the same Type, but with a new Interest Period, Committed Loans having an Interest Period expiring on such date. Cost of Funds Rate means, for any day, the rate per annum quoted by BofA as its costs for obtaining Federal Funds on such day. The Costs of Funds Rate for any day which is not a Business Day shall be the Cost of Funds Rate for the preceding Business Day. Credit Extension means and includes (a) the making of any Loan hereunder and (b) the acceptance of any BA hereunder. Debt means Short Term Debt and Funded Debt. Dollar Equivalent means, at any time, (a) as to any amount denominated in Dollars, the amount thereof at such time, and (b) as to any amount denominated in an Offshore Currency, the equivalent amount in Dollars as determined by the Agent at such time on the basis of the Spot Rate for the purchase of Dollars with such Offshore Currency on the most recent Computation Date provided for in subsection 2.5(a) or such other date as is specified herein. Dollars, dollars and $ each mean lawful money of the United States. EBITDA means, for any period, Consolidated Net Earnings for such period plus, to the extent deducted in computing such Consolidated Net Earnings, interest expense, taxes, depreciation and amortization. Effective Date - see Section 4.1. Environmental Claims means all claims, however asserted, by any Governmental 15 Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release or injury to the environment. Environmental Laws means all federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental, health, safety and land use matters. ERISA means the Employee Retirement Income Security Act of 1974 and regulations promulgated thereunder. ERISA Affiliate means any trade or business (whether or not incorporated) under common control with the Company within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code). ERISA Event means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a substantial cessation of operations which is treated as such a withdrawal; (c) a complete or partial withdrawal by the Company or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Pension Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Company or any ERISA Affiliate. Event of Default - see Section 8.1. Excess Net Cash Proceeds means Net Cash Proceeds from Assets Sales which, together with all other Net Cash Proceeds from Asset Sales after January 1, 2000 (excluding the amount of such Net Cash Proceeds, if any, previously applied to reduce the Commitments pursuant to Section 2.8.2), exceed $10,000,000. Exchange Act means the Securities Exchange Act of 1934 and regulations promulgated thereunder. Facility Fee Rate means the percentage set forth under the heading "Facility Fee 16 Rate" on Schedule 1.1 opposite the applicable Fixed Charge Coverage Ratio. Federal Funds Rate means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, "H.15(519)") on the preceding Business Day opposite the caption "Federal Funds (Effective)"; or, if for any relevant day such rate is not so published on any such preceding Business Day, the rate for such day will be the arithmetic mean as determined by the Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Agent. Fee Letter - see subsection 2.13(a). Fixed Charge Coverage Ratio means, as of the last day of any fiscal quarter, the ratio of (a) the sum, for the period of four consecutive fiscal quarters ending on such day, of (i) Consolidated Net Earnings plus (ii) to the extent deducted in determining such Consolidated Net Earnings, interest expense, taxes, operating lease expense, depreciation and amortization, plus (iii) for the period of four fiscal quarters ending March 31, 2000, June 30, 2000 and September 30, 2000, Special 1999 Charges (to the extent taken in such period), plus (iv) for the period of four fiscal quarters ending March 31, 2000 and June 30, 2000, Special A/P Charges (to the extent taken in such period), to (b) the sum for such period of (i) operating lease expense and (ii) interest expense; each as determined for the Company and its Subsidiaries on a consolidated basis. Foreign Subsidiary means each Subsidiary of the Company which is organized under the laws of any jurisdiction other than, and which is conducting the majority of its business outside of, the United States or any state thereof. FRB means the Board of Governors of the Federal Reserve System, and any Governmental Authority succeeding to any of its principal functions. Funded Debt means and includes, (i) any obligation payable more than one year from the date of creation thereof which under GAAP is shown on a balance sheet as a liability (including Capitalized Lease Obligations and notes payable to Members but 17 excluding reserves for deferred income taxes and other reserves to the extent that such reserves do not constitute an obligation); (ii) indebtedness payable more than one year from the date of creation thereof which is secured by any lien on property owned by the Company or any Subsidiary and (iii) Guarantees (excluding Guarantees of loans made to Members in an amount not exceeding in the aggregate $20,000,000). Further Taxes means any and all present or future taxes, levies, assessments, imposts, duties, deductions, fees, withholdings or similar charges (including net income taxes and franchise taxes), and all liabilities with respect thereto, imposed by any jurisdiction on account of amounts payable or paid pursuant to Section 3.1. FX Trading Office means the Foreign Exchange Trading Center #5193, San Francisco, California, of BofA, or such other office of BofA or any of its Affiliates as BofA may designate from time to time. GAAP means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination. Governmental Authority means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. Guarantee means, with respect to any Person, any direct or indirect liability, contingent or otherwise, of such Person with respect to any indebtedness, lease, dividend or other obligation of another, including, without limitation, any such obligation directly or indirectly guaranteed, endorsed (other than for collection of deposit in the ordinary course of business) or discounted or sold with recourse by such Person, or in respect of which such Person is otherwise directly or indirectly liable, including, without limitation, any such obligation in effect guaranteed by such Person through any agreement (contingent or otherwise) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), or to maintain the solvency or any balance sheet or other financial condition of the obligor of such obligation, or to make payment for any products, materials or supplies or for any transportation or services regardless of the non-delivery or non-furnishing thereof, in any such case if the purpose or intent of such agreement is to provide assurance that such obligation will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected against loss in 18 respect thereof. The amount of any Guarantee shall be equal to the outstanding principal amount of the obligation guaranteed or such lesser amount to which the maximum exposure of the guarantor shall have been specifically limited. Guarantor means, on any day, each Subsidiary that has executed a counterpart of the Guaranty on or prior to that day (or is required to execute a counterpart of the Guaranty on that day). Guaranty means the Guaranty executed by various Subsidiaries, substantially in the form of Exhibit K. Hostile Tender Offer means, with respect to the use of proceeds of any Loan or BA, any offer to purchase, or any purchase of, shares of capital stock of any corporation or equity interests in any other entity, or securities convertible into or representing the beneficial ownership of, or rights to acquire, any such shares or equity interests, if such shares, equity interests, securities or rights are of a class which is publicly traded on any securities exchange or in any over-the-counter market, other than purchases of such shares, equity interests, securities or rights representing less than 5% of the equity interests or beneficial ownership of such corporation or other entity for portfolio investment purposes, and such offer or purchase has not been duly approved by the board of directors of such corporation or the equivalent governing body of such other entity prior to the date on which the Company makes the borrowing request for such Loan or the request for such BA. Inactive Subsidiary means any Subsidiary which does not actively conduct business and which has less than $100,000 of assets. Indebtedness means, with respect to any Person, without duplication, (i) all items (excluding items of contingency reserves or of reserves for deferred income taxes) which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person as of the date on which Indebtedness is to be determined, (ii) all indebtedness secured by any Lien on any property or asset owned or held by such Person subject thereto, whether or not the indebtedness secured thereby shall have been assumed and (iii) all indebtedness of others with respect to which such Person has become liable by way of Guarantee. Indemnified Liabilities - see Section 10.5. Indemnified Person - see Section 10.5. Independent Auditor - see subsection 6.1(a). Insolvency Proceeding means, with respect to any Person, (a) any case, action or 19 proceeding with respect to such Person before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors; undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code. Intercreditor Agreement means the Intercreditor Agreement dated as of April 14, 2000 among the Agent, the Collateral Agent and various other parties, substantially in the form of Exhibit N. Interest Payment Date means (i) as to any Loan other than a Base Rate Committed Loan or a Swing Line Loan, the last day of each Interest Period applicable to such Loan, (ii) as to any Base Rate Committed Loan, the last Business Day of each calendar quarter, and (iii) as to any Swing Line Loan, each Business Day (or as otherwise agreed between the Company and the Swing Line Lender); provided that (a) if any Interest Period for an Offshore Rate Committed Loan exceeds three months, the date that falls three months after the beginning of such Interest Period shall also be an Interest Payment Date and (b) as to any Bid Loan, such intervening dates prior to the maturity thereof as may be specified by the Company and agreed to by the applicable Bid Loan Lender in the applicable Competitive Bid also shall be Interest Payment Dates. Interest Period means, (a) as to any Offshore Rate Loan, the period commencing on the Borrowing Date of such Loan or (in the case of any Offshore Rate Committed Loan) on the Conversion/Continuation Date on which the Loan is converted into or continued as an Offshore Rate Committed Loan, and ending on the date one, two, three or six months thereafter as selected by the Company in its Notice of Committed Borrowing, Notice of Conversion/Continuation or Competitive Bid Request, as the case may be; and (b) as to any Absolute Rate Bid Loan, a period of not more than 180 days as selected by the Company in the applicable Competitive Bid Request; provided that: (i) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the following Business Day unless, in the case of an Offshore Rate Loan, the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day; (ii) any Interest Period for an Offshore Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and 20 (iii) no Interest Period for any Loan shall extend beyond the scheduled Termination Date. Investments means any loan or advance to, or ownership, purchase or acquisition of any security (including stock) or obligations of, or any other interest in, or any capital contribution made to, any Person. IRS means the Internal Revenue Service, and any Governmental Authority succeeding to any of its principal functions under the Code. Lender - see the Preamble. References to the "Lenders" shall include BofA in its capacity as Accepting Lender and as Swing Line Lender. Lending Office means, as to any Lender, the office or offices of such Lender specified as its "Lending Office" or "Domestic Lending Office" or "Offshore Lending Office", as the case may be, on Schedule 10.2, or such other office or offices as such Lender may from time to time notify the Company and the Agent. LIBOR Auction means a solicitation of Competitive Bids setting forth a LIBOR Bid Margin pursuant to Section 2.7. LIBOR Bid Loan means any Bid Loan that bears interest at a rate based upon the Offshore Rate. LIBOR Bid Margin - see subsection 2.7(c)(ii)(C). Lien means any mortgage, pledge, security interest, encumbrance, lien (statutory or otherwise) or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction) or any other type of preferential arrangement for the purpose, or having the effect, of protecting a creditor against loss or securing the payment or performance of an obligation. Loan means an extension of credit by a Lender to the Company under Article II. A Loan may be a Committed Loan, a Bid Loan or a Swing Line Loan. Loan Documents means this Agreement, any Note, the Guaranty, the Collateral Documents, the Fee Letter, the Intercreditor Agreement and all other documents delivered to the Collateral Agent, the Agent or any Lender in connection herewith. Margin Stock means "margin stock" as such term is defined in Regulation T, U or X of the FRB. 21 Material Adverse Effect means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, condition (financial or otherwise) or prospects of the Company or the Company and its Subsidiaries taken as a whole; (b) a material impairment of the ability of the Company or any Subsidiary to perform its obligations under any Loan Document; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Company or any Subsidiary of any Loan Document. Member means any Person which is a member of the Company. Minimum Tranche means, in respect of Loans comprising part of the same Borrowing, or to be converted or continued under Section 2.4, (a) in the case of Base Rate Committed Loans, $1,000,000 or a higher integral multiple thereof and (b) in the case of Offshore Rate Committed Loans, a minimum Dollar Equivalent amount of $5,000,000 and an integral multiple of 1,000,000 units of the Applicable Currency. Mortgage means a mortgage, deed of trust, leasehold mortgage or similar instrument granting the Collateral Agent a Lien on real property owned or leased by the Company or any Subsidiary. Multiemployer Plan means any Plan which is a "multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA). Net Cash Proceeds means, with respect to any Asset Sale, the aggregate cash proceeds (including cash proceeds received by way of deferred payment of principal pursuant to a note, installment receivable or otherwise, but only as and when received) received by the Company or any Subsidiary pursuant to such Asset Sale net of (i) the direct costs relating to such Asset Sale (including sales commissions and legal, accounting and investment banking fees), (ii) taxes paid or reasonably estimated by the Company to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and (iii) amounts required to be applied to the repayment of any Debt or lease obligations secured by a Lien (other than Liens in favor of the Collateral Agent) on any asset subject to such Asset Sale (if such Lien is permitted by Section 7.2). Note means a promissory note executed by the Company in favor of a Lender pursuant to subsection 2.2(b), in substantially the form of Exhibit H. Notice of Borrowing means a notice in substantially the form of Exhibit A. Notice of Committed Borrowing means a Notice of Borrowing requesting Committed Loans pursuant to Section 2.3. 22 Notice of Conversion/Continuation means a notice in substantially the form of Exhibit B. Obligations means all advances, debts, liabilities, obligations, covenants and duties arising under any Loan Document owing by the Company to any Lender, the Agent or any Indemnified Person, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, or now existing or hereafter arising. Offshore Currency means at any time Canadian dollars, English pounds sterling, French francs, Deutschemarks, Japanese yen, and any Agreed Alternative Currency. Offshore Currency Loan means any Offshore Rate Committed Loan denominated in an Offshore Currency. Offshore Rate means, for any Interest Period, with respect to Offshore Rate Loans comprising part of the same Borrowing, the rate of interest per annum determined by the Agent as the average (rounded upwards, if necessary, to the nearest 0.01%) of the rates at which deposits in the Applicable Currency in the approximate amount of the Offshore Rate Loan of each Reference Lender (or, in the case of a Bid Borrowing in which no Reference Lender is participating, in the approximate amount of the largest Loan included in such Borrowing) for such Interest Period would be offered by such Reference Lender to major banks in the offshore interbank market at their request at approximately 11:00 a.m. (New York City time) two Business Days prior to the commencement of such Interest Period. Offshore Rate Committed Loan means a Committed Loan that bears interest based on the Offshore Rate. An Offshore Rate Committed Loan may be an Offshore Currency Loan or a Loan denominated in Dollars. Offshore Rate Loan means an Offshore Rate Committed Loan or a LIBOR Bid Loan. Offshore Rate Margin means the percentage set forth under the heading "Offshore Rate Margin" on Schedule 1.1 opposite the applicable Total Senior Debt to EBITDA Ratio. Organization Documents means, for any corporation, the certificate or articles of incorporation, the bylaws, any certificate of determination or instrument relating to the rights of preferred shareholders of such corporation, any shareholder rights agreement, and all applicable resolutions of the board of directors (or any committee thereof) of such corporation. 23 Original Agreement - see the Recitals. Other Taxes means any present or future stamp, court or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, this Agreement or any other Loan Document. Overnight Rate means, for any day, the rate of interest per annum at which overnight deposits in the Applicable Currency, in an amount approximately equal to the amount with respect to which such rate is being determined, would be offered for such day by BofA's London Branch to major banks in the London or other applicable offshore interbank market. The Overnight Rate for any day which is not a Business Day shall be the Overnight Rate for the preceding Business Day. Participant - see subsection 10.8(c). Payment Sharing Notice means a written notice from the Company or any Lender informing the Agent that an Event of Default has occurred and is continuing and directing the Agent to allocate payments received from the Company in accordance with subsection 2.17(b). PBGC means the Pension Benefit Guaranty Corporation, or any Governmental Authority succeeding to any of its principal functions under ERISA. Pension Plan means a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA with respect to which the Company or any ERISA Affiliate may have any liability. Person means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or Governmental Authority. Plan shall mean any employee pension benefit plan (as such term is defined in section 3 of ERISA) which is or has been established or maintained, or to which contributions are or have been made, by the Company or any ERISA Affiliate. Pledge Agreement means the Pledge Agreement among the Company, various Subsidiaries of the Company and the Collateral Agent, substantially in the form of Exhibit L. Preferred Stock, as applied to any corporation, means shares of such corporation that shall be entitled to preference or priority over any other shares of such corporation in respect of either the payment of dividends or the distribution of assets upon liquidation, or 24 both. Pro Rata Share means, as to any Lender at any time, the percentage equivalent (expressed as a decimal, rounded to the ninth decimal place) at such time of such Lender's Commitment divided by the combined Commitments of all Lenders (or, after the Commitments have terminated, of (i) the Dollar Equivalent amount of such Lender's Loans plus (without duplication) the participation of such Lender in (or, in the case of the Accepting Lender or the Swing Line Lender, its unparticipated portion of) all BA Outstandings and Swing Line Loans divided by (ii) the Dollar Equivalent amount of all outstanding Loans plus all BA Outstandings). Reference Lender means each of BofA, Bank of Montreal and PNC Bank, National Association. Replacement Lender - see Section 3.7. Reportable Event means, any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder, other than any such event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the PBGC. Required Lenders means Lenders having Pro Rata Shares of 66-2/3% or more. Requirement of Law means, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its property or to which the Person or any of its property is subject. Reset Date means the first date after the Effective Date on which the Total Senior Debt to EBITDA Ratio has been below 3.00 to 1.00 for a period of four consecutive fiscal quarters. Responsible Officer means the chief executive officer, chief operating officer, chief financial officer, treasurer or chief accounting officer of the Company, general counsel of the Company or any other officer of the Company involved principally in its financial administration or its controllership function. Restricted Investments shall mean any Investment prohibited by Section 7.11. Restricted Payment - see Section 7.12. Same Day Funds means (i) with respect to disbursements and payments in Dollars, immediately available funds, and (ii) with respect to disbursements and payments in an Offshore Currency, same day or other funds as may be determined by the Agent to be 25 customary in the place of disbursement or payment for the settlement of international banking transactions in the relevant Offshore Currency. SEC means the Securities and Exchange Commission or any Governmental Authority succeeding to any of its principal functions. Secured Funded Debt means Funded Debt which is secured by any Lien. Security Agreement means the Security Agreement among the Company, various Subsidiaries and the Collateral Agent, substantially in the form of Exhibit M. Senior Funded Debt means Funded Debt of the Company which is not Subordinated Debt. Short Term Debt means, as of any date of determination with respect to any Person, (i) all Indebtedness of such Person for borrowed money other than Funded Debt of such Person and (ii) Guarantees by such Person of Short Term Debt of Persons other than Members. Special A/P Charges means, at any time, the first $15,000,000 of accounts payable charges taken by the Company during the first and second fiscal quarters of its 2000 fiscal year. Special 1999 Charges means up to $100,000,000 of accounting adjustments taken by the Company during the 1999 fiscal year. Spot Rate for a currency means the rate quoted by BofA as the spot rate for the purchase by BofA of such currency with another currency through its FX Trading Office at approximately 8:00 a.m. (San Francisco time) on the date two Business Days prior to the date as of which the foreign exchange computation is made. Subordinated Debt shall mean any Indebtedness of the Company which contains terms of subordination identical to or, in the reasonable determination of the Agent no less favorable to the Lenders than, the terms of subordination set forth in Exhibit I hereto and, which by virtue of such language and any necessary action of the Board of Directors of the Company, is subordinated to the Obligations. Subsidiary means any corporation all of the stock of every class of which, except directors' qualifying shares, shall, at the time as of which any determination is being made, be owned by the Company either directly or through Subsidiaries. Notwithstanding the foregoing, for purposes of calculating the financial covenants, each of Cotter Canada Hardware and Variety Company Inc. and TruServ Canada Cooperative Inc. will be deemed a Subsidiary of the Company if, in accordance with GAAP, it is consolidated in 26 the financial statements of the Company required to be delivered pursuant to clauses (a) and (b) of Section 6.1 hereof. Substantial Stockholder means (i) any Person owning, beneficially or of record, directly or indirectly, either individually or together with all other Persons to whom such Person is related by blood, adoption or marriage, stock of the Company (of any class having ordinary voting power for the election of directors) aggregating five percent (5%) or more of such voting power or (ii) any Person related by blood, adoption or marriage to any Person described or coming within the provisions of clause (i) of this definition. Swing Line Commitment means the commitment of the Swing Line Lender to make Swing Line Loans hereunder. The Swing Line Commitment is a subfacility under the combined Commitments and not a separate, independent commitment. Swing Line Lender means BofA in its capacity as swing line lender hereunder, together with any successor thereto in such capacity. Swing Line Loan - see Section 2.18. Taxes means any and all present or future taxes, levies, assessments, imposts, duties, deductions, charges or withholdings, fees, withholdings or similar charges, and all liabilities with respect thereto, excluding, in the case of each Lender and the Agent, such taxes (including income taxes or franchise taxes) as are taxes imposed on or measured by its net income by the jurisdiction (or any political subdivision thereof) under the laws of which such Lender or the Agent, as the case may be, is organized or maintains a lending office. Termination Date means the earlier to occur of: (a) June 30, 2002; and (b) the date on which the Commitments terminate in accordance with the provisions of this Agreement. Total Outstandings means at any time the sum of (a) the Dollar Equivalent principal amount of all outstanding Loans (whether Committed Loans, Bid Loans or Swing Line Loans) plus (b) BA Outstandings. Total Senior Debt means the sum of (a) all Debt of the Company and its Subsidiaries other than Subordinated Debt and (b) the principal or face amount of all outstanding "LC Obligations" under and as defined in the Intercreditor Agreement. Total Senior Debt to EBITDA Ratio means, as of the last day of any fiscal quarter, 27 the ratio of (a) the remainder of (i) the daily average of the amount of Total Senior Debt outstanding during the last fiscal month of such fiscal quarter minus (ii) the daily average of cash and marketable securities during the last fiscal month of such fiscal quarter to (b) the sum of (i) EBITDA for the period of four consecutive fiscal quarters then ending, plus (ii) for the period of four fiscal quarters ending March 31, 2000, June 30, 2000 and September 30, 2000, Special 1999 Charges (to the extent taken in such period), plus (iii) for the period of four fiscal quarters ending March 31, 2000 and June 30, 2000, Special A/P Charges (to the extent taken in such period). Trademark Security Agreement means the Trademark Security Agreement between the Company and the Collateral Agent, substantially in the form of Exhibit J. Type has the meaning specified in the definition of "Committed Loan." Unfunded Pension Liability means the excess of a Pension Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Plan's assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year. United States and U.S. each means the United States of America. Unmatured Event of Default means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default. Unused Commitment Share means, for any Lender at any time, a fraction (a) the numerator of which is the remainder of (i) the Commitment of such Lender minus (ii) the sum of (x) the aggregate Dollar Equivalent principal amount of all then outstanding Loans of such Lender (excluding, in the case of the Swing Line Lender, all Swing Line Loans) and (b) the denominator of which is the remainder of (i) the aggregate Commitments of all Lenders, minus (ii) the aggregate Dollar Equivalent principal amount of all then outstanding Loans of all Lenders. Solely for purposes of the foregoing, (i) Loans to be repaid with the proceeds of Loans proposed to be made shall be deemed not to be outstanding; and (ii) funded participations in Swing Line Loans pursuant to Section 2.21 and in obligations with respect to BAs pursuant to subsection 2.24(e) shall be deemed to constitute Loans (but unfunded participations of the types described above shall not constitute Loans). Year 2000 Problem means the risk that computer applications and embedded microchips in non-computing devices may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999. 1.2 Other Interpretive Provisions. 28 (a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms. (b) The words "hereof", "herein", "hereunder" and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. (c) (i) The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced. (ii) The term "including" is not limiting and means "including without limitation." (iii) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including"; the words "to" and "until" each mean "to but excluding", and the word "through" means "to and including." (d) Unless otherwise expressly provided herein, (i) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation. (e) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. (f) This Agreement and other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms. Unless otherwise expressly provided herein, any reference to any action of the Agent, the Lenders or the Required Lenders by way of consent, approval or waiver shall be deemed modified by the phrase "in its/their sole discretion." (g) This Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to the Agent, the Company and the other parties, and are the products of all parties. Accordingly, they shall not be construed against the Lenders or the Agent merely because of the Agent's or Lenders' involvement in their preparation. 1.3 Accounting Principles. (a) Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP, consistently applied; provided that if the 29 Company notifies the Agent that the Company wishes to amend any covenant in Article VII to eliminate the effect of any change in GAAP on the operation of such covenant (or if the Agent notifies the Company that the Required Lenders wish to amend Article VII for such purpose), then the Company's compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Company and the Required Lenders. (b) References herein to "fiscal year" and "fiscal quarter" refer to such fiscal periods of the Company. 1.4 Currency Equivalents Generally. For all purposes of this Agreement (but not for purposes of the preparation of any financial statements delivered pursuant hereto), the equivalent in any Offshore Currency or other currency of an amount in Dollars, and the equivalent in Dollars of an amount in any Offshore Currency or other currency, shall be determined at the Spot Rate. 1.5 Introduction of Euro. For the avoidance of doubt, the parties hereto affirm and agree that neither the fixation of the conversion rate of any Offshore Currency of a country that is a member of the European Union against the Euro as a single currency, in accordance with the Treaty Establishing the European Economic Community, as amended by the Treaty on the European Union (the Maastricht Treaty), nor the conversion of any Obligations under the Loan Documents from an Offshore Currency of a country that is a member of the European Union into Euro, shall require the early termination of this Agreement or the prepayment of any amount due under the Loan Documents or create any liability of one party to another party for any direct or consequential loss arising from any of such events. As of the date that any such Offshore Currency is no longer the lawful currency of its respective country, all payment obligations under the Loan Documents that would otherwise be in such Offshore Currency shall thereafter by satisfied in Euro. ARTICLE II THE CREDITS 2.1 Amounts and Terms of Commitments. Each Lender severally agrees, on the terms and conditions set forth herein, to make Committed Loans to the Company from time to time on any Business Day during the period from the Closing Date to the Termination Date, in an aggregate Dollar Equivalent amount not to exceed at any time outstanding the amount set forth on Schedule 2.1 (such amount, as the same may be reduced under Section 2.8 or as a result of one or more assignments under Section 10.8, such Lender's "Commitment"); provided, however, that the Total Outstandings shall not at any time exceed the combined Commitments; and provided, further, that the aggregate Dollar Equivalent principal amount of all outstanding Loans 30 (whether Committed Loans or Bid Loans) of any Lender plus such Lender's participation interest in all Swing Line Loans and BA Outstandings shall not at any time exceed such Lender's Commitment. Within the foregoing limits, and subject to the other terms and conditions hereof, the Company may borrow under this Section 2.1, prepay under Section 2.9 and reborrow under this Section 2.1. 2.2 Loan Accounts. (a) The Loans made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender in the ordinary course of business. The accounts or records maintained by the Agent and each Lender shall be rebuttably presumptive evidence of the amount of the Loans made by the Lenders to the Company, and the interest and payments thereon. Any failure so to record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Company hereunder to pay any amount owing with respect to the Loans. (b) Upon the request of any Lender made through the Agent, the Loans made by such Lender may be evidenced by one or more Notes, instead of or in addition to loan accounts. Each such Lender shall endorse on the schedules annexed to its Note(s) the date, amount and maturity of each Loan made by it and the amount of each payment of principal made by the Company with respect thereto. Each such Lender is irrevocably authorized by the Company to endorse its Note(s) and each Lender's record shall be rebuttably presumptive evidence; provided, however, that the failure of a Lender to make, or an error in making, a notation thereon with respect to any Loan shall not limit or otherwise affect the obligations of the Company hereunder or under any such Note to such Lender. 2.3 Procedure for Committed Borrowing. (a) Each Committed Borrowing shall be made upon the Company's irrevocable written notice delivered to the Agent in the form of a Notice of Committed Borrowing, which notice must be received by the Agent prior to (i) 11:00 a.m. (Chicago time) four Business Days prior to the requested Borrowing Date, in the case of Offshore Currency Loans, (ii) 9:00 a.m.(Chicago time) two Business Days prior to the requested Borrowing Date, in the case of Offshore Rate Loans denominated in Dollars, and (iii) 11:00 a.m. (Chicago time) on the requested Borrowing Date, in the case of Base Rate Loans, specifying: (A) the amount of the Committed Borrowing, which shall be in an aggregate amount not less than the Minimum Tranche; (B) the requested Borrowing Date, which shall be a Business Day; (C) the Type of Loans comprising such Committed Borrowing; (D) in the case of Offshore Rate Committed Loans, the duration of the initial Interest Period therefor; and 31 (E) in the case of a Borrowing of Offshore Currency Loans, the Applicable Currency. (b) The Dollar Equivalent amount of any Committed Borrowing in an Offshore Currency will be determined by the Agent for such Borrowing on the Computation Date therefor in accordance with subsection 2.5(a). The Agent will promptly notify each Lender of its receipt of any Notice of Committed Borrowing and of the amount of such Lender's Unused Commitment Share of such Borrowing. In the case of a Borrowing comprised of Offshore Currency Loans, such notice will provide the approximate amount of each Lender's Unused Commitment Share of such Borrowing, and the Agent will, upon the determination of the Dollar Equivalent amount of such Borrowing as specified in the related Notice of Committed Borrowing, promptly notify each Lender of the exact amount of such Lender's Unused Commitment Share of such Borrowing. (c) Each Lender will make the amount of its Unused Commitment Share of each Committed Borrowing available to the Agent for the account of the Company at the Agent's Payment Office on the Borrowing Date requested by the Company in Same Day Funds and in the requested currency (i) in the case of a Committed Borrowing comprised of Loans in Dollars, by noon (Chicago time) and (ii) in the case of a Borrowing comprised of Offshore Currency Loans, by such time as the Agent may specify. The proceeds of all such Committed Loans will then be made available to the Company by the Agent at such office by crediting the account of the Company on the books of BofA with the aggregate of the amounts made available to the Agent by the Lenders and in like funds as received by the Agent. (d) After giving effect to any Committed Borrowing, unless the Agent otherwise consents, there may not be more than ten different Interest Periods in effect for all Committed Borrowings. 2.4 Conversion and Continuation Elections for Committed Borrowings. (a) The Company may, upon irrevocable written notice to the Agent in accordance with subsection 2.4(b): (i) elect, as of any Business Day, in the case of Base Rate Committed Loans, or as of the last day of the applicable Interest Period, in the case of Offshore Rate Committed Loans denominated in Dollars, to convert any such Committed Loans (or any part thereof in an aggregate amount not less than the Minimum Tranche) into Committed Loans in Dollars of any other Type; or (ii) elect as of the last day of the applicable Interest Period, to continue any Committed Loans having Interest Periods expiring on such day (or any part thereof in an amount not less than the Minimum Tranche) as Committed Loans of the same Type; provided that if at any time the aggregate amount of Offshore Rate Committed Loans denominated in Dollars in respect of any Committed Borrowing is reduced, by payment, prepayment, or conversion of part thereof, to be less than the Minimum Tranche, such Offshore 32 Rate Committed Loans shall automatically convert into Base Rate Committed Loans. (b) The Company shall deliver a Notice of Conversion/Continuation to be received by the Agent not later than (i) 11:00 a.m. (Chicago time) four Business Days prior to the Conversion/Continuation Date, if the Committed Loans are to be continued as Offshore Currency Loans; (ii) 10:00 a.m. (Chicago time) two Business Days in advance of the Conversion/Continuation Date, if the Committed Loans are to be converted into or continued as Offshore Rate Committed Loans denominated in Dollars; and (iii) 11:00 a.m. (Chicago time) on the Conversion/Continuation Date, if the Committed Loans are to be converted into Base Rate Committed Loans, specifying: (A) the proposed Conversion/Continuation Date; (B) the aggregate amount of Committed Loans to be converted or continued; (C) the Type of Committed Loans resulting from the proposed conversion or continuation; and (D) in the case of conversions into Offshore Rate Committed Loans, the duration of the requested Interest Period. (c) If upon the expiration of any Interest Period applicable to Offshore Rate Committed Loans denominated in Dollars, the Company has failed to select timely a new Interest Period to be applicable to such Offshore Rate Committed Loans, the Company shall be deemed to have elected to convert such Offshore Rate Committed Loans into Base Rate Committed Loans effective as of the expiration date of such Interest Period. If the Company has failed to select a new Interest Period to be applicable to Offshore Currency Loans by the applicable time on the fourth Business Day in advance of the expiration date of the current Interest Period applicable thereto as provided in subsection 2.4(b), or if any Event of Default or Unmatured Event of Default shall then exist, subject to the provisions of subsection 2.5(d), the Company shall be deemed to have elected to continue such Offshore Currency Loans on the basis of a one month Interest Period. (d) The Agent will promptly notify each Lender of its receipt of a Notice of Conversion/Continuation, or, if no timely notice is provided by the Company, the Agent will promptly notify each Lender of the details of any automatic conversion. All conversions and continuations shall be made ratably according to the respective outstanding principal amounts of the Committed Loans with respect to which the notice was given held by each Lender. (e) Unless the Required Lenders otherwise consent, during the existence of an Event of Default or Unmatured Event of Default, the Company may not elect to have a Loan converted into or continued as an Offshore Rate Committed Loan. 33 (f) After giving effect to any conversion or continuation of Committed Loans, unless the Agent shall otherwise consent, there may not be more than ten different Interest Periods in effect for all Committed Loans. 2.5 Utilization of Commitments in Offshore Currencies. (a) The Agent will determine the Dollar Equivalent amount with respect to (i) any Borrowing comprised of Offshore Currency Loans as of the requested Borrowing Date, (ii) all outstanding Offshore Currency Loans as of the last Business Day of each month, and (iii) any outstanding Offshore Currency Loan as of any redenomination date pursuant to this Section 2.5 or Section 3.2 or 3.5 and any date on which the Commitments are reduced pursuant to Section 2.8. (b) In the case of a proposed Borrowing comprised of Offshore Currency Loans, the Lenders shall be under no obligation to make Offshore Currency Loans in the requested Offshore Currency as part of such Borrowing if the Agent has received notice from any of the Lenders by 3:00 p.m. (Chicago time) four Business Days prior to the day of such Borrowing that such Lender cannot provide Loans in the requested Offshore Currency, in which event the Agent will promptly give notice to the Company that the Borrowing in the requested Offshore Currency is not then available, and notice thereof also will be given promptly by the Agent to the Lenders. If the Agent shall have so notified the Company that any such Borrowing in a requested Offshore Currency is not then available, the Company may, by notice to the Agent not later than 3:00 p.m. (Chicago time) three Business Days prior to the requested date of such Borrowing, withdraw the Notice of Committed Borrowing relating to such requested Borrowing. If the Company does so withdraw such Notice of Committed Borrowing, the Borrowing requested therein shall not occur and the Agent will promptly so notify each Lender. If the Company does not so withdraw such Notice of Committed Borrowing, the Agent will promptly so notify each Lender and such Notice of Committed Borrowing shall be deemed to be a Notice of Committed Borrowing that requests a Borrowing comprised of Base Rate Loans in an aggregate amount equal to the amount of the originally requested Borrowing as expressed in Dollars in the Notice of Committed Borrowing; and in such notice by the Agent to each Lender the Agent will state such aggregate amount of such Borrowing in Dollars and such Lender's Unused Commitment Share thereof. (c) In the case of a proposed continuation of Offshore Currency Loans for an additional Interest Period pursuant to Section 2.4, the Lenders shall be under no obligation to continue such offshore Currency Loans if the Agent has received notice from any of the Lenders by 3:00 p.m. (Chicago time) four Business Days prior to the day of such continuation that such Lender cannot continue to provide Loans in the relevant Offshore Currency, in which event the Agent will promptly give notice to the Company that the continuation of such Offshore Currency Loans in the relevant Offshore Currency is not then available, and notice thereof also will be given promptly by the Agent to the Lenders. If the Agent shall have so notified the Company that any such continuation of Offshore Currency Loans is not then available, any Notice of Continuation/Conversion with respect thereto shall be deemed withdrawn and such Offshore Currency Loans shall be repaid on the last day of the Interest Period with respect to such offshore 34 Currency Loans. (d) Notwithstanding anything herein to the contrary, during the existence of an Event of Default, upon the request of the Required Lenders, all or any part of any outstanding Offshore Currency Loans shall be redenominated and converted into Base Rate Committed Loans in Dollars with effect from the last day of the Interest Period with respect to such Offshore Currency Loans. The Agent will promptly notify the Company of any request pursuant to the foregoing sentence. (e) The Company shall be entitled to request that Loans hereunder also be permitted to be made in any other lawful currency, in addition to the eurocurrencies specified in the definition of "Offshore Currency" herein, that in the opinion of the Required Lenders is at such time freely traded in the offshore interbank foreign exchange markets and is freely transferable and freely convertible into Dollars (an "Agreed Alternative Currency"). The Company shall deliver to the Agent any request for designation of an Agreed Alternative Currency not later than 10:00 a.m. (Chicago time) at least seven Business Days in advance of the date of any Borrowing hereunder proposed to be made in such Agreed Alternative Currency. Upon receipt of any such request the Agent will promptly notify the Lenders thereof, and each Lender will use its best efforts to respond to such request within two Business Days of receipt thereof. Each Lender may grant or accept such request in its sole discretion. The Agent will promptly notify the Company of the acceptance or rejection of any such request. 2.6 Bid Borrowings. In addition to Committed Borrowings pursuant to Section 2.3, each Lender severally agrees that the Company may, as set forth in Section 2.7, from time to time request the Lenders prior to the Termination Date to submit offers to make Bid Loans to the Company; provided that the Lenders may, but shall have no obligation to, submit such offers and the Company may, but shall have no obligation to, accept any such offers; and provided, further, that (a) the Total Outstandings shall not at any time exceed the combined Commitments, (b) the aggregate Dollar Equivalent principal amount of all outstanding Loans (whether Bid Loans or Committed Loans) of any Lender plus such Lender's participation interest in all Swing Line Loans and BA Outstandings shall not at any time exceed such Lender's Commitment, and (c) after giving effect to any Bid Borrowing, there may not be more than ten (10) different Interest Periods in effect for all Bid Borrowings. 2.7 Procedure for Bid Borrowings. (a) When the Company wishes to request the Lenders to submit offers to make Bid Loans hereunder, it shall transmit to the Agent and each Lender by telephone call followed promptly by facsimile transmission a notice in substantially the form of Exhibit C (a "Competitive Bid Request") so as to be received no later than 9:00 a.m. (Chicago time) (x) four Business Days prior to the date of a proposed Bid Borrowing in the case of a LIBOR Auction or (y) on the date of a proposed Bid Borrowing in the case of an Absolute Rate Auction, specifying: 35 (i) the date of such Bid Borrowing, which shall be a Business Day; (ii) the aggregate amount of such Bid Borrowing, which shall be a minimum amount of $3,000,000 or a higher integral multiple of $1,000,000; (iii) whether the Competitive Bids requested are to be for LIBOR Bid Loans or Absolute Rate Bid Loans or both; and (iv) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of "Interest Period" herein. Subject to subsection 2.7(b), the Company may not request Competitive Bids for more than three Interest Periods in a single Competitive Bid Request and may not request Competitive Bids more than twice in any period of five Business Days. (b)(i) Each Lender may at its discretion submit a Competitive Bid containing an offer or offers to make Bid Loans in response to any Competitive Bid Request. Each Competitive Bid must comply with the requirements of this subsection 2.7(b) and must be submitted to the Company by facsimile transmission at the Company's office for notices not later than 9:30 a.m. (Chicago time) (1) three Business Days prior to the proposed date of Borrowing, in the case of a LIBOR Auction, or (2) on the proposed date of Borrowing, in the case of an Absolute Rate Auction. (ii) Each Competitive Bid shall be in substantially the form of Exhibit D, specifying therein: (A) the proposed date of Borrowing; (B) the principal amount of each Bid Loan for which such Competitive Bid is being made, which principal amount (x) may be equal to, greater than or less than the Commitment of the quoting Lender, (y) must be $3,000,000 or a higher integral multiple of $1,000,000 and (z) may not exceed the principal amount of Bid Loans for which Competitive Bids were requested; (C) if the Company elects a LIBOR Auction, the margin above or below LIBOR (the "LIBOR Bid Margin") offered for each such Bid Loan, expressed as a percentage (rounded to the nearest 1/16th of 1%) to be added to or subtracted from the applicable LIBOR, and the Interest Period applicable thereto; (D) if the Company elects an Absolute Rate Auction, the rate of interest per annum (which shall be an integral multiple of 1/100th of 1%) (the "Absolute Rate") offered for each such Bid Loan; and 36 (E) the identity of the quoting Lender. A Competitive Bid may contain up to three separate offers by the quoting Lender with respect to each Interest Period specified in the related Competitive Bid Request. (iii) Any Competitive Bid shall be disregarded if it: (A) is not substantially in conformity with Exhibit D or does not specify all of the information required by subsection (b)(ii) of this Section; (B) contains qualifying, conditional or similar language; (C) proposes terms other than or in addition to those set forth in the applicable Competitive Bid Request; or (D) arrives after the time set forth in subsection (b)(i) of this Section. (c) Not later than 10:00 a.m. (Chicago time) three Business Days prior to the proposed date of Borrowing, in the case of a LIBOR Auction, or 10:00 a.m. (Chicago time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction, the Company shall notify each Lender whose Competitive Bid the Company is accepting of its acceptance of the offer received pursuant to subsection 2.7(b) and the amount of the Bid Loan or Bid Loans to be made by such Lender on the date of the Bid Borrowing. The Company shall be under no obligation to accept any offer and may choose to reject all offers. The Company may accept any Competitive Bid in whole or in part; provided that: (i) the aggregate principal amount of each Bid Borrowing may not exceed the applicable amount set forth in the related Competitive Bid Request; (ii) the principal amount of each Bid Borrowing must be $3,000,000 or a higher integral multiple of $1,000,000; (iii) acceptance of offers may only be made on the basis of ascending LIBOR Bid Margins or Absolute Rates, as the case may be, within each Interest Period; and (iv) the Company may not accept any offer that is described in subsection 2.7(b)(iii) or that otherwise fails to comply with the requirements of this Agreement. (d) If offers are made by two or more Lenders with the same LIBOR Bid Margins or Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal 37 amount of Bid Loans in respect of which such offers are accepted shall be allocated by the Company among such Lenders as nearly as possible (in such multiples, not less than $1,000,000, as the Company may deem appropriate) in proportion to the aggregate principal amounts of such offers. (e)(i) The Company shall notify the Agent of all Competitive Bids accepted and the amount and maturity of each Bid Loan of each Lender whose Competitive Bid has been accepted. (ii) Each Lender which has received notice pursuant to subsection 2.7(c) that its Competitive Bid has been accepted shall make the amounts of such Bid Loans available to the Agent for the account of the Company at the Agent's Payment Office by 1:00 p.m. (Chicago time) on the date of the Bid Borrowing, in Same Day Funds. (iii) Promptly following each Bid Borrowing, the Agent shall notify each Lender of the amount and maturity of each Bid Loan borrowed pursuant to such Bid Borrowing. (iv) From time to time, the Company and the Lenders shall furnish such information to the Agent as the Agent may request relating to the making of Bid Loans, including the amounts, interest rates, dates of borrowings and maturities thereof, for purposes of the allocation of amounts received from the Company for payment of all amounts owing hereunder. (f) If, on the proposed date of Borrowing, the Commitments have not been terminated and all applicable conditions to funding referenced in Sections 3.2, 3.5 and 4.2 hereof are satisfied, the Lender or Lenders whose offers the Company has accepted will fund each Bid Loan so accepted. Nothing in this Section 2.7 shall be construed as a right of first offer in favor of the Lenders or to otherwise limit the ability of the Company to request and accept credit facilities from any Person (including any of the Lenders), provided that no Event of Default or Unmatured Event of Default would otherwise arise or exist as a result of the Company executing, delivering or performing under such credit facilities. 2.8 Termination or Reduction of Commitments. 2.8.1 Voluntary Termination or Reduction of Commitments. The Company may, upon not less than five Business Days' prior notice to the Agent, terminate the Commitments, or permanently reduce the Commitments by an aggregate amount of $5,000,000 or a higher integral multiple of $1,000,000; unless, after giving effect thereto and to any payments or prepayments of Loans made on the effective date thereof, the aggregate principal Dollar Equivalent amount of all Loans would exceed the amount of the combined Commitments then in effect. 2.8.2 Mandatory Reductions of Commitments. (a) If, at any time, the Company and its Subsidiaries receive any Excess Net Cash Proceeds, the Commitments shall be reduced by an 38 amount equal to the product of (i) such Excess Net Cash Proceeds multiplied by (ii) 0.75 multiplied by (iii) a fraction, the numerator of which is the amount of the Commitments as in effect prior to such reduction and the denominator of which is the sum of (A) the amount of the Commitments as in effect prior to such reduction plus (B) the outstanding principal amount of the Shelf Obligations and the Senior Note Obligations (each as defined in the Intercreditor Agreement) prior to any prepayment thereof on account of such Net Cash Proceeds; provided that (x) no such reduction shall be required unless the aggregate amount of Excess Net Cash Proceeds (excluding Excess Net Cash Proceeds previously applied to reduce the Commitments pursuant to this Section) equals or exceeds $400,000; and (y) the amount of Excess Net Cash Proceeds to be applied on any single occasion shall be rounded down to an integral multiple of $100,000 (it being understood that the amount of Excess Net Cash Proceeds in excess of any such integral multiple shall be applied on the next date on which Excess Net Cash Proceeds are applied). (b) The aggregate amount of the Commitments shall be automatically reduced (to the extent not already at or below the specified amount) to (i) $275,000,000 on December 31, 2000 and (ii) $250,000,000 on December 31, 2001. 2.8.3 All Reductions of Commitments. Once reduced in accordance with this Section 2.8, the Commitments may not be increased. Any reduction of the Commitments shall be applied to each Lender according to its Pro Rata Share. All accrued commitment fees to, but not including, the effective date of any reduction or termination of Commitments, shall be paid on the effective date of such reduction or termination. 2.9 Prepayments. 2.9.1 Optional Prepayments. (a) Subject to Section 3.4, the Company may, from time to time, upon irrevocable notice to the Agent not later than 11:00 a.m. (Chicago time) on any Business Day, ratably prepay Committed Loans in whole or in part, in minimum Dollar Equivalent amounts of not less than the Minimum Tranche. The Company shall deliver a notice of prepayment in accordance with Section 10.2 to be received by the Agent not later than (i) 11:00 a.m. (Chicago time) three Business Days in advance of the prepayment date if the Committed Loans to be prepaid are Offshore Rate Committed Loans, and (ii) 10:00 a.m. (Chicago time) on the prepayment date if the Committed Loans to be prepaid are Base Rate Loans. Such notice of prepayment shall specify the date and amount of such prepayment and whether such prepayment is of Base Rate Loans, Offshore Rate Committed Loans, or any combination thereof and the Applicable Currency. Such notice shall not thereafter be revocable by the Company. The Agent will promptly notify each Lender of its receipt of any such notice, and of such Lender's share of such prepayment (ratably in accordance with each Lender's aggregate Dollar Equivalent principal amount of Loans outstanding). If such notice is given by the Company, the Company shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, together with, in the case of Offshore Rate Committed Loans, accrued interest to each such date on the amount prepaid and any amounts required pursuant to Section 3.4. 39 (b) No Bid Loan may be voluntarily prepaid without the consent of the Lender that holds such Bid Loan. 2.9.2 Mandatory Prepayments. If on any date on which the Commitments are reduced pursuant to Section 2.8.2, the Total Outstandings exceed the aggregate amount of the Commitments as so reduced, the Company shall immediately prepay Loans in an amount equal to such excess. 2.10 Currency Exchange Fluctuations. Subject to Section 3.4, if on any Computation Date the Agent shall have determined that the Total Outstandings exceed the combined Commitments of all Lenders by more than $250,000 due to a change in applicable rates of exchange between Dollars, on the one hand, and Offshore Currencies on the other hand, then the Agent shall give notice to the Company that a prepayment is required under this subsection, and the Company agrees thereupon to make prepayments of Loans such that, after giving effect to such prepayment, the Total Outstandings do not exceed the combined Commitments of all Lenders. 2.11 Repayment. The Company shall repay each Bid Loan on the last day of each Interest Period therefor. The Company shall repay all Loans (including any outstanding Bid Loan) on the Termination Date. 2.12 Interest. (a) Each Committed Loan shall bear interest on the outstanding principal amount thereof from the applicable Borrowing Date at a rate per annum equal to (i) at all times such Committed Loan is a Base Rate Loan, the sum of the Base Rate as in effect from time to time plus the Base Rate Margin as in effect from time to time and (ii) at all times such Committed Loan is an Offshore Rate Loan, the sum of the Offshore Rate for the applicable Interest Period plus the Offshore Rate Margin as in effect from time to time. Each Swing Line Loan shall bear interest on the outstanding principal amount thereof from the applicable Borrowing Date at a rate per annum equal to the sum of (i) the Federal Funds Rate as in effect from time to time plus (ii) the applicable Offshore Rate Margin as in effect from time to time plus (iii) 0.10%. (b) Interest on each Loan shall be paid in arrears on each Interest Payment Date. Interest also shall be paid on the date of any conversion of Offshore Rate Committed Loans under Section 2.4 and prepayment of Offshore Rate Committed Loans under Section 2.9, in each case for the portion of the Loans so prepaid. During the existence of any Event of Default, interest shall be paid on demand of the Agent at the request or with the consent of the Required Lenders. (c) Notwithstanding subsection (a) of this Section, while any Event of Default exists, the Company shall pay interest (after as well as before entry of judgment thereon to the extent permitted by law) on the principal amount of all outstanding Loans and, to the extent 40 permitted by applicable law, on any other amount payable hereunder or under any other Loan Document, at a rate per annum equal to the rate otherwise applicable thereto pursuant to the terms hereof or such other Loan Document (or, if no such rate is specified, the Base Rate) plus 2%. All such interest shall be payable on demand. (d) Anything herein to the contrary notwithstanding, the obligations of the Company to any Lender hereunder shall be subject to the limitation that payments of interest shall not be required for any period for which interest is computed hereunder, to the extent (but only to the extent) that contracting for or receiving such payment by such Lender would be contrary to the provisions of any law applicable to such Lender limiting the highest rate of interest that may be lawfully contracted for, charged or received by such Lender, and in such event the Company shall pay such Lender interest at the highest rate permitted by applicable law. 2.13 Fees. (a) Certain Fees. The Company shall pay certain fees to the Agent and the Arranger for their own respective accounts at the times and in the amounts required by the letter agreement (the "Fee Letter") among the Company, the Agent and the Arranger dated March 10, 2000. (b) Commitment Fees. The Company shall pay to the Agent for the account of each Lender a commitment fee in such Lender's Pro Rata Share of the unused amount of the combined Commitments, as calculated by the Agent on a quarterly basis in arrears on the last day of each calendar quarter and on the Termination Date, at the Commitment Fee Rate. Such commitment fees shall accrue from the Effective Date to the Termination Date and shall be due and payable quarterly in arrears on the last Business Day of each calendar quarter and on the Termination Date. The commitment fees shall accrue at all times after the Effective Date, including at any time during which one or more conditions in Article IV are not met. For purposes of calculating commitment fees, Swing Line Loans shall not be deemed to constitute usage of the Commitments. 2.14 Computation of Fees and Interest. (a) All computations of interest for Base Rate Committed Loans when the Base Rate is determined by BofA's "reference rate", and all computations of interest for Offshore Currency Loans denominated in English pounds sterling shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of interest and fees shall be made on the basis of a 360-day year and actual days elapsed. Interest and fees shall accrue during each period during which such interest or such fees are computed from the first day thereof to the last day thereof. (b) Each determination of an interest rate or a Dollar Equivalent amount by the Agent shall be conclusive and binding on the Company and the Lenders in the absence of manifest error. The Agent will, at the request of the Company or any Lender, deliver to the Company or such Lender, as the case may be, a statement showing the quotations used by the Agent in 41 determining any interest rate or Dollar Equivalent amount. Each Reference Lender agrees to deliver to the Agent timely information for the purpose of determining the Offshore Rate. If any one of the Reference Lenders shall fail to furnish such information to the Agent for any such interest rate, the Agent shall determine such interest rate on the basis of the information furnished by the remaining Reference Lender or Reference Lenders. 2.15 Payments by the Company. (a) All payments to be made by the Company shall be made without set-off, recoupment or counterclaim. Except as otherwise expressly provided herein, all payments by the Company shall be made to the Agent for the account of the Lenders at the Agent's Payment Office, and (i) with respect to principal of, interest on, and any other amount relating to any Offshore Currency Loan, shall be made in the Offshore Currency in which such Loan is denominated or payable, and (ii) with respect to all other amounts payable hereunder, shall be made in Dollars. Such payments shall be made in Same Day Funds and (x) in the case of Offshore Currency payments, no later than such time on the dates specified herein as may be determined by the Agent to be necessary for such payment to be credited on such date in accordance with normal banking procedures in the place of payment, and (y) in the case of any Dollar payments, no later than 11:00 a.m. (Chicago time) on the date specified herein. The Agent will promptly distribute to each Lender its Pro Rata Share (or other applicable share as expressly provided herein) of such payment in like funds as received. Any payment received by the Agent later than the time specified in clause (x) or (y) above shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue. (b) Whenever any payment is due on a day other than a Business Day, such payment shall be made on the following Business Day (unless, in the case of an Offshore Rate Loan, the following Business Day is in another calendar month, in which case such payment shall be made on the preceding Business Day), and such extension of time shall in such case be included in the computation of interest or fees, as the case may be. (c) Unless the Agent receives notice from the Company prior to the date on which any payment is due to the Lenders that the Company will not make such payment in full as and when required, the Agent may assume that the Company has made such payment in full to the Agent on such date in Same Day Funds and the Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Company has not made such payment in full to the Agent, each Lender shall repay to the Agent on demand such amount distributed to such Lender, together with interest thereon at the Federal Funds Rate or, in the case of a payment in an Offshore Currency, the Overnight Rate for each day from the date such amount is distributed to such Lender until the date repaid. 2.16 Payments by the Lenders to the Agent. (a) Unless the Agent receives notice from a Lender on or prior to the Closing Date or, with respect to any Committed Borrowing after the Closing Date, at least one Business Day prior to the date of a Committed Borrowing that such Lender will not make available as and when required hereunder to the Agent for the account of the Company the amount of such Lender's Pro Rata Share of such Committed Borrowing, the 42 Agent may assume that such Lender has made such amount available to the Agent in Same Day Funds on the Borrowing Date and the Agent may (but shall not be so required), in reliance upon such assumption, make available to the Company on such date a corresponding amount. If and to the extent any Lender shall not have made its full amount available to the Agent in Same Day Funds and the Agent in such circumstances has made available to the Company such amount, such Lender shall on the Business Day following such Borrowing Date make such amount available to the Agent, together with interest at the Federal Funds Rate or, in the case of a payment in an Offshore Currency, the Overnight Rate for each day during such period. A notice of the Agent submitted to any Lender with respect to amounts owing under this subsection (a) shall be conclusive, absent manifest error. If such amount is so made available, such payment to the Agent shall constitute such Lender's Committed Loan on the date of Borrowing for all purposes of this Agreement. If such amount is not made available to the Agent on the Business Day following the Borrowing Date, the Agent will notify the Company of such failure to fund and, upon demand by the Agent, the Company shall pay such amount to the Agent for the Agent's account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Committed Loans comprising such Committed Borrowing. (b) The failure of any Lender to make any Loan on any Borrowing Date shall not relieve any other Lender of any obligation hereunder to make a Loan on such Borrowing Date, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on any Borrowing Date. 2.17 Sharing of Payments, Etc. (a) Whenever any payment received by the Agent to be distributed to the Lenders is insufficient to pay in full the amounts then due and payable to the Lenders, and the Agent has not received a Payment Sharing Notice, such payment shall be distributed to the Lenders (and for purposes of this Agreement shall be deemed to have been applied by the Lenders, notwithstanding the fact that any Lender may have made a different application in its books and records) in the following order: first, to the payment of the principal amount of the Loans which is then due and payable and any reimbursement obligation of the Company in respect of any BA which is then due and payable, ratably among the Lenders (including the Accepting Lender and the Swing Line Lender) in accordance with the aggregate amount of such Obligations owed to each Lender; second, to the payment of interest then due and payable on the Loans and on any unpaid reimbursement obligations in respect of BAs, ratably among the Lenders (including the Accepting Lender and the Swing Line Lender) in accordance with the aggregate amount of interest owed to each Lender; third, to the payment of the fees payable under subsection 2.13(b) and (c), ratably among the Lenders in accordance with their respective Pro Rata Shares; and fourth, to the payment of any other amount payable under this Agreement, ratably among the Lenders in accordance with the aggregate amount owed to each Lender. (b) After the Agent has received a Payment Sharing Notice, and for so long thereafter as any Event of Default exists, all payments received by the Agent to be distributed to the Lenders shall be distributed to the Lenders (and for purposes of this Agreement shall be deemed to have 43 been applied by the Lenders, notwithstanding the fact that any Lender may have made a different application in its books and records) in the following order: first, to the payment of amounts payable under Section 10.4, ratably among the Lenders in accordance with the aggregate amount owed to each Lender; second, to the payment of fees payable under subsection 2.13(b) and (c), ratably among the Lenders in accordance with their respective Pro Rata Shares; third, to the payment of the interest accrued on and the principal amount of all of the Loans and all reimbursement obligations of the Company in respect of BAs, regardless of whether any such amount is then due and payable, ratably among the Lenders (including the Accepting Lender and the Swing Line Lender) in accordance with the aggregate amount of such Obligations owed to each Lender; and fourth, to the payment of any other amount payable under this Agreement, ratably among the Lenders (including the Accepting Lender and the Swing Line Lender) in accordance with the aggregate amount owed to each Lender. (c) If, other than as expressly provided elsewhere herein, any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of principal of or interest on any Loan or any reimbursement obligation in respect of a BA, or any other amount payable hereunder, in excess of the share of payments and other recoveries such Lender would have received if such payment or other recovery had been distributed pursuant to the provisions of subsection 2.17(a) or (b) (whichever is applicable at the time of such payment or other recovery), such Lender shall immediately (i) notify the Agent of such fact and (ii) purchase from the other Lenders such participations in the Loans made by (or other Obligations owed to) them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery pro rata with each of them in accordance with the order of payments set forth in subsection 2.17(a) or (b), as the case may be; provided that if all or any portion of such excess payment or other recovery is thereafter recovered from the purchasing Lender, such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender's ratable share (according to the proportion of (A) the amount of such paying Lender's required repayment to (B) 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 Company agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to Section 10.10) with respect to such participation as fully as if such Lender were the direct creditor of the Company in the amount of such participation. The Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section and will in each case notify the Lenders following any such purchases or repayments. 2.18 Swing Line Commitment. Subject to the terms and conditions of this Agreement, the Swing Line Lender agrees to make loans to the Company on a revolving basis (each such loan, a "Swing Line Loan") from time to time on any Business Day during the period from the Closing Date to the Termination Date in an aggregate principal amount at any one time outstanding not to exceed U.S. $30,000,000; provided, however, that, after giving effect to any 44 proposed Swing Line Loan, the Total Outstandings shall not exceed the combined Commitments. 2.19 Borrowing Procedures for Swing Line Loans. The Company shall provide a Notice of Borrowing or telephonic notice (followed by a confirming Notice of Borrowing) to the Agent and the Swing Line Lender of each proposed borrowing pursuant to Section 2.18 not later than 12:00 noon (Chicago time) on the proposed Borrowing Date. Each such notice shall be effective upon receipt by the Agent and the Swing Line Lender and shall specify the date and the principal amount of borrowing. Unless the Swing Line Lender has received written notice prior to 11:00 a.m. (Chicago time) on the proposed Borrowing Date from the Agent or any Lender that one or more of the conditions precedent set forth in Article IV with respect to such borrowing is not then satisfied, the Swing Line Lender shall pay over the requested principal amount to the Company on the requested Borrowing Date in Same Day Funds. Each Swing Line Loan shall be made on a Business Day and shall be in the amount of at least U.S. $500,000 and an integral multiple of U.S. $100,000. The Swing Line Lender will promptly notify the Agent of the making and amount of each Swing Line Loan. 2.20 Prepayment or Refunding of Swing Line Loans. (a) The Company may, at any time and from time to time, prepay any Swing Line Loan in whole or in part, in an amount of at least U.S. $500,000 and an integral multiple of U.S. $100,000. The Company shall deliver a notice of prepayment to the Agent and the Swing Line Lender not later than 11:00 a.m. (Chicago time) on the Business Day of such prepayment, specifying the date and amount of such prepayment. If such notice is given by the Company, the payment amount specified in such notice shall be due and payable on the date specified therein. (b) The Swing Line Lender may, at any time in its sole and absolute discretion, on behalf of the Company (which hereby irrevocably directs the Swing Line Lender to act on its behalf), request each Lender to make a Base Rate Committed Loan in an amount equal to such Lender's Unused Commitment Share of the principal amount of the Swing Line Loans outstanding on the date such notice is given. Unless any of the events described in subsection 8.1(g), (h), (i) or (j) shall have occurred (in which event the procedures of Section 2.21 shall apply), and regardless of whether the conditions precedent set forth in this Agreement to the making of a Base Rate Committed Loan are then satisfied or the aggregate amount of such Base Rate Committed Loans is not in the minimum or integral amount otherwise required hereunder, each Lender shall make the proceeds of its Base Rate Committed Loan available to the Agent for the account of the Swing Line Lender at the Agent's Payment Office prior to 12:00 noon (Chicago time) in Same Day Funds on the Business Day next succeeding the date such notice is given. The proceeds of such Base Rate Committed Loans shall be immediately applied to repay the outstanding Swing Line Loans. 2.21 Participations in Swing Line Loans. (a) If an event described in subsection 8.1(g), (h), (i) or (j) occurs (or for any reason the Lenders may not make Revolving Loans pursuant to Section 2.20), each Lender will, upon notice from the Agent, purchase from the Swing Line Lender (and the Swing Line Lender will sell to each Lender) an undivided participation interest in 45 all outstanding Swing Line Loans in an amount equal to such Lender's Unused Commitment Share of the outstanding principal amount of the Swing Line Loans (and each Lender will immediately transfer to the Agent, for the account of the Swing Line Lender, in immediately available funds, the amount of its participation). (b) Whenever, at any time after the Swing Line Lender has received payment for any Lender's participation interest in the Swing Line Loans pursuant to subsection 2.21(a), the Swing Line Lender receives any payment on account thereof, the Swing Line Lender will distribute to the Agent for the account of such Lender its participation interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender's participation interest was outstanding and funded) in like funds as received; provided, however, that in the event that such payment received by the Swing Line Lender is required to be returned, such Lender will return to the Agent for the account of the Swing Line Lender any portion thereof previously distributed by the Swing Line Lender to it in like funds as such payment is required to be returned by the Swing Line Lender. 2.22 Participation Obligations Unconditional. (a) Each Lender's obligation to make Base Rate Committed Loans pursuant to Section 2.20 and/or to purchase participation interests in Swing Line Loans pursuant to Section 2.21 shall be absolute and unconditional and shall not be affected by any circumstance whatsoever, including (a) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, the Company or any other Person for any reason whatsoever; (b) the occurrence or continuance of an Event of Default; (c) any adverse change in the condition (financial or otherwise) of the Company or any other Person; (d) any breach of this Agreement or any other Loan Document by the Company or any other Lender; (e) any inability of the Company to satisfy the conditions precedent to borrowing set forth in this Agreement on the date upon which any Loan is to be refunded or any participation interest therein is to be purchased; or (f) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. (b) Notwithstanding the provisions of subsection 2.22(a), no Lender shall be required to make any Base Rate Committed Loan to the Company to refund a Swing Line Loan pursuant to Section 2.20 or to purchase a participation interest in a Swing Line Loan pursuant to Section 2.21 if, prior to the making by the Swing Line Lender of such Swing Line Loan, the Swing Line Lender received written notice from any Lender specifying that such Lender believes in good faith that one or more of the conditions precedent to the making of such Swing Line Loan were not satisfied and, in fact, such conditions precedent were not satisfied at the time of the making of such Swing Line Loan; provided that the obligation of such Lender to make such Base Rate Committed Loan and to purchase such participation interest shall be reinstated upon the earlier to occur of (i) the date on which such Lender notifies the Swing Line Lender that its prior notice has been withdrawn and (ii) the date on which all conditions precedent to the making of such Swing Line Loan have been satisfied (or waived by the Required Lenders or all Lenders, as applicable). 2.23 Conditions to Swing Line Loans. Notwithstanding any other provision of this 46 Agreement, the Swing Line Lender shall not be obligated to make any Swing Line Loan if an Event of Default or Unmatured Event of Default exists or would result therefrom. 2.24 BA Subfacility. (a) Creation. Subject to the terms and conditions hereof, at any time and from time to time from the Closing Date through the day 30 days prior to the scheduled Termination Date, the Accepting Lender shall create and discount such BAs as the Company may request by notice to the Accepting Lender in accordance with the procedure set forth in subsection (b) below; provided that upon creating and discounting any BA, the Total Outstandings will not exceed the combined Commitments; and provided, further, that BA Outstandings shall not at any time exceed $100,000,000. The maturity of any BA shall not be less than 30 days or more than 180 days and shall not extend beyond the scheduled Termination Date. Each BA shall comply with the Acceptance Documents and shall be executed on behalf of the Company and presented to the Accepting Lender pursuant to such procedures as are provided or required by the Accepting Lender. The face amount of each BA shall be $3,000,000 or a higher integral multiple of $1,000,000. The creation and maturity date of each BA shall be a Business Day. Notwithstanding the foregoing, the Accepting Lender shall not be obligated to create or discount any BA (i) that is not "eligible" pursuant to paragraph 7 of Section 13 of the Federal Reserve Act (12 U.S.C. ss.372), as amended from time to time, (ii) if creation thereof would cause the Accepting Lender to exceed the maximum amount of outstanding bankers' acceptances permitted by applicable law or (iii) if, in the reasonable opinion of the Accepting Lender, general conditions in the public market for rediscounting bankers' acceptances render it inadvisable to do so. (b) Notice. Each request for a BA shall be submitted in writing (or requested by telephone and promptly confirmed in writing) to the Accepting Lender and the Agent by 11:00 a.m. (Chicago time) on the date of creation of the requested BA and shall be accompanied by such documents as are specified therein and in the Acceptance Documents. The Accepting Lender will promptly notify the Agent (which shall promptly advise each Lender) of the creation of each BA and the amount and tenor thereof. (c) Issuance Fee. Upon the creation by the Accepting Lender of a BA, the Accepting Lender shall discount such BA by deducting from the face amount thereof a discount determined by the then current quoted discount rate for bankers' acceptances of the Accepting Lender plus the BA Commission, with such discount and BA Commission applied against the face amount of the BA, and the Accepting Lender shall make such net amount available in immediately available funds to the Company. The Accepting Lender shall retain from the amount so deducted a commission, for the account solely of the Accepting Lender, equal to .05% per annum (computed on the basis of the actual number of days elapsed over a year of 360 days). On the date of issuance of each BA, the Accepting Lender shall make available in immediately available funds to the Lenders, according to their respective Pro Rata Shares, an amount equal to the BA Commission (after the Accepting Lender's issuance fee of .05% has been deducted therefrom) for such BA. The Accepting Lender may retain or rediscount, at its election, any BA and the amount 47 received by the Accepting Lender upon payment thereof at maturity or upon rediscounting shall be solely for the account of the Accepting Lender. (d) Payment. As and when the Accepting Lender honors a BA, the Company agrees to immediately repay the Accepting Lender in immediately available funds the amount advanced by the Accepting Lender. In the event that such funds are not made available to the Accepting Lender by the Company, then, in order to implement the foregoing, the Company irrevocably authorizes the Agent and each Lender to treat each such advance by the Accepting Lender as a request for a Base Rate Committed Loan in the amount of such advance, to issue Base Rate Committed Loans simultaneously with any such advance in the aggregate amount of such advance, and to credit the proceeds of such Base Rate Committed Loan so as to immediately eliminate the liability of the Company to the Accepting Lender pertaining to such BA and immediately eliminate the liability of each other Lender to the Accepting Lender with respect to its Unused Commitment Share relating to such BA. (e) Participations in BAs. Each Lender shall be deemed at all times to have a participation in each outstanding BA in an amount equal to the result obtained by multiplying (i) such Lender's Unused Commitment Share times (ii) the face amount of such BA. Without limiting the scope and nature of each Lender's participation in any BA, to the extent that the Accepting Lender has not been reimbursed by the Company (pursuant to an advance pursuant to clause (d) or otherwise) for any payment required to be made by the Accepting Lender under any BA, each Lender shall, according to its Unused Commitment Share, reimburse the Accepting Lender promptly upon demand for the amount of such payment. The obligation of each Lender to so reimburse the Accepting Lender shall be absolute and unconditional and shall not be affected by the occurrence of an Event of Default, an Unmatured Event of Default or any other occurrence or event. Any such reimbursement shall not relieve or otherwise impair the obligation of the Company to reimburse the Accepting Lender for the amount of any payment made by the Accepting Lender under any BA, together with interest at the Base Rate plus 2%. The Company hereby specifically acknowledges and agrees that if the Company fails to perform in accordance with the terms of any BA, the Acceptance Documents related thereto or this Agreement as it relates to such BA, each lender shall have a claim against the Company, to the extent of such Lender's pro rata participation in such BA. (f) Limitation of Liability. None of the Accepting Lender, any other Lender or any of their respective directors, officers, agents or employees shall be liable, except for gross negligence or willful misconduct, for any action taken or omitted under or in connection with any BA, any draft to which a BA relates or any documents which in turn relate or pertain to any such draft. When dealing with any BA, draft or related document, the Accepting Lender shall be entitled to act (and shall be fully protected against any claim of loss by the Company occasioned by the lack, or claimed lack, of authenticity or authority of the issuance of any draft or any signature thereon, in acting) upon any telegram, telex, teletype, bank wire, cable or radiogram or any written application, notice, report, statement, certificate, resolution, request, order, consent, letter or other instrument or communication reasonably believed in good faith by the Accepting 48 Lender to be genuine and correct and to have been signed or sent or made by a proper Person. The Accepting Lender shall examine Acceptance Documents with reasonable care to ascertain that they appear on their face to be in accordance with the terms and conditions of the related BA. The Company further agrees that, if any BA shall not, in the reasonable opinion of the Agent or the Required Lenders, meet all requirements for "eligible" bankers' acceptances (as determined in accordance with paragraph 7 of Section 13 of the Federal Reserve Act (12 U.S.C. ss.372)), the Company shall, upon demand by the Agent, pay to the Agent for the account of each of the Lenders additional amounts sufficient to compensate the Lenders for any increased costs resulting therefrom (including costs resulting from any reserve requirement, premium liability to the Federal Deposit Insurance Corporation, or a higher discount rate). To demand payment under this subsection 2.24(f), the Agent shall deliver to the Company a certificate setting forth in reasonable detail the amount payable to the Agent (for the account of each of the Lenders) hereunder and such certificate shall be conclusive and binding on the Company in the absence of manifest error. ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 3.1 Taxes. (a) Any and all payments by the Company to each Lender and each Agent under this Agreement and any other Loan Document shall be made free and clear of, and without deduction or withholding for, any Taxes. In addition, the Company shall pay all Other Taxes. (b) If the Company shall be required by law to deduct or withhold any Taxes, Other Taxes or Further Taxes from or in respect of any sum payable hereunder to any Lender or the Agent, then: (i) the sum payable shall be increased as necessary so that, after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section), such Lender or the Agent, as the case may be, receives and retains an amount equal to the sum it would have received and retained had no such deductions or withholdings been made; (ii) the Company shall make such deductions and withholdings; (iii) the Company shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law; and (iv) the Company shall also pay to the Agent for the account of any applicable Lender or the Agent, at the time interest is paid, all additional amounts which such Lender or the Agent specifies as necessary to preserve the after-tax yield such Lender or Agent would have received if such Taxes, Other Taxes or Further Taxes had not been imposed. 49 (c) The Company agrees to indemnify and hold harmless each Lender and the Agent for the full amount of Taxes, Other Taxes and Further Taxes in the amount that such Lender or the Agent specifies as necessary to preserve the after-tax yield such Lender would have received if such Taxes, Other Taxes or Further Taxes had not been imposed, and any liability (including penalties, interest, additions to tax and reasonable expenses) arising therefrom or with respect thereto, whether or not such Taxes, Other Taxes or Further Taxes were correctly or legally asserted. Payment under this indemnification shall be made within 30 days after the date the Company receives written demand therefor from such Lender or the Agent. (d) Within 30 days after the date of any payment by the Company of Taxes, Other Taxes or Further Taxes, the Company shall furnish to each Lender and the Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to such Lender or the Agent. (e) If the Company is required to pay any amount to any Lender or the Agent pursuant to subsection (b) or (c) of this Section, then such Lender or the Agent shall use reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its Lending Office or other relevant office so as to eliminate any such additional payment by the Company which may thereafter accrue, if such change in the good faith judgment of such Lender or the Agent is not otherwise disadvantageous to such Lender or the Agent. 3.2 Illegality. (a) If any Lender determines that the introduction of any applicable Requirement of Law, or any change in any applicable Requirement of Law, or in the interpretation or administration of any applicable Requirement of Law, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make Offshore Rate Loans in any Applicable Currency, then, on notice thereof by the Lender to the Company through the Agent, any obligation of that Lender to make Offshore Rate Loans in such Applicable Currency (including in respect of any LIBOR Bid Loan as to which the Company has accepted such Lender's Competitive Bid, but which has not yet been borrowed) shall be suspended until the Lender notifies the Agent and the Company that the circumstances giving rise to such determination no longer exist. (b) If a Lender determines that it is unlawful to maintain any Offshore Rate Loan in any Applicable Currency, the Company shall, upon its receipt of notice of such fact and demand from such Lender (with a copy to the Agent), prepay in full such Offshore Rate Loan of such Lender then outstanding, together with interest accrued thereon and amounts required under Section 3.4, either on the last day of the Interest Period thereof or, if earlier, on the date on which such Lender may no longer lawfully continue to maintain such Offshore Rate Loan. If the Company is required to so prepay any Offshore Rate Committed Loan, then concurrently with such prepayment, the Company shall borrow from the affected Lender, in the amount of such repayment, a Base Rate Committed Loan. 50 (c) If the obligation of any Lender to make or maintain Offshore Rate Committed Loans has been so terminated or suspended, all Loans which would otherwise be made by such Lender as Offshore Rate Committed Loans shall be instead Base Rate Committed Loans. (d) Before giving any notice to the Agent or demand upon the Company under this Section, the affected Lender shall designate a different Lending Office with respect to its Offshore Rate Loans if such designation will avoid the need for giving such notice or making such demand and will not, in the good faith judgment of the Lender, be illegal in any respect or otherwise disadvantageous to the Lender. 3.3 Increased Costs and Reduction of Return. (a) If after the date hereof any Lender determines that, due to either (i) the introduction of or any change (other than any change by way of imposition of or increase in reserve requirements included in the calculation of the Offshore Rate) in or in the interpretation of any law or regulation or (ii) the compliance by that Lender with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining any Offshore Rate Loan or of participating in any BA or, in the case of the Accepting Lender, of agreeing to accept or accepting BAs, then the Company shall be liable for, and shall from time to time, upon demand (with a copy of such demand to be sent to the Agent), pay to the Agent for the account of such Lender, additional amounts as are sufficient to compensate such Lender for such increased costs. (b) If after the date hereof any Lender shall have determined that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or (iv) compliance by the Lender (or its Lending Office) or any corporation controlling the Lender with any Capital Adequacy Regulation, affects or would affect the amount of capital required or expected to be maintained by the Lender or any corporation controlling the Lender and (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy and such Lender's desired return on capital) determines that the amount of such capital is increased as a consequence of its Commitment, loans, credits or obligations under this Agreement, then, upon demand of such Lender to the Company through the Agent, the Company shall pay to the Lender, from time to time as specified by the Lender, additional amounts sufficient to compensate the Lender for such increase. (c) Notwithstanding the foregoing Section 3.3(a) and (b), if any Lender fails to notify the Company of any event which will entitle such Lender to compensation pursuant to this Section 3.3 within 180 days after such Lender obtains knowledge of such event, then such Lender shall not be entitled to any compensation from the Company for any such increased cost or reduction of return arising prior to the date which is 180 days before the date on which such 51 Lender notifies the Company of such event. 3.4 Funding Losses. The Company shall reimburse each Lender and hold each Lender harmless from any loss or reasonable expense which the Lender may sustain or incur as a consequence of: (a) the failure of the Company to make on a timely basis any payment of principal of any Offshore Rate Loan; (b) the failure of the Company to borrow, continue or convert a Loan after the Company has given (or is deemed to have given) a Notice of Borrowing, a Notice of Conversion/ Continuation or accepted a Competitive Bid; (c) the failure of the Company to make any prepayment of a Committed Loan in accordance with any notice delivered under Section 2.9; (d) the prepayment or other payment (including after acceleration thereof) of an Offshore Rate Loan on a day that is not the last day of the relevant Interest Period; or (e) the automatic conversion under Section 2.4 of any Offshore Rate Committed Loan to a Base Rate Committed Loan on a day that is not the last day of the relevant Interest Period; including any such loss or reasonable expense arising from the liquidation or reemployment of funds obtained by it to maintain its Offshore Rate Loans or from fees payable to terminate the deposits from which such funds were obtained or from changes relating to any Offshore Currency Loans. For purposes of calculating amounts payable by the Company to the Lenders under this Section and under subsection 3.3(a), each Offshore Rate Loan made by a Lender (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at the Offshore Rate used in determining the interest rate for such Offshore Rate Loan by a matching deposit or other borrowing in the interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Offshore Rate Loan is in fact so funded. 3.5 Inability to Determine Rates. If the Agent determines that for any reason adequate and reasonable means do not exist for determining the Offshore Rate for any requested Interest Period with respect to a proposed Offshore Rate Loan, or any Lender determines that the Offshore Rate applicable pursuant to subsection 2.12(a) for any requested Interest Period with respect to a proposed Offshore Rate Loan does not adequately and fairly reflect the cost to such Lender of funding such Loan, the Agent will promptly so notify the Company and each Lender. Thereafter, the obligation of the Lenders to make or maintain Offshore Rate Committed Loans hereunder shall be suspended until the Agent revokes such notice in writing. Upon receipt of such notice, the Company may revoke any Notice of Committed Borrowing or Notice of 52 Conversion/Continuation then submitted by it. If the Company does not revoke such Notice, the Lenders shall make, convert or continue the Committed Loans, as proposed by the Company, in the amount specified in the applicable notice submitted by the Company, but such Loans shall be made, converted or continued as Base Rate Committed Loans instead of Offshore Rate Committed Loans. In the case of any Offshore Currency Loans, the Borrowing or continuation shall be in an aggregate amount equal to the Dollar Equivalent amount of the originally requested Borrowing or continuation in the Offshore Currency, and to that end any outstanding Offshore Currency Loans which are the subject of any continuation shall be redenominated and converted into Base Rate Loans in Dollars with effect from the last day of the Interest Period with respect to such Offshore Currency Loans. 3.6 Reserves on Offshore Rate Loans. The Company shall pay to each Lender, as long as such Lender shall be required under regulations of the FRB to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as "Eurocurrency liabilities") and, in respect of any Offshore Currency Loans, under any applicable regulations of the relevant Governmental Authority in the country in which the Offshore Currency of such Offshore Currency Loan circulates, additional costs on the unpaid principal amount of each Offshore Rate Committed Loan and Offshore Currency Loan equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive), payable on each date on which interest is payable on such Loan, provided the Company shall have received at least 15 days' prior written notice (with a copy to the Agent) of the amount of such additional interest from such Lender. If a Lender fails to give notice 15 days prior to the relevant Interest Payment Date, such additional interest shall be payable 15 days from receipt of such notice. 3.7 Certificates of Lenders. Any Lender claiming reimbursement or compensation under this Article III shall deliver to the Company (with a copy to the Agent) a certificate setting forth in reasonable detail the amount payable to the Lender hereunder and such certificate shall be conclusive and binding on the Company in the absence of manifest error. 3.8 Substitution of Lenders. Upon the receipt by the Company from any Lender (an "Affected Lender") of a claim for compensation under Section 3.1 or 3.3 or a notice pursuant to Section 3.2 (which claim or notice results from circumstances applicable to such Lender and not Lenders generally) the Company may: (i) request the Affected Lender to use its best efforts to obtain a replacement bank or financial institution satisfactory to the Company to acquire and assume all or a ratable part of all of such Affected Lender's Loans and Commitment (a "Replacement Lender"); (ii) request one more of the other Lenders to acquire and assume all or part of such Affected Lender's Loans and Commitment; or (iii) designate a Replacement Lender. Any such designation of a Replacement Lender under clause (i) or (iii) shall be subject to the prior written consent of the Agent, the Swing Line Lender and the Accepting Lender (which consents shall not be unreasonably withheld). 53 3.9 Survival. The agreements and obligations of the Company in this Article III shall survive the payment of all other Obligations and the termination of this Agreement. ARTICLE IV CONDITIONS PRECEDENT 4.1 Conditions to Effectiveness. This Agreement shall become effective, all loans outstanding under the Original Agreement shall be deemed to be Loans made hereunder, and all accrued interest and fees payable under the Original Agreement shall be payable hereunder, on the date on which the Agent has received the following (the "Effective Date"): (a) Agreement. This Agreement executed by the Company and the Required Lenders. (b) Resolutions; Incumbency; Certificate of Incorporation; Bylaws. (i) Copies of the resolutions of the board of directors of the Company and each Guarantor authorizing the transactions contemplated hereby, certified as of the Effective Date by the Secretary or an Assistant Secretary of the Company or such Guarantor; (ii) a certificate of the Secretary or Assistant Secretary of the Company and each Guarantor certifying the names and true signatures of the officers of the Company and each Guarantor authorized to execute and deliver this Agreement, the Intercreditor Agreement and all other Loan Documents to be delivered by it hereunder; and (iii) copies of the certificate of incorporation and by-laws (or other organizational documents) of the Company and each Guarantor, certified by the Secretary or an Assistant Secretary of the Company or such Guarantor. (c) Good Standing. A copy of a good standing certificate as of a recent date for the Company and each Guarantor from the Secretary of State (or similar, applicable Governmental Authority) of its respective state of incorporation. (d) Legal Opinion. An opinion of counsel to the Company and the Guarantors in form and substance reasonably acceptable to the Agent. (e) Payment of Fees. (i) Evidence of payment by the Company of all accrued and unpaid fees, 54 costs and reasonable expenses to the extent then due and payable on the Effective Date, together with Attorney Costs of the Agent to the extent invoiced prior to or on the Effective Date, plus such additional amounts of Attorney Costs as shall constitute the Agent's reasonable estimate of Attorney Costs incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude final settling of accounts between the Company and the Agent), including any such costs, fees and reasonable expenses arising under or referenced in Sections 2.13 and 10.4; and (ii) Evidence of payment by the Company of an amendment fee for the account of each Lender which has executed and delivered a counterpart of this Agreement on or before April 14, 2000, in each case in an amount equal to 0.25% of such Lender's Commitment. (f) Certificate. A certificate signed by a Responsible Officer, dated as of the Closing Date, stating that: (i) the representations and warranties contained in Article V are true and correct on and as of such date, as though made on and as of such date; (ii) no Event of Default or Unmatured Event of Default exists or would result from the execution and delivery of this Agreement and the other Loan Documents; and (iii) since December 31, 1999, no event or circumstance has occurred that has resulted or could reasonably be expected to result in a Material Adverse Effect. (g) Guaranty. The Guaranty, signed by each Guarantor. (h) Security Agreement. The Security Agreement signed by the Company and each Guarantor, together with evidence, satisfactory to the Collateral Agent, that the Company and each Guarantor have delivered to the Collateral Agent all financing statements and other documents necessary to perfect the Collateral Agent's Lien on all collateral granted under the Security Agreement. (i) Pledge Agreement. The Pledge Agreement, executed by the Company and each Guarantor that as of the Effective Date has one or more Subsidiaries, together with all stock certificates, stock powers and other items required to be delivered in connection therewith. (j) Intercreditor Agreement. The Intercreditor Agreement, signed by the parties thereto and consented to by the Company and the Guarantors. (k) Trademark Security Agreement. The Trademark Security Agreement, signed by the Company. 55 (l) Amendment of Certain Agreements. Evidence, satisfactory to the Agent, that each of the "Operative Documents" as defined in the Synthetic Lease Guaranty, the Shelf Agreement and each Senior Note Agreement (each as defined in the Intercreditor Agreement) has been amended to conform in all material respects with the representations, warranties, covenants and defaults contained in this Agreement. (m) Other Documents. Such other approvals, opinions, documents or materials as the Agent or any Lender may reasonably request. 4.2 Conditions to All Credit Extensions. The obligation of each Lender to make any Credit Extension to be made by it (or any Bid Loan as to which the Company has accepted the relevant Competitive Bid) is subject to the satisfaction of the following conditions precedent on the date of such Credit Extension: (a) Notice. The Agent (and, in the case of a Swing Line Loan, the Swing Line Lender) shall have received a Notice of Borrowing or the Agent and the Accepting Lender shall have received a request for acceptance of a BA. (b) Continuation of Representations and Warranties. The representations and warranties in Article V shall be true and correct on and as of the date of such Credit Extension with the same effect as if made on and as of such date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall have been true and correct as of such earlier date). (c) No Existing Default. No Event of Default or Unmatured Event of Default shall exist or shall result from such Borrowing. Each Notice of Borrowing, Competitive Bid Request and request for acceptance of a BA submitted by the Company hereunder shall constitute a representation and warranty by the Company that, as of the date of such notice or request and as of the date of the applicable Credit Extension, the conditions in this Section 4.2 are satisfied. ARTICLE V REPRESENTATIONS AND WARRANTIES The Company represents and warrants to the Agent and each Lender as follows: 5.1 Organization; Subsidiary Preferred Stock. The Company is a corporation duly organized and existing in good standing under the laws of the State of Delaware, each Subsidiary is duly organized and existing in good standing under the laws of the jurisdiction in which it is 56 formed, and the Company has and each Subsidiary has the power to own its respective property and to carry on its respective business as now being conducted. No Subsidiary has outstanding any shares of stock of a class which has priority over any other class as to dividends or in liquidation. 5.2 Financial Statements. The audited consolidated financial statements of the Company and its Subsidiaries as at December 31, 1998 and the unaudited consolidated financial statements of the Company and its Subsidiaries as at September 30, 1999, copies of each of which have been delivered to each Lender, were prepared in accordance with GAAP (subject, in the case of such unaudited statements, to the absence of footnotes and to normal year-end adjustments) and present fairly the consolidated financial condition of the Company and its Subsidiaries as at such dates and the results of their operations for the periods then ended. 5.3 Actions Pending. There is no action, suit, investigation or proceeding pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries, or any properties or rights of the Company or any of its Subsidiaries, by or before any court, arbitrator or administrative or governmental body which could be reasonably expected to result in any material adverse change in the business, property or assets, condition (financial or otherwise) or operations of the Company and its Subsidiaries taken as a whole or the ability of the Company to perform its obligations under this Agreement. 5.4 Outstanding Debt. Neither the Company nor any of its Subsidiaries has outstanding any Debt except as permitted by Section 7.3. There exists no default under the provisions of any instrument evidencing Debt of the Company or any of its Subsidiaries in an amount greater than $250,000 or of any agreement relating thereto (it being understood that the representation and warranty in this sentence is made after giving effect to the effectiveness of this Agreement and the amendments referred to in subsection 4.1(l)). 5.5 Title to Properties. The Company has and each of its Subsidiaries has good and marketable title to its respective real properties (other than properties which it leases) and good title to all of its other respective properties and assets, including the properties and assets reflected in the most recent audited balance sheet referred to in Section 5.2 (other than properties and assets disposed of in the ordinary course of business), subject to no Lien of any kind except Liens permitted by Section 7.2. All leases necessary in any material respect for the conduct of the respective businesses of the Company and its Subsidiaries are valid and subsisting and are in full force and effect. 5.6 Taxes. The Company has and each of its Subsidiaries has filed all federal, state and other income tax returns which, to the best knowledge of the officers of the Company and its Subsidiaries, are required to be filed, and each has paid all taxes as shown on such returns and on all assessments received by it to the extent that such taxes have become due, except such taxes (i) as are being contested in good faith by appropriate proceedings for which adequate reserves have 57 been established in accordance with GAAP or (ii) the non-payment of which (a) could not be reasonably expected to have a material adverse effect on the business, condition (financial or otherwise) or operations of the Company and its Subsidiaries taken as a whole and (b) does not result in the creation of any Lien other than Liens permitted by Section 7.2. 5.7 Conflicting Agreements and Other Matters. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement or subject to any charter or other corporate restriction which materially and adversely affects its business, property or assets, condition (financial or otherwise) or operations. None of the execution and delivery of this Agreement or any other Loan Document, the making of the Loans, the creation of the BAs or the fulfillment of or compliance with the terms and provisions hereof and of the other Loan Documents will conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in any violation of, or result in the creation of any Lien upon any of the properties or assets of the Company or any of its Subsidiaries pursuant to, the charter or by-laws of the Company or any of its Subsidiaries, any award of any arbitrator or any agreement (including any agreement with stockholders), instrument, order, judgment, decree, statute, law, rule or regulation to which the Company or any of its Subsidiaries is subject. Neither the Company nor any of its Subsidiaries is a party to, or otherwise subject to any provision contained in, any instrument evidencing Indebtedness of the Company or such Subsidiary, any agreement relating thereto or any other contract or agreement (including its charter) which limits the amount of, or otherwise imposes restrictions on the incurring of, Debt of the Company of the type that the Obligations constitute except as set forth in the agreements listed in Schedule 5.7 attached hereto (as such Schedule 5.7 may have been modified from time to time by written supplements thereto delivered by the Company and accepted in writing by the Required Lenders). 5.8 Use of Proceeds. None of the proceeds of any Loan or BA will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying any "margin stock" as defined in Regulation U of the FRB (herein called "margin stock") or for the purpose of maintaining, reducing or retiring any Indebtedness which was originally incurred to purchase or carry any stock that is then currently a margin stock or for any other purpose which might constitute the transactions contemplated hereby a "purpose credit" within the meaning of such Regulation U, unless the Company shall have delivered to the Lenders, on the date of borrowing of such Loan or the acceptance of such BA, an opinion of counsel satisfactory to the Lenders stating that the making of such Loan or the acceptance of such BA does not constitute a violation of such Regulation U. Neither the Company nor any agent acting on its behalf has taken or will take any action which might cause this Agreement or the Loans or the BAs to violate Regulation T, Regulation U or any other regulation of the FRB or to violate the Exchange Act, in each case as in effect now or as the same may hereafter be in effect. 5.9 ERISA. No accumulated funding deficiency (as defined in section 302 of ERISA and section 412 of the Code), whether or not waived, exists with respect to any Plan (other than a Multiemployer Plan). No liability to the PBGC has been or is expected by the Company or any ERISA Affiliate to be incurred with respect to any Plan (other than a Multiemployer Plan) by the 58 Company, any Subsidiary or any ERISA Affiliate which is or would be materially adverse to the business, property or assets, condition (financial or otherwise) or operations of the Company and its Subsidiaries taken as a whole. Neither the Company, any Subsidiary nor any ERISA Affiliate has incurred or presently expects to incur any withdrawal liability under Title IV of ERISA with respect to any Multiemployer Plan which is or would be materially adverse to the business, property or assets, condition (financial or otherwise) or operations of the Company and its Subsidiaries taken as a whole. The execution and delivery of this Agreement and the making of Loans and the creation and acceptance of the BAs will be exempt from or will not involve any transaction which is subject to the prohibitions of section 406 of ERISA and will not involve any transaction in connection with which a penalty could be imposed under section 502(i) of ERISA or a tax could be imposed pursuant to section 4975 of the Code. 5.10 Governmental Consent. Neither the nature of the Company or of any Subsidiary, nor any of their respective businesses or properties, nor any relationship between the Company or any Subsidiary and any other Person, nor any circumstance in connection with the making of the Loans is such as to require any authorization, consent, approval, exemption or any action by or notice to or filing with any court or administrative or governmental body (other than routine filings after the Closing Date with the Securities and Exchange Commission and/or state Blue Sky authorities) in connection with the execution and delivery of this Agreement, the making of the Loans, the creation and acceptance of the BAs or the fulfillment of or compliance with the terms and provisions of the Loan Documents. 5.11 Environmental Compliance. The Company and its Subsidiaries and all of their respective properties and facilities have complied at all times and in all respects with all applicable foreign, federal, state, local and regional statutes, laws, ordinances and judicial or administrative orders, judgments, rulings and regulations relating to protection of the environment except, in any such case, where failure to so comply could not reasonably be expected to result in a material adverse effect on the business, condition (financial or otherwise) or operations of the Company and its Subsidiaries taken as a whole or the ability of the Company to perform its obligations under this Agreement. 5.12 Disclosure. Neither this Agreement nor any other document, certificate or statement furnished to the Agent or any Lender by or on behalf of the Company in connection herewith contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein not misleading. There is no fact peculiar to the Company or any of its Subsidiaries which materially adversely affects or in the future may (so far as the Company can now foresee) materially adversely affect the business, property or assets, condition (financial or otherwise) or operations of the Company or any of its Subsidiaries and which has not been set forth in this Agreement. 5.13 Hostile Tender Offers. None of the proceeds of any Loans or the BAs will be used to finance a Hostile Tender Offer. 59 5.14 Priority of Obligations. The Obligations constitute "Superior Indebtedness" as such term is defined in the Company's Promissory (subordinated) Notes, the form of which is attached hereto as Exhibit I, and the Subordinated Debt is subordinated to the Obligations. 5.15 Year 2000 Problem. The Company and its Subsidiaries (a) have reviewed the areas within their business and operations which could be adversely affected by, and have developed or are developing a program to address on a timely basis, the Year 2000 Problem and (b) have made appropriate inquiries as to the effect the Year 2000 Problem will have on their material suppliers and customers. Based on such a review, program and inquiries, the Company reasonably believes that the Year 2000 Problem will not have a Material Adverse Effect. ARTICLE VI AFFIRMATIVE COVENANTS So long as any Lender shall have any Commitment hereunder, any BA shall be outstanding or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Required Lenders waive compliance in writing: 6.1 Financial Statements. The Company shall deliver to the Agent, in form and detail reasonably satisfactory to the Agent and the Required Lenders, with sufficient copies for each Lender: (a) as soon as available, but not later than 120 days after the end of each fiscal year, a copy of the audited consolidated balance sheet of the Company and its Subsidiaries as at the end of such year and the related consolidated statements of income or operations, shareholders' equity and cash flows for such year, setting forth in each case in comparative form the figures for the previous fiscal year, and accompanied by the opinion of Ernst & Young or another nationally-recognized independent public accounting firm ("Independent Auditor") which report (x) shall state that such consolidated financial statements present fairly the financial position for the periods indicated in conformity with GAAP applied on a basis consistent with prior years and (y) shall not be qualified or limited because of a restricted or limited examination by the Independent Auditor of any material portion of the Company's or any Subsidiary's records; and (b) as soon as available, but not later than 60 days after the end of each of the first three fiscal quarters of each fiscal year, a copy of the unaudited consolidated balance sheet of the Company and its Subsidiaries as of the end of such quarter and the related consolidated statements of income, shareholders' equity and cash flows for the period commencing on the first day and ending on the last day of such quarter, and certified by a Responsible Officer as fairly presenting, in accordance with GAAP (subject to ordinary, good faith year-end audit adjustments), the financial position and the results of operations of the Company and the 60 Subsidiaries. 6.2 Certificates; Other Information. The Company shall furnish to the Agent, with sufficient copies for each Lender: (a) concurrently with the delivery of the financial statements referred to in subsection 6.1(a), a certificate of the Independent Auditor stating that in making the examination necessary therefor no knowledge was obtained of any Event of Default or Unmatured Event of Default, except as specified in such certificate; (b) concurrently with the delivery of the financial statements referred to in subsections 6.1(a) and (b), (i) a Compliance Certificate executed by a Responsible Officer and (ii) a schedule of the daily and 30 day average amounts of accounts receivable and Debt outstanding during the fiscal quarter ending on the date as of which such financial statements were prepared, together the calculations necessary to demonstrate compliance with Sections 7.14 and 7.3; (c) promptly, copies of all financial statements and reports that the Company sends to its shareholders, and copies of all financial statements and regular, periodical or special reports (including Forms 10K, 10Q and 8K) that the Company or any Subsidiary may make to, or file with, the SEC; (d) promptly, such information or documentation as the Agent, at the request of any Lender, may request from time to time regarding the efforts of the Company and its Subsidiaries to address the Year 2000 Problem; (e) within 30 days after the end of each fiscal month, a calculation in reasonable detail of the Borrowing Base as of the last day of such month, substantially in the form of Exhibit O; (f) concurrently with the execution of any amendment to the Synthetic Lease Guaranty, the Senior Note Agreements or the Shelf Note Agreement (each as defined in the Intercreditor Agreement), a copy of such executed amendment; (g) simultaneously with the delivery thereof under the Senior Note Agreements (as defined in the Intercreditor Agreement), copies of all information and notices required to be given by the Company pursuant to paragraph 5A thereof (or any successor provision thereto) or any other notice, report or other written information delivered to any noteholder under the Senior Note Agreements; and (h) promptly, such additional information regarding the business, financial or corporate affairs of the Company or any Subsidiary as the Agent, at the request of any Lender, may from time to time request. 61 6.3 Notices. The Company shall promptly notify the Agent and each Lender promptly after a Responsible Officer obtains knowledge of: (a) the occurrence of any Event of Default or Unmatured Event of Default; (b) any of the following matters that has resulted or may reasonably be expected to result in a Material Adverse Effect: (i) any breach or non-performance of, or any default under, a Contractual Obligation of the Company or any Subsidiary; (ii) any dispute, litigation, investigation, proceeding or suspension between the Company or any Subsidiary and any Governmental Authority; or (iii) the commencement of, or any material development in, any litigation or proceeding affecting the Company or any Subsidiary including pursuant to any applicable Environmental Law; (c) the occurrence of any of the following events affecting the Company or any ERISA Affiliate (but in no event more than 10 days after such event; provided that the Company shall notify the Agent and each Lender not less than ten days before the occurrence of any event described in clause (ii) below), and deliver to the Agent and each Lender a copy of any notice with respect to such event that is filed with a Governmental Authority and any notice delivered by a Governmental Authority to the Company or any ERISA Affiliate with respect to such event: (i) an ERISA Event; (ii) a contribution failure with respect to a Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA; (iii) a material increase in the Unfunded Pension Liability of any Pension Plan; (iv) the adoption of, or the commencement of contributions to, any Plan subject to Section 412 of the Code by the Company or any ERISA Affiliate; or (v) the adoption of any amendment to a Plan subject to Section 412 of the Code, if such amendment results in a material increase in contributions or Unfunded Pension Liability; and (d) any material change in accounting policies or financial reporting practices by the Company or any of its consolidated Subsidiaries. Each notice under this Section shall be accompanied by a written statement by a Responsible Officer setting forth details of the occurrence referred to therein, and stating what action the Company or any affected Subsidiary proposes to take with respect thereto and at what time. Each notice under subsection 6.3(a) shall describe with particularity any and all clauses or provisions of this Agreement or any other Loan Document that have been breached or violated. 62 6.4 Preservation of Corporate Existence, Etc. The Company shall, and shall cause each Subsidiary to: (a) preserve and maintain in full force and effect its corporate existence and good standing under the laws of its state or jurisdiction of incorporation; (b) preserve and maintain in full force and effect all governmental rights, privileges, qualifications, permits, licenses and franchises necessary or desirable in the normal conduct of its business except (i) in connection with transactions permitted by Section 7.6 and sales of assets permitted by Section 7.5 and (ii) to the extent the non-preservation or non-maintenance thereof could not reasonably be expected to have a Material Adverse Effect; (c) use reasonable efforts, in the ordinary course of business, to preserve its business organization and goodwill; and (d) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect. Notwithstanding the provisions of this Section 6.4, the Company may dissolve or liquidate any Inactive Subsidiary. 6.5 Maintenance of Property. The Company shall, and shall cause each Subsidiary to, maintain and preserve all its property which is used or useful in its business in good working order and condition, ordinary wear and tear excepted and make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. The Company and each Subsidiary shall use the standard of care typical in the industry in the operation and maintenance of its facilities. 6.6 Insurance. The Company shall, and shall cause each Subsidiary to, maintain with financially sound and reputable insurers, insurance in such amounts and against such liabilities and hazards as customarily maintained by the Company in accordance with its practices, policies and procedures prior to the Closing Date. Together with each delivery of financial statements under subsection 6.1(a), the Company will, upon the request of any Lender, deliver a certificate of a Responsible Officer specifying the details of such insurance in effect. 6.7 Payment of Obligations. The Company shall, and shall cause each Subsidiary to, pay and discharge as the same shall become due and payable all their respective obligations and liabilities, including: (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by the 63 Company or such Subsidiary; (b) all lawful claims which, if unpaid, would by law become a Lien upon its property; and (c) all indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness. 6.8 Compliance with Laws. The Company shall, and shall cause each Subsidiary to, comply in all material respects with all Requirements of Law of any Governmental Authority having jurisdiction over it or its business (including the Federal Fair Labor Standards Act), except such as may be contested in good faith or as to which a bona fide dispute may exist. 6.9 Compliance with ERISA. The Company shall, and shall cause each of its ERISA Affiliates to: (a) maintain each Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state law; (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; and (c) make all required contributions to any Plan subject to Section 412 of the Code. 6.10 Inspection of Property and Books and Records. The Company shall, and shall cause each Subsidiary to, maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Company and such Subsidiary. The Company shall, and shall cause each Subsidiary to, permit representatives and independent contractors of the Agent or any Lender to visit and inspect any of their respective properties, to examine their respective corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss their respective affairs, finances and accounts with their respective directors, officers, and independent public accountants, all at the reasonable expense of the Company and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Company; provided that when an Event of Default exists the Agent or any Lender may do any of the foregoing at the reasonable expense of the Company at any time during normal business hours without advance notice. 6.11 Environmental Laws. The Company shall, and shall cause each Subsidiary to, conduct its operations and keep and maintain its property in material compliance with all material Environmental Laws. 6.12 Use of Proceeds. The Company shall use the proceeds of the Loans and the BAs to repay Debt and for working capital and other general corporate purposes not in contravention of any applicable Requirement of Law or of any Loan Document. 6.13 Covenant to Secure Obligations Equally. The Company covenants that, if it or any Subsidiary shall create or assume any Lien upon any of its property or assets, whether now owned 64 or hereafter acquired, other than Liens permitted by the provisions of Section 7.2 (unless prior written consent to the creation or assumption thereof shall have been obtained pursuant to Section 10.1), it will make or cause to be made effective provision whereby the Obligations will be secured by such Lien equally and ratably with any and all other Debt thereby secured so long as any such other Debt shall be so secured. 6.14 Cooperative Status. The Company covenants that it will at all times maintain its status as a cooperative for purposes of Subchapter T of the Code; provided, however, in the event that the Code or other applicable law is modified after the date hereof and as a result of such modification the Company is unable to satisfy its obligations under this Section, then the Required Lenders and the Company shall agree, or in good faith negotiate to agree, to amend the covenants contained in this Agreement so that the application of such covenants (following such modification of the Code or other applicable law and the effect thereof on the Company) will be substantially the same as prior thereto. 6.15 Collateral/Accounting Systems Examination. The Company covenants that it will (a) cooperate with the Agent, the Lenders and their respective representatives in commencing a collateral and accounting systems examination within 30 days following the Effective Date and completing such examination as promptly as practicable thereafter and (b) pay all reasonable costs and expenses in connection with such examination. 6.16 Real Estate Documents. (a)(i)The Company shall, and shall cause each applicable Guarantor to, promptly (and, in any event, no later than April 26, 2000) execute and deliver a Mortgage providing for a fully perfected Lien, in favor of the Collateral Agent, in all right, title and interest of the Company or such Guarantor in each parcel of real property listed on Part 1 of Schedule 6.16 (each a "Primary Property"). (ii) The Company shall, and shall cause each applicable Guarantor to, promptly (and in any event, no later than May 10, 2000) execute and deliver a Mortgage providing for a fully perfected Lien, in favor of the Collateral Agent, in all right, title and interest of the Company or such Guarantor in each parcel of real property listed on Part 2 of Schedule 6.16 (each a "Secondary Property"; the Primary Properties and the Secondary Properties are collectively referred to as the "Properties"). (b) The Company shall, and shall cause each Guarantor to, promptly (and, in any event, no later than May 15, 2000 for each Primary Property and May 31, 2000 for each Secondary Property) provide the following documents in connection with each Mortgage referred to above: (i) an ALTA Loan Title Insurance Policy, issued by an insurer acceptable to the Collateral Agent, insuring the Collateral Agent's Lien on the Property subject to such Mortgage and containing such endorsements as the Collateral Agent may reasonably require (it being understood that the amount of coverage, exceptions to coverage and status of title set forth in such policy shall be acceptable to the Collateral 65 Agent); (ii) copies of all documents of record concerning such Property as shown on the commitment for the ALTA Loan Title Insurance Policy referred to above; (iii) original or certified copies of all insurance policies required to be maintained with respect to such Property by this Agreement or the applicable Mortgage; and (iv) a flood insurance policy covering such Property, reasonably satisfactory to the Collateral Agent, if required by the Flood Disaster Protection Act of 1973. Additionally, in the case of any real property leased by the Company or any Guarantor, the Company shall use its best efforts to, or shall cause such Guarantor to use its best efforts to, provide a consent, in form and substance satisfactory to the Collateral Agent, from the owner and each mortgagee of such property (a) consenting to the Mortgage in favor of the Collateral Agent with respect to such property and (b) waiving any landlord's Lien in respect of personal property kept at the premises subject to such lease. 6.17 Further Assurances. The Company shall (a) cause all Subsidiaries to guarantee the obligations of the Company hereunder pursuant to the Guaranty (and in furtherance of the foregoing, immediately upon the creation or acquisition of any Subsidiary, cause such Subsidiary to execute and deliver a counterpart of the Guaranty, together with such other documents, including resolutions and opinions of counsel, as the Agent or any Lender may reasonably request), provided neither TruServ Specialty Company, LLC nor any Inactive Subsidiary or Foreign Subsidiary (other than Cotter Canada Hardware and Variety Company Inc.) shall have an obligation to execute a counterpart of the Guaranty; and (b) take, and cause each of Guarantors to take, such actions as are necessary or as the Agent or the Required Lenders may reasonably request from time to time (including the execution and delivery of security agreements, pledge agreements, financing statements, mortgages, deeds of trust and other documents, the filing or recording of any of the foregoing, the delivery of stock certificates and other collateral with respect to which perfection is obtained solely by possession, the notation of the Collateral Agent's Liens on certificates of title for vehicles and the delivery of opinions of counsel) to ensure that the obligations of the Company and each Guarantor hereunder and under the Guaranty, as applicable, are secured by perfected security interests in substantially all of the personal property of each such entity, and provided further that neither the Company nor any Guarantor shall be required to pledge more than 65% of the stock of any Foreign Subsidiary (other than Cotter Canada Hardware and Variety Company Inc.). 6.18 Waiver of Negative Pledge. The Company will, not later than June 30, 2000, cause The Industrial Development Authority of the State of New Hampshire (the "IDA") to waive the negative pledge set forth in Section 8.1 of the Loan Agreement dated as of October 1, 1982 66 between the IDA and the Company (then known as Cotter & Company) to permit a Lien in favor of the Collateral Agent on the Project (as defined in the Loan Agreement referred to above). ARTICLE VII NEGATIVE COVENANTS So long as any Lender shall have any Commitment hereunder, any BA shall be outstanding or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Required Lenders waive compliance in writing: 7.1 Fixed Charge Coverage Ratio. The Company will not permit the Fixed Charge Coverage Ratio as of the end of any fiscal quarter to be less than the applicable ratio set forth below: Fiscal Quarter(s) Ending Ratio ------------------------ ----- 3/31/00 through 6/30/00 1.20 to 1.00 9/30/00 1.40 to 1.00 12/31/00 through 12/31/01 1.75 to 1.00 3/31/02 and thereafter 1.85 to 1.00. 7.2 Lien Restrictions. The Company will not and will not permit any Subsidiary to create, assume or suffer to exist any Lien upon any of its property or assets, whether now owned or hereafter acquired (whether or not provision is made for the equal and ratable securing of the Obligations in accordance with the provisions of Section 6.13), except: (a) Liens for taxes not yet due or which are being actively contested in good faith by appropriate proceedings and with respect to which the Company or the applicable Subsidiary maintains adequate reserves, (b) Liens incidental to the conduct of its business or the ownership of its property and assets which were not incurred in connection with the borrowing of money or the obtaining of advances or credit, (c) Liens on property or assets of a Subsidiary to secure obligations of such Subsidiary to the Company or another Subsidiary, (d) Liens in existence on the Closing Date and described on Schedule 7.2, (e) Liens in respect of capital leases entered into in connection with, or any 67 Lien arising in connection with, the acquisition of property, after the date hereof and attaching only to the property being acquired, if the Indebtedness secured thereby does not exceed 100% of the lesser of (i) the fair market value of the property acquired at the time of acquisition thereof and (ii) the total purchase price of the property so acquired, (f) other Liens (including Liens arising under capital leases), in addition to the Liens permitted by clauses (a) through (d) above and clause (g) below, securing Indebtedness of the Company or any Subsidiary (other than Indebtedness that constitutes Subordinated Debt); provided, however, that (i) such Indebtedness is permitted by the provisions of Section 7.3 and (ii) the aggregate outstanding principal amount of all such Indebtedness (other than Indebtedness listed on Schedule 7.2(f)) does not at any time exceed (A) prior to the Reset Date, $25,000,000 and (B) on and after the Reset Date, an amount equal to 10% of the consolidated total assets of the Company, and (g) Liens in favor of the Collateral Agent. 7.3 Debt Restrictions. The Company will not and will not permit any Subsidiary to create, incur, assume or suffer to exist any Debt, except: (a) Senior Funded Debt, (b) Subordinated Debt, (c) Debt under the Guaranty, and (d) Short Term Debt of the Company; provided that the ratio of (x) the sum of (i) the aggregate amount (without duplication) of all Senior Funded Debt plus (ii) an amount equal to (A) the remainder of the lowest daily average amount of Short Term Debt outstanding for any period of 30 consecutive days during the 12-month period ending on the most recently completed month minus (B) the daily average of cash and marketable securities for such 30-day period to (y) the sum of (i) Consolidated Capitalization plus (ii) Special 1999 Charges plus (iii) Special A/P Charges plus (iv) the amount determined pursuant to clause (x)(ii) above shall not at any time exceed the ratio set forth below during any period set forth below: Specified Period Ending Percentage ------------- ---------- Through 12/31/01 60% Thereafter 55% For purposes of this Section 7.3, Debt represented by the Loans or arising under the BAs 68 shall be considered Short Term Debt. Without limiting the foregoing provisions of this Section, the Company will not permit the aggregate principal amount of all Debt of the Company and its Subsidiaries (other than (i) Debt hereunder and under the other Loan Documents, (ii) Debt referred to on Schedule 5.7 which was outstanding on March 31, 2000 and (iii) Subordinated Debt owed to Members) to exceed $35,000,000 at any time prior to the Reset Date. 7.4 Sale of Assets. The Company will not and will not permit any Subsidiary to sell, lease or transfer or otherwise dispose of any assets of the Company or any Subsidiary other than in the ordinary course of business (which shall be deemed to include the planned sale of up to ten distribution facilities); provided that the Company and its Subsidiaries may sell, lease, transfer or otherwise dispose of assets outside the ordinary course of business so long as the aggregate amount of all assets sold, leased, transferred or otherwise disposed of outside the ordinary course of business during the most recent 36-month rolling period when added together, without duplication, with (a) any shares of stock or Debt of any Subsidiary sold or otherwise disposed of, or with respect to which the Company or any Subsidiary has parted control of, except to the Company or another Subsidiary, during such period and (b) any assets then proposed to be sold outside of the ordinary course of business do not constitute more than 10% of the consolidated total assets of the Company as of the end of the most recent fiscal quarter for which the Company has delivered financial statements pursuant to Section 6.1. 7.5 Merger. The Company will not and will not permit any Subsidiary to merge or consolidate with any other Person, except that Subsidiaries may be merged into the Company or any other Subsidiary and the Company may merge after the Reset Date with another Person, provided that the Company is the surviving corporation and no Event of Default or Unmatured Event of Default shall exist either immediately before or after such merger. 7.6 Restrictions on Transactions with Affiliates and Stockholders. The Company will not and will not permit any Subsidiary to directly or indirectly, purchase, acquire or lease any property from, or sell, transfer or lease any property (other than shares of stock of the Company) to, or otherwise deal with (i) any Affiliate or Substantial Stockholder, or (ii) any corporation in which an Affiliate, Substantial Stockholder or the Company (either directly or through Subsidiaries) owns 5% or more of the outstanding voting stock, except that (a) any such Affiliate or Substantial Stockholder may be a director, officer or employee of the Company or any Subsidiary and may be paid reasonable compensation in connection therewith (b) the Company and its Subsidiaries may perform or engage in any of the foregoing in the ordinary course of business upon terms no less favorable to the Company or such Subsidiary (as the case may be) than if no such relationship described in clauses (i) and (ii) above existed and (c) the Company may sell to or purchase from any such Person shares of the Company's stock subject to the provisions of Section 7.11. 7.7 Issuance of Stock by Subsidiaries. The Company will not permit any Subsidiary to 69 (either directly, or indirectly by the issuance of rights or options for, or securities convertible into, such shares) issue, sell or otherwise dispose of any shares of any class of its stock (other than directors' qualifying shares) except to the Company or another Subsidiary; provided, however, TruServ Canada Cooperative Inc. may issue and sell shares of its stock in the ordinary course of business consistent with its practices as of April 13, 1992. 7.8 Compliance with ERISA. The Company will not and will not permit any Subsidiary to engage in any transaction in connection with which the Company or any Subsidiary could be subject to either a civil penalty assessed pursuant to section 502(i) of ERISA or a tax imposed by section 4975 of the Code, terminate or withdraw from any Plan (other than a Multiemployer Plan) in a manner, or take any other action with respect to any such Plan (including, without limitation, a substantial cessation of operations within the meaning of section 4062(f) of ERISA), which could result in any liability of the Company or any Subsidiary to the PBGC, to a trust established pursuant to section 4041(c)(3)(B)(ii) or (iii) or 4042(i) of ERISA, or to a trustee appointed under section 4042(b) or (c) of ERISA, incur any liability to the PBGC on account of a termination of a Plan under section 4064 of ERISA, fail to make full payment when due of all amounts which, under the provisions of any Plan, the Company or any Subsidiary is required to pay as contributions thereto, or permit to exist any accumulated funding deficiency, whether or not waived, with respect to any Plan (other than a Multiemployer Plan), if, in any such case, such penalty or tax or such liability, or the failure to make such payment, or the existence of such deficiency, as the case may be, could be reasonably expected to have a material adverse effect on the Company and its Subsidiaries taken as a whole. 7.9 No Change in Subordination Terms, etc. The Company will not and will not permit any Subsidiary to amend, alter or otherwise change any provision of any of the subordinated promissory notes now or hereafter issued by the Company or take any other action (or refrain from taking an action) which would have the effect of eliminating or altering in any way the effect of the subordination language appearing in such subordinated promissory notes or the rights of the Agent and the Lenders arising as a result thereof. 7.10 Nature of Business. The Company will not and will not permit any Subsidiary to engage in the business of underwriting risks for insurance purposes, or in any other aspect of insurance related business other than in the ordinary course of business in accordance with its practices as of the Closing Date; or purchase and sell real estate (other than on an agency basis) for purposes other than those relating directly to its principal business except for purchases and sales of store locations in the ordinary course of business which in the aggregate for the Company and its Subsidiaries taken as a whole do not exceed $10,000,000 during any rolling consecutive five year period. 7.11 Restricted Investments. The Company will not and will not permit any Subsidiary to make or permit a Subsidiary to make any Investment except the Company and any Subsidiary may: 70 (a) make or permit to remain outstanding loans or advances to any Subsidiary other than an Inactive Subsidiary, (b) after the Reset Date, own, purchase or acquire stock, obligations or securities of a Subsidiary or of a corporation which immediately after such purchase or acquisition will be a Subsidiary, (c) acquire and own stock, obligations or securities received in settlement of debts (created in the ordinary course of business) owing to the Company or any Subsidiary, (d) own, purchase or acquire prime commercial paper, banker's acceptances and certificates of deposit in United States and Canadian commercial banks (having combined capital and surplus of not less than U.S. $100,000,000) and repurchase agreements with respect to the foregoing, in each case due within one year from the date of purchase and payable in the United States in United States dollars, obligations of the government of the United States or any agency thereof, and obligations guaranteed by the government of the United States, (e) make or permit to remain outstanding travel and other similar advances to officers and employees in the ordinary course of business, (f) permit to remain outstanding Investments existing on the Closing Date and described on Schedule 7.11, (g) maintain deposit accounts with financial institutions in the ordinary course of business; provided that the amount maintained in deposit accounts with financial institutions other than the Lenders shall not exceed (x) in the case of any one such account, $200,000 for more than three consecutive Business Days; and (y) in the case of all such accounts in the aggregate, $600,000 for more than two consecutive Business Days, and (h) to the extent applicable, make Investments permitted under Section 7.12 below. Notwithstanding the foregoing, the Company will not permit the aggregate amount of Investments in TruServ Specialty Company, LLC to exceed $1,500,000 at any time. 7.12 Restricted Payments. The Company will not and will not permit any Subsidiary to pay or declare cash dividends, cash patronage dividends or dividends on any class of its stock (other than dividends in kind) or redeem, purchase or otherwise acquire, or make any redemptions, purchase, or other acquisition of any of its stock or apply miscellaneous deductions in lieu of patronage dividends, or make or permit any Subsidiary to make any Restricted Investment (each a "Restricted Payment") except to the extent that the aggregate amount of all 71 such Restricted Payments made in any fiscal year does not exceed the Specified Percentage (as defined below) of Consolidated Net Earnings for such fiscal year. For purposes of the foregoing, "Specified Percentage" means 40%. Notwithstanding the foregoing, the Company will not, and will not permit any Subsidiary, to make or pay any Restricted Payment (a) prior to January 1, 2001, or (b) if at the time such Restricted Payment is made or paid, or after giving effect thereto, an Event of Default or Unmatured Event of Default would exist. 7.13 Use of Proceeds. The Company will not, and will not permit any Subsidiary to, use any portion of the proceeds of any Credit Extension, directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise refinance indebtedness of the Company or others incurred to purchase or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any security in any transaction that is subject to Section 13 or 14 of the Exchange Act. 7.14 Ratio of Borrowing Base to Debt. The Company will not permit the ratio of (a) the Borrowing Base as of the last day of any fiscal month to (b) the remainder of (i) the daily average of the amount of Total Senior Debt outstanding during the fiscal month ending on such date minus (ii) the daily average of cash and marketable securities during the fiscal month ending on such date to be equal to or less than the applicable ratio set forth below: Fiscal Month(s) Ending Ratio ---------------------- ----- 04/3/99 through 05/29/99 1.10 to 1 7/3/99 through 10/2/99 1.15 to 1 10/30/99 through 12/31/99 1.20 to 1 01/29/00 1.10 to 1 2/26/00 through 12/31/00 1.20 to 1 01/27/01 1.10 to 1 2/24/01 through 12/31/01 1.20 to 1 01/26/02 1.10 to 1 2/23/02 and thereafter 1.20 to 1. 7.15 Minimum EBITDA. The Company will not permit the sum of (i) EBITDA as of the end of any four consecutive fiscal quarters, plus (ii) for the period of four fiscal quarters ending March 31, 2000, June 30, 2000 and September 30, 2000, Special 1999 Charges (to the extent taken during such period), plus (iii) for the period of four fiscal quarters ending March 31, 2000 and June 30, 2000, Special A/P Charges (to the extent taken during such period), to be less than $85,000,000. 7.16 Inactive Subsidiaries. The Company will not at any time permit its Inactive Subsidiaries, taken as a whole, to have more than $200,000 of assets (based on fair market value) or to generate more than $5,000 of revenues in any fiscal quarter. 7.17 Amendments to Financing Agreements. The Company will not, and will not 72 permit any Subsidiary to, amend, modify, supplement or restate any Financing Agreement (as defined in the Intercreditor Agreement). ARTICLE VIII EVENTS OF DEFAULT 8.1 Event of Default. Any of the following events which occur and are continuing for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or otherwise) shall constitute an "Event of Default": (a) The Company defaults in the payment of any principal of any Loan or any amount due in respect of any BA when the same shall become due. (b) The Company defaults in the payment of any interest, fee or other amount payable hereunder or under any other Loan Document for more than three (3) Business Days after the date due. (c) The Company or any Subsidiary defaults (whether as primary obligor or as guarantor or other surety) in any payment of principal of or interest on any other obligation for money borrowed (or any Capitalized Lease Obligation, any obligation under a conditional sale or other title retention agreement, any obligation issued or assumed as full or partial payment for property whether or not secured by a purchase money mortgage or any obligation under notes payable or drafts accepted representing extensions of credit) beyond any period of grace provided with respect thereto, or the Company or any Subsidiary fails to perform or observe any other agreement, term or condition contained in any agreement under which any obligation is created (or if any other event thereunder or under any such agreement shall occur and be continuing) and the effect of such failure or other event is to cause, or to permit the holder or holders of such obligation (or a trustee on behalf of such holder or holders) to cause, such obligation to become due (or to be repurchased by the Company or any Subsidiary) prior to any stated maturity, provided that the aggregate amount of all obligations as to which such a payment default shall occur and be continuing or such a failure or other event causing or permitting acceleration (or resale to the Company or any Subsidiary) shall occur and be continuing exceeds $5,000,000. (d) Any representation or warranty made by the Company or any Subsidiary herein or in any other Loan Document or by the Company or any Subsidiary or any of their respective officers in any writing furnished in connection with or pursuant to this Agreement or any other Loan Document shall be false in any material respect on the date as of which made. (e) The Company fails to perform or observe any agreement contained in Article 73 VII. (f) The Company fails to perform or observe any other agreement, term or condition contained herein and such failure shall not be remedied within 30 days after any Responsible Officer obtains actual knowledge of such failure. (g) The Company or any Subsidiary makes an assignment for the benefit of creditors or is generally not paying its debts as such debts become due. (h) Any decree or order for relief in respect of the Company or any Subsidiary (other than an Inactive Subsidiary) is entered under any bankruptcy, reorganization, compromise, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law, whether now or hereafter in effect (herein called a "Bankruptcy Law"), of any jurisdiction. (i) The Company or any Subsidiary (other than an Inactive Subsidiary) petitions or applies to any tribunal for, or consents to, the appointment of, or taking possession by, a trustee, receiver, custodian, liquidator or similar official of the Company or such Subsidiary, or of any substantial part of the assets of the Company or such Subsidiary, or commences a voluntary case under the Bankruptcy Law of the United States or any proceedings (other than proceedings for the voluntary liquidation and dissolution of a Subsidiary) relating to the Company or such Subsidiary under the Bankruptcy Law of any other jurisdiction. (j) Any such petition or application is filed, or any such proceedings are commenced, against the Company or any Subsidiary (other than an Inactive Subsidiary) and the Company or such Subsidiary by any act indicates its approval thereof, consent thereto or acquiescence therein, or an order, judgment or decree is entered appointing any such trustee, receiver, custodian, liquidator or similar official, or approving the petition in any such proceedings, and such order, judgment or decree remains unstayed and in effect for more than 30 days. (k) Any order, judgment or decree is entered in any proceedings against the Company decreeing the dissolution of the Company and such order, judgment or decree remains unstayed and in effect for more than 60 days. (l) Any order, judgment or decree is entered in any proceedings against the Company or any Subsidiary decreeing a split-up of the Company or such Subsidiary which requires the divestiture of assets representing a substantial part, or the divestiture of the stock of a Subsidiary whose assets represent a substantial part, of the consolidated assets of the Company and its Subsidiaries 74 (determined in accordance with GAAP) or which requires the divestiture of assets, or stock of a Subsidiary, which shall have contributed a substantial part of the consolidated net income of the Company and its Subsidiaries (determined in accordance with GAAP) for any of the three fiscal years then most recently ended, and such order, judgment or decree remains unstayed and in effect for more than 60 days. (m) A final judgment in an amount in excess of $7,000,000 is rendered against the Company or any Subsidiary and, within 60 days after entry thereof, such judgment is not discharged or execution thereof stayed pending appeal, or within 60 days after the expiration of any such stay, such judgment is not discharged. (n) An Event of Default exists under and as defined in the Intercreditor Agreement. (o) The Guaranty shall cease to be in full force and effect with respect to any Guarantor (other than as a result of a transaction permitted hereunder), any Guarantor shall fail (subject to any applicable grace period) to comply with or to perform any applicable provision of the Guaranty, or any Guarantor (or any Person by, through or on behalf of such Guarantor) shall contest in any manner the validity, binding nature or enforceability of the Guaranty with respect to such Guarantor. (p) Any Collateral Document shall cease to be in full force and effect with respect to the Company or any Guarantor (other than as a result of a transaction permitted hereunder), the Company or any Guarantor shall fail (subject to any applicable grace period) to comply with or to perform any applicable provision of any Collateral Document to which such entity is a party, or the Company or any Guarantor (or any Person by, through or on behalf of the Company or such Guarantor) shall contest in any manner the validity, binding nature or enforceability of any Collateral Document. 8.2 Remedies. If any Event of Default occurs, the Agent shall, at the request of, or may, with the consent of, the Required Lenders, do any or all of the following: (a) declare the Commitment of each Lender to make Committed Loans, the obligation of the Swing Line Lender to make Swing Line Loans and the obligation of the Accepting Lender to accept BAs to be terminated, whereupon such Commitments and obligations shall be terminated; (b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Company; (c) demand that the Company deliver to the Agent for the benefit of the 75 Accepting Lender and the Lenders cash collateral in an amount equal to the aggregate maximum amount which may be required to be paid by the Accepting Lender in connection with all outstanding BAs, whereupon the Company shall be obligated to deliver such cash collateral; and (d) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable law; provided, however, that upon the occurrence of any event specified in subsection (g), (h), (i) or (j) of Section 8.1, the obligation of each Lender to make Loans and of the Accepting Lender to accept BAs shall automatically terminate and the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable and the Company shall automatically become obligated to the Agent for the benefit of the Accepting Lender and the Lenders cash collateral in an amount equal to the aggregate maximum amount which may be required to be paid by the Accepting Lender in connection with all outstanding BAs, all without further act of the Agent or any Lender. 8.3 Rights Not Exclusive. The rights provided for in this Agreement and the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. ARTICLE IX THE AGENT 9.1 Appointment and Authorization; "Agent". (a) Each Lender hereby irrevocably (subject to Section 9.9) appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Agent have or be deemed to have 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. Without limiting the generality of the foregoing sentence, the use of the term "agent" in this Agreement with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. (b) The Accepting Lender shall act on behalf of the Lenders with respect to 76 any BA accepted by it and the documents associated therewith. The Accepting Lender shall have all of the benefits and immunities (i) provided to the Agent in this Article IX with respect to any acts taken or omissions suffered by the Accepting Lender in connection with BAs accepted by it or proposed to be accepted by it and the documents and agreements pertaining thereto as fully as if the term "Agent", as used in this Article IX, included the Accepting Lender with respect to such acts or omissions and (ii) as additionally provided in this Agreement with respect to the Accepting Lender. (c) The Swing Line Lender shall have all of the benefits and immunities (i) provided to the Agent in this Article IX with respect to any acts taken or omissions suffered by the Swing Line Lender in connection with Swing Line Loans made or proposed to be made by it as fully as if the term "Agent", as used in this Article IX, included the Swing Line Lender with respect to such acts or omissions and (ii) as additionally provided in this Agreement with respect to the Swing Line Lender. 9.2 Delegation of Duties. The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees 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 agent or attorney-in-fact that it selects with reasonable care. 9.3 Liability of Agent. None of the Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Lenders for any recital, statement, representation or warranty made by the Company or any Subsidiary or Affiliate of the Company, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of the Company or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any 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 the Company or any of the Company's Subsidiaries or Affiliates. 9.4 Reliance by Agent. (a) The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement 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 the Company), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or 77 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 expressly required hereunder, all Lenders) as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which 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 or any other Loan Document in accordance with a request or consent of the Required Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders. (b) For purposes of determining compliance with the conditions specified in Section 4.1, each Lender that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender. 9.5 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Event of Default or Unmatured Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Lenders, unless the Agent shall have received written notice from a Lender or the Company referring to this Agreement, describing such Event of Default or Unmatured Event of Default and stating that such notice is a "notice of default". The Agent will notify the Lenders of its receipt of any such notice. The Agent shall take such action with respect to such Event of Default or Unmatured Event of Default as may be requested by the Required Lenders in accordance with Article VIII; provided, however, that unless and until the Agent has received any such request, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default or Unmatured Event of Default as it shall deem advisable or in the best interest of the Lenders. 9.6 Credit Decision. Each Lender acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by the Agent hereinafter taken, including any review of the affairs of the Company and its Subsidiaries, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Company and its Subsidiaries, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Company hereunder. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person 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 investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Company. Except for notices, reports and other documents expressly herein required to be furnished to the Lenders by the Agent, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, 78 property, financial and other condition or creditworthiness of the Company. Except for notices, reports and other documents expressly herein required to be furnished to the Lenders by the Agent, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the Company which may come into the possession of any of the Agent-Related Persons. 9.7 Indemnification of Agent. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Company and without limiting the obligation of the Company to do so), pro rata, from and against any and all Indemnified Liabilities; provided, however, that no Lender shall be liable for the payment to any Agent-Related Person of any portion of the Indemnified Liabilities resulting solely from such Person's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender shall reimburse the Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Company. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of the Agent. 9.8 Agent in Individual Capacity. BofA and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Company and its Subsidiaries and Affiliates as though BofA were not the Agent, the Accepting Lender and the Swing Line Lender hereunder, in each case without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, BofA or its Affiliates may receive information regarding the Company or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Company or such Subsidiary) and acknowledge that the Agent shall be under no obligation to provide such information to them. With respect to its Loans, BofA and any Affiliate thereof shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though BofA were not the Agent, the Accepting Lender or the Swing Line Lender. 9.9 Successor Agent. The Agent may, and at the request of the Required Lenders shall, resign as Agent upon 30 days' notice to the Lenders and the Company. If the Agent resigns under this Agreement, the Required Lenders (with, if no Event of Default and Unmatured Event of Default then exists, the consent of the Company, not to be unreasonably withheld) shall appoint from among the Lenders a successor agent for the Lenders. If no successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Lenders and the Company, a successor agent from among the Lenders. Upon the 79 acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor agent and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article IX and Sections 10.4 and 10.5 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which 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 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. Notwithstanding the foregoing, however, BofA may not be removed as the Agent at the request of the Required Lenders unless BofA or any Affiliate of BofA shall also simultaneously be replaced as "Accepting Lender" and as "Swing Line Lender" hereunder pursuant to documentation in form and substance reasonably satisfactory to BofA and, if applicable, such Affiliate. 9.10 Withholding Tax. (a) If any Lender is a "foreign corporation, partnership or trust" within the meaning of the Code and such Lender claims exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or 1442 of the Code, such Lender agrees with and in favor of the Agent, to deliver to the Agent: (i) if such Lender claims an exemption from, or a reduction of, withholding tax under a United States tax treaty, properly completed IRS Form W-8BEN before the payment of any interest in the first calendar year and before the payment of any interest in each third succeeding calendar year during which interest may be paid under this Agreement; (ii) if such Lender claims that interest paid under this Agreement is exempt from United States withholding tax because it is effectively connected with a United States trade or business of such Lender, two properly completed and executed copies of IRS Form W-8ECI before the payment of any interest is due in the first taxable year of such Lender and in each succeeding taxable year of such Lender during which interest may be paid under this Agreement, and IRS Form W-9; and (iii) such other form or forms as may be required under the Code or other laws of the United States as a condition to exemption from, or reduction of, United States withholding tax. Each such Lender agrees to promptly notify the Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction. (b) If any Lender claims exemption from, or reduction of, withholding tax under a United States tax treaty by providing IRS Form W-8BEN and such Lender sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of the Company to 80 such Lender, such Lender agrees to notify the Agent of the percentage amount in which it is no longer the beneficial owner of Obligations of the Company to such Lender. To the extent of such percentage amount, the Agent will treat such Lender's IRS Form W-8BEN as no longer valid. (c) If any Lender claiming exemption from United States withholding tax by filing IRS Form W-8ECI with the Agent sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of the Company to such Lender, such Lender agrees to undertake sole responsibility for complying with the withholding tax requirements imposed by Sections 1441 and 1442 of the Code. (d) If any Lender is entitled to a reduction in the applicable withholding tax, the Agent may withhold from any interest payment to such Lender an amount equivalent to the applicable withholding tax after taking into account such reduction. If the forms or other documentation required by subsection (a) of this Section are not delivered to the Agent, then the Agent may withhold from any interest payment to such Lender not providing such forms or other documentation an amount equivalent to the applicable withholding tax. (e) If the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered or was not properly executed, or because such Lender failed to notify the Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Lender shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Agent under this Section, together with all costs and expenses (including Attorney Costs). The obligation of the Lenders under this subsection shall survive the payment of all Obligations and the resignation or replacement of the Agent. 9.11 Co-Agents. None of the Lenders identified on the signature pages of this Agreement or any related document as a "co-agent" shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders so identified as a "co-agent" shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders so identified in deciding to enter into this Agreement or in taking or not taking action hereunder. ARTICLE X MISCELLANEOUS 10.1 Amendments and Waivers. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by the 81 Company or any applicable Subsidiary therefrom, shall be effective unless the same shall be in writing and signed by the Required Lenders (or by the Agent at the written request of the Required Lenders) and the Company and acknowledged by the Agent, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that no such waiver, amendment, or consent shall, unless in writing and signed by all the Lenders and the Company and acknowledged by the Agent, do any of the following: (a) increase or extend the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.2); (b) postpone or delay any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document; (c) reduce the principal of, or the rate of interest specified herein on, any Loan, reduce the BA Commission or the amount of any BA, or (subject to clause (iv) below) reduce any fees or other amounts payable hereunder or under any other Loan Document; (d) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Obligations which is required for the Lenders or any of them to take any action hereunder; or (e) amend this Section, or Section 2.13, or any provision herein providing for consent or other action by all Lenders; and, provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Required Lenders or all the Lenders, as the case may be, affect the rights or duties of the Agent under this Agreement or any other Loan Document, (ii) no amendment, waiver or consent shall, unless in writing and signed by the Accepting Lender in addition to the Required Lenders or all Lenders, as the case may be, affect the rights or duties of the Accepting Lender under this Agreement or any other Loan Document, (iii) no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Lender in addition to the Required Lenders or all Lenders, as the case may be, affect the rights or duties of the Swing Line Lender under this Agreement or any other Loan Document, and (iv) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed by the parties thereto. 10.2 Notices. (a) All notices, requests and other communications shall be in writing (including, unless the context expressly otherwise provides, by facsimile transmission, provided that any matter transmitted by the Company by facsimile (i) shall be immediately confirmed by a telephone call to the recipient at the number specified on Schedule 10.2, and (ii) shall be followed promptly by delivery of a hard copy original thereof) and mailed, faxed or delivered, to the address or facsimile number specified for notices on Schedule 10.2; or, as directed to the Company or the Agent, to such other address as shall be designated by such party in a written 82 notice to the other parties, and as directed to any other party, at such other address as shall be designated by such party in a written notice to the Company and the Agent. (b) All such notices, requests and communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the U.S. mail, certified mail, return receipt requested; except that notices pursuant to Article II or IX to the Agent, the Accepting Lender or the Swing Line Lender shall not be effective until actually received by the Agent, as the case may be. (c) Any agreement of the Agent and the Lenders herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Company. The Agent and the Lenders shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Company to give such notice and the Agent and the Lenders shall not have any liability to the Company or any other Person on account of any action taken or not taken by the Agent or the Lenders in reliance upon such telephonic or facsimile notice. The obligation of the Company to repay the Obligations shall not be affected in any way or to any extent by any failure by the Agent and the Lenders to receive written confirmation of any telephonic or facsimile notice or the receipt by the Agent and the Lenders of a confirmation which is at variance with the terms understood by the Agent and the Lenders to be contained in the telephonic or facsimile notice. 10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delaying exercising, on the part of the Agent or any Lender, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. 10.4 Costs and Expenses. The Company shall: (a) whether or not the transactions contemplated hereby are consummated, pay or reimburse the Agent, the Accepting Lender and the Swing Line Lender within five Business Days after demand (subject to subsection 4.1(e)) for all reasonable costs and expenses incurred by the Agent, the Accepting Lender and the Swing Line Lender in connection with the development, preparation, delivery, administration and execution of, and any amendment, supplement, waiver or modification to (in each case, whether or not consummated), this Agreement, any other Loan Document and any other documents prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby, including (i) reasonable Attorney Costs incurred by the Agent, the Accepting Lender and the Swing Line Lender with respect thereto and (ii) the reasonable fees and charges of any financial advisor retained by the Agent or by counsel to the Agent (but without duplication of fees and charges of any financial advisor retained by the Collateral Agent or its counsel); and 83 (b) pay or reimburse the Agent and each Lender within five Business Days after demand (subject to subsection 4.1(e)) for all reasonable costs and expenses (including Attorney Costs) incurred by them in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or any other Loan Document during the existence of an Event of Default or after acceleration of the Loans and other Obligations (including in connection with any "workout" or restructuring regarding the Loans and other Obligations, and including in any Insolvency Proceeding or appellate proceeding); provided that the Company shall not be obligated to pay or reimburse the Agent or any Lender in respect of any suit or proceeding in which the Company is adverse to the Agent or such Lender and final nonappealable judgment is rendered by a court of competent jurisdiction in favor of the Company on all counts. 10.5 Company Indemnification. Whether or not the transactions contemplated hereby are consummated, the Company shall indemnify and hold the Agent-Related Persons, and each Lender and each of their respective officers, directors, employees, counsel, agents and attorneys-in-fact (each an "Indemnified Person") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Obligations and the termination, resignation or replacement of the Agent or replacement of any Lender) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this Agreement or any document contemplated by or referred to herein, or the transactions contemplated hereby or thereby, or any action taken or omitted by any such Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any Insolvency Proceeding or appellate proceeding) related to or arising out of this Agreement or the Loans or the BAs or the use of the proceeds thereof, or related to any Offshore Currency transactions entered into in connection herewith, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); provided that the Company shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities resulting solely from the gross negligence or willful misconduct of such Indemnified Person. The agreements in this Section shall survive payment of all other Obligations and the termination of this Agreement. 10.6 Payments Set Aside. To the extent that the Company makes a payment to the Agent or any Lender, or the Agent or any Lender exercises its right of set-off, and such payment or the proceeds of such set-off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Agent or such Lender in its discretion) to be repaid to a trustee, receiver, or any other party, in connection with any Insolvency Proceeding or otherwise, then (a) to the extent of such recovery the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred and (b) each Lender severally agrees to pay to the Agent upon demand its pro rata share of any amount so recovered from or repaid by the Agent or any Lender. 84 10.7 Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Agent and each Lender. 10.8 Assignments, Participations, etc. (a) Any Lender may, with the written consent of the Accepting Lender, the Swing Line Lender and the Agent, which consents shall not be unreasonably withheld, at any time assign and delegate to one or more Persons (provided that no written consent of the Accepting Lender, the Swing Line Lender or the Agent shall be required in connection with any assignment and delegation by a Lender to an Affiliate of such Lender) (each an "Assignee") all, or any ratable part of all, of the Loans, the Commitment and the other rights and obligations of such Lender hereunder, in a minimum amount of $10,000,000 (or, if less, all of such Lender's remaining rights and obligations hereunder); provided, however, that (x) no assignment and delegation may be made to any Person if, at the time of such assignment and delegation, the Company would be obligated to pay any greater amount under Article III to the Assignee than the Company is then obligated to pay to the assigning Lender under such Article (and if any assignment is made in violation of the foregoing, the Company will not be required to pay the incremental amounts) and (y) the Company, the Accepting Lender, the Swing Line Lender and the Agent may continue to deal solely and directly with such Lender in connection with the interest so assigned to an Assignee until (i) written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to the Company and the Agent by such Lender and the Assignee; (ii) such Lender and its Assignee shall have delivered to the Company and the Agent an Assignment and Acceptance in the form of Exhibit G ("Assignment and Acceptance") together with any Note or Notes subject to such assignment and (iii) the assignor Lender or Assignee has paid to the Agent a processing fee in the amount of $2,500. (b) From and after the date that the Agent notifies the assignor Lender that it has received and provided its consent (and received the consent of the Accepting Lender and the Swing Line Lender) with respect to an executed Assignment and Acceptance and payment of the above-referenced processing fee, (i) 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, shall have the rights and obligations of a Lender under the Loan Documents, and (ii) the assignor Lender shall, to the extent that rights and obligations hereunder and under the other Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under the Loan Documents. (c) Any Lender may at any time sell to one or more commercial banks or other Persons not Affiliates of the Company (a "Participant") participating interests in any Loans, the Commitment of such Lender and the other interests of such Lender (the "originating Lender") hereunder and under the other Loan Documents; provided, however, that (i) the originating 85 Lender's obligations under this Agreement shall remain unchanged, (ii) the originating Lender shall remain solely responsible for the performance of such obligations, (iii) the Company, the Agent, the Swing Line Lender and the Accepting Lender shall continue to deal solely and directly with the originating Lender in connection with the originating Lender's rights and obligations under this Agreement and the other Loan Documents, and (iv) no Lender shall transfer or grant any participating interest under which the Participant has rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document, except to the extent such amendment, consent or waiver would require unanimous consent of the Lenders as described in the first proviso to Section 10.1. In the case of any such participation, the Participant shall be entitled to the benefit of Sections 3.1, 3.3 and 10.5 as though it were also a Lender hereunder (provided that no Participant shall receive any greater compensation pursuant to Article III than would have been paid to the participating Lender if no participation had been sold), and if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement. (d) Notwithstanding any other provision in this Agreement, any Lender may at any time create a security interest in, or pledge, all or any portion of its rights under and interest in this Agreement and any Note held by it in favor of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law. 10.9 Confidentiality. Each Lender agrees to take and to cause its Affiliates to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all information provided to it by the Company or any Subsidiary, or by the Agent on the Company's or such Subsidiary's behalf, under this Agreement or any other Loan Document, and neither such Lender nor any of its Affiliates shall use any such information other than in connection with or in enforcement of this Agreement and the other Loan Documents or in connection with other business now or hereafter existing or contemplated with the Company or any Subsidiary; except to the extent such information (i) was or becomes generally available to the public other than as a result of disclosure by such Lender, or (ii) was or becomes available on a non-confidential basis from a source other than the Company, provided that such source is not bound by a confidentiality agreement with the Company or any Subsidiary known to such Lender; provided, however, that any Lender may disclose such information (A) at the request or pursuant to any requirement of any Governmental Authority to which such Lender is subject or in connection with an examination of such Lender by any such authority; (B) pursuant to subpoena or other court process; (C) when required to do so in accordance with the provisions of any applicable Requirement of Law; (D) to the extent reasonably required in connection with any litigation or proceeding to which the Agent or any Lender or any of their respective Affiliates may be party; (E) to the extent reasonably required in connection with the exercise of any remedy hereunder or 86 under any other Loan Document; (F) to such Lender's independent auditors and other professional advisors; (G) to any Participant or Assignee, actual or potential, provided that such Person agrees in writing to keep such information confidential to the same extent required of the Lenders hereunder; (H) as to any Lender or its Affiliate, as expressly permitted under the terms of any other document or agreement regarding confidentiality to which the Company or any Subsidiary is party or is deemed party with such Lender or such Affiliate; and (I) to its Affiliates. Each Lender shall, to the extent permitted by applicable law, use reasonable efforts to give the Company timely notice of any event described in clause (B) or (C) of the preceding sentence which may require disclosure of confidential information so that the Company will have an opportunity to seek a protective order. 10.10 Set-off. In addition to any rights and remedies of the Lenders provided by law, if an Event of Default exists, or the Obligations have been accelerated, each Lender is authorized at any time and from time to time, without prior notice to the Company, any such notice being waived by the Company 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 by, and other indebtedness at any time owing by, such Lender to or for the credit or the account of the Company against any and all Obligations owing to such Lender, now or hereafter existing, irrespective of whether or not the Agent or such Lender shall have made demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured. Each Lender agrees promptly to notify the Company and the Agent after any such set-off and application made by such Lender; provided that the failure to give such notice shall not affect the validity of such set-off and application. 10.11 Automatic Debits of Fees. With respect to any non-use fee, arrangement fee or other fee, or any other cost or expense (including Attorney Costs) due and payable to the Agent, the Swing Line Lender, the Accepting Lender or BofA under the Loan Documents, the Company hereby irrevocably authorizes BofA to debit any deposit account of the Company with BofA in an amount such that the aggregate amount debited from all such deposit accounts does not exceed such fee or other cost or expense. If there are insufficient funds in such deposit accounts to cover the amount of the fee or other cost or expense then due, such debits will be reversed (in whole or in part, in BofA's sole discretion) and such amount not debited shall be deemed to be unpaid. No such debit under this Section shall be deemed a set-off. 10.12 Notification of Addresses, Lending Offices, Etc. Each Lender shall notify the Agent in writing of any change in the address to which notices to such Lender should be directed, of addresses of any Lending Office, of payment instructions in respect of all payments to be made to it hereunder and of such other administrative information as the Agent shall reasonably request. 10.13 Counterparts. This Agreement may be executed in any number of separate counterparts, each of which, when so executed, shall be deemed an original, and all of which taken together shall be deemed to constitute but one and the same instrument. 10.14 Severability. The illegality or unenforceability of any provision of this Agreement 87 or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or such instrument or agreement. 10.15 No Third Parties Benefited. This Agreement is made and entered into for the sole protection and legal benefit of the Company, the Lenders, the Agent, the Agent-Related Persons and the Indemnified Persons, and their respective permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any other Loan Document. 10.16 Governing Law and Jurisdiction. (a) THIS AGREEMENT AND ANY NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF ILLINOIS; PROVIDED THAT THE COMPANY, THE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT AND THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS. EACH OF THE COMPANY, THE AGENT AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE AGENT AND THE LENDERS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY ILLINOIS LAW. 10.17 Waiver of Jury Trial. THE COMPANY, THE LENDERS AND THE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON OR INDEMNIFIED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE LENDERS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY 88 IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENT, RENEWAL, SUPPLEMENT OR MODIFICATION TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. 10.18 Judgment. If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder or any other Loan Document in one currency into another currency, the rate of exchange used shall be that at which in accordance with normal banking procedures the Agent could purchase the first currency with such other currency on the Business Day preceding that on which final judgment is given. The obligation of the Company in respect of any such sum due from it to the Agent hereunder or under any other Loan Document shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than that in which such sum is denominated in accordance with the applicable provisions of this Agreement (the "Agreement Currency"), be discharged only to the extent that on the Business Day following receipt by the Agent of any sum adjudged to be so due in the Judgment Currency, the Agent may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency. If the amount of the Agreement Currency so purchased is less than the sum originally due to the Agent in the Agreement Currency, the Company agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Agent or the Person to whom such obligation was owing against such loss. If the amount of the Agreement Currency so purchased is greater than the sum originally due to the Agent in such currency, the Agent agrees to return the amount of any excess to the Company (or to any other Person who may be entitled thereto under applicable law). 10.19 Entire Agreement. This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among the Company, the Lenders and the Agent, and supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof. 10.20 Amendment and Restatement. This Agreement amends and restates the Original Agreement in its entirety and, after the Effective Date the Original Agreement shall be of no further force or effect (except for any provision thereof which by its terms survives termination thereof). 10.21 Bid Loan Option. Notwithstanding any provision of this Agreement to the contrary, the Company shall not have the option of borrowing any Bid Loans. All borrowings under Section 2 of this Agreement shall be Committed Loans or Swing Line Loans. 10.22 Intercreditor Agreement; Collateral Matters. (a) The Lenders hereby authorize the 89 Agent to sign the Intercreditor Agreement on behalf of the Lenders and acknowledge and agree that Bank of America may act as Collateral Agent under the Intercreditor Agreement and as Agent hereunder. (b) The Lenders irrevocably authorize the Collateral Agent, at its option and in its discretion, (i) to release any Lien on any property granted to or held by the Collateral Agent under any Collateral Document (x) upon termination of the Commitments and payment in full of all Loans and all other obligations of the Company hereunder; (y) which is sold or to be sold or disposed of as part of or in connection with any disposition permitted hereunder or (z) if approved, authorized or ratified in writing by the Required Lenders; (ii) to subordinate any Lien on any property granted to or held by the Collateral Agent under any Collateral Document to the holder of any Lien on such property which is permitted by Section 7.2 hereof; and (iii) to release any Guarantor from its obligations under the Guaranty if such entity ceases to be a Subsidiary as a result of a transaction permitted hereunder. Upon request by the Collateral Agent at any time, the Required Lenders will confirm in writing the Collateral Agent's authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Guaranty, pursuant to this Section 10.22. 10.23 Waiver. By signing this Agreement, the Required Lenders waive the Company's non-compliance with the financial covenants contained in Section 7.1 of the Original Agreement for the periods ended December 31, 1999 and March 31, 2000 or with Section 7.3 of the Original Agreement for the periods ended December 31, 1999, January 31, 2000, February 29, 2000 and March 31, 2000. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. 90 TRUSERV CORPORATION By: Title: By: Title: BANK OF AMERICA, N.A., as Agent By: Title: BANK OF AMERICA, N.A., as a Lender By: Title: BANK OF MONTREAL, as Co-Agent and as a Lender By: Title: BANK ONE, NA (Main Office Chicago), as Co-Agent and as a Lender By: Title: PNC BANK, NATIONAL ASSOCIATION, as Co-Agent and as a Lender 91 By: Title: WACHOVIA BANK, N.A., as Co-Agent and as a Lender By: Title: THE NORTHERN TRUST COMPANY, as a Lender By: Title: ABN AMRO BANK N.V., as a Lender By: Title: By: Title: NATIONAL CONSUMER COOPERATIVE BANK, as a Lender By: Title: 92 UMB BANK, N.A. By: Title: 93 SCHEDULE 1.1 PRICING SCHEDULE Beginning with the Effective Date, the Offshore Rate Margin, the Base Rate Margin, the BA Commission and the Commitment Fee Rate shall be 3.00%, 2.00%, 3.00% and 0.50%, respectively. Each of the foregoing shall be adjusted, to the extent applicable, 60 days (or, in the case of the last fiscal quarter of any fiscal year, 120 days) after the end of each fiscal quarter based on the applicable Total Senior Debt to EBITDA Ratio, determined pursuant to the table below, as of the last day of such fiscal quarter; provided that if the Company fails to deliver the financial statements required by Section 6.1 and the related Compliance Certificate by the 60th day (or, if applicable, the 120th day) after any fiscal quarter, the Offshore Rate Margin, the Base Rate Margin, the BA Commission and the Commitment Fee Rate that would apply if the Total Senior Debt to EBITDA Ratio were greater than 3.75 to 1 shall apply until such financial statements are delivered.
- ----------------------------------------------------------------------------------------------------------------- Total Senior Debt Offshore Rate Base Rate Commitment Fee to EBITDA Ratio Margin Margin BA Commission Rate ----------------- ------------- --------- ------------- ------------- - ----------------------------------------------------------------------------------------------------------------- Equal to or greater than 3.75 to 1 3.00% 2.00% 3.00% 0.50% - ----------------------------------------------------------------------------------------------------------------- Equal to or greater than 3.00 to 1 but less than 3.75 to 1 2.50% 1.50% 2.50% 0.50% - ----------------------------------------------------------------------------------------------------------------- Equal to or greater than 2.25 to 1 but less than 3.00 to 1 2.00% 1.00% 2.00% 0.45% - ----------------------------------------------------------------------------------------------------------------- Less than 2.25 to 1 1.50% 0.50% 1.50% 0.40% - -----------------------------------------------------------------------------------------------------------------
94 SCHEDULE 2.1 COMMITMENTS AND PRO RATA SHARES Pro Rata Lender Commitment Share ------ ---------- ----- Bank of America, N.A. $ 50,000,000 16.66666667% Bank of Montreal $ 40,000,000 13.33333333% Bank One, NA $ 40,000,000 13.33333333% PNC Bank, National $ 40,000,000 13.33333333% Association Wachovia Bank, N.A. $ 40,000,000 13.33333333% The Northern Trust Company $ 25,000,000 8.33333333% ABN AMRO Bank N.V. $ 25,000,000 8.33333333% National Consumer Cooperative Bank $ 20,000,000 6.66666667% UMB Bank $ 20,000,000 6.66666667% TOTAL $300,000,000 100% 95 SCHEDULE 5.7 RESTRICTIVE AGREEMENTS Shelf Agreement (as defined in the Intercreditor Agreement) Senior Note Agreements (as defined in the Intercreditor Agreement) "Operative Documents" referred to in the Synthetic Lease Guaranty (as defined in the Intercreditor Agreement) 96 SCHEDULE 6.16 MORTGAGED PROPERTY PART 1. PRIMARY PROPERTIES 7058 Snowdrift Road PO Box 789 Fogelsville, Pennsylvania 18051-9998 7600 Jonesboro Road Jonesboro, Georgia 30236-2450 333 Harvey Road Manchester, New Hampshire 03103 1542 Tanforan Avenue Woodland, California PART 2. SECONDARY PROPERTIES 215 N. Pioneer Avenue Woodland, California 95776 2500 Eastbrook Drive Brookings, South Dakota 57006 823 W. Blackhawk Street Chicago, Illinois 60622-2584 2601 East Highway 31 Corsicana, Texas 75110 201 Jandus Road Cary, Illinois 60013-2889 5201 W. 86th Street Indianapolis, Indiana 46268 14900 US Highway 71 Kansas City, Missouri 64147 97 4005 Mohave Airport Drive Kingman, Arizona 86401 2415 3rd Avenue Mankato, Minnesota 56001 1635 North 30th Street Springfield, Oregon 97477 211 Servistar Industrial Way Westfield, Massachusetts 01085 26025 First Street Westlake, Ohio 44145 1530 Gamble Place Winnipeg, Manitoba 1224 W. Van Buren Chicago, Illinois 60607 Hichory Lane Wecosville, Pennsylvania 18106 6829-B and 6829-C Ruppsville Road Allentown, Pennsylvania 18106 Highway 74 South Peachtree City, Georgia 30269 7072 Snowdrift Road Upper Maguire Township, Pennsylvania 1523 Western Avenue Brooking City, South Dakota Northern Ohio Industrial Park 1400 Lowell Street Elyria, Ohio 44035 4350 United Parkway Schiller Park, Illinois 98 11275 East 40th Avenue Denver, Colorado 80239 Parham Street Henderson, North Carolina 3161 Raleigh Road Henderson, North Carolina 4921 West 78th Street Indianapolis, Indiana 46268 624 N.E. Jones Industrial Drive Lee's Summit, Missouri 8201 E. 23rd Street Kansas City, Missouri 8503 Highway 45 Ft. Smith, Arkansas 72916 Two TruServ Way Butler, Pennsylvania 16001 99 SCHEDULE 7.2 LIENS A. Capital Leases Capitalized Value Estimated Obligation -------------- ----------------- -------------------- Transportation Equipment Lessors of Tractors & Trailers Integra Business $1,532,000 $417,000 Met Life $10,172,000 $1,543,000 NationsBank $3,807,000 $2,121,000 Norlease Inc. $2,824,000 $354,000 Signet Lease (First Union) $786,000 $566,000 ======== ======== $19,121,000 $5,001,000 B. Liens under the "Operative Documents" referred to in the Synthetic Lease Guaranty (as defined in the Intercreditor Agreement) 100 SCHEDULE 10.2 ------------- OFFSHORE AND DOMESTIC LENDING OFFICES, ADDRESSES FOR NOTICES -------------------------------------- BANK OF AMERICA, N.A., as Agent Bank of America, N.A. Agency Management Services #33499 231 South LaSalle Street Chicago, Illinois 60697 Attention: Senior Agency Officer Telephone: (312) 828-7933 Facsimile: (312) 974-9102 BANK OF AMERICA, N.A., as a Lender Domestic and Offshore Lending Office: 231 South LaSalle Street Chicago, Illinois 60697 Notices (other than Borrowing notices and Notices of Conversion/Continuation): Bank of America, N.A. 231 South LaSalle Street Chicago, Illinois 60697 Attention: Peter Gates Telephone: (312) 828-5893 Facsimile: (312) 828-1974 BANK OF MONTREAL, - ---------------- as Co-Agent and as a Lender Domestic and Offshore Lending Office: Bank of Montreal 115 South LaSalle Street 12th Floor West 101 Chicago, Illinois 60603 Attention: Jack Kane Operations Telephone: 312-750-5900 Facsimile: 312-750-6057 BANK ONE, NA (Main Office Chicago), - ---------------------------------- as Co-Agent and as a Lender Domestic and Offshore Lending Office: Bank One, NA 1 Bank One Plaza Suite 0086 Chicago, Illinois 60670 Operations Telephone: 312-732-6137 Facsimile: 312-732-2715 PNC BANK, NATIONAL ASSOCIATION, - ------------------------------ as Co-Agent and as a Lender Domestic and Offshore Lending Office: PNC Bank, National Association One PNC Plaza 249 Fifth Avenue 2nd Floor Pittsburgh, PA 15222-2707 Operations Telephone: 412-768-9973 Facsimile: 412-768-4586 with a copy to: PNC Bank, National Association One South Wacker Drive Suite 2980 Chicago, Illinois 60606 Operations Telephone: 312-338-5625 Facsimile: 312-338-5620 WACHOVIA BANK, N.A., - ------------------- 102 as Co-Agent and as a Lender Domestic and Offshore Lending Office: Wachovia Bank, N.A. 191 Peachtree Street, N.E. 29th Floor Atlanta, Georgia 30303 Operations Telephone: 312-795-1159 Facsimile: 312-795-0693 ABN AMRO BANK N.V., - ------------------ as a Lender Domestic and Offshore Lending Office: ABN AMRO Bank N.V. 10 East 53rd Street - 37th Floor New York, New York 10022 Attention: William Teresky Operations Telephone: 212-891-0628 Facsimile: 212-891-0650 NATIONAL CONSUMER COOPERATIVE BANK, - ---------------------------------- as a Lender Domestic and Offshore Lending Office: National Consumer Cooperative Bank 1401 Eye Street, NW, Suite 700 Washington, D.C. 20005 Attention: John S. Goldthwait Operations Telephone: 1-202-336-5464 Facsimile: 1-202-354-3888 THE NORTHERN TRUST COMPANY, - -------------------------- as a Lender Domestic and Offshore Lending Office: 103 The Northern Trust Company 50 South LaSalle Street Chicago, Illinois 60675 Attention: Jim Monhart Operations Telephone: 312-444-5646 Facsimile: 312-444-5055 UMB BANK, N.A., - -------------- as a Lender Domestic and Offshore Lending Office: UMB Bank, N.A. 1010 Grand Blvd. Kansas City, Missouri 64106 Operations Telephone: 816-860-7101 Facsimile: 816-860-7143 TRUSERV CORPORATION Address for Notices: TruServ Corporation 8600 West Bryn Mawr Avenue Chicago, Illinois 60631-3505 Telephone: 773-695-5375 Facsimile: 773-695-6568 EX-4.N 3 AMENDMENT TO THE AMENDED & RESTATED PVT. SHELF AG. 1 EXHIBIT 4.N April 14, 2000 TruServ Corporation 8600 West Bryn Mawr Avenue Chicago, Illinois 60631 Attention: Chief Financial Officer Controller Ladies and Gentlemen: Reference is made to that certain Amended and Restated Note Purchase and Private Shelf Agreement dated as of November 13, 1997 (as amended from time to time, the "NOTE AGREEMENT") between TruServ Corporation, a Delaware corporation (the "COMPANY"), and The Prudential Insurance Company of America and each Prudential Affiliate which pursuant to the terms thereof becomes bound thereby ("PRUDENTIAL"). Reference is also made to that certain Note Agreement, dated as of April 13, 1992, between the Company (then known as Cotter & Company) and Prudential (the "1992 NOTE AGREEMENT"). Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Note Agreement. Pursuant to the request of the Company and in accordance with the provisions of paragraph 11C of the Note Agreement and paragraph 11C of the 1992 Note Agreement, the parties hereto agree as follows: SECTION 1. Amendment to Note Agreement. From and after the date this letter becomes effective in accordance with its terms, the Note Agreement is amended as follows: 1.1. Paragraph l0B of the Note Agreement is amended to delete the terms "BA Credit Agreements", "Debt", "Fixed Charge Coverage Ratio", "Ratio Compliance Date", "Subsidiary", "Supplemental Coupon Elimination Date", "Total Senior Debt" and "Total Senior Debt to EBITDA Ratio" presently appearing therein and to add the following defined terms thereto in appropriate alphabetical order: "APRIL 2000 MODIFICATION" shall mean that certain letter agreement, dated April 14, 2000, between the Company and the Purchasers amending this Agreement. "BENEFITED OBLIGATIONS" has the meaning given in the Intercreditor Agreement. "BENEFITED PARTIES" has the meaning given in the Intercreditor Agreement. 2 "BA" shall mean a draft drawn by the Company on, and accepted and discounted by, BofA, in its capacity as an accepting lender under the BofA Credit Agreement, or by any successor in such capacity, pursuant to the BofA Credit Agreement. "BOFA" shall mean Bank of America, N.A., a national banking association. "BA CREDIT AGREEMENTS" shall mean the Amended and Restated Credit Agreement dated as of April 14, 2000 among the Company, BofA, as agent, and the various financial institutions party thereto, as amended from time to time, and (ii) any refinancings, renewals or replacements of the credit agreement referred to in clause (i) above. "COLLATERAL AGENT" shall mean BofA in its capacity as collateral agent under the Intercreditor Agreement, together with any successor thereto in such capacity. "COLLATERAL DOCUMENTS" shall mean the Security Agreement, the Trademark Security Agreement, the Pledge Agreement, each Mortgage and any other document or instrument pursuant to which the Company or any Guarantor grants to the Collateral Agent, for the benefit of the Benefited Parties, a security interest in any of its property to secure the payment of any of the Benefited Obligations. "DEBT" shall mean Short Term Debt and Funded Debt. "EFFECTIVE DATE" shall have the meaning given in the April 2000 Modification. "FINANCING AGREEMENTS" shall have the meaning given in the Intercreditor Agreement. "FIXED CHARGE COVERAGE RATIO" shall mean, as of the last day of any fiscal quarter, the ratio of: (a) the sum, for the period of four consecutive fiscal quarters ending on such day, of (i) Consolidated Net Earnings plus (ii) to the extent deducted in determining such Consolidated Net Earnings, interest expense, taxes, operating lease expense, depreciation and amortization, plus (iii) for the period of four fiscal quarters ending March 31, 2000, June 30, 2000 and September 30, 2000, Special 1999 Charges (to the extent taken in such period), plus (iv) for the period of four fiscal quarters ending March 31, 2000 and June 30, 2000, Special A/P Charges (to the extent taken in such period), to (b) the sum for such period of (i) operating lease expense and (ii) interest expense; each as determined for the Company and its Subsidiaries on a consolidated basis. 2 3 "FOREIGN SUBSIDIARY" shall mean each Subsidiary of the Company which is organized under the laws of any jurisdiction other than, and which is conducting the majority of its business outside of, the United States or any state thereof. "GUARANTOR" shall mean, on any day, each Subsidiary that has executed a counterpart of the Guaranty on or prior to that day (or is required to execute a counterpart of the Guaranty on that day). "GUARANTY" shall mean the Guaranty executed by various Subsidiaries, substantially in the form as delivered pursuant to Section 4(b)(i) of the April 2000 Modification. "INACTIVE SUBSIDIARY" means any Subsidiary which does not actively conduct business and which has less than $100,000 of assets. "INTERCREDITOR AGREEMENT" shall mean the Intercreditor Agreement dated as of April 14, 2000 among BofA, as agent under the BofA Credit Agreement, the Collateral Agent, the Purchasers and various other parties. "INVESTMENTS" shall mean any loan or advance to, or ownership, purchase or acquisition of any security (including stock) or obligations of, or any other interest in, or any capital contribution made to, any Person. "MEMBER" shall mean any Person which is a member of the Company. "MORTGAGE" shall mean a mortgage, deed of trust, leasehold mortgage or similar instrument granting the Collateral Agent a Lien on real property owned or leased by the Company or any Subsidiary. "PLEDGE AGREEMENT" shall mean the Pledge Agreement among the Company, various Subsidiaries of the Company and the Collateral Agent, substantially in the form as delivered pursuant to Section 4(b)(iv) of the April 2000 Modification. "RATIO COMPLIANCE DATE" shall mean the first date to occur after the Effective Date on which financial statements of the Company have been delivered pursuant to Section 5A showing that for each of the four most recent fiscal quarters of the Company, as reported in such financial statements, the Total Senior Debt to EBITDA Ratio has been below 3.0 to 1.0 as of the last day of each of such fiscal quarters. "RESTRICTED INVESTMENTS" shall mean any Investment prohibited by paragraph 6I. "SECURITY AGREEMENT" means the Security Agreement among the Company, various Subsidiaries and the Collateral Agent, substantially in the form as delivered pursuant to Section 4(b)(iii) of the April 2000 Modification. 3 4 "SHORT TERM DEBT" shall mean, as of any date of determination with respect to any Person, (i) all Indebtedness of such Person for borrowed money other than Funded Debt of such Person and (ii) Guarantees by such Person of Short Term Debt of Persons other than Members. "SPECIAL A/P CHARGES" means, at any time, the first $15,000,000 of accounts payable charges taken by the Company during the fiscal quarters ending March 31, 2000 and June 30, 2000. "SPECIAL 1999 CHARGES" means up to $100,000,000 of accounting adjustments taken by the Company during the 1999 fiscal year. "SUBSIDIARY" shall mean any corporation all of the stock of every class of which, except directors' qualifying shares, shall, at the time as of which any determination is being made, be owned by the Company either directly or through Subsidiaries. Notwithstanding the foregoing, for purposes of calculating the financial covenants, each of Cotter Canada Hardware and Variety Company, Inc. and TruServ Canada Cooperative Inc. will be deemed a Subsidiary of the Company if, in accordance with generally accepted accounting principles, it is consolidated in the financial statements of the Company required to be delivered pursuant to clauses (i) and (ii) of paragraph 5A hereof. "SUPPLEMENTAL COUPON ELIMINATION DATE" shall mean the first January 1st or July 1st to occur after the Ratio Compliance Date. "SUPPLEMENTAL INTEREST RATE" shall mean (a) to (but excluding) the Supplemental Coupon Elimination Date, 3.25% per annum, and (b) on and after the Supplemental Coupon Elimination Date, 2.40% per annum. "TOTAL SENIOR DEBT" means the sum of (a) all Debt of the Company and its Subsidiaries other than Subordinated Debt and (b) the principal or face amount of all outstanding "LC Obligations" under and as defined in the Intercreditor Agreement. "TOTAL SENIOR DEBT TO EBITDA RATIO" shall mean, as of the last day of any fiscal quarter, the ratio of (a) the remainder of (i) the daily average of the amount of Total Senior Debt outstanding during the last fiscal month of such fiscal quarter minus (ii) the daily average of cash and marketable securities during the last fiscal month of such fiscal quarter to (b) the sum of (i) EBITDA for the period of four consecutive fiscal quarters then ending, plus (ii) for the period of four fiscal quarters ending March 31, 2000, June 30, 2000 and September 30, 2000, Special 1999 Charges (to the extent taken in such period), plus (iii) for the period of four fiscal quarters ending March 31, 2000 and June 30, 2000, Special A/P Charges (to the extent taken in such period). 4 5 "TRADEMARK SECURITY AGREEMENT" shall mean the Trademark Security Agreement between the Company and the Collateral Agent, substantially in the form as delivered pursuant to Section 4(b)(vi) of the April 2000 Modification. 1.2 The paragraph at the end of paragraph 1 of the Note Agreement is amended in its entirety to read as follows: The Company shall pay to each holder of Notes supplemental interest on the unpaid balance of the aggregate principal amount of the Notes held by it at the rate equal to the Supplemental Interest Rate. Such supplemental interest shall be computed on the basis of a 360 day year of twelve 30 day months and shall be payable on the interest payment due dates for the applicable Notes to which such supplemental interest relates, commencing with the first such interest payment due date on or after the Effective Date. To the extent permitted by law, any overdue payment of principal on any Note, interest on any Note and supplemental interest shall bear interest (payable on demand) at a rate per annum from time to time equal to the greater of (i) the sum of (x) 2%, plus (y) the Supplemental Interest Rate as from time to time in effect, plus (z) the interest rate per annum which such Note bears other than during the period in which an Event of Default is in existence or (ii) 2% over the rate of interest publicly announced by Morgan Guaranty Trust Company of New York from time to time as its "base" or "prime" rate. For the avoidance of doubt, all references in this Agreement to interest shall be deemed to include the supplemental interest payable pursuant to this paragraph (including, without limitation, the references to interest in paragraphs 4, 7A(ii), and 10A). The Company further agrees that, during any period that an Event of Default shall be in effect, to the extent permitted by law the entire outstanding principal amount of each Note shall bear interest at a rate per annum which is equal to the sum of (x) 2%, plus (y) the Supplemental Interest Rate as from time to time in effect, plus (z) the interest rate per annum which such Note would otherwise bear. The Purchasers acknowledge that the forgoing provisions added to the Note Agreement by this Section 1.1 replace and are in lieu of the requirement to pay supplemental interest at the rate of .50% per annum previously added to the Note Agreement by amendment. 1.3 Paragraph 5A of the Note Agreement is amended by (a) deleting the word "and" immediately after clause 5A(vi), (b) renumbering clause (vii) as clause (ix), and (c) inserting the following new clauses (vii) and (viii): (vii) as soon as practicable and in any event within 45 days after the end of each month in each fiscal year, consolidated statements of operations, capital stock and retained earnings and cash flows of the Company and its Subsidiaries for such month, and a consolidated balance sheet of the Company and its Subsidiaries as of the end of such month, all in reasonable detail and satisfactory in form to the Required Holder(s) and certified by an authorized financial officer of the Company, subject to change resulting from year-end adjustments; 5 6 (viii) simultaneously with sending the same to the agent or any lender under the BofA Credit Agreement, a copy of any notice, report or other written information delivered to the agent or any lender under the BofA Credit Agreement; and 1.4 Paragraph 5 of the Note Agreement is amended by adding the following new paragraphs 5G, 5H, 5I and 5J thereto: 5G. COLLATERAL/ACCOUNTING SYSTEMS EXAMINATION. The Company covenants that it will (a) cooperate with the holders of the Notes and their respective representatives in commencing a collateral and accounting systems examination within 60 days following the Effective Date and completing such examination as promptly as practicable thereafter and (b) pay all reasonable costs and expenses in connection with such examination. 5H. REAL ESTATE DOCUMENTS. (a)(i)The Company shall, and shall cause each applicable Guarantor to, promptly (and, in any event, no later than April 26, 2000) execute and deliver a Mortgage providing for a fully perfected Lien, in favor of the Collateral Agent, in all right, title and interest of the Company or such Guarantor in each parcel of real property listed on Part 1 of Schedule 6.16 to the BA Credit Agreement (as in effect on the Effective Date) (each a "PRIMARY PROPERTY"). (ii) The Company shall, and shall cause each applicable Guarantor to, promptly (and in any event, no later than May 10, 2000) execute and deliver a Mortgage providing for a fully perfected Lien, in favor of the Collateral Agent, in all right, title and interest of the Company or such Guarantor in each parcel of real property listed on Part 2 of Schedule 6.16 to the BA Credit Agreement, as in effect on the Effective Date (each a "SECONDARY PROPERTY"; the Primary Properties and the Secondary Properties are collectively referred to as the "PROPERTIES"). (b) The Company shall, and shall cause each Guarantor to, promptly (and, in any event, no later than May 15, 2000 for each Primary Property and May 31, 2000 for each Secondary Property) provide the following documents in connection with each Mortgage referred to above: (i) an ALTA Loan Title Insurance Policy, issued by an insurer acceptable to the Required Holder(s), insuring the Collateral Agent's Lien on the Property subject to such Mortgage and containing such endorsements as the Collateral Agent may reasonably require (it being understood that the amount of coverage, exceptions to coverage and status of title set forth in such policy shall be acceptable to the Required Holder(s)); (ii) copies of all documents of record concerning such Property as shown on the commitment for the ALTA Loan Title Insurance Policy referred to above; 6 7 (iii) original or certified copies of all insurance policies required to be maintained with respect to such Property by this Agreement or the applicable Mortgage; and (iv) a flood insurance policy covering such Property, reasonably satisfactory to the Required Holder(s), if required by the Flood Disaster Protection Act of 1973. Additionally, in the case of any real property leased by the Company or any Guarantor, the Company shall use its best efforts to, or shall cause such Guarantor to use its best efforts to, provide a consent, in form and substance satisfactory to the Required Holder(s), from the owner and each mortgagee of such property (a) consenting to the Mortgage in favor of the Collateral Agent with respect to such property and (b) waiving any landlord's Lien in respect of personal property kept at the premises subject to such lease. 5I. FURTHER ASSURANCES. The Company shall (a) cause all Subsidiaries to guarantee the obligations of the Company hereunder pursuant to the Guaranty (and in furtherance of the foregoing, immediately upon the creation or acquisition of any Subsidiary, cause such Subsidiary to execute and deliver a counterpart of the Guaranty, together with such other documents, including resolutions and opinions of counsel, as the holder of a Note may reasonably request), provided neither TruServ Specialty Company, LLC nor any Inactive Subsidiary or Foreign Subsidiary (other than Cotter Canada Hardware and Variety Company, Inc.) shall have an obligation to execute a counterpart of the Guaranty; and (b) take, and cause each of Guarantors to take, such actions as are necessary or as the Required Holder(s) may reasonably request from time to time (including the execution and delivery of security agreements, pledge agreements, financing statements, mortgages, deeds of trust and other documents, the filing or recording of any of the foregoing, the delivery of stock certificates and other collateral with respect to which perfection is obtained solely by possession, the notation of the Collateral Agent's Liens on certificates of title for vehicles and the delivery of opinions of counsel) to ensure that the obligations of the Company and each Guarantor hereunder and under the Guaranty, as applicable, are secured by perfected security interests in substantially all of the personal property of each such entity, and provided further that neither the Company nor any Guarantor shall be required to pledge more than 65% of the stock of any Foreign Subsidiary (other than Cotter Canada Hardware and Variety Company Inc.). 5J. WAIVER OF NEGATIVE PLEDGE. The Company will, not later than June 30, 2000, cause The Industrial Development Authority of the State of New Hampshire (the "IDA") to waive the negative pledge set forth in Section 8.1 of the Loan Agreement dated as of October 1, 1982 between the IDA and the Company (then known as Cotter&Company) to permit a Lien in favor of the Collateral Agent on the Project (as defined in the Loan Agreement referred to above). 7 8 1.5 Paragraph 6B(1) of the Note Agreement is amended by renumbering clause (x) thereof as clause (xi) and adding new clause (x) thereto, to read as follows: (x) Liens in favor of the Collateral Agent, provided that the Intercreditor Agreement shall be in full force and effect; 1.6 Paragraph 6B(2) of the Note Agreement is amended in its entirety to read as follows: 6B(2). DEBT. The Company will not and will not permit any Subsidiary to create, incur, assume or suffer to exist any Debt, except: (a) Senior Funded Debt, (b) Subordinated Debt, (c) Debt under the Guaranty, and (d) Short Term Debt of the Company; provided that the ratio of (x) the sum of (i) the aggregate amount (without duplication) of all Senior Funded Debt plus (ii) an amount equal to (A) the remainder of the lowest daily average amount of Short Term Debt outstanding for any period of 30 consecutive days during the 12-month period ending on the most recently completed month minus (B) the daily average of cash and marketable securities for such 30-day period to (y) the sum of (i) Consolidated Capitalization plus (ii) Special 1999 Charges plus (iii) Special A/P Charges plus (iv) the amount determined pursuant to clause (x)(ii) above shall not at any time exceed the ratio set forth below during any period set forth below: Specified Period Ending Percentage ------------- ---------- Through 12/31/01 60% Thereafter 55% For purposes of this paragraph 6B(2), Debt represented by the loans under the BofA Credit Agreement or arising under the BAs shall be considered Short Term Debt. Without limiting the foregoing provisions of this paragraph, the Company will not permit the aggregate principal amount of all Debt of the Company and its Subsidiaries (other than (i) Debt under the BofA Credit Agreement and under the other Loan Documents (as defined in the BofA credit Agreement), (ii) Debt referred to on Schedule 6B(2) which was outstanding on March 31, 2000 and (iii) Subordinated Debt owed to Members) to exceed $35,000,000 at any time prior to the Supplemental Coupon Elimination Date. 8 9 1.7 Paragraph 6B(4)(i) of the Note Agreement is amended by deleting clause (z) therefrom. 1.8 Paragraph 6C of the Note Agreement is amended in its entirety to read as follows: 6C. RATIO OF ASSET BASE TO DEBT. The Company will not permit the ratio of (a) the Asset Base as of the last day of any fiscal month to (b) the remainder of (i) the daily average of the amount of Total Senior Debt outstanding during the fiscal month ending on such date minus (ii) the daily average of cash and marketable securities during the fiscal month ending on such date to be equal to or less than the applicable ratio set forth below: Fiscal Month(s) Ending Ratio ---------------------- ----- 04/3/99 through 05/29/99 1.10 to 1 07/3/99 through 10/2/99 1.15 to I 10/30/99 through 12/31/99 1.20 to 1 01/29/00 1.10 to 1 2/26/00 through 12/31/00 1.20 to 1 01/27/01 1.10 to 1 2/24/01 through 12/31/01 1.20 to 1 01/26/02 1.10 to 1 2/23/02 and thereafter 1.20 to 1 1.9 Paragraph 6H of the Note Agreement is amended in its entirety to read as follows: 6H. FIXED CHARGE COVERAGE RATIO. The Company shall not permit the Fixed Charge Coverage Ratio as of the end of any fiscal quarter to be less than the applicable ratio set forth below: Fiscal Quarter(s) Ending Ratio ------------------------ ----- 3/31/00 through 6/30/00 1.20 to 1.00 9/30/00 1.40 to 1.00 12/31/00 through 12/31/01 1.75 to 1.00 3/31/02 and thereafter 1.85 to 1.00. 1.10 Paragraph 6 of the Note Agreement is amended to add the following new paragraphs 6I, 6J, 6K, 6L and 6M: 6I. RESTRICTED INVESTMENTS. The Company will not and will not permit any Subsidiary to make any Investment except the Company and any Subsidiary may: (i) make or permit to remain outstanding loans or advances to any Subsidiary other than an Inactive Subsidiary, 9 10 (ii) after the Supplemental Coupon Elimination Date, own, purchase or acquire stock, obligations or securities of a Subsidiary or of a corporation which immediately after such purchase or acquisition will be a Subsidiary, (iii) acquire and own stock, obligations or securities received in settlement of debts (created in the ordinary course of business) owing to the Company or any Subsidiary, (iv) own, purchase or acquire prime commercial paper, banker's acceptances and certificates of deposit in United States and Canadian commercial banks (having combined capital and surplus of not less than U.S. $100,000,000) and repurchase agreements with respect to the foregoing, in each case due within one year from the date of purchase and payable in the United States in United States dollars, obligations of the government of the United States or any agency thereof, and obligations guaranteed by the government of the United States, (v) make or permit to remain outstanding travel and other similar advances to officers and employees in the ordinary course of business, (vi) permit to remain outstanding Investments existing on the Effective Date and described on Schedule 6I, (vii) maintain deposit accounts with financial institutions in the ordinary course of business; provided that the amount maintained in deposit accounts with financial institutions other than the lenders under the BofA Credit Agreement shall not exceed (x) in the case of any one such account, $200,000 for more than three consecutive Business Days; and (y) in the case of all such accounts in the aggregate, $600,000 for more than two consecutive Business Days, and (viii) to the extent applicable, make Investments permitted under paragraph 6J below. Notwithstanding the foregoing, the Company will not permit the aggregate amount of Investments in TruServ Specialty Company, LLC to exceed $1,500,000 at any time. 6J. RESTRICTED PAYMENTS. The Company will not and will not permit any Subsidiary to pay or declare cash dividends, cash patronage dividends or dividends on any class of its stock (other than dividends in kind) or redeem, purchase or otherwise acquire, or make any redemptions, purchase, or other acquisition of any of its stock or apply miscellaneous deductions in lieu of patronage dividends, or make or permit any Subsidiary to make any Restricted Investment (each a "Restricted Payment") except, if Consolidated Net Earnings for any fiscal year are positive, to the extent that the aggregate amount of all such Restricted Payments made in such fiscal year does not exceed 40% of Consolidated Net Earnings for such fiscal year. Notwithstanding the foregoing, the Company will not and will not permit any Subsidiary to make or pay any Restricted payment (a) prior to 10 11 January 1, 2001, or (b) if at the time such Restricted Payment is made or paid, or after giving effect thereto, a Default or an Event of Default would exist. 6K. AMENDMENTS TO FINANCING AGREEMENTS OR SUBORDINATED DEBT; NO OPTIONAL PREPAYMENTS. The Company covenants that, without the consent of the Required Holder(s), it will not amend, modify, supplement or restate any Financing Agreement. The Company will not, and will not permit any Subsidiary to, (a) amend, alter or otherwise change any provision of any of the notes evidencing any Subordinated Debt now or hereafter issued by the Company or take any other action (or refrain from taking an action) which would have the effect of eliminating or altering in any way the effect of the subordination language appearing in such notes or any agreement relating thereto or the rights of the holders of the Notes arising as a result thereof or (b) make any optional or voluntary prepayment, in whole or in part, of any Subordinated Debt. The Company will not, and will not permit any Subsidiary to, make any optional or voluntary prepayment, in whole or in part, of any Benefited Obligations, other than (i) optional or voluntary prepayments, in whole or in part, of loans under the BA Credit Agreements that do not trigger a reduction in any commitments of the lenders thereunder and (ii) optional or voluntary prepayments, in whole or in part, of the Shelf Obligations (as defined in the Intercreditor Agreement) pursuant to the terms hereof. 6L. MINIMUM EBITDA. The Company will not permit the sum of (i) EBITDA as of the end of any four consecutive fiscal quarters, plus (ii) for the period of four fiscal quarters ending March 31, 2000, June 30, 2000 and September 30, 2000, Special 1999 Charges (to the extent taken during such period), plus (iii) for the period of four fiscal quarters ending March 31, 2000 and June 30, 2000, Special A/P Charges (to the extent taken during such period), to be less than $85,000,000. 6M. INACTIVE SUBSIDIARIES. The Company will not at any time permit its Inactive Subsidiaries, taken as a whole, to have more than $200,000 of assets (based on fair market value) or to generate more than $5,000 of revenues in any fiscal quarter. 1.11 Paragraph 7A of the Note Agreement is amended by adding the following new clauses (xiv), (xv), (xvi), (xvii) and (xviii) thereto, to read as follows: (xiv) an Event of Default exists under and as defined in the Intercreditor Agreement; or (xv) the Guaranty shall cease to be in full force and effect with respect to any Guarantor (other than as a result of a transaction permitted hereunder), any Guarantor shall fail (subject to any applicable grace period) to comply with or to perform any applicable provision of the Guaranty, or any Guarantor (or any Person by, through or on behalf of such Guarantor) shall contest in any manner the validity, binding nature or enforceability of the Guaranty with respect to such Guarantor; or 11 12 (xvi) any Collateral Document shall cease to be in full force and effect with respect to the Company or any Guarantor (other than as a result of a transaction permitted hereunder), the Company or any Guarantor shall fail (subject to any applicable grace period) to comply with or to perform any applicable provision of any Collateral Document to which such entity is a party, or the Company or any Guarantor (or any Person by, through or on behalf of the Company or such Guarantor) shall contest in any manner the validity, binding nature or enforceability of any Collateral Document; or (xvii) the lenders under the BA Credit Agreement shall at any time refuse to make revolving loans available to the Company thereunder when requested by the Company; or (xviii) the Company shall, on any date, not have in effect a BA Credit Agreement providing for a revolving loan facility to the Company in the amount of at least $250,000,000 for a period expiring at least 6 months after such date; SECTION 2. From and after the date this letter becomes effective in accordance with its terms, the 1992 Note Agreement is amended as follows: 2.1 Paragraphs 5, 6 and clauses (i) through (xiii) of paragraph 7A of the 1992 Note Agreement are amended in their entirety to read as set forth in paragraphs 5, 6 and clauses (i) through (xviii) of paragraph 7A, respectively, of the Note Agreement, as amended by Section 1 hereof. 2.2 Each of the definitions in paragraph 10B of the 1992 Note Agreement which is used in paragraphs 1, 5, 6 or clauses (i) through (xviii) of paragraph 7A of the 1992 Note Agreement, as amended by Section 2.1 hereof, other than the definition of the term "Notes", which shall remain unchanged, is amended to read as set forth in paragraph 10B of the Note Agreement, as amended by Section 1 hereof. 2.3 Paragraph 1 of the 1992 Note Agreement is amended to add at the end thereof the following paragraph: The Company shall pay to each holder of Notes supplemental interest on the unpaid balance of the aggregate principal amount of the Notes held by it at the rate equal to the Supplemental Interest Rate. Such supplemental interest shall be computed on the basis of a 360 day year of twelve 30 day months and shall be payable on the interest payment due dates for the applicable Notes to which such supplemental interest relates, commencing with the first such interest payment due date on or after the Effective Date. To the extent permitted by law, any overdue payment of principal on any Note, interest on any Note and supplemental interest shall bear interest (payable on demand) at a rate per annum from time to time equal to the greater of (i) the sum of (x) 2%, plus (y) the Supplemental Interest Rate as from time to time in effect, plus (z) the interest rate per annum which the such Note bears other than during the period in which an Event of Default is in existence or (ii) 2% over the rate of interest publicly announced by Morgan 12 13 Guaranty Trust Company of New York from time to time as its "base" or "prime" rate. For the avoidance of doubt, all references in this Agreement to interest shall be deemed to include the supplemental interest payable pursuant to this paragraph (including, without limitation, the references to interest in paragraphs 4, 7A(ii), and 10A). The Company further agrees that, during any period that an Event of Default shall be in effect, to the extent permitted by law the entire outstanding principal amount of each Note shall bear interest at a rate per annum which is equal to the sum of (x) 2%, plus (y) the Supplemental Interest Rate as from time to time in effect, plus (z) the interest rate per annum which such Note would otherwise bear. The Purchasers acknowledge that the foregoing provisions added to the 1992 Note Agreement by this Section 2.3 replace and are in lieu of the requirement to pay supplemental interest at the rate of .50% per annum previously added to the 1992 Note Agreement by amendment. SECTION 3. Representations and Warranties. The Company represents and warrants to each of the undersigned that, after giving effect hereto (a) each representation and warranty set forth in paragraph 8 of the Note Agreement is true and correct as of the date of the execution and delivery of this letter by the Company with the same effect as if made on such date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they were true and correct as of such earlier date) and (b) except for the Specified Defaults (as defined below), no Event of Default or Default exists. SECTION 4. Effectiveness.. The amendments described in Section 1 above shall become effective on the date when (the "EFFECTIVE DATE") each Purchaser has received: (a) the fees referred to in Section 5 below and all costs and expenses of such Purchaser (including reasonable fees and disbursements of special counsel to the Purchasers) in connection with this letter; (b) the following documents, each (including, with limitation, those referred to in clause (vii) below) in a form and substance satisfactory to the Purchasers: (i) counterparts of this letter agreement executed by the Company and the Purchasers; (ii) the Guaranty, signed by each Guarantor; (iii) The Security Agreement signed by the Company and each Guarantor, together with evidence, satisfactory to the Purchasers, that the Company and each Guarantor have delivered to the Collateral Agent all financing statements and other documents necessary to perfect the Collateral Agent's Lien on all collateral granted under the Security Agreement; (iv) the Pledge Agreement, executed by the Company and each Guarantor that as of the Effective Date has one or more Subsidiaries, together with 13 14 all stock certificates, stock powers and other items required to be delivered in connection therewith; (v) the Intercreditor Agreement, signed by the parties thereto and consented to by the Company and the Guarantors; (vi) the Trademark Security Agreement, signed by the Company; (vii) evidence that each of the "Operative Documents" as defined in the Synthetic Lease Guaranty, the Private Placement Agreement (each as defined in the Intercreditor Agreement) and the Amended and Restated Credit Agreement, dated as of July 1, 1997, among the Company, various financial institutions, and BofA, as agent, has been amended to conform in all material respects with the representations, warranties, covenants and defaults contained in this Agreement; and (viii) an opinion of counsel to the Company and the Guarantors in form and substance reasonably acceptable to the Purchasers; (c) All corporate and other proceedings in connection with the transactions contemplated by this letter agreement shall be satisfactory to the Purchasers and their counsel, and the Purchasers shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request. SECTION 5. Fees. In consideration of the Purchasers entering into this letter agreement, the Company agrees to pay, on or before the Effective Date, ratably to Prudential and the Prudential Affiliates who are holders of notes issued by the Company, an aggregate fee of $920,000. SECTION 6. Reference to and Effect on Note Agreements. Upon the effectiveness of this letter, each reference to the Note Agreement or the 1992 Note Agreement in any other document, instrument or agreement shall mean and be a reference to the Note Agreement or the 1992 Note Agreement, as the case may be, as modified by this letter. Except as specifically set forth in Section 1 or 2 hereof, each of the Note Agreement and the 1992 Note Agreement shall remain in full force and effect and is hereby ratified and confirmed in all respects. SECTION 7. Waiver. Effective on the Effective Date, the Purchasers hereby waive any Default or Event of Default under paragraph 7A(v) of the Note Agreement or the 1992 Note Agreement resulting solely from a failure to comply with paragraph 6B(2) and 6H of the Note Agreement for the periods ended December 31, 1999 and March 31, 2000, with paragraph 6C of the Note Agreement for the periods ended December 31, 1999, January 31, 2000, February 29, 2000 and March 31, 2000, or with paragraphs 6A(ii), 6A(iii) and 6B(2) of the 1992 Note Agreement for the periods ended December 31, 1999 and March 31, 2000 (collectively, the "Specified Defaults"). Except as specifically set forth in the preceding sentence, nothing contained in the letter shall be construed as a waiver of or consent to any other violation of the 14 15 Note Agreement or the 1992 Note Agreement or any other Default or Event of Default under the Note Agreement or the 1992 Note Agreement. SECTION 8. Governing Law. THIS LETTER SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS OF SUCH STATE WHICH WOULD OTHERWISE CAUSE THIS LETTER TO BE CONSTRUED OR ENFORCED OTHER THAN IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 15 16 SECTION 9. Counterparts; Section Titles. This letter may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. The section titles contained in this letter are and shall be without substance, meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. Very truly yours, THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: ---------------------------------------------- Vice President PRUCO LIFE INSURANCE COMPANY By: ---------------------------------------------- Vice President U.S. PRIVATE PLACEMENT FUND By: Prudential Private Placement Investors, L.P., Investment Advisor By: Prudential Private Placement Investors, Inc., its General Partner By: -------------------------------------- Vice President AGREED AND ACCEPTED: TRUSERV CORPORATION By: ----------------------- Title: By: ----------------------- Title: 16 17 Schedule 6B(2) Debt Shelf Agreement (as defined in the Intercreditor Agreement) Senior Note Agreements (as defined in the Intercreditor Agreement) "Operative Documents" referred to in the Synthetic Lease Guaranty (as defined in the Intercreditor Agreement) 17 18 Schedule 6I Investments None 18 EX-4.Q 4 AMENDED & RESTATEMENT TO CREDIT AGREEMENT 1 EXHIBIT 4-Q TRUSERV CORPORATION $105,000,000 AMENDED AND RESTATED SENIOR SECURED NOTES DUE 2008 ---------- AMENDED AND RESTATED NOTE PURCHASE AGREEMENT DATED AS OF APRIL 14, 2000 ---------- 2 TRUSERV CORPORATION 8600 West Bryn Mawr Avenue Chicago, Illinois 60631 April 14, 2000 To Each of the Purchasers Listed in the Attached Schedule 1 (each, a "PURCHASER") Ladies and Gentlemen: Re: AMENDED AND RESTATED NOTE PURCHASE AGREEMENT (the "AGREEMENT") The undersigned, TruServ Corporation, a Delaware corporation formerly known as Cotter & Company (herein called the "COMPANY"), hereby agrees and acknowledges that: A. The Company and you are parties to the Note Purchase Agreement dated as of September 10, 1998 as amended by Amendment No. 1 to Note Purchase Agreements dated as of April 1, 1999 (the "ORIGINAL NPA"). B. Pursuant to the Original NPA, the Company issued and sold to you $105,000,000 aggregate principal amount of its 6.85% Senior Notes due 2008 (the "ORIGINAL NOTES"). C. You and the Company desire to amend the Original NPA and to restate the Original NPA in full as hereinafter set forth. D. In addition, you and the Company desire to amend the Original Notes and to restate the Original Notes in full as hereinafter set forth. In consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company hereby agrees with you as set forth below. Reference is made to paragraph 10 hereof for definitions of capitalized terms used herein and not otherwise defined herein; references to a "paragraph," a "Schedule" or an "Exhibit" are, unless otherwise specified, to a paragraph of this Agreement or to a Schedule or an Exhibit attached to this Agreement. 3 DESCRIPTION OF NOTES. 1A. DESCRIPTION OF NOTES. As of the Effective Date, the Original Notes are hereby amended and restated in accordance with the terms of this Agreement (such Original Notes, as so amended and restated, the "NOTES," such term to include any such notes issued in substitution therefor pursuant to paragraph 11 of this Agreement or the Other Agreements). As a result, each of the Notes shall (i) be dated as of the Effective Date, (ii) bear interest from (and including) the Original Issuance Date to (but excluding) the date of repayment in full of all amounts due thereunder, at a rate per annum equal to (x) for each day during the period from (and including) the Original Issuance Date to (but excluding) April 1, 1999, 6.85% (y) for each day during the period from (and including) April 1, 1999 to (but excluding) January 1, 2000, 7.35%, and (z) for each day during the period from (and including) January 1, 2000 to (but excluding) the date of repayment in full of all amounts due thereunder, the Applicable Interest Rate; (iii) bear interest on overdue principal (whether by acceleration or otherwise and including any overdue prepayment of principal), Make-Whole Amount (as defined in paragraph 4F), premium, if any, and installments of interest at the Overdue Rate until paid; and (iv) be substantially in the form attached hereto as Exhibit A. Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30 day months. In this paragraph 1A, the following terms have the following meanings: "APPLICABLE INTEREST RATE" shall mean, for each day during each Relevant Period, (a) 10.10%, if (i) the long-term unsecured debt of the Company is not rated by Standard & Poor's Rating Services, a Division of The McGraw-Hill Companies, Inc. ("S&P"), on the first day of such Relevant Period, or (ii) the long-term unsecured debt of the Company is rated lower than BBB by S&P on the first day of such Relevant Period; (b) 9.25%, if the long-term unsecured debt of the Company is rated BBB or higher by S&P on the first day of such Relevant Period; provided, however, that the Applicable Interest Rate shall mean, for each day during any Relevant Period in which an Event of Default shall have occurred or be continuing, the Overdue Rate for such day. "RELEVANT PERIOD" shall mean (i) each six-month period from (and including) January 1 of each year to (but excluding) July 1 of such year and (ii) each six-month period from (and including) July 1 of each year to (but excluding) January 1 of the immediately succeeding year. 1B. ORIGINAL ISSUANCE DATE; REPLACEMENT OF NOTES; AMENDMENT FEE. (a) The Company issued and sold to each Purchaser listed in the attached Schedule 1, and each Purchaser purchased from the Company, the principal amount of Original Notes set forth beside such Purchaser's name on Schedule 1 at a price of 100% of the principal amount thereof (the "PURCHASE PRICE"), on September 10, 1998 (the "ORIGINAL ISSUANCE DATE"). The aggregate principal amount of Original Notes issued and sold on the Original Issuance Date by the Company was $105,000,000. 2 4 (b) On the Effective Date, each Purchaser will surrender all Original Notes held by it to the Company and the Company will deliver in exchange therefor, without expense to such Purchaser, Notes in the same aggregate principal amount as the then aggregate unpaid principal amount of the Original Notes so surrendered, in such denominations of U.S. $100,000 or any amount in excess thereof, and registered in such names, as such Purchaser shall have specified. (c) On the Effective Date, the Company shall pay to each Purchaser an amendment fee in an amount equal to 0.50% of the aggregate principal amount of the Original Notes that are being exchanged by such Purchaser pursuant to this paragraph 1B (the "AMENDMENT FEE"). 2. OTHER AGREEMENTS; OTHER NOTES. Contemporaneously with entering into this Agreement, the Company is entering into separate Amended and Restated Note Purchase Agreements (the "OTHER AGREEMENTS") identical with this Agreement with each of the other purchasers listed in Schedule 1 (the "OTHER PURCHASERS"), providing for the amendment and restatement of their Original NPAs and of their Original Notes and for the exchange of the Original Notes held by each of such Other Purchasers for Notes in the principal amount specified opposite such Other Purchaser's name in Schedule 1. Your obligation hereunder and the obligations of the Other Purchasers under the Other Agreements are several and not joint obligations and you shall have no obligation under any Other Agreement and no liability to any Person for the performance or non-performance by any Other Purchaser thereunder. 3. EFFECTIVENESS. This Agreement shall become effective on the date on which the following conditions have been fulfilled to your satisfaction (the "EFFECTIVE DATE"): 3A. CERTAIN DOCUMENTS. You shall have received the following, each dated the date of the Effective Date: (i) The Notes to be issued to you pursuant to paragraph 1B. (ii) This Agreement executed by the Company. (iii) Certified copies of the resolutions of the Board of Directors of the Company and each Guarantor authorizing the execution and delivery of this Agreement, the Notes, the Intercreditor Agreement, the Guaranty and all other Note Documents to be delivered by it hereunder, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement, the Notes, the Intercreditor Agreement, the Guaranty and all other Note Documents to be delivered by it hereunder. (iv) A certificate of the Secretary or an Assistant Secretary of the Company and each Guarantor, dated the Effective Date, certifying the names and true signatures of the officers of the Company and each Guarantor authorized to 3 5 sign this Agreement, the Notes, the Intercreditor Agreement, the Guaranty and all other Note Documents to be delivered by it hereunder and certifying as to the resolutions attached to such certificate and other corporate proceedings relating to the authorization, execution and delivery of this Agreement, the Notes, the Intercreditor Agreement, the Guaranty and all other Note Documents to be delivered by it hereunder. (v) A certificate of an officer of the Company, dated the date of the Effective Date, certifying that the conditions specified in paragraphs 3B and 3F have been fulfilled. (vi) Copies of the Certificate of Incorporation and By-laws (or other organizational documents) of the Company and each Guarantor certified by the Secretary or an Assistant Secretary of the Company and each Guarantor, as applicable. (vii) A favorable opinion of Michael Best & Friedrich LLC counsel to the Company and the Guarantors satisfactory to you and substantially in the form of Exhibit B attached hereto, and as to such other matters as you may reasonably request. The Company hereby directs such counsel to deliver such opinions, agrees that the issuance of any Notes will constitute a reconfirmation of such directions, and understands and agrees that you upon receipt of such opinions will and hereby are authorized to rely on such opinions. (viii) Good standing certificates for (a) the Company from the Secretaries of State of Delaware and Illinois, and (b) each Guarantor from the Secretary of State (or similar applicable Governmental Authority) of its State of incorporation, each dated of a recent date, and such other evidence of the status of the Company or any Guarantor as you may reasonably request. (ix) Evidence of payment by the Company of all accrued and unpaid fees, costs and reasonable expenses to the extent then due and payable on the Effective Date, together with Attorney Costs of each Purchaser to the extent invoiced prior to or on the Effective Date, plus such additional amounts of Attorney Costs as shall constitute each Purchaser's reasonable estimate of Attorney Costs incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude final settling of accounts between the Company and such Purchaser), including any such costs, fees and reasonable expenses arising under or referenced in paragraph 13. (x) Evidence of payment by the Company of the Amendment Fee referred to in paragraph 1B. (xi) The Guaranty, signed by each Guarantor. (xii) The Security Agreement signed by the Company and each Guarantor, together with evidence, satisfactory to the Collateral Agent and the holders of the Notes, that the Company and each Guarantor have delivered to the 4 6 Collateral Agent all financing statements and other documents necessary to perfect the Collateral Agent's Lien on all collateral granted under the Security Agreement. (xiii) The Pledge Agreement, executed by the Company and each Guarantor that as of the Effective Date has one or more Subsidiaries, together with all stock certificates, stock powers and other items required to be delivered in connection therewith. (xiv) The Intercreditor Agreement, signed by the parties thereto and consented to by the Company and the Guarantors. (xv) The Trademark Security Agreement, signed by the Company. (xvi) Copies of each of the BA Credit Agreement, the Prudential Agreement and each of the other Financing Agreements (as defined in the Intercreditor Agreement) certified as true and correct by the Secretary or an Assistant Secretary of the Company, together with evidence reasonably satisfactory to the holders of Notes that all conditions to the effectiveness thereof have been satisfied. (xvii) Additional documents or certificates with respect to legal matters or corporate or other proceedings related to the transactions contemplated hereby as may be reasonably requested by you. 3B. REPRESENTATIONS AND WARRANTIES; PERFORMANCE; NO DEFAULT. The representations and warranties contained in paragraph 8 shall be true when made and on the Effective Date. The Company shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or on the Effective Date and no Default or Event of Default shall have occurred and be continuing or would result from the execution and performance by the Company of this Agreement and all the other Note Documents. Neither the Company nor any Subsidiary nor any Guarantor shall have entered into any transaction since the date of the Memorandum that would have been prohibited by paragraph 6 had such paragraph applied since such date. Since December 31, 1999, no event or circumstance has occurred that has resulted or could reasonably be expected to result in a Material Adverse Effect. 3C. PURCHASE PERMITTED BY APPLICABLE LAWS. The execution and delivery of this Agreement and all other Note Documents shall (i) be permitted by the laws and regulations of each jurisdiction to which you are subject, without recourse to provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (ii) not violate any applicable law or regulation (including, without limitation, Section 5 of the Securities Act or Regulation T, U or X of the Board of Governors of the Federal Reserve System) and (iii) not subject you to any tax, penalty, liability or other onerous condition under or pursuant to any applicable law or regulation, and you shall have received such certificates or other evidence as you may request to establish compliance with this condition. 5 7 3D. OTHER PURCHASERS. The Other Purchasers shall have executed the Other Agreements referred to in paragraph 2 and shall have exchanged their Original Notes for Notes as contemplated thereby on the Effective Date. 3E. PRIVATE PLACEMENT NUMBER. A Private Placement number issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for the Notes. 3F. CHANGES IN CORPORATE STRUCTURE. The Company shall not have changed its jurisdiction of incorporation or been a party to any merger or consolidation and shall not have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 8E. 3G. PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in connection with the transactions contemplated by this Agreement and the other Note Documents and all documents and instruments incident to such transactions shall be satisfactory to you and your special counsel, and you and your special counsel shall have received all such counterpart originals or certified or other copies of such documents as you or they may reasonably request. 4. PREPAYMENTS. 4A. REQUIRED PREPAYMENTS. On July 1, 2002, the Company will prepay $10,500,000 principal amount (or such lesser principal amount as shall then be outstanding) of the Notes, and on July 1, 2003 and on each July 1 thereafter to and including July 1, 2007 the Company will prepay $15,750,000 principal amount (or such lesser principal amount as shall then be outstanding) of the Notes, each such prepayment to be at par and without payment of the Make-Whole Amount or any premium, provided that upon any partial prepayment of the Notes pursuant to paragraph 4B or purchase of the Notes permitted by paragraph 4E the principal amount of each required prepayment of the Notes becoming due under this paragraph 4A on and after the date of such prepayment or purchase shall be reduced in the same proportion as the aggregate unpaid principal amount of the Notes is reduced as a result of such prepayment or purchase. 4B. OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT. The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, the Notes, in an amount not less than 10% of the aggregate principal amount of the Notes then outstanding in the case of a partial prepayment, at 100% of the principal amount so prepaid, together with interest on such principal amount so prepaid accrued to the prepayment date plus the Make-Whole Amount determined for the prepayment date with respect to such principal amount. The Company will give each holder of Notes written notice of each optional prepayment under this paragraph 4B not less than 30 days and not more than 60 days prior to the date fixed for such prepayment. Each such notice shall specify such date, the aggregate principal amount of the Notes to be prepaid on such date, the principal amount of each Note held by such holder to be prepaid (determined in accordance with paragraph 4C), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were 6 8 the date of the prepayment), setting forth the details of such computation. Two Business Days prior to such prepayment, the Company shall deliver to each holder of Notes a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date. 4C. ALLOCATION OF PARTIAL PREPAYMENTS. In the case of each partial prepayment of the Notes, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment. 4D. MATURITY; SURRENDER, ETC. In the case of each prepayment of Notes pursuant to this paragraph 4, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and canceled and shall not be reissued, and no Note shall be reissued in lieu of any prepaid principal amount of any Note. 4E. PURCHASE OF NOTES. The Company will not and will not permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes except upon the payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes. The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provisions of this Agreement and no Notes may be issued in substitution or exchange for any such Notes. 4F. MAKE-WHOLE AMOUNT. The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings: "CALLED PRINCIPAL" means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to paragraph 4B or has become or is declared to be immediately due and payable pursuant to paragraph 7A, as the context requires. "DISCOUNTED VALUE" means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal. 7 9 "REINVESTMENT YIELD" means, with respect to the Called Principal of any Note, 0.50% over the yield to maturity implied by (i) the yields reported, as of 11:00 A.M. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on page "USD" of the Bloomberg Financial Markets Services Screen (or, if not available, any other nationally recognized trading screen reporting on-line intraday trading in United States government securities) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security with the duration closest to and greater than the Remaining Average Life and (2) the actively traded U.S. Treasury security with the duration closest to and less than the Remaining Average Life. "REMAINING AVERAGE LIFE" means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. "REMAINING SCHEDULED PAYMENTS" means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date (it being understood and agreed that the interest rate on the Notes, for purposes of this calculation, shall be the interest rate that applies to the Notes on the third Business Day immediately preceding such Settlement Date), provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to paragraph 4B or 7A. "SETTLEMENT DATE" means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to paragraph 4B or has become or is declared to be immediately due and payable pursuant to paragraph 7A, as the context requires. 8 10 5. AFFIRMATIVE COVENANTS. The Company covenants that so long as any Note is outstanding: 5A. FINANCIAL STATEMENTS. The Company covenants that it will deliver to each holder of Notes that is an Institutional Investor: (i) as soon as practicable and in any event within 60 days after the end of each quarterly period (other than the last quarterly period) in each fiscal year, consolidated statements of operations and cash flows of the Company and its Subsidiaries for the period from the beginning of the current fiscal year to the end of such quarterly period, and a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarterly period, setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year, all in reasonable detail, prepared in accordance with GAAP and satisfactory in form to the Required Holders and certified by a Senior Financial Officer of the Company, subject to changes resulting from year-end adjustments; (ii) as soon as practicable and in any event within 120 days after the end of each fiscal year, consolidated statements of operations, capital stock and retained earnings and cash flows of the Company and its Subsidiaries for such year, and a consolidated balance sheet of the Company and its Subsidiaries as at the end of such year, setting forth in each case in comparative form corresponding consolidated figures from the preceding fiscal year, all in reasonable detail and satisfactory in scope to the Required Holder(s) and, as to such consolidated statements, certified by Ernst & Young LLP (or any independent public accountants of recognized national standing) whose certificate shall be in scope and substance satisfactory to the Required Holder(s) accompanied by an additional certificate of such accountants stating that they have reviewed this Agreement and stating further whether, in making their audit, they have become aware of any condition or event that then constitutes a Default or an Event of Default, and, if they are aware that any such condition or event then exists, specifying the nature and period of the existence thereof (it being understood that such accountants shall not be liable, directly or indirectly, for any failure to obtain knowledge of any Default or Event of Default unless such accountants should have obtained knowledge thereof in making an audit in accordance with generally accepted auditing standards or did not make such an audit); (iii) as soon as practicable and in any event within 45 days after the end of each month in each fiscal year, consolidated statements of operations and cash flows of the Company and its Subsidiaries for such month, and a consolidated balance sheet of the Company and its Subsidiaries as at the end of such month, setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year, all in reasonable detail, prepared in accordance with GAAP and satisfactory in form to the Required Holders and certified by a Senior Financial Officer of the Company, subject to changes resulting from year-end adjustments; 9 11 (iv) promptly upon transmission thereof, copies of all such financial statements, proxy statements, notices and reports as it shall send to its stockholders and copies of all registration statements (without exhibits) and all reports which it files with the Securities and Exchange Commission (or any governmental body or agency succeeding to the functions of the Securities and Exchange Commission); (v) promptly, and in any event within ten days after a Responsible Officer becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto: (a) with respect to any Plan, any reportable event, as defined in section 4043(b) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof if such reportable event could reasonably be expected to have a Material Adverse Effect; or (b) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or (c) any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title 1 or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect; (vi) promptly, and in any event within 30 days of receipt thereof, copies of any notice to be Company or any Subsidiary from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; (vii) promptly, such information or documentation as any such holder of Notes may request from time to time regarding the efforts of the Company and its Subsidiaries to address the Year 2000 Problem; (viii) promptly, and in any event within five Business Days after a Responsible Officer becoming aware of any of the following, a written notice to you setting forth the nature of any of the following matters that has resulted or may reasonably be expected to result in a Material Adverse Effect: (a) any breach 10 12 or non-performance of, or any default under, a Contractual Obligation of the Company or any Subsidiary; (b) any dispute, litigation, investigation, proceeding or suspension between the Company or any Subsidiary and any Governmental Authority; or (c) the commencement of, or any material development in, any litigation or proceeding affecting the Company or any Subsidiary including pursuant to any applicable Environmental Laws; (ix) together with each delivery of financial statements required by clauses (i) and (ii) above relating to each of the periods covered by the projections attached hereto as Schedule 8E, the Company will deliver to each such holder of Notes a management's discussion and analysis (x) discussing the results of such period and (y) showing all the variances from such projections that occurred in such period and explaining in reasonable detail the reasons therefor; (x) promptly following, and in any event within five Business Days of, (x) any change in, or withdrawal of, the rating of the Company's long-term unsecured debt by S&P or (y) any material change in accounting policies or financial reporting practices by the Company or any Subsidiary, notice thereof; (xi) simultaneously with the delivery thereof under the BA Credit Agreements, copies of all information and notices required to be given by the Company pursuant to Section 6.3 thereof (or any successor provision thereto) or of any other notice, report or other written information delivered to the agent or any lender under the BA Credit Agreements; and (xii) with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Company or any of its Subsidiaries or relating to the ability of the Company to perform its obligations hereunder, under the Notes and under the other Note Documents as from time to time may be reasonably requested by any such holder of Notes. Together with each delivery of financial statements required by clauses (i) and (ii) above, the Company will deliver to each such holder an Officer's Certificate executed by a Responsible Officer demonstrating (with computations in reasonable detail) compliance by the Company and its Subsidiaries with the provisions of paragraph 6 and stating that there exists no Event of Default or Default, or, if any Event of Default or Default exists, specifying the nature and period of existence thereof and what action the Company proposes to take with respect thereto. The Company also covenants that immediately after any Responsible Officer obtains knowledge of an Event of Default or Default, and in any event within five Business Days of the date that such Responsible Officer obtains such knowledge, it will deliver to each holder of Notes an Officer's Certificate executed by a Responsible Officer specifying the nature and period of existence thereof and what action the Company proposes to take with respect thereto. 5B. INSPECTION. The Company shall, and shall cause each Subsidiary to, maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving 11 13 the assets and business of the Company and such Subsidiary. The Company shall permit the representatives of each holder of Notes that is an Institutional Investor: (i) No Default. If no Default or Event of Default then exists, at the expense of the Company and upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the Company's officers, and (with the consent of the Company, which consent will not be unreasonably withheld) its independent public accountants, and (with the consent of the Company, which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and (ii) Default. If a Default or Event of Default then exists, at the expense of the Company to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times and as often as may be requested. 5C. MAINTENANCE OF PROPERTIES. The Company will and will cause each of its Subsidiaries to maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times and shall make all repairs, replacements, additions and betterments as needed so that the efficiency of such properties shall be maintained, provided that this paragraph 5C shall not prevent the Company or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 5D. MAINTENANCE OF INSURANCE. The Company covenants that it and each Subsidiary will maintain, with financially sound and reputable insurers, insurance in such amounts and against such liabilities and hazards as are customarily maintained by companies in businesses similar to the businesses of the Company and each such Subsidiary and owning properties similar to the properties owned by the Company and each such Subsidiary; provided, however, that such insurance is commercially available; and provided further that the Company and its Subsidiaries may maintain a system of self insurance against such liabilities and hazards if such system is comparable to the self-insurance systems customarily maintained by companies in businesses similar to the Company's business and owning properties similar to the Company's properties. Together with each delivery of financial statements under clause (ii) of paragraph 5A, the Company will, upon the request of any holder of Notes that is an Institutional Investor, deliver an Officer's Certificate specifying the details of such insurance in effect. 5E. COOPERATIVE STATUS. The Company covenants that it will at all times maintain its status as a cooperative for purposes of Subchapter T of the Code; provided, 12 14 however, in the event that the Code or other applicable law is modified after the date hereof and as a result of such modification the Company is unable to satisfy its obligations under this paragraph, then the Required Holders and the Company shall agree, or in good faith negotiate to agree, to amend the covenants contained in this Agreement so that the application of such covenants (following such modification of the Code or other applicable law and the effect thereof on the Company) will be substantially the same as prior thereto. 5F. COMPLIANCE WITH LAWS. The Company covenants that it shall, and shall cause each Subsidiary to, comply with all applicable laws, rules, regulations, decrees and orders of all federal, state, local or foreign courts or governmental agencies, authorities, instrumentalities or regulatory bodies (including, without limitation, Environmental Laws) the noncompliance with which could be reasonably expected to result in a Material Adverse Effect. 5G. PAYMENT OF TAXES AND CLAIMS. The Company will and will cause each of its Subsidiaries to file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their respective properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent and all claims (including, without limitation, claims for labor, materials and supplies) for which sums have become due and payable that have or might become a Lien on properties or assets of the Company or any Subsidiary, provided that neither the Company nor any Subsidiary need pay any such tax or assessment or claims if the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or such Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary. 5H. CORPORATE EXISTENCE, ETC. The Company will at all times preserve and keep in full force and effect its corporate existence. Subject to paragraph 6A(3)(ii), the Company will at all times preserve and keep in full force and effect the corporate existence of each of its Subsidiaries (unless merged into the Company or a Subsidiary) and all rights and franchises of the Company and its Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect. Notwithstanding the provisions of this paragraph 5H, the Company may dissolve or liquidate any Inactive Subsidiary. 5I. COLLATERAL ACCOUNTING SYSTEMS EXAMINATION. The Company covenants that it will (a) cooperate with the Collateral Agent, the holders of the Notes and their respective representatives in commencing a collateral and accounting systems examination within 30 days following the Effective Date and completing such examination as promptly as practicable thereafter and (b) pay all reasonable costs and expenses in connection with such examination. 5J. REAL ESTATE DOCUMENTS. (a)(i) The Company shall, and shall cause each applicable Guarantor to, promptly (and, in any event, no later than April 26, 2000) execute and deliver a Mortgage providing for a fully perfected Lien, in favor of the Collateral Agent, in all 13 15 right, title and interest of the Company or such Guarantor in each parcel of real property listed on Part 1 of Schedule 5J (each a "PRIMARY PROPERTY"). (ii) The Company shall, and shall cause each applicable Guarantor to, promptly (and in any event, no later than May 10, 2000) execute and deliver a Mortgage providing for a fully perfected Lien, in favor of the Collateral Agent, in all right, title and interest of the Company or such Guarantor in each parcel of real property listed on Part 2 of Schedule 5J (each a "SECONDARY PROPERTY"; the Primary Properties and the Secondary Properties are collectively referred to as the "PROPERTIES"). (b) The Company shall, and shall cause each Guarantor to, promptly (and, in any event, no later than May 15, 2000 for each Primary Property and May 31, 2000 for each Secondary Property) provide the following documents in connection with each Mortgage referred to above: (i) an ALTA Loan Title Insurance Policy, issued by an insurer acceptable to the Collateral Agent, insuring the Collateral Agent's Lien on the Property subject to such Mortgage and containing such endorsements as the Collateral Agent and the Majority Holders may reasonably require (it being understood that the amount of coverage, exceptions to coverage and status of title set forth in such policy shall be acceptable to the Collateral Agent and the Majority Holders); (ii) copies of all documents of record concerning such Property as shown on the commitment for the ALTA Loan Title Insurance Policy referred to above; (iii) original or certified copies of all insurance policies required to be maintained with respect to such Property by this Agreement or the applicable Mortgage; and (iv) a flood insurance policy covering such Property, reasonably satisfactory to the Collateral Agent and the Majority Holders, if required by the Flood Disaster Protection Act of 1973. Additionally, in the case of any real property leased by the Company or any Guarantor, the Company shall use its best efforts to, or shall cause such Guarantor to use its best efforts to, provide a consent, in form and substance satisfactory to the Collateral Agent, from the owner and each mortgagee of such property (a) consenting to the Mortgage in favor of the Collateral Agent with respect to such property and (b) waiving any landlord's Lien in respect of personal property kept at the premises subject to such lease. 5K. FURTHER ASSURANCES. The Company shall (a) cause all Subsidiaries to guarantee the obligations of the Company hereunder pursuant to the Guaranty (and in furtherance of the foregoing, immediately upon the creation or acquisition of any Subsidiary, cause each Subsidiary to execute and deliver a counterpart of the Guaranty, together with such other documents, including resolutions and opinions of counsel, as the Collateral Agent or any 14 16 holder of Notes may reasonably request), provided neither TruServ Specialty Company, LLC nor any Inactive Subsidiary or Foreign Subsidiary (other than Cotter Canada Hardware and Variety Company, Inc.), shall have an obligation to execute a counterpart of the Guaranty; and (b) take, and cause each of Guarantors to take (at the expense of the Company or such Guarantor, as the case may be), such actions as are necessary or as the Collateral Agent or the Majority Holders may reasonably request from time to time (including the execution and delivery of security agreements, pledge agreements, financing statements, mortgages, deeds of trust and other documents, the filing or recording of any of the foregoing, the delivery of stock certificates and other collateral with respect to which perfection is obtained solely by possession, the notation of the Collateral Agent's Liens on certificates of title for vehicles and the delivery of opinions of counsel) to ensure that the obligations of the Company and each Guarantor hereunder, under the Guaranty and under any other Note Document, as applicable, are and continue to be secured by valid and perfected security interests in substantially all of the personal property of each such entity, and provided further that neither the Company nor any Guarantor shall be required to pledge more than 65% of the stock of any Foreign Subsidiary (other than Cotter Canada Hardware and Variety Company, Inc.). 5L. WAIVER OF NEGATIVE PLEDGE. The Company will not later than June 30, 2000 cause The Industrial Development Authority of the State of New Hampshire (the "IDA") to waive the negative pledge set forth in Section 8.1 of the Loan Agreement dated as of October 1, 1982 between the IDA and the Company (then known as Cotter & Company) to permit a Lien in favor of the Collateral Agent on the Project (as defined in the Loan Agreement referred to above). 6. NEGATIVE COVENANTS. 6A. LIEN, DEBT AND OTHER RESTRICTIONS. The Company covenants that it will not and will not permit any Subsidiary to: 6A(1) LIENS. Create, assume or suffer to exist any Lien upon any of its property or assets, whether now owned or hereafter acquired, except: (i) Liens for taxes, assessments, governmental charges or levies, statutory Liens of landlords and Liens of carriers, warehousemen, mechanics and materialmen incurred in the ordinary course of business for sums not yet due or which are being actively contested in good faith by appropriate proceedings and with respect to which the Company or the applicable Subsidiary maintains adequate reserves; (ii) Liens arising out of judgments or awards against the Company or any Subsidiary which are being actively contested in good faith by appropriate proceedings; (iii) Liens incidental to the conduct of its business or the ownership of its properties and assets (including attorneys' Liens and Liens in connection with worker's compensation, unemployment insurance and other like laws, but excluding any Lien imposed by ERISA) and Liens to secure the performance of 15 17 bids, tenders or trade contracts, or to secure statutory obligations, surety or appeal bonds or other Liens of like general nature, all of which were not incurred in connection with the borrowing of money or the obtaining of advances or credit; provided in each case, the obligation secured is not overdue, or, if overdue, is being actively contested in good faith by appropriate proceedings; (iv) minor survey exceptions or minor encumbrances, easements or reservations, or rights of others for rights-of-way, utilities and other similar purposes, or zoning or other restrictions as to the use of real property that are necessary for the conduct of the operations of the Company and its Subsidiaries or that customarily exist on properties of corporations engaged in similar businesses and are similarly situated and that do not in any event materially impair their use in the operations of the Company and its Subsidiaries; (v) Liens on property or assets of a Subsidiary to secure obligations of such Subsidiary to the Company or another Subsidiary; (vi) Liens in existence on the date hereof described on Schedule 6A(1); (vii) after the date hereof, Liens (A) consisting of Capitalized Lease Obligations, or (B) existing prior to the time of acquisition upon any property acquired by the Company or any Subsidiary through purchase, merger or consolidation or otherwise, whether or not expressly assumed by the Company or such Subsidiary, or (C) placed on property at the time of acquisition by the Company or any Subsidiary to secure all or a portion of (or to secure Debt incurred to pay all or a portion of) the purchase price thereof, provided that (1) in the case of (B), any such Lien shall not -------- have been created, incurred or assumed in contemplation of such purchase, merger, consolidation or other event in (B), (2) all of such property is not or shall not thereby become encumbered in any amount in excess of the lesser of 100% of the cost thereof or fair market value thereof (as determined in good faith by the board of directors of the Company), (3) in the case of (B) and (C), any such Lien shall be confined solely to the item(s) of property so acquired, (4) in the case of (C), any such Lien shall have been created or incurred concurrently with the acquisition of such property, and (5) any Debt secured by such Lien is permitted by the provisions of paragraph 6A(2). Notwithstanding the terms of this clause (vii) of paragraph 6(A)(1), the Company or any Subsidiary may not dispose of assets to a third party and repurchase them with Debt secured in whole or in part by Liens placed on such assets; however, this subparagraph is not intended to limit the Company's ability to sell assets and lease such assets back under operating leases; (viii) Liens renewing or extending any Lien permitted by clauses (vi) and (vii) of this paragraph 6(A)(1), provided that (A) such Lien is not extended to other property of the Company or any Subsidiary, (B) the principal amount of Debt secured by such Lien does not exceed the principal amount outstanding at the time of such renewal or extension, and (C) no Default or Event of Default shall exist or result therefrom; 16 18 (ix) other Liens securing Funded Debt (other than Funded Debt that constitutes Subordinated Debt); provided, however, that (a) such Funded Debt is permitted by the provisions of paragraph 6A(2), (b) the aggregate amount of all Secured Funded Debt outstanding together with all Funded Debt of any Subsidiary (other than as permitted by clause (i) of paragraph 6A(2)) does not at any time exceed (A) prior to the Reset Date, $25,000,000 and (B) on and after the Reset Date, an amount equal to ten percent (10%) of Consolidated Total Assets, and (c) no Default or Event of Default shall exist or result therefrom; and (x) Liens in favor of the Collateral Agent, provided that the Intercreditor Agreement shall be in full force and effect. 6A(2) DEBT. Create, incur, assume or suffer to exist any Debt, except: (i) Funded Debt of any Subsidiary to the Company or any other wholly-owned Subsidiary; (ii) Subordinated Funded Debt; (iii) Senior Funded Debt of the Company and its Subsidiaries, so long as (a) the aggregate principal amount (without duplication) of consolidated Senior Funded Debt does not exceed at any time (i) through (and including) December 31, 2000, an amount equal to sixty percent (60%) of the sum of Consolidated Capitalization plus Special 1999 Charges plus Special A/P Charges, (ii) from (and including) January 1, 2001 through (and including) December 31, 2001 an amount equal to sixty per cent (60%) of Consolidated Capitalization and (iii) after December 31, 2001, an amount equal to fifty-five per cent (55%) of Consolidated Capitalization, and (b) the aggregate amount of all Funded Debt of Subsidiaries (excluding that permitted by clause (i) of this paragraph 6A(2) and that evidenced by the Guaranty), together with all Secured Funded Debt does not exceed 10% of Consolidated Total Assets (it being understood that for purposes of this clause (iii) Consolidated Capitalization and Consolidated Total Assets shall be measured as of the later of (x) the end of the Company's most recent quarterly period and (y) any other date as of which the Company has prepared and delivered to each holder of the Notes that is an Institutional Investor a consolidated balance sheet of the Company and its Subsidiaries); (iv) Current Debt of the Company provided that commencing on September 1, 1998 and at all times thereafter there shall have been a period of at least thirty (30) consecutive days within the twelve month period immediately preceding the date of determination during which the average aggregate principal amount of Current Debt of the Company outstanding during such 30-day period did not exceed at any time during such 30-day period an amount equal to the minimum amount of Funded Debt which would have been permitted as additional Senior Funded Debt under clause (iii) of this paragraph 6A(2) at any time during such 30-day period, it being understood and agreed that to the extent Current Debt 17 19 is treated as Senior Funded Debt for purposes of this paragraph 6A(2)(iv), it shall also be included in Consolidated Capitalization. Without limiting the foregoing provisions of this paragraph 6A(2), the Company shall not permit the aggregate principal amount of all Debt of the Company and its Subsidiaries (other than (i) Debt hereunder and under the other Note Documents, (ii) Debt under the BA Credit Agreements referred to in clause (i) of the definition thereof (without giving effect to any amendments thereto that would increase the amounts that may be borrowed thereunder), (iii) Debt referred to on Schedule 6A(2) which was outstanding on March 31, 2000 and (iv) Subordinated Debt owed to members of the Company) to exceed $35,000,000 at any time prior to the Reset Date. 6A(3)(I) SALE OF ASSETS. Sell, lease, transfer or otherwise dispose of any assets of the Company or any Subsidiary (an "ASSET SALE") (it being understood that an Asset Sale shall include (A) the sale and/or issuance of stock of any Subsidiary to Persons other than the Company or any wholly-owned Subsidiary and (B) any dilution of ownership arising from a merger or consolidation of Subsidiaries as permitted by paragraph 6A(3)(ii)), other than in the ordinary course of business, unless the Net Cash Proceeds of all such assets sold, leased or otherwise disposed of outside of the ordinary course of business during the most recent 36-month rolling period when added together, without duplication, with any assets then proposed to be sold outside of the ordinary course of business, do not exceed $10,000,000. Excluded from the foregoing limitation are the disposition of assets the proceeds of which are, within 180 days of such disposition, either (i) reinvested in property or assets for use in the existing business of the Company and its Subsidiaries, or (ii) applied on a pro rata basis to prepay Senior Funded Debt, including, without limitation, the Notes pursuant to paragraph 4B hereof, including the Make-Whole Amount provided for in said paragraph 4B. Notwithstanding the foregoing, TruServ Canada Cooperative Inc. may issue and sell shares of its stock in the ordinary course of business consistent with its practices as of April 13, 1992. 6A(3)(II) MERGER. Merge or consolidate with any other Person, except that (a) Subsidiaries may be merged into the Company or any other Subsidiary, (b) the Company may after the Reset Date merge with another Person, provided that the Company is the surviving corporation, and no Event of Default or Default shall exist either immediately before or after such merger and (c) any Subsidiary may after the Reset Date merge with another Person (other than the Company unless permitted by clauses (a) and (b) above) so long as no Event of Default or Default shall exist immediately before or after such merger. 6A(4) RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES AND STOCKHOLDERS. Directly or indirectly, purchase, acquire or lease any property from, or sell, transfer or lease any property (other than shares of stock of Company) to, or otherwise deal with (i) any Affiliate or Substantial Stockholder, or (ii) any corporation in which an Affiliate, Substantial Stockholder or the Company (either directly or through Subsidiaries) owns 5% or more of the outstanding voting stock, except that (a) any such Affiliate or Substantial Stockholder may be a director, officer or employee of the Company or any Subsidiary and may be paid reasonable compensation in connection therewith, (b) the Company and its Subsidiaries may perform or engage in any of the foregoing in the ordinary course of business upon terms no less favorable to the Company or such Subsidiary (as the case may be) than if no such relationship described in 18 20 clauses (i) and (ii) above existed and (c) the Company may sell or purchase from any such Person shares of the Company's stock subject to the provisions of paragraphs 6B and 6C. 6B. RESTRICTED INVESTMENTS. The Company will not, and will not permit any Subsidiary to, make or permit a Subsidiary to make any Investment except the Company and any Subsidiary may: (a) make or permit to remain outstanding loans or advances to any Subsidiary other than an Inactive Subsidiary; (b) after the Reset Date, own, purchase or acquire stock, obligations or securities of a Subsidiary or of a corporation which immediately after such purchase or acquisition will be a Subsidiary; (c) acquire and own stock, obligations or securities received in settlement of debts (created in the ordinary course of business) owing to the Company or any Subsidiary; (d) own, purchase or acquire prime commercial paper, banker's acceptances and certificates of deposit in United States and Canadian commercial banks (having combined capital and surplus of not less than U.S. $100,000,000) and repurchase agreements with respect to the foregoing, in each case due within one year from the date of purchase and payable in the United States in United States dollars, obligations of the government of the United States or any agency thereof, and obligations guaranteed by the government of the United States; (e) make or permit to remain outstanding travel and other similar advances to officers and employees in the ordinary course of business; (f) permit to remain outstanding Investments existing on the Effective Date and described on Schedule 6B; (g) to the extent applicable, make Investments permitted under paragraph 6C below; and (h) maintain deposit accounts with financial institutions in the ordinary course of business; provided that the amount maintained in deposit accounts with financial institutions other than the Lenders (as defined in the BA Credit Agreement) shall not exceed (x) in the case of any one such account, $200,000 for more than three consecutive Business Days; and (y) in the case of all such accounts in the aggregate, $600,000 for more than two consecutive Business Days. Notwithstanding the foregoing, the Company will not permit the aggregate amount of Investments in TruServ Specialty Company, LLC to exceed $1,500,000 at any time. 6C. RESTRICTED PAYMENTS. The Company will not, and will not permit any Subsidiary to, pay or declare cash dividends, cash patronage dividends or dividends on any class 19 21 of its stock (other than dividends in kind) or redeem, purchase or otherwise acquire, or make any redemptions, purchase, or other acquisition of any of its stock or apply miscellaneous deductions in lieu of patronage dividends, or make or permit any Subsidiary to make any Restricted Investment (each a "RESTRICTED PAYMENT") except, if Consolidated Net Earnings for any fiscal year are positive, to the extent that the aggregate amount of all such Restricted Payments made in such fiscal year does not exceed the Applicable Percentage (as defined below) of Consolidated Net Earnings for such fiscal year. For purposes of the foregoing, "APPLICABLE PERCENTAGE" means 40%. Notwithstanding the foregoing, the Company will not and will not permit any Subsidiary to make or pay any Restricted Payment (a) prior to January 1, 2001, or (b) if at the time such Restricted Payment is made or paid, or after giving effect thereto, a Default or an Event of Default would exist. 6D. COMPLIANCE WITH ERISA. The Company will not, and will not permit any Subsidiary to, engage in any transaction in connection with which the Company or any Subsidiary could be subject to either a civil penalty assessed pursuant to section 502(i) of ERISA or a tax imposed by section 4975 of the Code, terminate or withdraw from any Plan in a manner, or take any other action with respect to any such Plan (including, without limitation, a substantial cessation of operations within the meaning of section 4062(e) of ERISA), which could result in any liability of the Company or any Subsidiary under Title IV of ERISA to any Person (including the PBGC or a trustee appointed under section 4042(b) or (c) of ERISA), fail to make full payment when due of all amounts which, under the provisions of any Plan, the Company or any Subsidiary is required to pay as contributions thereto, or permit to exist any accumulated funding deficiency, whether or not waived, with respect to any Plan (other than a Multiemployer Plan), if, in any such case, such penalty or tax or such liability, or the failure to make such payment, or the existence of such deficiency, as the case may be, could be reasonably expected to have a Material Adverse Effect. 6E. NO CHANGE IN SUBORDINATION TERMS, NO OPTIONAL PREPAYMENTS ETC. The Company will not, and will not permit any Subsidiary to, (a) amend, alter or otherwise change any provision of any of the subordinated promissory notes now or hereafter issued by the Company or take any other action (or refrain from taking an action) which would have the effect of eliminating or altering in any way the effect of the subordination language appearing in such subordinated promissory notes or the rights of the holders of the Notes arising as a result thereof or (b) make any optional or voluntary prepayment, in whole or in part, of any Subordinated Debt. The Company will not, and will not permit any Subsidiary to, make any optional or voluntary prepayment, in whole or in part, of any Benefited Obligations, other than (i) optional or voluntary prepayments, in whole or in part, of loans under the BA Credit Agreements that do not trigger a reduction in any commitments of the lenders thereunder and (ii) optional or voluntary prepayments, in whole or in part, of the Senior Note Obligations (as defined in the Intercreditor Agreement) pursuant to the terms hereof. 6F. NATURE OF BUSINESS. The Company will not, and will not permit any Subsidiary to, engage in the business of underwriting risks for insurance purposes, or in any other aspect of insurance related business other than in the ordinary course of business in accordance with its practices as of the Effective Date; or purchase and sell real estate (other than on an agency basis) for purposes other than those relating directly to its principal business except for purchases and sales of store locations in the ordinary course of business. 20 22 6G. RATIO OF ASSET BASE TO DEBT. The Company will not permit the ratio of (a) the Asset Base as of the last day of any fiscal month to (b) the remainder of (i) the daily average of the amount of Total Senior Debt outstanding during the fiscal month ending on such date minus (ii) the daily average of cash and marketable securities during the fiscal month ending on such date to be equal to or less than the applicable ratio set forth below: Fiscal Month(s) Ending Ratio ---------------------- ----- 04/3/99 through 05/29/99 1.10 to 1 07/3/99 through 10/2/99 1.15 to 1 10/30/99 through 12/31/99 1.20 to 1 01/29/00 1.10 to 1 02/26/00 through 12/31/00 1.20 to 1 01/27/01 1.10 to 1 02/24/01 through 12/31/01 1.20 to 1 01/26/02 1.10 to 1 02/23/02 and thereafter 1.20 to 1 6H. FIXED CHARGE COVERAGE RATIO. The Company shall not permit the Fixed Charge Coverage Ratio as of the end of any fiscal quarter to be less than the applicable ratio set forth below: Fiscal Quarter(s) Ending Ratio ------------------------ ----- 03/31/00 through 06/30/00 1.20 to 1.00 09/30/00 1.40 to 1.00 12/31/00 through 12/31/01 1.75 to 1.00 03/31/02 and thereafter 1.85 to 1.00 6I. MINIMUM EBITDA. The Company shall not permit the sum of (i) EBITDA as of the end of any four consecutive fiscal quarters, plus (ii) for the period of four fiscal quarters ending March 31, 2000, June 30, 2000 and September 30, 2000, Special 1999 Charges (to the extent taken during such period), plus (iii) for the period of four fiscal quarters ending March 31, 2000 and June 30, 2000, Special A/P Charges (to the extent taken during such period), to be less than $85,000,000. 6J. INACTIVE SUBSIDIARIES. The Company will not at any time permit its Inactive Subsidiaries, taken as a whole, to have more than $200,000 of assets (based on fair market value) or to generate more than $5,000 of revenues in any fiscal quarter. 6K. AMENDMENTS TO FINANCING AGREEMENTS. The Company covenants that, without the consent of the Majority Holders, it will not, and will not permit any Subsidiary to, amend, modify, supplement or restate any Financing Agreement. The Company will not deliver any certificate to the Collateral Agent pursuant to Section 3(f) of the Intercreditor Agreement unless it shall have furnished a copy thereof to each holder of Notes at least ten days prior to the date that it proposes to deliver such certificate to the Collateral Agent. 21 23 7. EVENTS OF DEFAULT. 7A. ACCELERATION. If any of the following events shall occur and be continuing for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or otherwise): (i) the Company defaults in the payment of any principal or Make-Whole Amount, if any, payable with respect to any Note when the same shall become due, either by the terms thereof or otherwise as herein provided (including, without limitation, paragraph 4A); or (ii) the Company defaults in the payment of any interest on any Note payable with respect to any Note, or the Company or any Subsidiary defaults in the payment of any other amount payable hereunder or under any other Note Document, for more than 3 days after the date due; or (iii) the Company or any Subsidiary defaults (whether as primary obligor or as guarantor or other surety) in any payment of principal of or premium or make-whole amount or interest on any other obligation for money borrowed (or any Capitalized Lease Obligation, any obligation under a conditional sale or other title retention agreement, any obligation issued or assumed as full or partial payment for property whether or not secured by a purchase money mortgage or any obligation under notes payable or drafts accepted representing extensions of credit) beyond any period of grace provided with respect thereto, or the Company or any Subsidiary fails to perform or observe any other agreement, term or condition contained in any agreement under which any such obligation is created (or if any other event thereunder or under any such agreement shall occur and be continuing) and the effect of such failure or other event is to cause, or to permit the holder or holders of such obligation (or a trustee on behalf of such holder or holders) to cause, such obligation to become due (or to be repurchased by the Company or any Subsidiary) prior to any stated maturity, provided that the aggregate amount of all obligations (other than -------- any such obligation for money borrowed which is payable solely out of the property or assets of a partnership, joint venture or similar entity of which the Company or any Subsidiary is an equity participant or is secured by a Lien on property or assets owned or held by such an entity without further recourse to or liability of the Company or any Subsidiary) as to which such a payment default shall occur and be continuing or such a failure or other event causing or permitting acceleration (or resale to the Company or any Subsidiary) shall occur and be continuing exceeds $5,000,000; or (iv) any representation or warranty made by the Company or any Subsidiary herein or in any other Note Document or by the Company or any Subsidiary or any of their respective officers in any writing furnished in connection with or pursuant to this Agreement or any other Note Document shall be false in any material respect on the date as of which made; or 22 24 (v) the Company fails to perform or observe any agreement contained in paragraph 6; or (vi) the Company or any Subsidiary fails to perform or observe any other agreement, term or condition contained herein or in any other Note Document (subject to any applicable grace period); or (vii) the Company or any Subsidiary makes an assignment for the benefit of creditors or is generally not paying its debts as such debts become due; or (viii) any decree or order for relief in respect of the Company or any Subsidiary (other than an Inactive Subsidiary) is entered under any bankruptcy, reorganization, compromise, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law, whether now or hereafter in effect (herein called the "BANKRUPTCY LAW"), of any jurisdiction; or (ix) the Company or any Subsidiary (other than an Inactive Subsidiary) petitions or applies to any tribunal for, or consents to, the appointment of, or taking possession by, a trustee, receiver, custodian, liquidator or similar official of the Company or such Subsidiary, or of any substantial part of the assets of the Company or such Subsidiary, or commences a voluntary case under the Bankruptcy Law of the United States or any proceedings (other than proceedings for the voluntary liquidation and dissolution of a Subsidiary) relating to the Company or such Subsidiary under the Bankruptcy Law of any other jurisdiction; or (x) any such petition or application is filed, or any such proceedings are commenced, against the Company or any Subsidiary (other than an Inactive Subsidiary) and the Company or such Subsidiary by any act indicates its approval thereof, consent thereto or acquiescence therein, or an order, judgment or decree is entered appointing any such trustee, receiver, custodian, liquidator or similar official, or approving the petition in any such proceedings, and such order, judgment or decree remains unstayed and in effect for more than 60 days; or (xi) any order, judgment or decree is entered in any proceedings against the Company decreeing the dissolution of the Company and such order, judgment or decree remains unstayed and in effect for more than 60 days; or (xii) any order, judgment or decree is entered in any proceedings against the Company or any Subsidiary decreeing a split-up of the Company or such Subsidiary which requires the divestiture of assets representing a substantial part, or the divestiture of the stock of a Subsidiary whose assets represent a substantial part, of the Consolidated Total Assets or which requires the divestiture of assets, or stock of a Subsidiary, which shall have contributed a substantial part of the Consolidated Net Earnings of the Company and its Subsidiaries for any of 23 25 the three fiscal years then most recently ended, and such order, judgment or decree remains unstayed and in effect for more than 60 days; or (xiii) a final judgment or judgments in an aggregate amount in excess of $7,000,000 is or are rendered against the Company and/or any Subsidiaries and, within 60 days after entry thereof, such judgment or judgments are not discharged or execution thereof stayed pending appeal, or within 60 days after the expiration of any such stay, such judgment or judgments are not discharged; or (xiv) an Event of Default exists under any BA Credit Agreement or under the Prudential Agreement; or an Event of Default (as defined in the Intercreditor Agreement) exists; or (xv) the Guaranty shall cease to be in full force and effect with respect to any Guarantor (other than as a result of a transaction permitted hereunder), any Guarantor shall fail (subject to any applicable grace period) to comply with or to perform any applicable provision of the Guaranty, or any Guarantor (or any Person by, through or on behalf of such Guarantor) shall contest in any manner the validity, binding nature or enforceability of the Guaranty with respect to such Guarantor; or (xvi) any Collateral Document shall cease to be full force and effect with respect to the Company or any Guarantor (other than as a result of a transaction permitted hereunder), the Company or any Guarantor shall fail (subject to any applicable grace period) to comply with or to perform any applicable provision of any Collateral Document to which such entity is a party, or the Company or any Guarantor (or any Person by, through or on behalf of the Company or such Guarantor) shall contest in any manner the validity, binding nature or enforceability of any Collateral Document, or any Collateral Document shall cease to be effective to grant a Lien on the collateral described therein with the priority purported to be created thereby; or (xvii) any Lien created by any of the Collateral Documents shall at any time fail to constitute a valid and perfected Lien on all of the collateral purported to be secured thereby, subject to no prior or equal Lien (other than Liens expressly permitted by paragraph 6A(1) hereunder), or the Company or any Subsidiary shall so assert in writing; or (xviii) the Lenders (as defined in the BA Agreements) shall at any time refuse to make revolving loans available to the Company thereunder when requested by the Company; or (xix) the Company shall, on any date, not have in effect a BA Agreement for a revolving loan facility to the Company in the amount of at least $250,000,000 for a period expiring at least 6 months after such date; or (xx) the Company fails to furnish to you and each Other Purchaser by 5:00 pm (New York time) on Monday, April 17, 2000 the audited consolidated 24 26 financial statements of the Company and its Subsidiaries as at December 31, 1999 and consolidated statements of operations and cash flows and a consolidated statement of capital stock and retained earnings of the Company and its Subsidiaries for the year ended December 31, 1999, all reported by Ernst & Young without material qualification and in a manner acceptable to the Required Holders, then (a) if such event is an Event of Default specified in clause (i) or (ii) of this paragraph 7A, any holder of any Note may at its option during the continuance of such Event of Default, by notice in writing to the Company, declare all of the Notes held by such holder to be, and all of the Notes held by such holder shall thereupon be and become, immediately due and payable at par together with interest accrued thereon and together with, to the full extent permitted by applicable law, the Make-Whole Amount, if any, with respect to such Notes, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Company, (b) if such event is an Event of Default specified in clause (vii), (viii), (ix), (x) or (xi) of this paragraph 7A with respect to the Company, all of the Notes at the time outstanding shall automatically become immediately due and payable together with interest accrued thereon and together with, to the full extent permitted by applicable law, the Make-Whole Amount, if any, with respect to each Note, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Company, and (c) with respect to any other event constituting an Event of Default, the Majority Holder(s) of the Notes may at its or their option during the continuance of such Event of Default, by notice in writing to the Company, declare all of the Notes to be, and all of the Notes shall thereupon be and become, immediately due and payable together with interest accrued thereon and together with, to the full extent permitted by applicable law, the Make-Whole Amount, if any, with respect to each Note, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Company. The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) and that the provision for payment of a Make-Whole Amount by the Company in the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances. 7B. RESCISSION OF ACCELERATION. At any time after any or all of the Notes shall have been declared immediately due and payable pursuant to paragraph 7A(a) or (c), the Majority Holder(s) of the Notes may, by notice in writing to the Company, rescind and annul such declaration and its consequences if (i) the Company shall have paid all overdue interest on the Notes, the principal of and Make-Whole Amount, if any, payable with respect to any Notes which have become due otherwise than by reason of such declaration, and interest on such overdue interest and overdue principal and Make-Whole Amount at the rate specified in the Notes, (ii) the Company shall not have paid any amounts which have become due solely by reason of such declaration, (iii) all Events of Default and Defaults, other than non-payment of amounts which have become due solely by reason of such declaration, shall have been cured or waived pursuant to paragraph 15 or to the satisfaction (in their sole discretion) of the Majority Holders, and (iv) no judgment or decree shall have been entered for the payment of any amounts due pursuant to the Notes or this Agreement. No such rescission or annulment shall extend to or affect any subsequent Event of Default or Default or impair any right arising therefrom. 25 27 7C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be declared immediately due and payable pursuant to paragraph 7A or any such declaration shall be rescinded and annulled pursuant to paragraph 7B, the Company shall forthwith give written notice thereof to the holder of each Note at the time outstanding. 7D. OTHER REMEDIES. If any Event of Default or Default shall occur and be continuing, the holder of any Note may proceed to protect and enforce its rights under this Agreement and such Note by exercising such remedies as are available to such holder in respect thereof under applicable law, either by suit in equity or by action at law, or both, whether for specific performance of any covenant or other agreement contained in this Agreement or in aid of the exercise of any power granted in this Agreement. No remedy conferred in this Agreement upon the holder of any Note is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to every other remedy conferred herein or now or hereafter existing at law or in equity or by statute or otherwise. 7E. NO CURE OF DEFAULT BY APPLICATION OF COLLATERAL. Notwithstanding anything in this Agreement or any other Note Documents to the contrary, it is understood that if the Company shall fail to pay any amount payable hereunder or thereunder when due and an Event of Default described in paragraph 7A shall have occurred as a result thereof, such Event of Default shall continue to exist (and shall not be deemed to be cured) notwithstanding any repayment of such amount as a result of the application of any proceeds realized from the sale or disposition of any collateral described in any of the Collateral Documents. 8. REPRESENTATIONS, COVENANTS AND WARRANTIES. THE COMPANY REPRESENTS, COVENANTS AND WARRANTS AS FOLLOWS: 8A. ORGANIZATION; QUALIFICATIONS; CORPORATE POWER. The Company is a corporation duly organized and existing in good standing under the laws of the State of Delaware, each Subsidiary is duly organized and existing in good standing under the laws of the jurisdiction in which it is formed and the Company and each of its Subsidiaries is duly qualified as a foreign corporation or entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions in which the failure to be so qualified could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has and each Subsidiary has the power to own their respective properties and to carry on their respective businesses as now being conducted. No Subsidiary has outstanding any shares of stock of a class which has priority over any other class as to dividends or in liquidation (except as otherwise disclosed on Schedule 8A). Each of the Company and each Subsidiary has the power and authority to execute and deliver this Agreement, the Other Agreements, the Guaranty, the Collateral Documents, the Notes and all other Note Documents to which it is a party and to perform the provisions hereof and thereof. 8B. AUTHORIZATION, ETC. This Agreement, the Other Agreements, the Guaranty, the Collateral Documents, the Notes and all other Note Documents have been duly authorized by all necessary action on the part of the Company and each Subsidiary party thereto and this Agreement, the Other Agreements, the Guaranty, the Collateral Documents and all other Note Documents constitute, and upon execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of the Company and each Subsidiary party thereto enforceable 26 28 against the Company and each such Subsidiary in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 8C. DISCLOSURE. The Company, through its agent, William Blair & Company, has delivered to you and each Other Purchaser a copy of a Private Placement Memorandum, dated July 1998 (the "MEMORANDUM"), relating to the transactions contemplated hereby. The Memorandum fairly describes, in all material respects, the general nature of the business and principal properties of the Company and its Subsidiaries. The Memorandum, the documents, certificates or other writings delivered to you by or on behalf of the Company in connection with the transactions contemplated hereby and the financial statements provided pursuant to paragraph 8E, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. Except as disclosed in the Memorandum or as expressly described in Schedule 8C, or in one of the documents, certificates or other writings identified therein, or in the financial statements provided pursuant to paragraph 8E, since December 31, 1999, there has been no change in the financial condition, operations, business, properties or prospects of the Company or any Subsidiary except changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. There is no fact known to the Company that could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Memorandum or in the other documents, certificates and other writings delivered to you by or on behalf of the Company specifically for use in connection with the transactions contemplated hereby. 8D. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES. (a) Schedule 8D contains complete and correct lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary, (ii) of the Company's Affiliates, other than Subsidiaries, and (iii) of the Company's directors and senior officers. (b) All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 8D as being owned by the Company and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien (except as otherwise disclosed in Schedule 8D). (c) No Subsidiary is a party to, or otherwise subject to any legal restriction or any agreement (other than this Agreement, the agreements listed on Schedule 8D and customary limitations imposed by corporate law statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Subsidiary. (d) The Subsidiaries that are parties to the Guaranty and the Security Agreement constitute all of the Subsidiaries of the Company, other than the Inactive 27 29 Subsidiaries, TruServ Specialty Company, LLC and the Foreign Subsidiaries (other than, in the case of the Guaranty only, Cotter Canada Hardware and Variety Company, Inc.). The Company has pledged, pursuant to the Pledge Agreement, all of the capital stock of each Subsidiary, other than TruServ Canada Cooperative Inc. and TruServ Specialty Company, LLC and other than 35% of the capital stock of each Foreign Subsidiary (other than Cotter Canada Hardware and Variety Company, Inc.). 8E. FINANCIAL STATEMENTS. (a) The Company has furnished you and each Other Purchaser of any Note with the following financial statements, identified by a Senior Financial Officer of the Company: (i) a consolidated balance sheet of the Company and its Subsidiaries as at fiscal year end in each of the three fiscal years of the Company most recently completed prior to the date as of which this representation is made or repeated to such Purchaser (other than fiscal years completed within 90 days prior to such date for which audited financial statements have not been released) and consolidated statements of operations and cash flows and a consolidated statement of capital stock and retained earnings of the Company and its Subsidiaries for each such year, all reported on by Ernst & Young (or any independent public accounting firm of recognized national standing) and (ii) a consolidated balance sheet of the Company and its Subsidiaries as at the end of the quarterly period (if any) most recently completed prior to such date and after the end of such fiscal year (other than quarterly periods completed within 60 days prior to such date for which financial statements have not been released) and the comparable quarterly period in the preceding fiscal year and consolidated statements of operations and cash flows and a consolidated statement of capital stock and retained earnings for the periods from the beginning of the fiscal years in which such quarterly periods are included to the end of such quarterly periods, prepared by the Company. Such financial statements (including any related schedules and/or notes) are true and correct in all material respects (subject, as to interim statements, to changes resulting from audits and year-end adjustments), have been prepared in accordance with GAAP consistently followed throughout the periods involved and show all liabilities, direct and contingent, of the Company and its Subsidiaries required to be shown in accordance with such principles. The balance sheets fairly present the condition of the Company and its Subsidiaries as at the dates thereof, and the statements of operations, capital stock and retained earnings and cash flows fairly present the results of the operations of the Company and its Subsidiaries and their cash flows for the periods indicated. (b) There has been no material adverse change in the business, operations, condition (financial or otherwise), assets, properties or prospects of the Company and its Subsidiaries taken as a whole since the end of the most recent fiscal year for which such audited financial statements have been furnished. The projections relating to the Company and its Subsidiaries for the three-year period 2000 through 2002, a copy of which is attached hereto as Schedule 8E, disclose all material assumptions used in formulating such projections. The Company is not aware of any facts that (individually or in the aggregate) would result in any material change in any of such projections. Such projections have been prepared on the basis of the assumptions stated therein (all of which were made by the Company in good faith), and reflect the reasonable estimates of the Company of the financial condition, results of operations and other information projected therein. 28 30 (c) Notwithstanding the provisions of paragraph 8E(a) and (b), the representations made by the Company in paragraph 8E(a)(i) as at the Effective Date only shall refer to the audited consolidated financial statements of the Company and its Subsidiaries as at December 31, 1998, and the representations made by the Company in paragraph 8E(a)(ii) as at the Effective Date only shall refer to the unaudited consolidated financial statements of the Company and its Subsidiaries as at September 30, 1999, copies of each of which have been delivered to each Purchaser. 8F. ACTIONS PENDING. There is no action, suit, investigation or proceeding pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries, or any properties or rights of the Company or any of its Subsidiaries, by or before any court, arbitrator or administrative or governmental body which could be reasonably expected to have a Material Adverse Effect. 8G. OUTSTANDING DEBT. Neither the Company nor any of its Subsidiaries has outstanding any Debt except as permitted by paragraph 6A(2). There exists no default under the provisions of any instrument evidencing Debt of the Company or any of its Subsidiaries in an amount greater than $250,000 or of any agreement relating thereto (it being understood that the representation and warranty in this sentence is made after giving effect to the effectiveness of this Agreement and the amendments referred to in paragraph 3A(xvi)). All outstanding Funded Debt and all outstanding Current Debt of the Company and its Subsidiaries are listed on and described in reasonable detail on Schedule 8G (including, without limitation, maturity dates, scheduled prepayments, mandatory prepayments, interest rates, the extent (if any) to which such Debt is secured and, if secured, a brief description of the nature of the collateral.) 8H. TITLE TO PROPERTIES. The Company has and each of its Subsidiaries has good and marketable title to its respective real properties (other than properties which it leases) and good title to all of its other respective properties and assets, including the properties and assets reflected in the most recent audited balance sheet referred to in paragraph 8E (other than properties and assets disposed of in the ordinary course of business), subject to no Lien of any kind except Liens permitted by paragraph 6A(1). All leases necessary in any material respect for the conduct of the respective businesses of the Company and its Subsidiaries are valid and subsisting and are in full force and effect. The security interests granted under the Security Agreement by the Company and its Subsidiaries (the "SECURITY INTERESTS") are granted as security only and shall not subject the Collateral Agent or any holder of the Notes to, or transfer or in any way affect or modify, any obligation or liability of the Company or any other Debtor (as defined in the Security Agreement) with respect to any of the Collateral (as defined in the Security Agreement) or any transaction in connection therewith. The Security Interests constitute valid security interests under the Uniform Commercial Code as in effect from time to time in the State of Illinois ("UCC") securing the Liabilities (as defined in the Security Agreement). The Security Interests constitute perfected security interests in the Collateral (as defined in the Security Agreement) (except inventory in transit) to the extent that a security interest therein may be perfected by filing pursuant to the UCC, prior to all other liens, claims and rights of others therein except for Permitted Liens (as defined in the Security Agreement). 8I. TAXES. The Company has and each of its Subsidiaries has filed all federal, state and other tax returns which are required to be filed, and each has paid all taxes as shown on 29 31 such returns and on all assessments received by it to the extent that such taxes have become due, except such unfiled returns and unpaid taxes (i) as are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP or (ii) the non-filing or non-payment of which (a) could not be reasonably expected to have a Material Adverse Effect and (b) does not result in the creation of any Lien other than Liens permitted by paragraph 6A(1)(i). 8J. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement or subject to any charter or other corporate restriction which could have a Material Adverse Effect. Neither the execution nor delivery of this Agreement, the Other Agreements, the Guaranty, the Collateral Documents, the Notes or any of the other Note Documents, nor the offering, issuance and sale of the Notes, nor fulfillment of nor compliance with the terms and provisions hereof and thereof and of the Notes will conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in any violation of, or result in the creation of any Lien (other than the Liens created by the Collateral Documents) upon any of the properties or assets of the Company or any of its Subsidiaries pursuant to, the charter or by-laws of the Company or any of its Subsidiaries, any award of any arbitrator or any agreement (including any agreement with stockholders), instrument, order, judgment, decree, statute, law, rule or regulation to which the Company or any of its Subsidiaries is subject. Neither the Company nor any of its Subsidiaries is a party to, or otherwise subject to any provision contained in, any instrument evidencing Indebtedness of the Company or such Subsidiary, any agreement relating thereto or any other contract or agreement (including its charter) which limits the amount of, or otherwise imposes restrictions on the incurring of, Debt of the Company of the type to be evidenced by the Notes except as set forth in the agreements listed in Schedule 8J attached hereto (as such Schedule 8J may have been modified from time to time by written supplements thereto delivered by the Company and accepted in writing by the Required Holders). 8K. OFFERING OF NOTES. Neither the Company nor any agent acting on its behalf (including William Blair & Company) has, directly or indirectly, offered the Notes or any similar security of the Company for sale to, or solicited any offers to buy the Notes or any similar security of the Company from, or otherwise approached or negotiated with respect thereto with, any Person other than you, the Other Purchasers and not more than 86 Institutional Investors, each of which has been offered the Notes at a private sale for investment. Neither the Company nor any agent acting on its behalf has taken or will take any action which would subject the issuance or sale of the Notes to the provisions of Section 5 of the Securities Act or to the provisions of any securities or Blue Sky law of any applicable jurisdiction. 8L. USE OF PROCEEDS. The Company has applied the proceeds of the sale of the Notes as set forth in Schedule 8L. None of the proceeds of the sale of any Notes were or will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying any "MARGIN STOCK" as defined in Regulation U of the Board of Governors of the Federal Reserve System (herein called "MARGIN STOCK") or for the purpose of maintaining, reducing or retiring any Indebtedness which was originally incurred to purchase or carry any stock that is then currently a margin stock or for any other purpose which might constitute the purchase of such Notes a "PURPOSE CREDIT" within the meaning of such Regulation U. Neither the Company nor any agent acting on its behalf (including William Blair & 30 32 Company) has taken or will take any action which might cause this Agreement or the Notes to violate Regulation U, Regulation T, Regulation X or any other regulation of the Board of Governors of the Federal Reserve System or to violate the Exchange Act, in each case as in effect now or as the same may hereafter be in effect. 8M. ERISA. No contribution required to have been made to any Plan by the Company or any Subsidiary under the provisions of the Plan or ERISA remains unpaid and no accumulated funding deficiency (as defined in section 302 of ERISA and section 412 of the Code), whether or not waived, exists with respect to any Plan (other than a Multiemployer Plan). No liability to the PBGC has been or is expected by the Company or any ERISA Affiliate to be incurred with respect to any Plan (other than a Multiemployer Plan) by the Company, any Subsidiary or any ERISA Affiliate which has caused or could cause a Material Adverse Effect. None of the Company, any Subsidiary or any ERISA Affiliate has incurred or presently expects to incur any withdrawal liability under Title IV of ERISA with respect to any Multiemployer Plan which has caused or could cause a Material Adverse Effect. The execution and delivery of this Agreement and the issuance and sale of the Notes will be exempt from or will not involve any transaction which is subject to the prohibitions of section 406 of ERISA and will not involve any transaction in connection with which a penalty could be imposed under section 502(i) of ERISA or a tax could be imposed pursuant to section 4975 of the Code. The representation by the Company in the next preceding sentence is made in reliance upon and subject to the accuracy of the representation of you in paragraph 9B as to the source of funds used by you to purchase any Notes. 8N. GOVERNMENTAL CONSENT. Neither the nature of the Company or of any Subsidiary, nor any of their respective businesses or properties, nor any relationship between the Company or any Subsidiary and any other Person, nor any circumstance in connection with the offering, issuance, sale or delivery of the Notes is such as to require any authorization, consent, approval, exemption or any action by or notice to or filing with any court or administrative or governmental body (other than routine filings after the Effective Date for any Notes with the Securities and Exchange Commission and/or state Blue Sky authorities) in connection with the execution and delivery of this Agreement, the offering, issuance, sale or delivery of the Notes or fulfillment of or compliance with the terms and provisions hereof or of the Notes. 8O. ENVIRONMENTAL COMPLIANCE. The Company and its Subsidiaries and all of their respective properties and facilities have complied at all times and in all respects with all Environmental Laws, except, in any such case, where failure to so comply could not reasonably be expected to result in a Material Adverse Effect. 8P. SECTION 144A. The Notes are not of the same class as securities, if any, of the Company listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer quotation system. 8Q. STATUS UNDER CERTAIN STATUTES. Neither the Company nor any Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the Federal Power Act, as amended. 31 33 8R. PRIORITY OF NOTES; BENEFITED OBLIGATIONS. The Notes constitute "SUPERIOR INDEBTEDNESS" as such term is defined in the Company's Promissory (subordinated) Notes, the form of which is attached hereto as Exhibit D and the Subordinated Debt is subordinated to the Indebtedness owing from time to time by the Company to the holders of the Notes in connection with this Agreement. Schedule 8R lists, as of the date hereof, the principal or face amount of each of the Benefited Obligations held by a Benefited Party and the amount thereof constituting First Tier Benefited Obligations. 8S. LICENSES, PERMITS, ETC. Except as disclosed in Schedule 8S, (i) the Company and its Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are Material, without known conflict with the rights of others; (ii) to the best knowledge of the Company, no product of the Company infringes in any material respect any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person; and (iii) to the best knowledge of the Company, there is no Material violation by any Person of any right of the Company or any of its Subsidiaries with respect to any patent, copyright, service mark, trademark, trade name or other right owned or used by the Company or any of its Subsidiaries. 8T. YEAR 2000 PROBLEM. The Company and its Subsidiaries (a) have reviewed the areas within their business and operations which could be adversely affected by, and have developed or are developing a program to address on a timely basis, the Year 2000 Problem and (b) have made appropriate inquiries as to the effect the Year 2000 Problem will have on their material suppliers and customers. Based on such a review, program and inquiries, the Company reasonably believes that the Year 2000 Problem will not have a Material Adverse Effect. 9. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. 9A. PURCHASE FOR INVESTMENT. You represent that you have purchased the Note for your own account or for one or more separate accounts maintained by you or for the account of one or more pension, trust or commingled pension trust funds or for the account of one or more investors who are accredited investors within the meaning of Regulation D of the Securities Act for whom you are acting as investment manager, agent or investment advisor and not with a view to the distribution thereof, provided that the disposition of your or their property shall at all times be within your or their control. You understand that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act of if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the Notes. 32 34 9B. SOURCE OF FUNDS. You represent that at least one of the following statements is an accurate representation as to each source of funds (a "SOURCE") used by you to pay the purchase price of the Notes purchased by you hereunder: (i) if you are an insurance company, the Source is your "INSURANCE COMPANY GENERAL ACCOUNT" as defined in Department of Labor Prohibited Transaction Exemption PTE 95-60 (60 FR 35925), July 12, 1995 (hereinafter "PTE 95-60"), and in respect thereof you represent that there is no "EMPLOYEE BENEFIT PLAN" (as defined in section 3(3) of ERISA and section 4975(e)(1) of the Code) established or maintained by the Company (and affiliates thereof as defined in section V(a)(1) of the PTE 95-60) with respect to which the amount of general account reserves and liabilities of all contracts held by or on behalf of such plan exceed ten percent (10%) of the total reserves and liabilities of such general account (exclusive of separate account liabilities) plus surplus, as set forth in the National Association of Insurance Commissioners' Annual Statement filed with your state of domicile; or (ii) the Source is either (i) an insurance company pooled separate account, within the meaning of Prohibited Transaction Exemption ("PTE") 90-1 (issued January 29, 1990), or (ii) a bank collective investment fund, within the meaning of the PTE 91-38 (issued July 12, 1991) and, except as you have disclosed to the Company in writing pursuant to this clause (ii), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or (iii) the Source constitutes assets of an "INVESTMENT FUND" (within the meaning of Part V of the QPAM Exemption) managed by a "QUALIFIED PROFESSIONAL ASSET MANAGER" or "QPAM" (within the meaning of Part V of the QPAM Exemption), no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a Person controlling or controlled by the QPAM (applying the definition of "CONTROL" in Section V(e) of the QPAM Exemption) owns a 5% or more interest in the Company and (i) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Company in writing pursuant to this clause (iii); or (iv) the Source is a governmental plan; or (v) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this clause (v); or 33 35 (vi) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA. As used in this paragraph 9B, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL PLAN", "PARTY IN INTEREST" and "SEPARATE ACCOUNT" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 10. DEFINITIONS; ACCOUNTING MATTERS. For the purpose of this Agreement, the terms defined in paragraph 10A (or within the text of any other paragraph) shall have the respective meanings specified therein and all accounting matters shall be subject to determination as provided in paragraph 10B. 10A. DEFINED TERMS. "AFFILIATE" shall mean, at any time, and with respect to any Person, any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person. As used in this definition, "CONTROL" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, membership interests, by contract or otherwise. Unless the context otherwise clearly requires, any reference to an "AFFILIATE" is a reference to an Affiliate of the Company. "APPLICABLE INTEREST RATE" shall have the meaning specified in paragraph 1A. "ASSET BASE" shall mean, as of the last day of any fiscal month, the total of (i) 85% of the remainder of (A) the daily average for such month of the amount of "ACCOUNTS AND NOTES RECEIVABLE, NET" as would be shown on the Company's consolidated balance sheet minus (B) the sum of (x) all Debt payable to members of the Company and (y) the then outstanding amount of all Indebtedness secured by a Lien on any such Accounts and notes receivable (other than Liens in favor of the Collateral Agent) plus (ii) 50% of the remainder of (A) the amount, based on the lower of cost or market value, of "INVENTORIES" as would be shown on the Company's consolidated balance sheet as of the last day of such month minus (B) the then outstanding amount of all Indebtedness secured by a Lien on any such Inventories (other than Liens in favor of the Collateral Agent) plus (iii) the remainder of (x) the Specified Percentage (as defined below) of the amount of "PROPERTIES, LESS ACCUMULATED DEPRECIATION" as would be shown on the Company's consolidated balance sheet as of the last day of such month minus (y) the then outstanding amount of all Indebtedness secured by a Lien on any such properties (other than Liens in favor of the Collateral Agent); provided that the "Accounts and notes receivable", "Inventories" and "Properties" of Cotter Canada Hardware and Variety Company Inc. and of TruServ Canada Cooperative Inc. shall be excluded from clauses (i), (ii) and (iii) above; and provided further that the amount determined pursuant to clause (ii) (the "INVENTORY AMOUNT") shall be reduced by the amount (if any) necessary so that the Inventory Amount is not more than 45% of the total of clauses (i), (ii) and (iii). For purposes of the foregoing, "SPECIFIED PERCENTAGE" means (a) from January 1, 2000 through December 31, 2000, 40%, (b) from January 1, 2001 through December 31, 2001, 30%, and (c) thereafter, 20%. "ASSET SALE" shall have the meaning specified in paragraph 6A(3)(i). 34 36 "ATTORNEY COSTS" shall mean all fees and charges of any law firm or other external counsel, and, without duplication, the allocated costs of internal legal services and all disbursements of internal counsel. "AUTHORIZED OFFICER" shall mean, in the case of the Company, its chief executive officer, its chief financial officer, its chief operating officer or any other officer of the Company designated as an "AUTHORIZED OFFICER" of the Company for the purpose of this Agreement and the other Note Documents in an Officer's Certificate executed by the Company's chief executive officer or chief financial officer and delivered to the holders of the Notes. Any action taken under this Agreement or any other Note Document on behalf of the Company by any individual who on or after the date of this Agreement shall have been an Authorized Officer of the Company shall be binding on the Company even though such individual shall have ceased to be an Authorized Officer of the Company. "BA CREDIT AGREEMENTS" shall mean (i) the Amended and Restated Credit Agreement dated as of April 14, 2000 among the Company, Bank of America, N.A., as agent, and the various financial institutions party thereto, as amended from time to time, and (ii) any refinancings, renewals or replacements of the credit agreement referred to in clause (i) above. "BANKRUPTCY LAW" shall have the meaning specified in clause (viii) of paragraph 7A. "BENEFITED OBLIGATIONS" shall have the meaning specified in the Intercreditor Agreement. "BENEFITED PARTIES" shall have the meaning specified in the Intercreditor Agreement. "BUSINESS DAY" shall mean any day other than (i) a Saturday or a Sunday and (ii) a day on which commercial banks in New York City or in the State of Illinois are required or authorized to be closed. "CAPITALIZED LEASE OBLIGATION" shall mean any rental obligation which, under GAAP, is or will be required to be capitalized on the books of the Company or any Subsidiary, taken at the amount thereof accounted for as indebtedness (net of interest expenses) in accordance with such principles. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended. "CODE" shall mean the Internal Revenue Code of 1986, as amended. "COLLATERAL AGENT" shall mean Bank of America, N.A., a national banking association, in its capacity as collateral agent under the Intercreditor Agreement and the Collateral Documents, together with any successor thereto in such capacity. "COLLATERAL DOCUMENTS" shall mean the Security Agreement, the Trademark Security Agreement, the Pledge Agreement, each Mortgage and any other document or 35 37 instrument pursuant to which the Company or any Guarantor grants to the Collateral Agent, for the benefit of the Benefited Parties, a security interest in any of its property to secure the payment of any of the Benefited Obligations, as such documents are amended from time to time in accordance with their respective terms and the terms of the Intercreditor Agreement. "CONFIDENTIAL INFORMATION" shall have the meaning specified in paragraph 18. "CONSOLIDATED CAPITALIZATION" shall mean, as of the time of any determination, the sum of (i) Consolidated Net Worth and (ii) Funded Debt of the Company and its Subsidiaries on a consolidated basis. "CONSOLIDATED NET EARNINGS" shall mean with respect to any period: (i) consolidated gross revenues of the Company and its Subsidiaries, minus (ii) all operating and non-operating expenses of the Company and its Subsidiaries including all charges of a proper character (including current and deferred taxes on income, provision for taxes on unremitted foreign earnings which are included in gross revenues, and current additions to reserves and merger integration costs), provided that it is agreed and understood that the following shall not be included in the calculation of consolidated gross revenues of the Company and its Subsidiaries: (a) any gains (net of expenses and taxes applicable thereto) in excess of losses resulting from the sale, conversion or other disposition of capital assets (i.e., assets other than current assets); (b) any gains resulting from the appraised write-up of assets; (c) any equity of the Company or any Subsidiary in the unremitted earnings of any corporation which is not a Subsidiary; (d) any earnings of any Person acquired by the Company or any Subsidiary through purchase, merger or consolidation or otherwise for any year prior to the year of acquisition; or (e) any deferred credit representing the excess of equity in any Subsidiary at the date of acquisition over the cost of the investment in the Subsidiary, all determined in accordance with GAAP provided that, to the extent that amounts are deducted from Consolidated Net Earnings during the Company's 1999 fiscal year as a result of SOP 98-5, "REPORTING THE COSTS OF START-UP ACTIVITIES", issued by the American Institute of Certified Public Accountants ("SOP 98-5"), in excess of the amount that would have been deducted absent SOP 98-5, such excess shall be added back to Consolidated Net Earnings. 36 38 "CONSOLIDATED NET WORTH" shall mean, as of any date of determination, the sum of (i) the par value (or value stated on the books of the Company) of the capital stock of all classes of the Company, plus (or minus in the case of a surplus deficit) (ii) the amount of the consolidated surplus, whether capital or earned, of the Company and its Subsidiaries, all determined in accordance with GAAP. "CONSOLIDATED TOTAL ASSETS" shall mean the consolidated assets of the Company and its Subsidiaries calculated in accordance with GAAP. "CONTRACTUAL OBLIGATION" shall mean, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its property is bound. "CURRENT DEBT" shall mean, with respect to any Person, all Indebtedness of such Person for borrowed money which by its terms or by the terms of any instrument or agreement relating thereto matures on demand or within one year from the date of the creation thereof and is not directly or indirectly renewable or extendible at the option of the debtor to a date more than one year from the date of the creation thereof, provided that (i) borrowings under any revolving credit facility (including, without limitation, the BA Credit Agreements) shall constitute Current Debt and (ii) Guarantees of Indebtedness of Company members in an aggregate amount not to exceed $20,000,000 shall not constitute Current Debt, so long as no event has occurred the result of which would be to cause or permit such Indebtedness to become due prior to any stated maturity. "DEBT" shall mean Current Debt and Funded Debt. "EBITDA" shall mean, for any period, Consolidated Net Earnings for such period plus, to the extent deducted in computing such Consolidated Net Earnings, interest expense, taxes, depreciation and amortization. "EFFECTIVE DATE" shall have the meaning specified in paragraph 3. "ENVIRONMENTAL LAWS" shall mean all federal, state, local and foreign laws relating to pollution or protection of the environment, including laws relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment (including without limitation ambient air, surface water, ground water, or land), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes, and any and all regulations, codes, plans, orders, decrees, judgments, injunctions, notices or demand letters issued, entered, promulgated or approved thereunder. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "ERISA AFFILIATE" shall mean any corporation which is a member of the same controlled group of corporations as the Company within the meaning of section 414(b) of the 37 39 Code, or any trade or business which is under common control with the Company within the meaning of section 414(c) of the Code. "EVENT OF DEFAULT" shall mean any of the events specified in paragraph 7A, provided that there has been satisfied any requirement in connection with such event for the giving of notice, or the lapse of time, or the happening of any further condition, event or act, and "DEFAULT" shall mean any of such events, whether or not any such requirement has been satisfied. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder. "FINANCING AGREEMENT" shall have the meaning specified in the Intercreditor Agreement. "FIRST TIER BENEFITED OBLIGATIONS" shall have the meaning specified in the Intercreditor Agreement. "FIXED CHARGE COVERAGE RATIO" shall mean, as of the last day of any fiscal quarter, the ratio of: (a) the sum, for the period of four consecutive fiscal quarters ending on such day, of (i) Consolidated Net Earnings plus (ii) to the extent deducted in determining such Consolidated Net Earnings, interest expense, taxes, operating lease expense, depreciation and amortization plus (iii) for the period of four fiscal quarters ending March 31, 2000, June 30, 2000 and September 30, 2000, Special 1999 Charges (to the extent taken in such period), plus (iv) for the period of four fiscal quarters ending March 31, 2000 and June 30, 2000, Special A/P Charges (to the extent taken in such period), to (b) the sum for such period of (i) operating lease expense and (ii) interest expense; each as determined for the Company and its Subsidiaries on a consolidated basis. "FOREIGN SUBSIDIARY" shall mean each Subsidiary of the Company which is organized under the laws of any jurisdiction other than, and which is conducting the majority of its business outside of, the United States or any state thereof. "FUNDED DEBT" shall mean and include, (i) any obligation payable more than one year from the date of creation thereof which under GAAP is shown on a balance sheet as a liability (including Capitalized Lease Obligations but excluding reserves for deferred income taxes and other reserves to the extent that such reserves do not constitute an obligation and excluding borrowings under any revolving credit facility (including, without limitation, any BA Credit Agreement)); (ii) indebtedness payable more than one year from the date of creation thereof which is secured by any Lien on property owned by the Company or any Subsidiary; and 38 40 (iii) Guarantees, provided that Guarantees of Indebtedness of Company members in an aggregate amount not to exceed $20,000,000 shall not constitute Funded Debt, so long as no event has occurred the result of which would be to cause or permit such Indebtedness to become due prior to any stated maturity. "GAAP" shall mean United States generally accepted accounting principles. "GOVERNMENT AUTHORITY" shall mean any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "GUARANTEE" shall mean, with respect to any Person, any direct or indirect liability, contingent or otherwise, of such Person with respect to any Indebtedness, lease, dividend or other obligation of another, including, without limitation, any such obligation directly or indirectly guaranteed, endorsed (other than for collection or deposit in the ordinary course of business) or discounted or sold with recourse by such Person, or in respect of which such Person is otherwise directly or indirectly liable, including, without limitation, any such obligation in effect guaranteed by such Person through any agreement (contingent or otherwise) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), or to maintain the solvency or any balance sheet or other financial condition of the obligor of such obligation, or to make payment for any products, materials or supplies or for any transportation or services regardless of the non-delivery or non-furnishing thereof, in any such case if the purpose or intent of such agreement is to provide assurance that such obligation will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected against loss in respect thereof. The amount of any Guarantee shall be equal to the outstanding principal amount of the obligation guaranteed or such lesser amount to which the maximum exposure of the guarantor shall have been specifically limited. "GUARANTOR" shall mean, on any day, each Subsidiary that has executed a counterpart of the Guaranty on or prior to that day (or is required to execute a counterpart of the Guaranty on or prior to that day). "GUARANTY" shall mean the Guaranty executed by various Subsidiaries, substantially in the form of Exhibit F, as amended from time to time in accordance with its terms and the terms of the Intercreditor Agreement. "HAZARDOUS MATERIALS" means (a) any "hazardous substance" as defined by CERCLA; (b) any "hazardous waste" or "petroleum," as defined by the Resource Conservation and Recovery Act, as amended; (c) any petroleum product; (d) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material or substance within the meaning of any other Environmental Law, as amended or hereafter amended; (e) any radioactive material, including any source, special nuclear or by-product material as defined at 42 U.S.C. 2011 et seq., as 39 41 amended or hereafter amended; or (f) any other toxic chemical, hazardous substance, contaminant or pollutant, medical waste, infectious waste or hazardous waste. "INACTIVE SUBSIDIARY" means any Subsidiary which does not actively conduct business and which has less than $100,000 of assets. "INCLUDING" shall mean, unless the context clearly requires otherwise, "including without limitation". "INDEBTEDNESS" shall mean, with respect to any Person, without duplication, (i) all items (excluding items of contingency reserves or of reserves for deferred income taxes) which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person as of the date on which Indebtedness is to be determined, (ii) all indebtedness secured by any Lien on any property or asset owned or held by such Person subject thereto, whether or not the indebtedness secured thereby shall have been assumed, and (iii) all indebtedness of others with respect to which such Person has become liable by way of Guarantee. "INSTITUTIONAL INVESTOR" shall mean (i) any original purchaser of a Note (or any of its affiliates) or (ii) any insurance company, pension fund, mutual fund, investment company, bank, savings bank, savings and loan association, investment banking company, broker, dealer, trust company, or any finance or credit company, any portfolio or any investment fund managed by any of the foregoing, or any other institutional investor, and any nominee of the foregoing. The term "INSTITUTIONAL INVESTOR" shall not include any competitor of the Company or its Subsidiaries or any labor union with which the Company then has a collective bargaining agreement; provided that it is understood and agreed that no original purchaser of a Note (or any of its affiliates) shall be deemed to be a competitor of the Company or any of its Subsidiaries for purposes of this Agreement. "INTERCREDITOR AGREEMENT" shall mean the Intercreditor Agreement dated as of April 14, 2000 among the Agent, the Collateral Agent and various other parties, substantially in the form of Exhibit G, as amended from time to time in accordance with its terms. "INVESTMENTS" shall mean any loan or advance to, or ownership, purchase or acquisition of any security (including stock) or obligations of, or any other interest in, or any capital contribution made to, any Person. "LIEN" shall mean any mortgage, pledge, security interest, encumbrance, lien (statutory or otherwise) or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction) or any other type of preferential arrangement for the purpose, or having the effect, of protecting a creditor against loss or securing the payment or performance of an obligation. "MAJORITY HOLDER(S)" shall mean the holder or holders of at least 50.1% of the aggregate principal amount of the Notes from time to time outstanding (exclusive of Notes then owned by the Company or any of its Affiliates). 40 42 "MATERIAL" means material in relation to the business, operations, affairs, condition (financial or otherwise), assets, properties, or prospects of the Company and its Subsidiaries taken as a whole. "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on (a) the business, operations, affairs, condition (financial or otherwise), assets, properties or prospects of the Company and its Subsidiaries taken as a whole, or (b) the ability of the Company or any Subsidiary to perform its obligations under this Agreement, the Notes, the Other Agreements, the Guaranty, the Collateral Documents or any other Note Documents, or (c) the validity or enforceability of this Agreement, the Notes, the Other Agreements, the Guaranty, the Collateral Documents or any other Note Documents. "MEMORANDUM" shall have the meaning specified in paragraph 8C. "MORTGAGE" shall mean a mortgage, deed of trust, leasehold mortgage or similar instrument granting the Collateral Agent a Lien on real property owned or leased by the Company or any Subsidiary (such Mortgage to be in form and substance satisfactory to the Collateral Agent and the Majority Holders). "MULTIEMPLOYER PLAN" shall mean any Plan which is a "MULTIEMPLOYER PLAN" (as such term is defined in section 4001(a)(3) of ERISA. "NET CASH PROCEEDS" shall mean, with respect to any Asset Sale, the aggregate cash proceeds (including cash proceeds received by way of deferred payment of principal pursuant to a note, installment receivable or otherwise, but only as and when received) received by the Company or any Subsidiary pursuant to such Asset Sale net of (i) the direct costs relating to such Asset Sale (including sales commissions and legal, accounting and investment banking fees), (ii) taxes paid or reasonably estimated by the Company to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and (iii) amounts required to be applied to the repayment of any Debt or lease obligations secured by a Lien (other than Liens in favor of the Collateral Agent) on any asset subject to such Asset Sale (if such Lien is permitted by paragraph 6A(1)). "NOTE DOCUMENTS" shall mean this Agreement, the Other Agreements, any Note, the Guaranty, the Intercreditor Agreement, the Collateral Documents, and all other documents delivered to the Collateral Agent or any holder of Notes in connection herewith. "NOTES" shall have the meaning specified in paragraph 1A. "OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of the Company by an Authorized Officer of the Company. "ORIGINAL NPA" shall have the meaning specified in the Recitals hereto. "OVERDUE RATE" shall mean, for each day, a rate per annum equal to the greater of (a) 12.60% and (b) the sum of 3.50% plus the Prime Rate for such day. 41 43 "PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "PERSON" shall mean and include an individual, a partnership, a limited liability company, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof. "PLAN" shall mean any employee pension benefit plan (as such term is defined in section 3 of ERISA) which is or has been established or maintained, or to which contributions are or have been made, by the Company or any ERISA Affiliate. "PLEDGE AGREEMENT" shall mean the Pledge Agreement among the Company, various Subsidiaries of the Company and the Collateral Agent, substantially in the form of Exhibit H, as amended from time to time in accordance with its terms and the terms of the Intercreditor Agreement. "PRIME RATE" shall mean the rate of interest publicly announced by Morgan Guaranty Trust Company of New York in New York City from time to time as its "BASE" or "PRIME" rate. "PRUDENTIAL AGREEMENT" shall mean, collectively, (i) the Amended and Restated Note Purchase and Private Shelf Agreement dated as of November 13, 1997, among the Company and The Prudential Insurance Company of America and certain of its affiliates ("PRUDENTIAL"), and (ii) the Note Purchase Agreement dated as of April 13, 1992 between the Company and Prudential, each as amended from time to time. "PURCHASER'S ENVIRONMENTAL LIABILITY" shall mean any and all losses, liabilities, obligations, penalties, claims, litigation, demands, defenses, costs, judgments, suits, proceedings, damages (including consequential damages), disbursements or expenses of any kind or nature whatsoever (including reasonable attorneys' fees at trial and appellate levels and experts' fees and disbursements and expenses incurred in investigating, defending against or prosecuting any litigation, claim or proceeding) which may at any time be imposed upon, incurred by or asserted or awarded against any Purchaser or any of its respective affiliates, shareholders, directors, officers, employees or agents in connection with or arising from: (a) any investigation, litigation or proceeding related to any environmental cleanup, audit, compliance or other matter relating to the protection of the environment to which the Company or any of its Subsidiaries may be subject; (b) the Release by the Company or any of its Subsidiaries of any Hazardous Material on, in, under or affecting all or any portion of any property of the Company or any such Subsidiary, the groundwater, or any of the surrounding areas; (c) the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, discharging or releases from, any real property owned or operated by the Company or any of its Subsidiaries of any Hazardous Material (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Environmental Law); 42 44 (d) any misrepresentation, inaccuracy or breach of any warranty or covenant, contained in or referred to in paragraph 5F or paragraph 80; or (e) the imposition of any lien for damages caused by or the recovery of any costs for the cleanup, release or threatened release of Hazardous Material by the Company or any of its Subsidiaries, or in connection with any property owned or formerly owned by the Company or any of its Subsidiaries. "QPAM EXEMPTION" shall mean Prohibited Transaction Class Exemption 84-14 issued by the United States Department of Labor. "RELEASE" means a "release," as such term is defined in CERCLA. "REQUIRED HOLDER(S)" shall mean the holder or holders of at least 66 2/3% of the aggregate principal amount of the Notes from time to time outstanding (exclusive of Notes then owned by the Company or any of its Affiliates). "RESET DATE" shall mean the first date after the Effective Date on which the Total Senior Debt to EBITDA Ratio has been below 3.00 to 1.00 for a period of four consecutive fiscal quarters. "RESPONSIBLE OFFICER" shall mean the chief executive officer, chief operating officer, chief financial officer or chief accounting officer of the Company, the general counsel of the Company, or any other officer of the Company involved principally in its financial administration or its controllership function. "RESTRICTED INVESTMENTS" shall mean any Investment prohibited by paragraph 6B. "RESTRICTED PAYMENT" shall have the meaning specified in paragraph 6C. "S&P" shall have the meaning specified in paragraph 1A. "SECURED FUNDED DEBT" shall mean Funded Debt which is secured by any Lien. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and the regulations promulgated thereunder. "SECURITY AGREEMENT" shall mean the Security Agreement among the Company, various Subsidiaries and the Collateral Agent, substantially in the form of Exhibit I, as amended from time to time in accordance with its terms and the terms of the Intercreditor Agreement. "SENIOR FINANCIAL OFFICER" shall mean the chief financial officer, principal accounting officer, treasurer or controller of the Company. "SENIOR FUNDED DEBT" shall mean Funded Debt of the Company or any of its Subsidiaries on a consolidated basis which is not Subordinated Debt. 43 45 "SOURCE" shall have the meaning set forth in paragraph 9B. "SPECIAL A/P CHARGES" shall mean, at any time through (and including) June 30, 2000, up to $15,000,000 of accounts payable charges taken by the Company during the four immediately preceding fiscal quarters. "SPECIAL 1999 CHARGES" shall mean up to $100,000,000 of accounting adjustments taken by the Company during the 1999 fiscal year. "SUBORDINATED DEBT" shall mean any Indebtedness of the Company which (i) is not Guaranteed by any other Person, (ii) requires no payment of principal to be made prior to July 1, 2009 and (iii) contains terms of subordination identical to or, in the reasonable determination of the holders of the Notes no less favorable to such holders of the Notes than, the terms of subordination set forth in Exhibit E hereto and, which by virtue of such language and any necessary action of the Board of Directors of the Company, is subordinated to the Indebtedness owing from time to time by the Company to the holders of any Note issued in connection with this Agreement; provided, however, that notwithstanding the foregoing, Indebtedness which requires payment of principal to be made prior to July 1, 2009 that has been or is issued to and beneficially held by any Person that at the time of such issuance is or was a member of the Company shall be considered "SUBORDINATED DEBT" if such Indebtedness otherwise complies with clauses (i) and (iii) above. "SUBORDINATED FUNDED DEBT" shall mean Funded Debt of the Company or any of its Subsidiaries which is Subordinated Debt. "SUBSIDIARY" shall mean any corporation eighty percent (80%) or more of the stock of every class of which, except directors' qualifying shares, shall, at the time as of which any determination is being made, be owned by the Company either directly or through Subsidiaries. Notwithstanding the foregoing, for purposes of calculating the financial covenants, each of Cotter Canada Hardware and Variety Company Inc. and TruServ Canada Cooperative Inc. will be deemed a Subsidiary of the Company if, in accordance with GAAP, it is consolidated in the financial statements of the Company required to be delivered pursuant to clauses (i) and (ii) of paragraph 5A hereof. "SUBSTANTIAL STOCKHOLDER" shall mean (i) any Person owning, beneficially or of record, directly or indirectly, either individually or together with all other Persons to whom such Person is related by blood, adoption or marriage, stock of the Company (of any class having ordinary voting power for the election of directors) aggregating five percent (5%) or more of such voting power or (ii) any Person related by blood, adoption or marriage to any Person described or coming within the provisions of clause (i) of this definition. "TOTAL SENIOR DEBT" shall mean the sum of (a) all Debt of the Company and its Subsidiaries other than Subordinated Debt and (b) the principal or face amount of all outstanding "LC Obligations" under and as defined in the Intercreditor Agreement. "TOTAL SENIOR DEBT TO EBITDA RATIO" shall mean, as of the last day of any fiscal quarter, the ratio of (a) the remainder of (i) the daily average of the amount of Total Senior Debt outstanding during the last fiscal month of such fiscal quarter minus (ii) the daily average 44 46 of cash and marketable securities during the last fiscal month of such fiscal quarter to (b) the sum of (i) EBITDA for the period of four consecutive fiscal quarters then ending, plus (ii) for the period of four fiscal quarters ending March 31, 2000, June 30, 2000 and September 30, 2000, Special 1999 Charges (to the extent taken in such period), plus (iii) for the period of four fiscal quarters ending March 31, 2000 and June 30, 2000, Special A/P Charges (to the extent taken in such period). "TRADEMARK SECURITY AGREEMENT" shall mean the Trademark Security Agreement between the Company and the Collateral Agent, substantially in the form of Exhibit J, as amended from time to time in accordance with its terms and the terms of the Intercreditor Agreement. "VOTING STOCK" shall mean, with respect to any corporation, any shares of stock of such corporation whose holders are entitled under ordinary circumstances to vote for the election of directors of such corporation (irrespective of whether at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency). "YEAR 2000 PROBLEM" shall mean the risk that computer applications and embedded microchips in non-computing devices may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999. 10B. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all unaudited financial statements and certificates and reports as to financial matters required to be furnished hereunder shall be prepared, in accordance with GAAP applied on a basis consistent with the most recent audited financial statements delivered pursuant to clause (ii) of paragraph 5A or, if no such statements have been so delivered, the most recent audited financial statements referred to in clause (i) of paragraph 8B. 11. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES. 11A. REGISTRATION OF NOTES. The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary. The Company shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of the Notes. 11B. TRANSFER AND EXCHANGE OF NOTES. Upon surrender of any Note at the principal executive office of the Company for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written 45 47 instrument of transfer duly executed by the registered holder of such Note or his attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or part thereof), the Company shall execute and deliver, at the Company's expense (except as provided below), one or more new Notes (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibit A. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than $100,000, provided that if necessary to enable the registration of transfer by a holder of its entire holding of Notes, one Note may be in a denomination of less than $100,000. Any transferee, by its acceptance of a Note registered in its name (or the name or its nominee), shall be deemed to have made the representation set forth in Section 9B. 11C. REPLACEMENT OF NOTES. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation) and (i) in the case of loss, theft, or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Note is, or is a nominee for, you or an original Other Purchaser or another holder of a Note with a minimum net worth of at least $100,000,000, such Person's own unsecured agreement of indemnity shall be deemed to be satisfactory), or (ii) in the case of mutilation, upon surrender and cancellation thereof, the Company at its own expense shall execute and deliver, in lieu thereof, a new Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon. 12. PAYMENTS ON NOTES. 12A. PLACE OF PAYMENT. Subject to paragraph 12B, payments of principal, Make-Whole Amount, if any, and interest becoming due and payable on the Notes shall be made in Kansas City, Missouri at the principal office of the United Missouri Bank in such jurisdiction. The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office of the Company in such jurisdiction or the principal office of a bank or trust company in such jurisdiction. 12B. HOME OFFICE PAYMENT. So long as you or your nominee shall be the holder of any Note, and notwithstanding anything contained in paragraph 12A or in such Note to the contrary, the Company will pay all sums becoming due on such Note for principal, Make-Whole Amount, if any, and interest by the method and at the address specified for such purpose 46 48 below your name in Schedule 1, or by such other method or at such other address as you shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, you shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to paragraph 12A. Prior to any sale or other disposition of any Note held by you or your nominee you will, at your election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes pursuant to paragraph 11B. The Company will afford the benefits of this paragraph 12B to any Institutional Investor that is the direct or indirect transferee of any Note purchased by you under this Agreement and that has made the same agreement relating to such Note as you have made in this paragraph 12B. 13. EXPENSES, ETC. 13A. TRANSACTION EXPENSES. Whether or not the transactions contemplated hereby are consummated, the Company will pay all costs and expenses (including reasonable attorneys' fees of a special counsel and, if reasonably required, local or other counsel) incurred by you and each Other Purchaser or holder of a Note in connection with such transactions (including, without limitation, the transactions contemplated by paragraphs 5J and 5K) and in connection with any amendments, waivers or consents under or in respect of this Agreement or the Notes or any other Note Documents (whether or not such amendment, waiver or consent becomes effective), including, without limitation: (a) the costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement or the Notes or any other Note Documents or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement or the Notes or any other Note Documents, or by reason of being a holder of any Note, and (b) the costs and expenses, including financial advisors' fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby, by the Notes and by the other Note Documents. The Company will pay, and will save you and each other holder of a Note harmless from, (i) all claims in respect of any fees, costs or expenses if any, of brokers and finders (other than those retained by you), (ii) all initial and ongoing fees and all expenses of the Collateral Agent and (iii) all liabilities in respect of any filing, recording and other similar fees or expenses, or any stamp, documentary, recording and other similar taxes, if any, which may be payable or which may be determined to be payable with respect to the execution, delivery, filing, recording, or enforcement of this Agreement, the Notes or the other Note Documents. 13B. COMPANY INDEMNIFICATION. Whether or not the transactions contemplated by this Agreement are consummated, the Company shall indemnify and hold you and each of your respective officers, directors, employees, counsel, agents and attorneys-in-fact (each an "INDEMNIFIED PERSON") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including attorney's fees and expenses) of any kind or nature whatsoever which may at any time (including at any time following repayment, or transfer by you, of the Notes) be imposed on, 47 49 incurred by or asserted against any such Indemnified Person in any way relating to or arising out of (i) this Agreement, the Notes or any other Note Document or any document contemplated by or referred to herein or therein, or the transactions contemplated hereby or thereby, or any action taken or omitted by any such Indemnified Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any bankruptcy, insolvency, reorganization or other similar proceeding or any appellate proceeding) related to or arising out of this Agreement, the Notes or any other Note Document, (ii) the use of the proceeds of the Notes, or (iii) any Purchaser's Environmental Liability, in each case, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "INDEMNIFIED LIABILITIES") provided that the Company shall not have obligation under this Paragraph 13B to any Indemnified Person with respect to Indemnified Liabilities resulting solely from the gross negligence or willful misconduct of such Indemnified Person. 13C. SURVIVAL. The obligations of the Company under this paragraph 13 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement or the Notes or any other Note Document and the termination of this Agreement or any other Note Document. The obligations of the Company under this paragraph 13 will also survive the release of any collateral, or a transfer of the Company's property by foreclosure or by a deed in lieu of foreclosure, regardless of whether caused by, or within the control of, the Company or any Subsidiary of the Company. The Company, its successors and assigns, hereby waive, release and agree not to make any claim or bring any cost recovery action against any Indemnified Person under CERCLA or any state equivalent, or any other similar law now existing or hereafter enacted. It is expressly understood and agreed that the Company's obligation to any Indemnified Person under the indemnity set forth in paragraph 13B shall be without regard to fault on the part of the Company with respect to the violation or condition which results in liability of any Indemnified Person. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. 14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All representations and warranties contained herein shall survive the execution and delivery of this Agreement, the Notes and any other Note Document, the purchase or transfer by you of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of you or any other holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of the Company pursuant to this Agreement and any other Note Document shall be deemed representations and warranties of the Company under this Agreement. Subject to the preceding sentence, this Agreement, the Notes and the other Note Documents embody the entire agreement and understanding between you and the Company and supersede all prior agreements and understandings relating to the subject matter hereof. 48 50 15. AMENDMENT AND WAIVER. 15A. REQUIREMENTS. This Agreement and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of the Company and the Required Holders, except that (a) no amendment or waiver of any of the provisions of paragraphs 1, 2, 3, 8, 9 or 19 hereof, or any defined term (as it is used therein), will be effective as to you unless consented to by you in writing, and (b) no such amendment or waiver may, without the written consent of the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of paragraph 7 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of payment or method of computation of interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver, or (iii) amend any of paragraphs 4, 7A(i), 7A(ii), 7A(a), 7A(b), 7A(c), 15 or 18. 15B. SOLICITATION OF HOLDERS OF NOTES. (a) Solicitation. The Company will provide each holder of the Notes (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof, of the Notes or of any other Note Document. The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this paragraph 15 or pursuant to the provisions of the Intercreditor Agreement or any other Note Document to each holder of outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes. (b) Payment. The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes of any waiver or amendment of any of the terms and provisions hereof or of any other Note Document unless such remuneration is concurrently paid, or security is concurrently granted, on the same terms, ratably to each holder of Notes then outstanding even if such holder did not consent to such waiver or amendment. 15C. BINDING EFFECT, ETC. Any amendment or waiver consented to as provided in this paragraph 15 applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon the Company without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any rights consequent thereon. No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder, under any Note or under any other Note Document shall operate as a waiver of any rights of any holder in such Note. As used herein, the term "THIS AGREEMENT" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented. 49 51 15D. NOTES HELD BY COMPANY, ETC. Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement, the Notes or under any other Note Document, or have directed the taking of any action provided herein, in the Notes or in any other Note Document to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by the Company or any of its Affiliates shall be deemed not to be outstanding. 16. NOTICES. All notices and communications provided for hereunder shall be in writing and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (i) if to you or your nominee or to any Other Purchaser, or its nominee, to you or it at the address specified for such communications in Schedule 1, or at such other address as you or it shall have specified to the Company in writing, (ii) if to the Company, to the Company at its address set forth at the beginning hereof to the attention of the Chief Financial Officer, or at such other address as the Company shall have specified to the holder of each Note in writing. Notices under this paragraph 16 will be deemed given only when actually received. 17. REPRODUCTION OF DOCUMENTS. This Agreement, all other Note Documents and all other agreements relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you on the Effective Date (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and you may destroy any original document so reproduced. The Company agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This paragraph 17 shall not prohibit the Company or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction. 50 52 18. CONFIDENTIAL INFORMATION. For the purposes of this paragraph 18, "CONFIDENTIAL INFORMATION" means information delivered to you by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by you as being confidential information of the Company or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to you prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by you or any Person acting on your behalf, (c) otherwise becomes known to you other than through disclosure by the Company or any Subsidiary or (d) constitutes financial statements delivered to you under paragraph 5A that are otherwise publicly available. You will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by you in good faith to protect confidential information of third parties delivered to you, provided that you may deliver or disclose Confidential Information to (i) your directors, officers, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by your Notes), (ii) your financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this paragraph 18, (iii) any other holder of any Note, (iv) any Institutional Investor to which you sell or offer to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this paragraph 18), (v) any Person from which you offer to purchase any security of the Company (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this paragraph 18), (vi) any federal or state regulatory authority having jurisdiction over you, (vii) the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about your investment portfolio or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to you, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which you are a party or (z) if an Event of Default has occurred and is continuing, to the extent you may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under your Notes, this Agreement or any other Note Document. Each holder of a Note shall, to the extent permitted by applicable law, use reasonable efforts to give the Company timely notice of any event described in paragraph 18(viii)(w)(x) or (y) of the preceding sentence which may require disclosure of Confidential Information so that the Company will have an opportunity to seek a protective order. Each holder of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this paragraph 18 as though it were a party to this Agreement. On reasonable request by the Company in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Company embodying the provisions of this paragraph 18. 51 53 19. SUBSTITUTION OF PURCHASER. You shall have the right to substitute any one of your Affiliates as the purchaser of the Notes that you have agreed to purchase hereunder, by written notice to the Company, which notice shall be signed by both you and such Affiliate, shall contain such Affiliate's agreement to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in paragraph 9. Upon receipt of such notice, wherever the word "you" is used in this Agreement (other than in this paragraph 19), such word shall be deemed to refer to such Affiliate in lieu of you. In the event that such Affiliate is so substituted as a purchaser hereunder and such Affiliate thereafter transfers to you all of the Notes then held by such Affiliate, upon receipt by the Company of notice of such transfer, wherever the word "you" is used in this Agreement (other than in this paragraph 19), such word shall no longer be deemed to refer to such Affiliate, but shall refer to you, and you shall have all the rights of an original holder of the Notes under this Agreement. 20. MISCELLANEOUS. 20A. SUCCESSORS AND ASSIGNS. All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent holder of a Note) whether so expressed or not. 20B. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal of or Make-Whole Amount or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day. 20C. SEVERABILITY. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction. 20D. CONSTRUCTION. Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. This Agreement and the Notes are the result of negotiations among and have been reviewed by counsel to the holders of the Notes and the Company, and are the product of all parties. Accordingly, they shall not be construed against the holders of the Notes merely because of the involvement of the holders of the Notes in their preparation. 20E. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one 52 54 instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. 20F. GOVERNING LAW. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York, excluding choice-of-law principles of the law in such State that would require the application of the laws of a jurisdiction other than such State. 20G. SUBMISSION TO JURISDICTION. The Company hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York County for purposes of all legal proceedings arising out of or relating to this Agreement, the Notes or the transactions contemplated hereby or thereby. The Company irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. 20H. WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND EACH HOLDER OF NOTES HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 20I. AMENDMENT AND RESTATEMENT. This Agreement amends and restates the Original NPA in its entirety and, on and after the Effective Date, the Original NPA shall be of no further force or effect (except for any provision thereof which by its terms survives termination thereof). 20J. INTERCREDITOR AGREEMENT; COLLATERAL MATTERS. (a) Collateral Agent. Each holder of Notes hereby acknowledges and agrees that Bank of America, N.A., may act as Collateral Agent under the Intercreditor Agreement. (b) Release of Liens. Each holder of Notes irrevocably authorizes the Collateral Agent, at its option and in its discretion, (i) to release any Lien on any property granted to or held by the Collateral Agent under any Collateral Document (x) upon payment in full of all Notes and all other obligations of the Company hereunder and under the other Note Documents; (y) which is sold or to be sold or disposed of as part of or in connection with any disposition permitted hereunder or (z) subject to paragraph 15, if approved, authorized or ratified in writing by the Required Holders; (ii) to subordinate any Lien on any property granted to or held by the Collateral Agent under any Collateral Document to the holder of any Lien on such property which is permitted by paragraph 6A(1) hereof; and (iii) to release any Guarantor from its obligations under the Guaranty if such entity ceases to be a Subsidiary as a result of a transaction permitted hereunder. Upon request by the Collateral Agent at any time, the Required Holders will confirm in writing the Collateral Agent's authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Guaranty, pursuant to this paragraph 20J(b). 53 55 20K. WAIVER. By signing this Agreement, the Required Holders waive the Company's non-compliance with the financial covenants contained in paragraph 6H of the Original NPA for the periods ended December 31, 1999 and March 31, 2000 or with paragraph 6A(2) of the Original NPA for the periods ended December 31, 1999, January 31, 2000, February 29, 2000 and March 31, 2000. 20L. INTEREST RATE LIMITATION. Nothing contained in the definition of Overdue Rate or in any Note Document shall require the Company or any Subsidiary to pay interest at a rate exceeding the maximum rate permitted by applicable law. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 54 56 * * * * * If you are in agreement with the foregoing, please sign the form of agreement on the accompanying counterpart of this Agreement and return it to the Company, whereupon the foregoing shall become a binding agreement between you and the Company. Very truly yours, TRUSERV CORPORATION By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: The foregoing Agreement is hereby accepted as of the date first above written. [Name of Purchaser] By: -------------------------------- Name: Title: 57 SCHEDULE 1 INFORMATION RELATING TO PURCHASERS Principal Amount of Name and Address of Purchaser Notes Purchased - ----------------------------- ------------------- WHITING & CO. $26,750,000 (1) All payments by wire transfer of immediately available funds to: Bank of NYC/CTR/BBK IOC566 - Custody JPMIM Incoming Wire Account ABA=021000018 Ref: TruServ Corp. with sufficient information to identify the source and application of such funds. (2) All notices of payments and written confirmations of such wire transfers: J.P. Morgan Investment Management Inc. Securities Administration 522 Fifth Avenue New York, N.Y. 10036 (3) All other communications: J.P. Morgan Investment Management Inc. Securities Administration 522 Fifth Avenue New York, N.Y. 10036 58 SCHEDULE 1 INFORMATION RELATING TO PURCHASERS Principal Amount of Name and Address of Purchaser Notes Purchased - ----------------------------- ------------------ WHITING & CO. $2,000,000 (1) All payments by wire transfer of immediately available funds to: Bank of NYC/CTR/BBK IOC566 - Custody JPMIM Incoming Wire Account ABA=021000018 Ref: TruServ Corp. with sufficient information to identify the source and application of such funds. (2) All notices of payments and written confirmations of such wire transfers: J.P. Morgan Investment Management Inc. Securities Administration 522 Fifth Avenue New York, N.Y. 10036 (3) All other communications: J.P. Morgan Investment Management Inc. Securities Administration 522 Fifth Avenue New York, N.Y. 10036 59 SCHEDULE 1 INFORMATION RELATING TO PURCHASERS Principal Amount of Name and Address of Purchaser Notes Purchased - ----------------------------- ------------------ HARE & CO. $500,000 (1) All payments by wire transfer of immediately available funds to: State Street Bank and Trust Co. - Boston Ma ABA #011-000-028 A/C #EF4A A/C Name: Global Strategic Income (Corporate) with sufficient information to identify the source and application of such funds. (2) All notices of payments and written confirmations of such wire transfers: State Street Bank and Trust Co. One Heritage Drive North Quincy, Massachusetts 02171 Attn.: Phil Cummings (3) All other communications: State Street Bank and Trust Co. One Heritage Drive North Quincy, Massachusetts 02171 Attn.: Phil Cummings 60 SCHEDULE 1 INFORMATION RELATING TO PURCHASERS Principal Amount of Name and Address of Purchaser Notes Purchased - ----------------------------- ------------------ KANE & CO. $750,000 (1) All payments by wire transfer of immediately available funds to: Chase Manhattan Bank ABA #021-000-021 FFC: P81858 (Kane & Co.) with sufficient information to identify the source and application of such funds. (2) All notices of payments and written confirmations of such wire transfers: Chase Manhattan Bank, N.A. Three Chase Metrotec Center (6th Floor) Brooklyn, New York 11245 Attn: Mariam Lopez (3) All other communications: Chase Manhattan Bank, N.A. Three Chase Metrotec Center (6th Floor) Brooklyn, New York 11245 Attn: Mariam Lopez 61 SCHEDULE 1 INFORMATION RELATING TO PURCHASERS
Principal Amount of Name and Address of Purchaser Notes Purchased - ----------------------------- ------------------ ALLSTATE LIFE INSURANCE COMPANY $13,333,340 (1) All payments by wire transfer of immediately available funds to: BBK = Harris Trust and Savings Bank ABA #071000288 BNF = Allstate Life Insurance Company Collection Account #168-117-0 ORG = TruServ Corp. OBI = DPP - PPN: 89824@AE5 Payment Due Date (MM/DD/YY) - P_ (Enter "P" and amount of principal being remitted, for example, P 5000000.00) I_(Enter "I" and amount of interest being remitted, for example, I 225000.00) with sufficient information to identify the source and application of such funds. (2) All notices of payments and written confirmations of such wire transfers: Allstate Insurance Company Investment Operations - Private Placements 3075 Sanders Road, Suite G4A Northbrook, Illinois 60062-7127 Telephone: (847) 402-2769 Telecopy: (847) 326-5040 (3) All other communications: Allstate Life Insurance Company Private Placement Department 3075 Sanders Road, Suite G3A Northbrook, Illinois 60062-7127 Telephone: (847) 402-4394 Telecopy: (847) 326-3092
62 SCHEDULE 1 INFORMATION RELATING TO PURCHASERS
Principal Amount of Name and Address of Purchaser Notes Purchased - ----------------------------- ------------------- ALLSTATE LIFE INSURANCE COMPANY $6,666,660 (1) All payments by wire transfer of immediately available funds to: BBK = Harris Trust and Savings Bank ABA #071000288 BNF = Allstate Life Insurance Company Collection Account #168-117-0 ORG = TruServ Corp. OBI = DPP - PPN: 89824@AE5 Payment Due Date (MM/DD/YY) - P_ (Enter "P" and amount of principal being remitted, for example, P 5000000.00) I_(Enter "I" and amount of interest being remitted, for example, I 225000.00) with sufficient information to identify the source and application of such funds. (2) All notices of payments and written confirmations of such wire transfers: Allstate Insurance Company Investment Operations - Private Placements 3075 Sanders Road, Suite G4A Northbrook, Illinois 60062-7127 Telephone: (847) 402-2769 Telecopy: (847) 326-5040 (3) All other communications: Allstate Life Insurance Company Private Placement Department 3075 Sanders Road, Suite G3A Northbrook, Illinois 60062-7127 Telephone: (847) 402-4394 Telecopy: (847) 326-3092
63 SCHEDULE 1 INFORMATION RELATING TO PURCHASERS Principal Amount of Name and Address of Purchaser Notes Purchased - ----------------------------- ------------------ ALLSTATE INSURANCE COMPANY $10,000,000 (1) All payments by wire transfer of immediately available funds to: BBK = Harris Trust and Savings Bank ABA #071000288 BNF = Allstate Insurance Company Collection Account #168-114-7 ORG = TruServ Corp. OBI = DPP - PPN: 89824@AE5 Payment Due Date (MM/DD/YY) - P_ (Enter "P" and amount of principal being remitted, for example, P 5000000.00) I_(Enter "I" and amount of interest being remitted, for example, I 225000.00) with sufficient information to identify the source and application of such funds. (2) All notices of payments and written confirmations of such wire transfers: Allstate Insurance Company Investment Operations - Private Placements 3075 Sanders Road, Suite G4A Northbrook, Illinois 60062-7127 Telephone: (847) 402-2769 Telecopy: (847) 326-5040 (3) All other communications: Allstate Life Insurance Company Private Placement Department 3075 Sanders Road, Suite G3A Northbrook, Illinois 60062-7127 Telephone: (847) 402-4394 Telecopy: (847) 326-3092 64 SCHEDULE 1 INFORMATION RELATING TO PURCHASERS Principal Amount of Name and Address of Purchaser Notes Purchased - ----------------------------- ------------------ AID ASSOCIATION FOR LUTHERANS $10,000,000 (1) All payments by wire transfer of immediately available funds to: Citibank, N.A. ABA #021-000-089 DDA #36126473 Attn: Judy Rock Ref. Account #846647 Aid Association for Lutherans Custody Account $105,000,000 Senior Secured Notes Due 2008 July 1, 2008 payable date principle and interest breakdown with sufficient information to identify the source and application of such funds. (2) All notices of payments and written confirmations of such wire transfers: Income Collection and Disbursement REF Account #846647 Aid Association for Lutherans Custody Account 3800 Citibank Center Tampa Building B, Floor 1, Zone 7 Tampa, Florida 33610-9122 Attn: Income Collection/Judith Rock (3) All other communications: Investment Department Aid Association for Lutherans 4321 North Ballard Road Appleton, Wisconsin 54919 65 SCHEDULE 1 INFORMATION RELATING TO PURCHASERS Principal Amount of Name and Address of Purchaser Notes Purchased - ----------------------------- ------------------ KEYPORT LIFE INSURANCE COMPANY C/O STEIN ROE & FARNHAM INCORPORATED $10,000,000 (1) All payments by wire transfer of immediately available funds to: Federal Reserve Bank of Boston ABA# 011001234 / BOS SAFE DEP DDA# 125261 For: KEYPORT / # KEYF0005002 CUSIP, Pay Date Physical Private: Federal Reserve Bank of Boston Placement Wire: 011001234/BOS SAFE DEP Instructions for Income: Attn.: MBS Income CC: 1253 For: Keyport / # KEYF0005002 Cusip, Description of Security, Pay Date with sufficient information to identify the source and application of such funds. (2) All notices of payments and written confirmations of such wire transfers: Keyport Life Insurance Company c/o Stein Roe & Farnham Incorporated 1 South Wacker Drive Chicago, Illinois 60606 Attn.: Private Placements (3) All other communications: Keyport Life Insurance Company c/o Stein Roe & Farnham Incorporated 1 South Wacker Drive Chicago, IL 60606 66 SCHEDULE 1 INFORMATION RELATING TO PURCHASERS Principal Amount of Name and Address of Purchaser Notes Purchased - ----------------------------- ------------------ NATIONWIDE LIFE INSURANCE COMPANY $10,000,000 (1) All payments by wire transfer of immediately available funds to: The Bank of New York ABA #021-000-018 BNF: IOC566 F/A/O Nationwide Life Insurance Company Attn.: P&I Department PPN #89824@AE5 Security Description ___________________ with sufficient information to identify the source and application of such funds. (2) All notices of payments and written confirmations of such wire transfers: Nationwide Life Insurance Company c/o The Bank of New York P.O. Box 19266 Attn.: P&I Department Newark, New Jersey 07915 With a copy to : Nationwide Life Insurance Company Attn.: Investment Accounting One Nationwide Plaza (1-32-05) Columbus, Ohio 43215-2220 (3) All other communications: Nationwide Life Insurance Company One Nationwide Plaza Columbus, Ohio 43215 Attn.: Corporate Fixed-Income Securities 67 SCHEDULE 1 INFORMATION RELATING TO PURCHASERS Principal Amount of Name and Address of Purchaser Notes Purchased - ----------------------------- ------------------ FEDERATED MUTUAL INSURANCE COMPANY $3,000,000 (1) All payments by wire transfer of immediately available funds to: Norwest Bank Minnesota, N.A. ABA #091000019 s/B BNF A/C # 0000840245 BNF A/C Name: Trust Clearing Acct. OBI: FFC to A/C #12364600 Federated Mutual Insurance Company with sufficient information to identify the source and application of such funds. (2) All notices of payments and written confirmations of such wire transfers: Federal Mutual Insurance Company Attn.: Mark Hood 121 East Park Square Owatonna, Minnesota 55060 (3) All other communications: Federated Mutual Insurance Company Attn.: Mark Hood 121 East Park Square Owatonna, Minnesota 55060 (4) Federal Tax ID#: 41-0417460 68 SCHEDULE 1 INFORMATION RELATING TO PURCHASERS Principal Amount of Name and Address of Purchaser Notes Purchased - ----------------------------- ------------------- FEDERATED LIFE INSURANCE COMPANY $2,000,000 (1) All payments by wire transfer of immediately available funds to: Northwest Bank Minnesota, N.A. ABA #091000019 BNF A/C S/B# 0000840245 BNF A/C Name: Trust Clearing Acct. OBI: FFC to A/C #12364500 Federated Life Insurance Company with sufficient information to identify the source and application of such funds. (2) All notices of payments and written confirmations of such wire transfers: Federated Life Insurance Company Attn.: Mark Hood 121 East Park Square Owatonna, Minnesota 55060 (3) All other communications: Federated Life Insurance Company Attn.: Mark Hood 121 East Park Square Owatonna, Minnesota 55060 (4) Federal Tax ID#: 41-6022443 69 SCHEDULE 1 INFORMATION RELATING TO PURCHASERS Principal Amount of Name and Address of Purchaser Notes Purchased - ----------------------------- ------------------- MODERN WOODMEN OF AMERICA $5,000,000 (1) All payments by wire transfer of immediately available funds to: The Northern Trust Company 50 South LaSalle Street Chicago, Illinois 60675 ABA No. 071-000-152 Account Name: Modern Woodmen of America Account No.: 84352 Each such wire transfer shall set forth the name of the Company, the full title (including the applicable coupon rate and final maturity date) of the Notes, a reference to PPN. No. 89824@AE5 and the due date and application (as among principal, premium and interest) with sufficient information to identify the source and application of such funds. (2) All notices of payments and written confirmations of such wire transfers: Modern Woodmen of America Attn.: Investment Accounting Department 1701 First Avenue Rock Island, Illinois 61201 (3) All other communications: Modern Woodmen of America Attn.: Investment Department 1701 First Avenue Rock Island, Illinois 61201 70 SCHEDULE 1 INFORMATION RELATING TO PURCHASERS Principal Amount of Name and Address of Purchaser Notes Purchased - ----------------------------- ------------------- AMERITAS LIFE INSURANCE CORP. $3,000,000 (1) All payments by wire transfer of immediately available funds to: U.S. Bank ABA #104-000-029 Acct. #1-494-0070-0188 Re. Description of Note; Principal & Interest Breakdown Principal and Interest Breakdown with sufficient information to identify the source and application of such funds. (2) All notices of payments and written confirmations of such wire transfers: Ameritas Life Insurance Corp. 5900 "O" Street Lincoln, Nebraska 68510-2234 ATTN.: James Mikus Telecopy: (402) 467-6970 (3) All other communications: Ameritas Life Insurance Corp. 5900 "O" Street Lincoln, Nebraska 68510-2234 ATTN.: James Mikus 71 SCHEDULE 1 INFORMATION RELATING TO PURCHASERS
Principal Amount of Name and Address of Purchaser Notes Purchased - ----------------------------- ------------------- NATIONAL GUARDIAN LIFE INS. CO $2,000,000 (1) All payments by wire transfer of immediately available funds to: Firstar Bank Madison P.O. Box 7900 Madison, Wisconsin 53707 ABA No. 075900465 For credit to: National Guardian Life Insurance Company Account No.: 312 335 010 with sufficient information to identify the source and application of such funds. (2) All notices of payments and written confirmations of such wire transfers: Attn.: Investment Department National Guardian Life Insurance Company 2 East Gilman Street P.O. Box 1191 Madison, Wisconsin 53701-1191 (3) All other communications: Attn.: Investment Department National Guardian Life Insurance Company 2 East Gilman Street P.O. Box 1191 Madison, Wisconsin 53701-1191
72 EXHIBIT A [FORM OF NOTE] TRUSERV CORPORATION SENIOR SECURED NOTE DUE 2008 No. [_____] April 14, 2000 $[________] PPN: 89824@AE5 FOR VALUE RECEIVED, the undersigned, TruServ Corporation (herein called the "COMPANY"), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to [___________________], or registered assigns, the principal sum of [_____________] DOLLARS on July 1, 2008, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof from (and including) the Original Issuance Date to (but excluding) the date of repayment in full of all amounts due hereunder, at a rate per annum equal to (x) for each day during the period from (and including) the Original Issuance Date to (but excluding) April 1, 1999, 6.85% (y) for each day during the period from (and including) April 1, 1999 to (but excluding) January 1, 2000, 7.35%, and (z) for each day during the period from (and including) January 1, 2000 to (but excluding) the date of repayment in full of all amounts due hereunder, the Applicable Interest Rate, in each case payable semiannually, on the first day of January and July in each year and at maturity, and (b) to the extent permitted by law on any overdue payment (whether by acceleration or otherwise and including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreements referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum equal to the Overdue Rate. In this Note: "APPLICABLE INTEREST RATE" shall mean, for each day during each Relevant Period, (a) 10.10%, if (i) the long-term unsecured debt of the Company is not rated by Standard & Poor's Rating Services, a Division of The McGraw-Hill Companies, Inc. ("S&P"), on the first day of such Relevant Period, or (ii) the long-term unsecured debt of the Company is rated lower than BBB by S&P on the first day of such Relevant Period; (b) 9.25%, if the long-term unsecured debt of the Company is rated BBB or higher by S&P on the first day of such Relevant Period; provided, however, that the Applicable Interest Rate shall mean, for each day during any Relevant Period in which an Event of Default (as defined in the Note Purchase Agreements referred to below) shall have occurred or be continuing, the Overdue Rate for such day. "RELEVANT PERIOD" shall mean (i) each six-month period from (and including) January 1 of each year to (but excluding) July 1 of such year and (ii) each six-month period from (and including) July 1 of each year to (but excluding) January 1 of the immediately succeeding year. 73 "OVERDUE RATE" shall mean, for each day, a rate per annum equal to the greater of (i) 12.60% and (ii) the sum of 3.5% plus the rate of interest publicly announced by Morgan Guaranty Trust Company of New York from time to time in the City of New York as its "base" or "PRIME" rate for such day; "ORIGINAL ISSUANCE DATE" shall mean September 10, 1998; and "RELEVANT PERIOD" shall mean (i) each six-month period from (and including) January 1 of each year to (but excluding) July 1 of such year and (ii) each six-month period from (and including) July 1 of each year to (but excluding) January 1 of the immediately succeeding year. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at Kansas City, Missouri or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreements referred to below. This Note is one of a series of Senior Notes (herein called the "NOTES") issued pursuant to separate Amended and Restated Note Purchase Agreements, dated as of April 14, 2000 (as from time to time amended, the "NOTE PURCHASE AGREEMENTS"), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in paragraph 18 of the Note Purchase Agreements and (ii) to have made the representation set forth in paragraph 9B of the Note Purchase Agreements. This Note is a registered Note and, as provided in the Note Purchase Agreements, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreements. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreements, but not otherwise. This Note is also entitled to the benefits of the Guaranty and the Collateral Documents referred to in the Note Purchase Agreements. If an Event of Default, as defined in the Note Purchase Agreements, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreements. 74 This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York, excluding choice of law principles in such State that would require the application of the laws of a jurisdiction other than such State. TruServ Corporation By ------------------------- Name: Title: 75 SCHEDULE 6A2 [Debt outstanding as of March 31, 2000] 76 SCHEDULE 8E [Projections on a quarterly basis through 12/31/2000 and on an annual basis for 2001 and 2002] 77 TABLE OF CONTENTS 1. DESCRIPTION OF NOTES.......................................................................................2 1A. Description Of Notes................................................................................2 1B. Original Issuance Date; Replacement Of Notes; Amendment Fee.........................................2 2. OTHER AGREEMENTS; OTHER NOTES..............................................................................3 3. EFFECTIVENESS..............................................................................................3 3A. Certain Documents...................................................................................3 3B. Representations and Warranties; Performance; No Default.............................................5 3C. Purchase Permitted by Applicable Laws...............................................................5 3D. Other Purchasers....................................................................................6 3E. Private Placement Number............................................................................6 3F. Changes in Corporate Structure......................................................................6 3G. Proceedings and Documents...........................................................................6 4. PREPAYMENTS................................................................................................6 4A. Required Prepayments................................................................................6 4B. Optional Prepayments with Make-Whole Amount.........................................................6 4C. Allocation of Partial Prepayments...................................................................7 4D. Maturity; Surrender, etc............................................................................7 4E. Purchase of Notes...................................................................................7 4F. Make-Whole Amount...................................................................................7 5. AFFIRMATIVE COVENANTS......................................................................................9 5A. Financial Statements................................................................................9 5B. Inspection.........................................................................................11 5C. Maintenance of Properties..........................................................................12 5D. Maintenance of Insurance...........................................................................12 5E. Cooperative Status.................................................................................12 5F. Compliance with Laws...............................................................................13 5G. Payment of Taxes and Claims........................................................................13 5H. Corporate Existence, etc...........................................................................13 5I. Collateral Accounting Systems Examination..........................................................13 5J. Real Estate Documents..............................................................................13 5K. Further Assurances.................................................................................14 5L. Waiver of Negative Pledge..........................................................................15 6. NEGATIVE COVENANTS........................................................................................15 6A. Lien, Debt and Other Restrictions..................................................................15 6B. Restricted Investments.............................................................................19 6C. Restricted Payments................................................................................19 6D. Compliance with ERISA..............................................................................20 6E. No Change in Subordination Terms, etc..............................................................20 6F. Nature of Business.................................................................................20 6G. Ratio of Asset Base to Debt........................................................................21 6H. Fixed Charge Coverage Ratio........................................................................21 6I. Minimum EBITDA.....................................................................................21 6J. Inactive Subsidiaries..............................................................................21 6K. Amendments to Financing Agreements.................................................................21
78 7. EVENTS OF DEFAULT.........................................................................................22 7A. Acceleration.......................................................................................22 7B. Rescission of Acceleration.........................................................................25 7C. Notice of Acceleration or Rescission...............................................................26 7D. Other Remedies.....................................................................................26 7E. No Cure of Default by Application of Collateral....................................................26 8. REPRESENTATIONS, COVENANTS AND WARRANTIES.................................................................26 8A. Organization; Qualifications; Corporate Power......................................................26 8B. Authorization, etc.................................................................................26 8C. Disclosure.........................................................................................27 8D. Organization and Ownership of Shares of Subsidiaries; Affiliates...................................27 8E. Financial Statements...............................................................................28 8F. Actions Pending....................................................................................29 8G. Outstanding Debt...................................................................................29 8H. Title to Properties................................................................................29 8I. Taxes..............................................................................................29 8J. Conflicting Agreements and Other Matters...........................................................30 8K. Offering of Notes..................................................................................30 8L. Use of Proceeds....................................................................................30 8M. ERISA..............................................................................................31 8N. Governmental Consent...............................................................................31 8O. Environmental Compliance...........................................................................31 8P. Section 144A.......................................................................................31 8Q. Status under Certain Statutes......................................................................31 8R. Priority of Notes; Benefited Obligations...........................................................32 8S. Licenses, Permits, etc.............................................................................32 8T. Year 2000 Problem..................................................................................32 9. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS..........................................................32 9A. Purchase for Investment............................................................................32 9B. Source of Funds....................................................................................33 10. DEFINITIONS; ACCOUNTING MATTERS...........................................................................34 10A. Defined Terms........................................................................................34 10B. Accounting Principles, Terms and Determinations......................................................45 11. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.............................................................45 11A. Registration of Notes................................................................................45 11B. Transfer and Exchange of Notes.......................................................................45 11C. Replacement of Notes.................................................................................46 12. PAYMENTS ON NOTES.........................................................................................46 12A. Place of Payment.....................................................................................46 12B. Home Office Payment..................................................................................46 13. EXPENSES, ETC.............................................................................................47 13A. Transaction Expenses.................................................................................47 13B. Company Indemnification..............................................................................47 13C. Survival.............................................................................................48
79 14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT..............................................48 15. AMENDMENT AND WAIVER......................................................................................49 15A. Requirements.........................................................................................49 15B. Solicitation of Holders of Notes.....................................................................49 15C. Binding Effect, etc..................................................................................49 15D. Notes Held by Company, etc...........................................................................50 16. NOTICES...................................................................................................50 17. REPRODUCTION OF DOCUMENTS.................................................................................50 18. CONFIDENTIAL INFORMATION..................................................................................51 19. SUBSTITUTION OF PURCHASER.................................................................................52 20. MISCELLANEOUS.............................................................................................52 20A. Successors and Assigns...............................................................................52 20B. Payments Due on Non-Business Days....................................................................52 20C. Severability.........................................................................................52 20D. Construction.........................................................................................52 20E. Counterparts.........................................................................................52 20F. Governing Law........................................................................................53 20G. Submission to Jurisdiction...........................................................................53 20H. WAIVER OF JURY TRIAL.................................................................................53 20I. Amendment and Restatement..........................................................................53 20J. Intercreditor Agreement; Collateral Matters..........................................................53 20K. Waiver...............................................................................................54 20L. Interest Rate Limitation.............................................................................54
Exhibits Exhibit A Form of Note Exhibit B Form of Opinion of Michael Best & Friedrich LLC Exhibit C [Not Used] Exhibit D Form of Promissory Notes Exhibit E Form of Subordination Provisions Exhibit F Guaranty Exhibit G Intercreditor Agreement Exhibit H Pledge Agreement Exhibit I Security Agreement Exhibit J Trademark Security Agreement Schedules Schedule 1 Purchasers Schedule 5J Part 1 - Primary Property Part 2 - Secondary Property Schedule 6A(1) Liens Schedule 6A(2) Debt Schedule 6B Investments Schedule 8A Subsidiary Stock Schedule 8C Change Schedule 8D Subsidiaries, Affiliates, Directors/Officers and Agreements Schedule 8E Financial Statements/Projections Schedule 8G Outstanding Funded and Current Debt Schedule 8J Restricting Agreements Schedule 8L Proceeds of Notes Schedule 8R Benefited Obligations Schedule 8S Licenses, Permits EX-10.E 5 SUPPLEMENTAL RETIREMENT PLAN 1 EXHIBIT 10-E TRU*SERV(TM) TRU*SERV CORPORATION SUPPLEMENTAL RETIREMENT PLAN (AMENDED EFFECTIVE JULY 24, 1998) - -------------------------------------------------------------------------------- WORLD HEADQUARTERS 8600 W. Bryn Mawr Avenue Chicago, Illinois 60631-3505 773/695-5000 2 SUPPLEMENTAL RETIREMENT PLAN Amended Effective January 1, 1998 SECTION 1. ESTABLISHMENT AND PURPOSE 1.1 ESTABLISHMENT OF THE PLAN. TRU*SERV CORPORATION (the "Company") has heretofore established an unfunded supplemental retirement plan, which is known as the "TRU*SERV CORPORATION SUPPLEMENTAL RETIREMENT PLAN"(the "Plan") and which was originally effective January 1, 1988. This Amendment is effective January 1, 1998. 1.2 PURPOSE. The purpose of this Plan is to supplement the benefits from the Company's Qualified Retirement Plan for selected executives of the Company and its subsidiaries. SECTION 2. DEFINITIONS 2.1 DEFINITIONS. Whenever used in this Plan, it is intended that the following terms shall have the meanings set forth below: (a) "ACTUARIAL EQUIVALENT" means the term as defined in the Qualified Retirement Plan. (b) "ADMINISTRATOR" means an individual or committee appointed by the Chief Executive Officer and so identified to Participants. (c) "BOARD" means the board of Directors of the Company. (d) "CHANGE IN CORPORATE STRUCTURE" means either: (I) During any period of two (2) consecutive years (not including any period prior to January 1, 1998), individuals who at the beginning of such period constitute the Board (and any new Director, whose election was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of 3 the period or whose election or nomination for election was so approved) cease for any reason to constitute a majority thereof; or (ii) the consummation of: (A) a plan of liquidation of the Company; or (B) sale or disposition of all or substantially all the Company's assets; or (C) a merger, consolidation, or reorganization of the Company with or involving any other corporation, including the merger of Cotter & Company and ServiStar Coast to Coast, July 1, 1997. (e) "CHIEF EXECUTIVE OFFICER" means the Chief Executive Officer of the Company. (f) "COMPANY" MEANS TRU*SERV CORPORATION, a Delaware corporation. (g) EARLY RETIREMENT DATE means the date on which the participant attains age 55 and completes at least 10 years of Service, or, with respect to persons who on July 1, 1997, or, on December 31, 1997 were Officers of the Company or Participants in the Plan, the date such person actually terminates employment. (h) "FINAL AVERAGE COMPENSATION" means the average of the sum of the Participant's base annual salary plus performance, plus bonuses, which are paid for goal or performance achievements, and (including any reduction therein related to a Participant-elected deferral of such base annual salary, or bonuses to a later payment date, but excluding the payment of any such deferred base salary or bonus in the year received) paid during the three (3) highest paid calendar years in the ten (10) calendar years of continuous employment with the Company or a Predecessor Corporation immediately preceding the date on which occurs the earliest of the Participant's retirement (at or after his Normal Retirement Date or Early Retirement Date), death, or Early Retirement Date), death, or termination subsequent to a Change in Corporate Structure. (i) "HIS" means Participant, without regard to actual gender. 4 (j) "NORMAL RETIREMENT DATE" means the date on which a Participant has both attained age sixty (60) and completed five (5) years of Service. (k) "OFFICER" means an employee holding one or more of the following positions: President, Chief Executive Officer, Chief Operating Officer, or Vice President, but shall not include Assistant Vice Presidents. (1) "PARTICIPANT" means an Officer or a management employee of the Company or any subsidiary thereof who satisfies the participation requirement of Section 3.1 hereof. (m) "PREDECESSOR CORPORATION" means a corporation (and its subsidiaries) which have been acquired by the Company or which became part of the Company through a merger, consolidation or reorganization, including but not limited to ServiStar Coast to Coast Corporation ("ServiStar"). (n) "PRIMARY SOCIAL SECURITY BENEFIT" means the estimated monthly primary old-age Social Security insurance benefit to which the Participant is or would be entitled at his Normal Retirement Date or at his retirement if later, based on the provisions of the Social Security Act in effect on the date of retirement, before any offsets for earned income. For purposes of estimating the Primary Social Security Benefit, it shall be assumed that the Participant has no wages covered by Social Security after retirement. (o) "QUALIFIED RETIREMENT PLAN" means any retirement plan which is maintained by the Company and/or any subsidiary thereof and which is a qualified plan under Section 401 (a) of the Internal Revenue Code, excluding the TruServ Corporation Employee Savings and Compensation Deferral Plan. The amount of the benefits payable from such Qualified Retirement Plan shall be determined on an actuarially equivalent lump sum basis in accordance with such retirement plan. (p) "SECULAR TRUST BENEFITS" means benefits from any "secular" trust provided for by the Company, any of its subsidiaries, any Predecessor Corporation or a Participant 5 himself, under which contributions to the trust for a Participant's benefit are immediately taxable to the Participant. (q) "SERVICE" shall have the same meaning in this Plan as "Years of Service" in the Qualified Retirement Plan under which the Participant's last date of hire. Service with a Predecessor shall also be counted and for this purpose, such service shall be quantified in terms of Years of Service in accordance with the rules of the Qualified Retirement Plan under which the Participant is covered. (r) "SURVIVING SPOUSE" means the spouse to whom a deceased Participant has been lawfully married: (1) for a period of at least one year ending on the date of the Participant's death; or (2) where such death occurs after benefit payments have commenced under the Plan, as of the commencement date of those payments to the Participant. SECTION 3. PARTICIPATION 3.1 SELECTION OF PARTICIPANTS. Officers of the Corporation shall be participants in the Plan. The Chief Executive Officer, in his discretion, may also select those persons to be Participants in the Plan from among those other management employees of the Company and its subsidiaries who are Participants in a Qualified Retirement Plan. Notwithstanding the foregoing, no employee previously employed by ServiStar shall become a Participant in this Plan if he has elected in writing to continue to participate in the ServiStar supplemental executive retirement plan. SECTION 4. RETIREMENT BENEFITS 4.1 NORMAL RETIREMENT BENEFIT. (a) ELIGIBILITY. A Participant shall receive a normal retirement benefit upon termination of Service on or after his Normal Retirement Date. (b) AMOUNT. (i) BENEFIT. The Participant's benefit shall be a "Defined Lump Sum" which shall be an amount equal to the sum of thirty-three (33) percent of the Participant's Final Average Compensation for each Year of Service up to age fifty-five (55) and forty-two (42) percent of the 6 Participant's Final Average Compensation for each Year of Service after age fifty-five (55), up to a maximum of six hundred sixty (660) percent of the Participant's Final Average Compensation, reduced by the Actuarial Equivalent lump sum amounts that the Participant has received or is eligible to receive from any of the other sources of benefits described in Subsection 4.1(b)(ii). (ii) OTHER SOURCES OF BENEFITS. The other sources of benefits include: Qualified Retirement Plans; Payments made to a participant's individual secular trust pursuant to Section 7.2; The lump sum equivalent of the Participant's Primary Social Security Benefit to which he is entitled, whether or not received, multiplied by a fraction, the numerator of which is the Participant's Years of Service (but not more than 20) and the denominator of which is 20; and Secular Trust Benefits (including the cash surrender value of any life insurance) plus any amounts paid to the Participant to "gross up" the Participant for taxes paid by the Participant with respect to contributions to a Secular Trust, under this Plan or any Predecessor Corporation plan. For purposes of calculating the lump sum equivalent of a Participant's Primary Social Security Benefit, such lump sum equivalent will be considered to be ninety-six (96) times the Primary Social Security Benefit. (c) PAYMENT AND DURATION. Such Participant's Defined Lump Sum calculated in (b) above shall be paid on the first day of the calendar month after the date the Participant's Service terminates pursuant to this Section 4.1, unless with the consent of the Administrator, the Defined Lump Sum shall be converted into an Actuarial Equivalent single life annuity. Payment of monthly retirement benefits pursuant to a single life annuity, shall commence as on the first day of the calendar month beginning on or after the date the Participant's Service terminates pursuant to this Section 4.1, unless at the election of the Participant, the Defined Lump Sum is converted and shall continue to be paid as of the first day of each month for the remainder of the Participant's life. If a Participant is married, however, and does not elect benefits to be paid as provided in Section 6.1, such 7 amount shall be paid in the form of an Actuarial Equivalent joint and survivor annuity with fifty (50) percent of such Participant's reduced monthly lifetime amounts being payable to such Participant's Surviving Spouse for the remainder of such Spouse's life. 4.2 EARLY RETIREMENT BENEFITS. (a) ELIGIBILITY. A Participant shall receive vested early retirement benefits under the provisions of this Plan upon termination of his Service prior to his Normal Retirement Date, but on or after his Early Retirement Date. (b) AMOUNT. Upon termination of a Participant's Service, pursuant to (a) above, the Participant shall be entitled to receive a vested early retirement benefit. Such benefit shall be computed in the same manner as the Participant's normal retirement benefit under Subsection 4.1(b), based on the Participant's Final Average Compensation and Years of Service as of the date his Service terminates. (c) PAYMENT AND DURATION. Such Participant's Defined Lump Sum calculated in Subsection 4.1(b) above shall be paid on the first day of the calendar month after the date the Participant's Service terminates pursuant to Section 4.1(b) unless with the consent of the Administrator, the defined lump sum shall be converted into an Actuarial Equivalent single life annuity. Payment of monthly retirement benefits pursuant to a single life annuity, shall commence as on the first day of the calendar month beginning on or after the date the Participant's Service terminates pursuant to this Section 4.2 unless at the election of the Participant, the Defined Lump Sum is converted and shall continue to be paid as on the first day of each month for the remainder of the Participant's life. If a Participant is married, however, and does not elect benefits to be paid as provided in Section 6.1, such amount shall be paid in the form of an Actuarial Equivalent joint and survivor annuity with fifty (50) percent of such Participant's reduced monthly lifetime amounts being payable to such Participant's Surviving Spouse for the remainder of such Spouse's life. 8 SECTION 5. DEATH BENEFIT 5.1 PAYMENTS TO SURVIVING SPOUSE. (a) ELIGIBILITY. A Surviving Spouse shall receive a death benefit under the provisions of this Plan, upon the death, prior to the payment of a benefit, of a Participant eligible to receive a retirement benefit under Subsection 4.1 or 4.2. (b) AMOUNT. The monthly death benefit payable to an eligible Surviving Spouse shall be equal to fifty-five (55) percent of the Participant's Defined Lump Sum determined in accordance with Subsection 4.1(b) or 4.2(b), whichever is applicable, or at the surviving spouse's option converted to an Actuarial Equivalent single life annuity. (c) PAYMENT AND DURATION. Such Surviving Spouse's death benefits shall be in a single lump sum, with the consent of the Administrator, in an Actuarial Equivalent single life annuity. Payment of monthly death benefits provided under this Plan shall commence as of the first day of the calendar month beginning after the date of a Participant's death and shall continue to be paid monthly thereafter as of the first day of each month for the remainder of the Surviving Spouse's life unless paid in a single lump sum. SECTION 6. OPTIONAL PAYMENT METHOD 6.1 MARRIED PARTICIPANT'S PAYMENT FORM ELECTION. A married Participant who is eligible to receive any benefits provided under Section 4 hereof may, prior to terminating Service, elect to have those benefits paid in the alternative form of a joint and survivor annuity which will continue monthly payments for life to his spouse equal to one hundred (100) percent of the actuarially reduced monthly amount paid to him during his lifetime. The benefits payable to the Participant and his spouse under this alternative form shall be the Actuarial Equivalent to the value of the benefits that would have otherwise been payable to him under Section 4 hereof. A Participant's election under this Section 6 must be filed in writing with the Administrator at least sixty (60) days prior to the date his monthly benefit payments are to commence under Section 4. 9 SECTION 7. FINANCING OF BENEFITS 7.1 CONTRACTUAL OBLIGATION. Subject to the provisions of Section 8.3 hereof, it is intended that the Company is under a contractual obligation to fully fund all benefit obligations, and to make the payments, under this Plan while it is in effect. 7.2 PARTICIPANT SECURITY. A "rabbi" trust may be established under this Plan by the execution of a separate trust agreement with one or more trustees. The assets of the rabbi trust will be held, invested and disposed of by its trustee, in accordance with the terms of the rabbi trust, for the exclusive purpose of providing Plan benefits for those Participants employed by the Company. The assets of the rabbi trust shall at all times be subject to the claims of the general creditors of the Company. The rabbi trust shall be a means of segregating and accumulating funds to be used to pay benefits pursuant to the terms of this Plan, and no part of the assets of the rabbi trust shall be recoverable by the Company, until all benefits payable under this plan have been paid to Participants; provided, however, that the assets of the rabbi trust shall be subject at all times to the claims of the Company's creditors. Plan Participants and Surviving Spouses shall have no preferred claim on, or any beneficial ownership interest in, any assets of the rabbi trust. Any rights created under the Plan and rabbi trust shall be mere unsecured contractual rights of Plan Participants and their surviving spouses against the Company. In the event of a Change in Corporate Structure, a Defined Lump Sum Payment under Section 8.3, or if the Company has a Senior Debt to Capital Ratio of more than 2.0 to 1.0, each Participant's vested benefits shall be transferred from the Company and/or the rabbi trust to individual secular trusts for the exclusive benefit of each Participant and Surviving Spouse. The assets transferred from the rabbi trust to the individual secular trusts shall be divided in proportion to the accrued benefit as of the date of the transfer. 10 The Company shall be relieved of any obligation to pay any benefits under this Plan to a Participant or surviving spouse to the extent such obligation has been discharged through payments made under the rabbi trust or to a Participant's Secular Trust. 7.3 For the purposes of this Section 7 the following definitions shall be applicable: "Affiliate" shall mean any person, partnership, firm or corporation, which, directly or indirectly, controls, is controlled by, or is under common control with, the Company. "Capitalized Lease" shall mean any lease which is capitalized on the books of the Company, or should be so capitalized under GAAP. "Debt to Worth Ratio" shall mean the relationship, expressed as a numerical ratio, between: (i) the total of all liabilities of Company which would appear on a balance sheet of Company in accordance with GAAP including Capitalized Lease obligations; and (ii) Tangible Net Worth. "GAAP" shall mean generally accepted accounting principles currently in effect in the United States as they may be changed or supplemented from time to time. "Tangible Net Worth" shall mean the total of all assets which, under GAAP, would appear on the consolidated balance sheet of the Company and its Affiliates, less the sum of the following: (a) the book amount of all such assets which would be treated as intangibles under GAAP, including, without limitation, all such items as goodwill, noncompete agreements, trademarks, trademark rights, trade names, trade name rights, brands, copyrights, patents, patent rights, licenses, deferred charges and unamortized debt discount and expense; (b) any net write-up in the book value of any such assets resulting from a revaluation thereof subsequent to January 1, 1998; 11 (c) all reserves, including reserves for depreciation, obsolescence, depletion, insurance and inventory valuation, but excluding contingency reserves not allocated for any particular purpose and not deducted from assets; (d) the amount, if any, at which any shares of stock of the Company or any Affiliate appear on the asset side of such consolidated balance sheet; (e) all liabilities of the Company and its Affiliates shown on such consolidated balance sheet; and (f) all investments in foreign Affiliates and unconsolidated domestic Affiliates. SECTION 8. MUTUAL AGREEMENTS 8.1 GUARANTEE OF EMPLOYMENT. Nothing herein shall be construed as conferring upon the Participant any greater rights to employment by the Company and its subsidiaries than he would otherwise have. 8.2 LIABILITY. Neither the Company and any subsidiary thereof nor any shareholder, director, Officer or other employee of the Company or any other person shall be liable for any act or failure to act under the Plan, except for gross negligence or fraud. 8.3 AMENDMENT OR TERMINATION OF THE PLAN. The Company reserves the right to amend, modify, terminate, or discontinue the Plan at any time. Such action shall only be by resolution of the Board of Directors and shall be final, binding, and conclusive as to all parties, including any Participant, any Surviving Spouse thereof and all other Company or subsidiary employees and persons; provided, however, that any such Company action to amend, terminate or discontinue the Plan or to change the payment amount or the time and manner of payment thereof as then provided in the Plan shall not be effective and operative with respect to any Participant or Surviving Spouse who already is vested or has commenced receipt of benefit payments under Sections 4, 5, 6 or 9 hereof, as applicable, on the date of such Company action or with respect to any Spouse to whom benefits under Section 6 hereof, as applicable, would be payable due to the subsequent 12 death of any such Participant then receiving benefit payments. Unless any amendment, termination, or modification results in a new, or modified Plan, with equal or improved terms to this Plan, the benefits of all Participants in the Plan shall be vested and payable in a Defined Lump Sum in accordance with Section 4.2 at the effective time of such change in the terms of the Plan. 8.4 ASSIGNMENT OF RIGHTS. No benefits payable under this Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, prior to actually being received by the person entitled to the benefit under the terms of the Plan; and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any right to benefits payable hereunder shall be void. 8.5 APPLICABLE LAW. This Plan is intended to constitute a plan which is unfunded and is maintained by the Company primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees and that except to the extent that ERISA applies to such plan, the laws of Illinois will apply. 8.6 OVERPAYMENT. If any payment under this or a Predecessor Corporation Plan shall be determined by the Company to have been excessive or improper and the Participant or his Surviving Spouse shall fail, upon Company request, to make repayment to the Company of such overpayment, the Company shall deduct the amount of such overpayment from any future benefit payments under this Plan. 8.7 FACILITY OF PAYMENT. Whenever a Participant or a Surviving Spouse entitled to a monthly retirement benefit or death benefit hereunder shall be determined to be under a legal disability or otherwise incapacitated in any way as so to be unable to manage his or her financial affairs, the following provisions apply. The Company may direct that all or any portion of the monthly retirement payments or death benefits to be made to such Participant or Surviving Spouse shall be made to such person's spouse or any other person, in any manner that the Company considers advisable, to be expended for his benefit. The decision of the Company shall, in each case, be 13 final and binding upon all persons, and any payment made pursuant to this provision shall operate as a complete discharge of the obligations of the Company under the Plan. 8.8 ACTION CONCLUSIVE. The Administrator has sole discretion administering and interpreting all provisions of this Plan. Any action or decision made by the Administrator with respect to eligibility for and payment of supplemental retirement income benefits of death benefits to be made under the Plan made by the Administrator in good faith will be binding and conclusive on the Participant, his Spouse or his beneficiary. 8.9 SUCCESSORS. The Plan shall be binding upon and inure to the benefit of the Participant and the Company and any successor company of the Company by way of merger, reorganization, acquisition, or sale by the Company of substantially all of its assets. SECTION 9. CHANGE IN CORPORATE STRUCTURE In the event of a Change in Corporate Structure each Participant at the time of the change in the Corporate Structure who is not already vested under the Plan shall be vested and have a right to receive all benefits calculated and paid in accordance with Section 4.2. Unless such surviving or successor employer agrees to maintain the Plan in accordance with its existing, or improved terms following the Change in Corporate Structure the benefits of all Participants in the Plan shall be vested and payable in a Defined Lump Sum, at the effective time of any such change in the terms of the Plan. Executed on this ___ day of ____________, 1998. Attest: By:__________________________ By: _________________________ Title:_______________________ Title: ______________________ -----END PRIVACY-ENHANCED MESSAGE-----