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<SEC-DOCUMENT>0001047469-98-012979.txt : 19980401
<SEC-HEADER>0001047469-98-012979.hdr.sgml : 19980401
ACCESSION NUMBER: 0001047469-98-012979
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 14
CONFORMED PERIOD OF REPORT: 19971231
FILED AS OF DATE: 19980331
SROS: NYSE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: CVS CORP
CENTRAL INDEX KEY: 0000064803
STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DRUG STORES AND PROPRIETARY STORES [5912]
IRS NUMBER: 050494040
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT:
SEC FILE NUMBER: 001-01011
FILM NUMBER: 98582525
BUSINESS ADDRESS:
STREET 1: ONE CVS DR.
CITY: WOONSOCKET
STATE: RI
ZIP: 02895-
BUSINESS PHONE: (401)-765-1500
MAIL ADDRESS:
STREET 1: ONE CVS DR.
CITY: WOONSOCKET
STATE: RI
ZIP: 02895-
FORMER COMPANY:
FORMER CONFORMED NAME: MELVILLE CORP
DATE OF NAME CHANGE: 19920703
FORMER COMPANY:
FORMER CONFORMED NAME: MELVILLE SHOE CORP
DATE OF NAME CHANGE: 19760630
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<DESCRIPTION>10-K405
<TEXT>
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-K
----------------------
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-1011
CVS CORPORATION
(Exact name of registrant as specified in its charter)
-----------------------
Delaware 05-0494040
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
One CVS Drive
Woonsocket, Rhode Island 02895
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (401) 765-1500
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
- ----------------------- -----------------------------------------
Common Stock, par value
$.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Exchange Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the registrant's voting stock* held by
non-affiliates** of the registrant (without admitting that any person whose
shares are not included in such calculation is an affiliate) on March 2, 1998
was approximately $12,669,785,088, based on the last sale price as reported by
the New York Stock Exchange.
As of March 2, 1998, the registrant had 172,557,470 shares of Common
Stock outstanding.
- ---------
* Does not include 5,324,504 outstanding shares of Series One ESOP
Convertible Preference Stock ("ESOP Preference Stock"). As of
March 2, 1998, each share of ESOP Preference Stock is entitled to 1.2 votes
per share on all matters submitted to a vote of the holders of Common
Stock.
** Only voting stock held by directors and executive officers is excluded.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The following documents (or parts thereof) are incorporated by reference
into this Annual Report on Form 10-K: certain information required in Part
II, Items 6, 7 and 8; and Part IV, Item 14 of this Annual Report on Form 10-K
is incorporated from the Registrant's Annual Report to Shareholders for the
year ended December 31, 1997; certain information required in Part III, Items
10, 11, 12 and 13 of this Annual Report on Form 10-K is incorporated by
reference to the Registrant's Proxy Statement for the 1998 Annual Meeting of
Stockholders, to be held on May 13, 1998.
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
CVS Corporation, a Delaware corporation ("CVS" or the "Company"), is a
leader in the chain drugstore industry in the United States, with over $12.7
billion in revenue in 1997. Additionally, as of December 31, 1997, the Company
operated 3,888 stores in 24 states in the Northeast, Mid-Atlantic, Midwest and
Southeast regions and in the District of Columbia, making CVS one of the largest
drugstore chains in the nation in terms of store count. The Company's stores are
well positioned, operating in 48 of the top 100 drugstore markets in the
country. CVS commands the number one or two share position in approximately 80%
of these markets. CVS also is among the industry leaders in terms of store
productivity and operating profit margin.
A primary focus of the Company's operations is its pharmacy business, which
represented approximately 54% of total sales for the year. In 1997, the Company
dispensed over 225 million prescriptions, making it the largest drugstore chain
in the United States in terms of prescriptions filled and pharmacy sales. The
Company believes that its pharmacy operations will continue to represent a
critical part of its business and strategy due to favorable trends, including an
aging American population, greater responsibility being borne by Americans for
their healthcare, an increasing demand for retail formats that provide easy
access and convenience, discovery of new and better drug therapies, and the need
for cost effective healthcare solutions.
In addition to prescription drugs and services, the Company offers a broad
selection of general merchandise, presented in a well-organized fashion, in
stores that are designed to be warm, inviting and easy to shop. Merchandise
categories include, among other things, over-the-counter drugs, greeting cards,
film and photo-finishing services, beauty and cosmetics, seasonal merchandise
and convenience foods. The Company also offers over 1,300 products under the CVS
private label brand, which accounted for approximately 11% of the Company's
front store sales in 1997. Total front store sales, which are generally higher
margin than pharmacy sales, represented approximately 46% of total sales for the
year.
The Company's principal executive offices are located at One CVS Drive,
Woonsocket, Rhode Island 02895, telephone (401) 765-1500. As of December 31,
1997, the Company and its subsidiaries had approximately 90,000 employees.
CVS STRATEGIC RESTRUCTURING PROGRAM
In October 1995, the Board of Directors approved a comprehensive
restructuring plan that was the product of a strategic review initiated in 1994.
The purpose of the restructuring plan was, among other things, to enhance
stockholder value by transforming Melville Corporation ("Melville") from a
diversified retailer with a wide range of specialty retail businesses into an
industry-focused retail healthcare company, CVS. The restructuring plan
included, among other things:
(i) the continued operation of CVS (which would include CVS and, initially,
Linens 'n Things and Bob's Stores);
(ii) the disposal of Marshalls, Kay-Bee Toys, Wilsons and This End Up;
(iii) the spinoff of Footstar, Inc. (the holding company for Meldisco,
Footaction and Thom McAn); and
(iv) the elimination of certain corporate overhead costs.
In May 1996, the Board of Directors approved further refinements to the
restructuring plan. The refinements included: (i) a formal plan to separate
Linens 'n Things and Bob's Stores from CVS; and (ii) a formal plan to convert
80 to 100 Thom McAn stores to the Footaction format and to sell or close the
remaining Thom McAn stores, and thereby exit the Thom McAn business by
mid-1997.
On November 20, 1996, following shareholder approval, CVS, a newly-formed
Delaware corporation, became the new holding company for Melville (which is a
New York corporation) and its subsidiaries. This was accomplished by merging a
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special purpose subsidiary of CVS with and into Melville, with Melville
surviving such merger and becoming a wholly-owned subsidiary of CVS.
For more information regarding the Company's strategic restructuring
program, see Note 3 of Notes to Consolidated Financial Statements.
ACQUISITION OF REVCO D.S., INC.
On May 29, 1997, CVS completed its acquisition of Revco D.S., Inc. ("Revco")
pursuant to a stock-for-stock merger that was tax free to Revco's stockholders.
The merger was accounted for as a pooling of interests.
The merger resulted in CVS becoming one of the largest chain drugstore
companies in the United States based on store count, with approximately 4,000
stores in 24 states and the District of Columbia. Pursuant to a consent
decree with the Federal Trade Commission entered into in connection with the
merger, the Company divested 120 Revco stores during 1997, primarily in the
Tidewater area of Virginia.
In the merger, each outstanding share of Revco common stock was exchanged
for 0.8842 of a share of CVS common stock, resulting in CVS issuing an aggregate
of approximately 60.3 million shares of its common stock. In addition,
outstanding Revco stock options were converted at the same exchange ratio into
options to purchase approximately 3.3 million shares of CVS common stock.
AGREEMENT TO ACQUIRE ARBOR DRUGS, INC.
On February 8, 1998, CVS entered into an Agreement and Plan of Merger with
Arbor Drugs, Inc. ("Arbor"). Under the terms of the merger agreement, subject to
satisfaction of certain customary closing conditions, CVS will acquire Arbor in
an exchange of stock that is expected to be accounted for as a pooling of
interests, and to be tax free to Arbor stockholders. If the merger is completed,
Arbor stockholders will receive, for each Arbor share, 0.3182 of a share of
CVS common stock, resulting in CVS issuing an aggregate of approximately 18.9
million shares of its common stock. In addition, outstanding Arbor stock
options will be converted at the same exchange ratio into options to purchase
approximately 2.6 million shares of CVS common stock.
Arbor is the leading drugstore chain in southeastern Michigan in terms of
store count and sales volume. The merger would strengthen CVS' position as one
of the nation's leading chain drugstore companies by bringing CVS into a
high-growth, contiguous geographic market where CVS has no existing presence.
The merger is subject to approval by Arbor's shareholders, expiration of
the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and certain other customary closing
conditions. Subject to satisfying these conditions, management expects to
complete the merger on or about March 31, 1998.
PHARMACY OPERATIONS AND MANAGED CARE
In 1997, pharmacy sales increased 23.6% to $6.9 billion, representing
approximately 54% of total sales for the year, compared to pharmacy sales of
$5.6 billion in 1996, representing approximately 51% of total sales for such
year. CVS pharmacies fill an average of about 1,200 prescriptions per store per
week, which is significantly higher than the average community pharmacy. The
Company believes that its pharmacy operations will continue to represent a
critical part of its business and strategy due to favorable trends, including an
aging American population, greater responsibility being borne by Americans for
their healthcare, an increasing demand for retail formats that provide easy
access and convenience, discovery of new and better drug therapies, and the need
for cost effective healthcare solutions.
During fiscal 1997, approximately 80% of pharmacy sales were attributable
to payments by third party providers under prescription drug plans, as
compared to approximately 76% in 1996. The growth in managed care has
substantially increased the use of prescription drugs as managed care
providers have (i) made the cost of prescription drugs more affordable to a
greater number of people and (ii) supported prescription drug therapy as an
alternative to more expensive forms of treatment, such as surgery. In a
typical third party payment plan, the Company has a contract with a third
party payor, such as an insurance company, a prescription benefit management
2
<PAGE>
company, a governmental agency, a private employer, a health maintenance
organization or other managed care provider, which agrees to pay for all or a
portion of a customer's eligible prescription purchases in exchange for
reduced prescription rates. Although third party payment plans provide a high
volume of prescription drug sales, such sales typically generate lower gross
margins than other prescription drug sales due to the cost containment
efforts of these large third party payors and the increasing competition
among pharmacies for this business. During 1997, the top 5 third party
providers accounted for approximately 36% of pharmacy sales. Any significant
loss of third party provider business could have a material adverse affect on
the Company's business and results of operations.
CVS' experience in providing solutions to managed care providers, and its
existing store base which affords easy access and convenience to consumers,
are factors that should contribute to the Company's continued ability to
attract and maintain third party business. In addition, the Company's RX2000
pharmacy computer system facilitates the management of third party healthcare
plans and enables CVS to provide managed care providers with a level of
information which the Company believes is unmatched by competitors. By
analyzing this data, CVS and its managed care partners are able to evaluate
treatment outcomes with an eye toward improving care and containing costs.
The Company's emphasis on customer service extends from the expert advice and
service that individual customers receive from CVS pharmacists to the managed
care portion of the Company's business, where Managed Care Service Teams are
responsible for ensuring the high level of service that CVS' managed care
partners receive.
The Company's pharmacy business also continues to benefit from an
"independent file buy" program, in which CVS purchases prescription files from
one or more independent pharmacies. During 1997, CVS purchased 190 prescription
files, containing an average weekly prescription count of nearly 500, from
independent pharmacies. The Company believes that independent file buys are
productive investments. In many cases, the independent pharmacist will move to
CVS, thereby providing continuity in the pharmacist-patient relationship.
PHARMACARE AND STRATEGIC HEALTHCARE ALLIANCES
CVS is committed to being part of an integrated healthcare approach that
brings together industry participants such as physicians, pharmaceutical
companies, managed care providers and pharmacies in order to provide patients
with the best possible care at the lowest cost. The Company's efforts to date
have primarily concentrated on two main areas: (i) the operation and expansion
of PharmaCare, the Company's prescription benefit management subsidiary and (ii)
the creation of strategic alliances with healthcare partners.
PharmaCare provides managed care providers a full range of prescription
benefit management services, including plan design and administration, formulary
management, claims processing and generic substitution, with a focus on
providing integrated solutions to the delivery of healthcare. In the three and a
half years since it was established, PharmaCare has grown considerably and, at
the end of 1997, managed healthcare services for more than 5 million people
through a preferred national pharmacy network of approximately 40,000
pharmacies. In December 1997, PharmaCare merged with Revco's prescription
benefit management subsidiary, called Rx Connections, and also assumed Revco's
mail order pharmacy operations, thereby strengthening and broadening
PharmaCare's services network.
One of the features that sets PharmaCare apart from other prescription
benefit management providers is its proprietary Clinical Information Management
System ("CIMS"). CIMS enables CVS pharmacists to work more efficiently with
physicians by facilitating communication and information-sharing, with the
objective of improving patient care and reducing costs. Approximately 20,000
physicians are currently using CIMS, which began with only 500 physicians in
1994. In addition, PharmaCare plays an increasing role in healthcare management
through integrated partnerships with several large managed care providers.
CVS also pursues strategic alliances with healthcare partners to develop
products and services that create new opportunities for revenue and profit
growth. For example, CVS has entered into a joint venture, called CVS Health
Connection, with Pfizer Health Solutions, Inc., a subsidiary of Pfizer, Inc.
Through this partnership, community health screening centers are established in
CVS store settings. The first CVS Health Connection center opened in September
1997 in a New Bedford, Massachusetts CVS store. Harvard Pilgrim Healthcare, one
of the nation's largest and most progressive HMOs, has contracted to offer
health screening services through this center to its members.
3
<PAGE>
FRONT STORE OPERATIONS
In 1997, front store sales increased 8.8% to $5.8 billion, representing
approximately 46% of total sales for the year, compared to front store sales of
$5.3 billion in 1996, representing approximately 49% of total sales for such
year. The Company's front store merchandising strategies are designed to improve
customer satisfaction, selection and convenience, and establish CVS stores as a
destination for a growing number of front store merchandise categories, such as
greeting cards, photo-finishing, beauty, seasonal merchandise and
over-the-counter drugs. The Company's 10,125 square-foot freestanding prototype
stores have helped to enable the Company to improve store layout, convenience
and selection through the addition of product categories and the enhancement of
assortments within product categories. In addition, over the past several years,
the Company has made significant investments in systems and technology to more
effectively respond to customer needs, manage inventory and control costs.
Through its point-of-sale scanning technology, the Company has developed an
advanced retail data warehouse of information that has enabled CVS to adopt a
category management approach to front end merchandising. Through category
management, CVS works in partnership with major suppliers to refine and tailor
assortments within product categories to the specific purchasing preferences of
customers within each market. Category management enables the Company to analyze
the impact of pricing, promotion and mix on a category's sales and profitability
and develop tactical merchandising plans for each category by market. Among CVS'
key destination categories are over-the-counter drugs, greeting cards, film and
photo-finishing services, beauty and cosmetics and convenience foods.
The Company believes that effective category management increases
customer satisfaction and that its category management approach has been a
primary factor in its front store comparable sales gains and improved gross
margins. In addition, the Company believes that its ability to satisfy
customers through category management will be enhanced through its
implementation of supply chain management. Supply chain management is
designed to more effectively link CVS' stores and distribution centers with
suppliers to speed the delivery of merchandise to CVS stores in a manner that
both reduces out-of-stock positions and lowers the Company's investment in
inventory. The Company expects to see tangible benefits of its supply chain
management project beginning in 1998.
CVS STORES
At December 31, 1997, the Company operated 3,888 stores in 24 states in the
Northeast, Mid-Atlantic, Midwest and Southeast regions and the District of
Columbia, making CVS one of the nation's largest chain drugstore companies based
on store count. CVS stores, which are located primarily in "strip" shopping
centers or in freestanding units, generally range in size from approximately
8,000 to 10,000 square feet, with an average store size of approximately 9,000
square feet. The Company has extended store hours in many locations and, at the
end of 1997, approximately 160 of its stores were operated on a 24-hour basis.
The following is a breakdown by state of the locations of the Company's stores
at the end of 1997:
<TABLE>
<S> <C> <C> <C>
Alabama.............................. 164 New Hampshire........................ 30
Connecticut.......................... 118 New Jersey........................... 175
Delaware............................. 3 New York............................. 340
District of Columbia................. 46 North Carolina....................... 309
Florida.............................. 23 Ohio................................. 395
Georgia.............................. 316 Pennsylvania......................... 317
Illinois............................. 69 Rhode Island......................... 50
Indiana.............................. 298 South Carolina....................... 188
Kentucky............................. 68 Tennessee............................ 148
Maine................................ 20 Vermont.............................. 2
Maryland............................. 170 Virginia............................. 258
Massachusetts........................ 314 West Virginia........................ 63
Mississippi.......................... 4
</TABLE>
To support growth in its existing stores, the Company has in place an active
remodeling and remerchandising program, which seeks to remodel 20% of the
Company's existing stores each year and to remerchandise another 20% each year.
In addition, as described more fully below, the Company is actively seeking to
relocate many of its strip center locations to freestanding sites. During 1997,
4
<PAGE>
the Company opened 287 new stores, including 116 relocations, and in 1998
expects to open approximately 300 new stores, including approximately 150
relocations. During 1997, the Company also began the process of converting
all retained Revco stores into the CVS store format. The conversion process
consists of three elements: converting the Revco point-of-sale and pharmacy
computer systems to CVS' systems, revising the Revco planograms to reflect
the CVS merchandise mix, and remodeling the Revco stores to the "look and
feel" of a CVS store. The conversion of Revco's systems has been completed
and the revision of planograms is expected to be completed during the first
half of 1998. Approximately 500 Revco stores had been remodeled into the CVS
"look and feel" as of December 31, 1997, and the Company expects to complete
the Revco store remodeling project by the end of 1998.
The addition of new stores has played, and will continue to play, a major
role in the Company's continued growth. As new stores have been opened, the
Company has maintained its objective of securing strong positions in each
market that its stores serve. This provides the Company several important
advantages, including an ability to save on advertising and distribution
costs. It is also an important consideration for managed care providers, who
want to provide their members with convenient access to pharmacy services.
Management anticipates that most of the planned store openings will be based
on CVS' 10,125 square foot freestanding prototype, which includes a
drive-thru pharmacy. New sites will be selected based on convenience, with an
emphasis on freestanding locations at traffic controlled intersections.
Management expects that relocations of existing in-line strip center
stores to freestanding locations will account for approximately 50% of store
openings over the next several years. Historically, as a result of their more
convenient locations and larger size, relocated stores have typically
realized significant improvement in customer count and revenues, driven
largely by increased sales of higher margin front store merchandise.
Management expects this trend to continue, however there can be no assurance
that similar improvements will be achieved in each geographic market in which
the Company operates. See "Cautionary Statement Concerning Forward-Looking
Statements" below. Freestanding locations require properties of approximately
1 1/4 acres to support parking for 40-60 cars. As a result, site selection is
also an important aspect of the Company's relocation program.
The Company believes that achieving a critical mass in terms of store count
and locating stores in desirable geographic markets is essential to competing
effectively in the context of the current managed care environment described
more fully above. As a result, management believes that the Company's store
development program is an important element of its ability to maintain its
leadership position in the chain drugstore industry.
INFORMATION SYSTEMS
CVS has made significant investments in information systems to enable the
Company to deliver an exceptional level of customer service, while lowering
costs and increasing operating efficiency. The Company's client-server based
systems permit rapid and flexible system development to meet changing business
needs, enabling the integration of CVS systems with those of other healthcare
providers, including many of the Company's managed care customers. With a
scaleable technical architecture, CVS can efficiently expand its network and add
stores.
In the Company's pharmacy business, the RX2000 computer system enables CVS
pharmacists to manage their prescription filling duties more efficiently, giving
them more time to spend with customers. The RX2000 system, which includes one of
the largest data warehouses in the country, facilitates the management of third
party healthcare plans and provides a warehouse of pharmacy data that can be
analyzed by both CVS and its managed care customers for a variety of healthcare-
and business-related applications. In addition, during 1997 the Company
implemented CVS Rapid Refill, an interactive voice response system that enables
customers to place refill orders by telephone 24 hours a day.
In the front store business, the Company has developed an advanced "Retail
Data Warehouse" that enables a quick analysis of point-of-sale ("POS") data on a
store-by-store basis to develop targeted marketing and merchandising strategies.
The Company has also implemented a "Field Management System" that uses POS data
to identify areas to improve operational execution on a store-by-store basis. In
addition, the Company is in the process of a major supply chain initiative to
reengineer its entire warehouse and merchandising network, which is intended to
enable the more efficient and effective control of merchandise flow to CVS
stores.
5
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SUPPLIERS
The Company centrally purchases most of its merchandise, including
prescription drugs, directly from manufacturers, allowing it to take advantage
of the promotional and volume discount programs that certain manufacturers offer
to retailers. During 1997, approximately 85% of the merchandise purchased
by the Company was received at one of the Company's distribution centers for
redistribution to its stores. The balance of store merchandise is shipped
directly to CVS stores from manufacturers and distributors at prices negotiated
at the corporate level.
The Company believes that the loss of any one supplier or group of suppliers
under common control would not have a material effect on its business.
CUSTOMER SERVICE
CVS strives to provide the highest levels of service to its customers and
partners. As a result, the Company devotes considerable time and attention to
people, systems and high service standards. The Company places an emphasis on
attracting and training friendly and helpful associates to work both in CVS
stores and throughout the CVS organization. Each CVS store receives a formal
customer service evaluation twice per year, based on a mystery shopper program,
customer letters and calls, and market research. CVS' priority on customer
service extends into the managed care portion of its business as well. In every
market, a Managed Care Service Team is responsible for ensuring that managed
care partners are receiving high levels of service. CVS pharmacists consistently
rank at the top of the industry on measurements of trust, relationship-building
and accessibility. This high level of service and expertise has played a key
role in enabling the growth of CVS' pharmacy operations.
REGULATION
The Company's pharmacies and pharmacists are required to be licensed by the
appropriate state boards of pharmacy. The Company's pharmacies and its
distribution centers are also registered with the Federal Drug Enforcement
Agency. By virtue of these licensing and registration requirements, the Company
is required to comply with various statutes, rules and regulations, a violation
of which could result in a suspension or revocation of such licenses or
registrations. Under the Omnibus Budget Reconciliation Act of 1990, the
Company's pharmacists are required to offer counseling, without charge, to
customers covered by Medicare about medication, dosage, delivery system,
potential side effects, and other information deemed significant by such
pharmacists. The Company's pharmacists in fact routinely offer such counseling
to consumers.
COMPETITION
The retail drugstore business is highly competitive. The Company believes
that it competes principally on the basis of: (i) store location and
convenience, (ii) customer service and satisfaction, (iii) product selection and
variety and (iv) price. The Company experiences active competition not only from
independent and other chain drugstores, but also from health maintenance
organizations, hospitals, mail order organizations, supermarkets, discount
drugstores and discount general merchandisers. The deep discount drug segment
has experienced significant growth over the past several years as drug chains,
food, discount and specialty retailers have entered the business. Major retail
companies now operate deep discount drugstores in the most competitive retailing
markets. "Combo" stores, which consist of grocery, drugstore and several other
operations under the same roof, have also experienced significant growth over
the past several years as consumers have become more attracted to one-stop
shopping. Retail mass merchandisers with prescription departments have also
grown in popularity. The Company is among the nation's largest chain drugstores,
in terms of both store count and annual sales volume.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This report (as well as other public filings, press releases and discussions
with Company management) contains and incorporates by reference certain
forward-looking statements that are subject to risks and uncertainties.
Forward-looking statements include the information concerning future results of
operations, cost savings and synergies of the Company following the Revco merger
and the Arbor acquisition; the information concerning the Company's ability to
continue to achieve significant sales growth; the information concerning the
6
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ability of the Company to elevate the performance level of Revco stores
following the Revco merger; the information concerning the Company's belief
that it can continue to improve operating performance by relocating existing
in-line stores to freestanding locations; and the information concerning the
Company's ability to continue to reduce selling, general and administrative
expenses as a percentage of net sales; as well as those preceded by, followed
by or that otherwise include the words "believes", "expects", "anticipates",
"intends", "estimates" or similar expressions. For those statements, we claim
the protection of the safe harbor for forward-looking statements contained in
the Private Securities Litigation Reform Act of 1995. You should understand
that the following important factors, in addition to those discussed
elsewhere in this report and in the documents which are incorporated by
reference, and in our other public filings, press releases and discussions
with Company management, could affect the future results of CVS and could
cause those results to differ materially from those expressed in the
forward-looking statements: materially adverse changes in economic conditions
in the markets served by the Company; future regulatory and legislative
actions affecting the Company and/or the chain-drug industry; competition
from other drugstore chains, from alternative distribution channels such as
supermarkets, membership clubs, other retailers and mail order companies and
from other third party plans; and the continued efforts of health maintenance
organizations, managed care organizations, pharmacy benefit management
companies and other third party payors to reduce prescription drug costs. The
forward looking statements referred to above are also subject to
uncertainties and assumptions relating to the operations and results of
operations of the Company following the Revco merger and the Arbor
acquisition, including: risks relating to the Company's ability to combine
the businesses of CVS, Revco and Arbor and maintain current operating
performance levels during the integration period(s) and the challenges
inherent in diverting the Company's management focus and resources from other
strategic opportunities and from operational matters for an extended period
of time during the integration process(es); the Company's ability to continue
to secure suitable new store locations on favorable lease terms as it seeks
to open new stores and relocate a portion of its existing store base to
freestanding locations; the Company's ability to continue to purchase
inventory on favorable terms; the Company's ability to attract, hire and
retain suitable pharmacists and management personnel; the ability of the
Company and its key vendors to successfully manage Year 2000 issues;
relationships with suppliers; and the impact of inflation.
ITEM 2. DESCRIPTION OF PROPERTY
Most CVS stores are occupied pursuant to long-term leases that vary as to
rental amounts and payments, expiration dates, renewal options and other rental
provisions. The Company does not deem any individual store lease to be
significant in relation to its overall business. For information as to the
amount of the Company's rental obligations for retail store leases, see Note 9
of Notes to Consolidated Financial Statements.
The Company owns its corporate headquarters, located in two buildings in
Woonsocket, Rhode Island which contain an aggregate of approximately 312,000
square feet. Additionally, the Company recently announced plans to begin
construction of a third headquarters building, expected to contain in excess of
200,000 square feet, on a site adjacent to its corporate headquarters. The
Company also owns distribution centers located in Rhode Island, New Jersey,
Virginia, Indiana, Alabama, Pennsylvania, Tennessee, North Carolina and South
Carolina, which contain an aggregate of approximately 4,944,000 square feet, and
leases additional space near its distribution centers which contain an aggregate
of approximately 1,189,000 square feet. In addition, the Company owns an office
building located in Woonsocket, Rhode Island which contains approximately 33,000
square feet. The Company also leases approximately 41,000 square feet in an
office building in Lincoln, Rhode Island and four "satellite" store support
buildings located in Rhode Island and Massachusetts which contain an aggregate
of approximately 146,000 square feet. The Company also owns Revco's former
corporate headquarters, located in Twinsburg, Ohio, which contains approximately
108,000 square feet, and leases an additional 151,000 square feet in Twinsburg
formerly used for Revco store support. All of the Company's Twinsburg facilities
are expected to be consolidated or closed in 1998.
In addition, in connection with certain dispositions of divisions
completed between 1991 and 1997, CVS continues to guaranty certain lease
obligations for store leases that had been entered into and guaranteed by the
Company prior to the time of disposition for approximately 2,000 former
stores. The Company is indemnified for these guarantee obligations by the
respective purchasers. These guarantees generally remain in effect for the
initial lease term and any extension thereof pursuant to a renewal option
provided for in the lease prior to the time of the disposition. See Note 8 of
Notes to Consolidated Financial Statements.
7
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
From time to time the Company and its subsidiaries are involved in the
assertion of claims and in litigation incidental to the normal course of
business. Management does not believe that any existing claims or litigation
will have a material adverse effect on the consolidated financial condition or
results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following is included as an unnumbered item in Part I of this Report.
<TABLE>
<CAPTION>
DATE FIRST
DATE APPOINTED APPOINTED
TO PRESENT OFFICER OF
OFFICE OF THE THE
NAME/OFFICE AGE COMPANY COMPANY
- ----------------------------------------------------------------------------- --- -------------- ------------
<S> <C> <C> <C>
Charles C. Conaway
Executive Vice President and Chief Financial Officer,
CVS Corporation and CVS Pharmacy, Inc ..................................... 37 07/10/96 07/10/96
Stanley P. Goldstein
Chairman of the Board and Chief Executive Officer,
CVS Corporation............................................................ 63 01/01/87 04/13/71
Rosemary Mede
Vice President, CVS Corporation
Senior Vice President--Human Resources, CVS Pharmacy, Inc.................. 51 10/01/97 10/01/97
Larry J. Merlo
Vice President, CVS Corporation
Senior Vice President--Stores, CVS Pharmacy, Inc........................... 42 10/09/96 10/09/96
Daniel C. Nelson
Vice President, CVS Corporation
Executive Vice President--Marketing, CVS Pharmacy, Inc..................... 48 10/09/96 10/09/96
Thomas M. Ryan
Vice Chairman and Chief Operating Officer, CVS Corporation
President and Chief Executive Officer, CVS Pharmacy, Inc................... 45 10/09/96 01/01/94
Douglas A. Sgarro
Vice President, CVS Corporation
Senior Vice President--Administration and Chief Legal Officer,
CVS Pharmacy, Inc.......................................................... 38 09/10/97 09/10/97
Larry D. Solberg
Vice President, CVS Corporation
Senior Vice President--Finance and Controller, CVS Pharmacy, Inc........... 50 10/09/96 10/09/96
</TABLE>
In each case the term of office extends to the date of the board of
directors meeting following the next annual meeting of stockholders of the
Company. In addition to the office(s) which they hold in CVS
8
<PAGE>
Corporation and CVS Pharmacy, Inc. as shown above, each of the individuals
listed holds various offices in certain CVS subsidiaries. Previous positions and
responsibilities held by each of the above officers over the past five years are
indicated below:
CHARLES C. CONAWAY, Executive Vice President and Chief Financial Officer
of CVS Corporation since July 1996; Executive Vice President and Chief
Financial Officer of CVS Pharmacy, Inc. since February 1995; from September
1992 to February 1995, Senior Vice President--Pharmacy of CVS Pharmacy, Inc.;
director of Linens 'n Things, Inc.
STANLEY P. GOLDSTEIN, Chairman of the Board and Chief Executive Officer
of CVS Corporation since January 1987; director of Bell Atlantic Corporation,
Linens 'n Things, Inc. and Footstar, Inc. Additionally, the Company recently
announced that Mr. Goldstein will step down as Chief Executive Officer of CVS
Corporation effective May 13, 1998, at the time of the Company's Annual
Meeting of Stockholders. He will be succeeded as Chief Executive Officer by
Thomas M. Ryan (see below). Mr. Goldstein will remain Chairman of the Board.
ROSEMARY MEDE, Vice President of CVS Corporation and Senior Vice
President--Human Resources of CVS Pharmacy, Inc. since October 1997; from
December 1995 to September 1997, Vice President/General Manager of Business
Services, Becton Dickinson & Co.; from 1988 to November 1995, held various
management positions in human resources, Becton Dickinson & Co.
LARRY J. MERLO, Vice President of CVS Corporation since October 1996;
Senior Vice President--Stores of CVS Pharmacy, Inc. since January 1994; from
March 1993 to December 1993, Area Vice President of CVS Pharmacy, Inc.; from
March 1991 to March 1993, Area Vice President of Peoples Drug Stores, Inc.
DANIEL C. NELSON, Vice President of CVS Corporation since October 1996;
Executive Vice President--Marketing of CVS Pharmacy, Inc. since September
1993; from June 1990 to September 1993, Senior Vice President of Dominicks
Finer Foods, Inc.
THOMAS M. RYAN, Vice Chairman of the Board and Chief Operating Officer of
CVS Corporation since October 1996; President and Chief Executive Officer of
CVS Pharmacy, Inc. since January 1994; from January 1990 to January 1994,
Executive Vice President--Stores of CVS Pharmacy, Inc.; director of Fleet
Financial Group and Reebok International Ltd. Additionally, the Company
recently announced that Mr. Ryan has been elected President and Chief
Executive Officer of CVS Corporation effective May 13, 1998, at the time of
the Company's Annual Meeting of Stockholders.
DOUGLAS A. SGARRO, Vice President of CVS Corporation and Senior Vice
President--Administration and Chief Legal Officer of CVS Pharmacy, Inc. since
September 1997; from January 1993 to August 1997, partner in the New York
City office of the law firm of Brown & Wood LLP; from September 1984 to
December 1992, associate in the New York City office of Brown & Wood LLP.
LARRY D. SOLBERG, Vice President of CVS Corporation since October 1996;
Senior Vice President--Finance and Controller of CVS Pharmacy, Inc. since
March 1996; Vice President and Controller of CVS Pharmacy, Inc. from October
1994 to March 1996; from September 1993 to October 1994, Senior Vice
President of PIMMS Corp.; prior to September 1993, various offices with
National Car Rental Corp., most recently as Executive Vice President and
Chief Financial Officer.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The number of holders of the Company's Common Stock, based upon the number
of record holders according to the records of the Company's transfer agent, was
approximately 10,200 as of December 31, 1997. The Company's Common Stock is
listed on the New York Stock Exchange ("NYSE"), under the ticker symbol "CVS."
The following table sets forth, for the calendar quarters indicated, the
reported high and low sale prices of the Company's Common Stock as reported on
the NYSE Composite Transaction Tape, and the cash dividends declared by the
Company per share of Common Stock.
9
<PAGE>
<TABLE>
<CAPTION>
CASH
DIVIDENDS
HIGH LOW DECLARED
--------- --------- -----------
<S> <C> <C> <C>
1996
First Quarter.................................................................... $ 36 3/8 $ 27 1/4 $ 0.11
Second Quarter................................................................... $ 44 1/2 $ 35 1/4 $ 0.11
Third Quarter(1)................................................................. $ 46.00 $ 36 5/8 $ 0.11
Fourth Quarter................................................................... $ 44 3/4 $ 36 3/8 $ 0.11
1997
First Quarter.................................................................... $ 48.00 $ 39.00 $ 0.11
Second Quarter................................................................... $ 53 3/4 $ 44 1/4 $ 0.11
Third Quarter.................................................................... $ 60.00 $ 50 7/8 $ 0.11
Fourth Quarter................................................................... $ 70.00 $ 54 5/8 $ 0.11
</TABLE>
- ------------------------
On March 2, 1998, the closing sale price of the Common Stock as reported by the
New York Stock Exchange was $73 9/16.
(1) On October 12, 1996, the Company completed the distribution of 100% of the
common stock of Footstar, Inc. ("Footstar"), formerly a wholly owned
subsidiary of the Company, in the form of a stock dividend to the Company's
stockholders. The stock prices shown in the table are actual trading prices
and do not reflect any adjustments for the when issued price of Footstar
prior to October 16, 1996 (the date on which Footstar common stock commenced
trading regular way on the NYSE).
UNREGISTERED SALES OF SECURITIES
The Company did not sell any equity securities during the period covered by
this Annual Report on Form 10-K that were not registered under the Securities
Act of 1933.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is included in the Registrant's Annual
Report to Shareholders for the year ended December 31, 1997 on page 66 and is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is included in the Registrant's Annual
Report to Shareholders for the year ended December 31, 1997 on pages 36 through
44 and is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Management does not believe that there is any material market risk exposure
with respect to derivative or other financial instruments which would require
disclosure under this Item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is included in the Registrant's Annual
Report to Shareholders for the year ended December 31, 1997 on pages 46 through
65, and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
During the Registrant's two most recent fiscal years and subsequent interim
period, no event occurred which would require disclosure under this Item.
10
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item, with the exception of the
information relating to executive officers of the Registrant (which is
presented under the caption "Executive Officers of the Registrant" in Part I,
Item 4, above), is included in the Registrant's Proxy Statement for the 1998
Annual Meeting of Stockholders under the captions "Directors" and "Section
16(a) Beneficial Ownership Reporting Compliance" and is incorporated herein
by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is included in the Registrant's Proxy
Statement for the 1998 Annual Meeting of Stockholders under the caption
"Executive Compensation" and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is included in the Registrant's Proxy
Statement for the 1998 Annual Meeting of Stockholders under the captions "Share
Ownership Information of Directors and Named Executive Officers" and "Share
Ownership Information of Certain Principal Stockholders" and is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is included in the Registrant's Proxy
Statement for the 1998 Annual Meeting of Stockholders under the caption "Certain
Relationships and Related Transactions" and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
ITEM 14(A) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS ANNUAL REPORT
ON FORM 10-K.
Item 14(a)(1) and (2) The consolidated financial statements of CVS
Corporation incorporated herein by reference to the Annual Report to
Shareholders for the year ended December 31, 1997 and the related
consolidated financial statement schedule are listed in the Index to
Consolidated Financial Statements and Schedule on page 16 hereof. Other
financial statement schedules have not been included because they are not
applicable or the information is included in the financial statements or
notes thereto.
ITEM 14(A)(3) EXHIBITS
The following is a list of exhibits filed as part of this Annual Report on
Form 10-K.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------------ ----------------------------------------------------------------------------------------------------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to
Exhibit 3.1 of CVS Corporation's Annual Report on Form 10-K for the fiscal year ended December 31,
1996).
3.2 Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 of CVS Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996).
11
<PAGE>
4 Pursuant to Regulation S-K, Item 601(b)(4)(iii)(A), no instrument which defines the rights of
holders of long-term debt of the Registrant ant its subsidiaries is filed herewith. The Registrant
hereby agrees to furnish a copy of any such instrument to the Securities and Exchange Commission
upon request.
4.1 Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registration
Statement of the Registrant on Form 8-B dated November 4, 1996 and filed under the Securities
Exchange Act of 1934 on November 5, 1996).
10(i)(1) Stock Purchase Agreement dated as of October 14, 1995 between The TJX Companies, Inc. and Melville
Corporation, as amended November 17, 1995 (incorporated by reference to Exhibits 2.1 and 2.2 to
Melville's Current Report on Form 8-K dated December 4, 1995).
10(i)(2) Stock Purchase Agreement dated as of March 25, 1996 between Melville Corporation and Consolidated
Stores Corporation, as amended May 3, 1996 (incorporated by reference to Exhibits 2.1 and 2.2 to
Melville's Current Report on Form 8-K dated May 5, 1996).
10(i)(3) Distribution Agreement dated as of September 24, 1996 among Melville Corporation, Footstar, Inc. and
Footstar Center, Inc. (incorporated by reference to Exhibit 99.1 to Melville's Current Report on
Form 8-K dated October 28, 1996).
10(i)(4) Tax Disaffiliation Agreement dated as of September 24, 1996 among Melville Corporation, Footstar,
Inc. and certain subsidiaries named therein (incorporated by reference to Exhibit 99.2 to Melville's
Current Report on Form 8-K dated October 28, 1996).
10(i)(5) Agreement and Plan of Merger dated as of February 8, 1998, as amended as of March 2, 1998, among the
Registrant, Arbor Drugs, Inc. and Red Acquisition, Inc. (incorporated by reference to Exhibit 2 to
the Registrant's Registration Statement on Form S-4 filed March 2, 1998).
10(i)(6) Stockholder Agreement dated as of December 2, 1996 between the Registrant, Nashua Hollis CVS, Inc.
and Linens 'n Things, Inc.
10(i)(7) Tax Disaffiliation Agreement dated as of December 2, 1996 between the Registrant and Linens 'n
Things, Inc. and certain of their respective affiliates.
10(i)(8) Five Year Credit Agreement dated as of May 23, 1997 by and among the Registrant, the Lenders party
thereto, Fleet National Bank, as Documentation Agent, JP Morgan Securities, Inc., as Syndication
Agent and The Bank of New York, as Administrative Agent.
10(i)(9) Note Purchase Agreement dated as of June 7, 1989 by and among The Melville Corporation and Subsidiaries
Employee Stock Ownership Plan Trust, as Issuer, Melville Corporation, as Guarantor, and the Purchasers
named therein.
12
<PAGE>
10(iii)(A) 1973 Stock Option Plan (incorporated by reference to Exhibit (10)(iii)(A)(i) to Melville
(i) Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1987).
(ii) 1987 Stock Option Plan (incorporated by reference to Exhibit (10)(iii)(A)(iii) to Melville
Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1987).
(iii) 1989 Directors Stock Option Plan (incorporated by reference to Exhibit B to Melville Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31, 1988).
(iv) Melville Corporation Omnibus Stock Incentive Plan (incorporated by reference to Exhibit B to
Melville Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1989 and
Exhibit A to Melville's definitive Proxy Statement dated March 7, 1995).
(v) Profit Incentive Plan of Melville Corporation (incorporated by reference to Exhibit A to Melville
Corporation's definitive Proxy Statement dated March 14, 1994).
(vi) Supplemental Retirement Plan for Select Senior Management of Melville Corporation I as amended
through July 1995 (incorporated by reference to Exhibit 10(iii)(A)(vii) to Melville's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995).
(vii) Supplemental Retirement Plan for Select Senior Management of Melville Corporation II as amended
through July 1995 (incorporated by reference to Exhibit 10(iii)(A)(viii) to Melville's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995).
(viii) Income Continuation Policy for Select Senior Executives of Melville Corporation as amended through
May 12, 1988 (incorporated by reference to Exhibit 10 (viii) to Melville's Annual Report on Form
10-K for the fiscal year ended December 31, 1994).
(ix) Melville Corporation 1996 Directors Stock Plan (incorporated by reference to Exhibit A to Melville's
definitive Proxy Statement dated March 7, 1996).
(x) Form of Employment Agreements between the Registrant and each of Messrs. Ryan, Conaway, Nelson and
Merlo (incorporated by reference to the Registrant's Annual Report on Form 10-K/A for the fiscal year
ended December 31, 1996).
(xi) Deferred Stock Compensation Plan.
11 Statement re: Computation of Earnings per Common Share.
12 Statement re: Computation of Ratio of Earnings to Fixed Charges.
13 1997 Annual Report to Shareholders (Sections entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Management's Responsibility for Financial
Reporting," "Independent Auditors' Report," "Consolidated Statements of Operations," "Consolidated
Balance Sheets," "Consolidated Statements of Cash Flows," "Consolidated Statements of Shareholders'
Equity," "Notes to Consolidated Financial Statements," and "Five-Year Financial Summary").
21 Subsidiaries of the Registrant.
23 Consent of KPMG Peat Marwick LLP.
27.1 Financial Data Schedule.
27.2 Restated Financial Data Schedule -- Fiscal Year 1996.
27.3 Restated Financial Data Schedule -- Fiscal Year 1995.
</TABLE>
ITEM 14(B) REPORTS ON FORM 8-K
During the quarter ended December 31, 1997, the Company filed did not file
any Reports on Form 8-K.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
CVS CORPORATION
DATE: March 30 , 1998 BY: /S/ Stanley P. Goldstein
--------------------------------------
Stanley P. Goldstein,
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report 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
- ------------------------------ ----------------------------- ----------------
Chairman of the Board,
/s/ STANLEY P. GOLDSTEIN Chief Executive Officer
- ------------------------------ and Director (Principal March 30, 1998
Stanley P. Goldstein Executive Officer)
Executive Vice President
/s/ CHARLES C. CONAWAY and Chief Financial
- ------------------------------ Officer (Principal March 30, 1998
Charles C. Conaway Financial Officer)
/s/ LARRY D. SOLBERG Vice President (Principal
- ------------------------------ Accounting Officer) March 30, 1998
Larry D. Solberg
/s/ ALLAN J. BLOOSTEIN Director
- ------------------------------ March 30, 1998
Allan J. Bloostein
/s/ W. DON CORNWELL Director
- ------------------------------ March 30, 1998
W. Don Cornwell
/s/ THOMAS P. GERRITY Director
- ------------------------------ March 30, 1998
Thomas P. Gerrity
/s/ WILLIAM H. JOYCE Director
- ------------------------------ March 30, 1998
William H. Joyce
/s/ TERRY R. LAUTENBACH Director
- ------------------------------ March 30, 1998
Terry R. Lautenbach
14
<PAGE>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ TERRENCE MURRAY Director
- ------------------------------ March 30, 1998
Terrence Murray
/s/ SHELI Z. ROSENBERG Director
- ------------------------------ March 30, 1998
Sheli Z. Rosenberg
/s/ THOMAS M. RYAN Vice Chairman, Chief
- ------------------------------ Operating Officer and March 30, 1998
Thomas M. Ryan Director
/s/ IVAN G. SEIDENBERG Director
- ------------------------------ March 30, 1998
Ivan G. Seidenberg
/s/ PATRICIA CARRY STEWART Director
- ------------------------------ March 30, 1998
Patricia Carry Stewart
/s/ THOMAS O. THORSEN Director
- ------------------------------ March 30, 1998
Thomas O. Thorsen
/s/ M. CABELL WOODWARD, JR. Director
- ------------------------------ March 30, 1998
M. Cabell Woodward, Jr.
15
<PAGE>
CVS CORPORATION AND SUBSIDIARY COMPANIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
The consolidated financial statements of CVS Corporation together with the
report on such consolidated financial statements of KPMG Peat Marwick LLP dated
February 9, 1998 which appear on the pages listed below of the Annual Report to
Shareholders for the year ended December 31, 1997, are incorporated by reference
in this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
PAGE NUMBER IN
1997 ANNUAL
REPORT TO
SHAREHOLDERS
-----------------
<S> <C>
Management's Responsibility for Financial Reporting.............................................. 45
Independent Auditors' Report..................................................................... 45
Consolidated Statements of Operations for the years ended December 31, 1997, 1996 and 1995....... 46
Consolidated Balance Sheets as of December 31, 1997 and 1996..................................... 47
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1997, 1996 and
1995........................................................................................... 48
Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995....... 49
Notes to Consolidated Financial Statements....................................................... 50-65
Five-Year Financial Summary...................................................................... 66
</TABLE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Included in Part IV of this report:
Independent Auditors' Report on Consolidated Financial Statements.......................................... F-1
Consolidated Financial Statement Schedule of CVS Corporation for the years ended December 31, 1997, 1996
and 1995:
Schedule II -- Valuation and Qualifying Accounts........................................................... S-1
</TABLE>
16
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
of CVS Corporation:
Under date of February 9, 1998, we reported on the consolidated balance
sheets of CVS Corporation and subsidiaries as of December 31, 1997 and 1996,
and related consolidated statements of operations, shareholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1997, as contained in the 1997 annual report to shareholders. These
consolidated financial statements and our report thereon are incorporated by
reference in the annual report on Form 10-K for the year 1997. In connection
with our audits of the aforementioned consolidated financial statements, we
also audited the related consolidated financial statement schedule as listed
in the accompanying index. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
/s/ KPMG PEAT MARWICK LLP
- ----------------------------
KPMG PEAT MARWICK LLP
Providence, Rhode Island
February 9, 1998
F-1
<PAGE>
SCHEDULE II
CVS CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS CHARGED TO BALANCE AT
IN MILLIONS BEGINNING OF YEAR COSTS & EXPENSES (1) (3) DEDUCTIONS (2) END OF YEAR (3)
- -------------------------------------- ----------------- ------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Accounts Receivable Allowance
for Doubtful Accounts:
Year Ended December 31, 1997.......... $ 36.0 $ 7.3 $ 5.3 $ 38.0
Year Ended December 31, 1996.......... 58.6 11.2 33.8 36.0
Year Ended December 31, 1995.......... 45.4 43.6 30.4 58.6
</TABLE>
- ------------------------
(1) 1995 includes a charge of $21.3 million that relates to certain receivables
of former operating businesses that were retained by the Company subsequent
to the sale of the related operating businesses.
(2) 1996 includes a deduction of $21.2 million that relates to the actual
write-off of the receivables discussed in Note (1) above.
(3) 1997 amounts are consistent with the historical results of the Company's
continuing operations.
S-1
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(I)6
<SEQUENCE>2
<DESCRIPTION>EX-10(I)6
<TEXT>
<PAGE>
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT dated as of December 2, 1996 (the "Agreement")
between CVS Corporation, a Delaware corporation ("CVS"), Nashua Hollis CVS,
Inc., a New Hampshire corporation ("Nashua Hollis"), and Linens 'n Things, Inc.
("Linens"), a Delaware corporation.
W I T N E S S E T H:
WHEREAS, Linens is presently a wholly owned Subsidiary of CVS;
WHEREAS, after the sale on the date hereof of Common Stock, $0.01
par value per share (the "Common Stock"), of Linens to the public in an initial
public offering (the "Initial Public Offering") registered under the Securities
Act of 1933, as amended, CVS will own approximately 32.5% of the outstanding
Common Stock of Linens;
WHEREAS, CVS and Linens are concurrently herewith entering into the
Transitional Services Agreement and the Tax Disaffiliation Agreement;
WHEREAS, the parties hereto desire to set forth herein certain
matters relating to the relationship and the respective rights and obligations
of the parties following the Initial Public Offering;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"Action" means any claim, suit, action, arbitration, investigation
or other proceeding by or before any court, governmental or other regulatory or
administrative agency or commission or any other tribunal.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with,
such Person. For the purposes of
<PAGE>
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, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing; provided that, for purposes hereof, CVS and Linens
will be deemed not to be Affiliates of each other.
"Applicable CVS Number" has the meaning assigned to such term in the
Linens Charter.
"Commission" means the Securities and Exchange Commission.
"Common Stock" has the meaning assigned thereto in the recitals
above.
"CVS Group" means CVS and its Subsidiaries (other than any
Subsidiary or member of, or other entity in, the Linens Group).
"CVS Liabilities" means all (i) Liabilities of the CVS Group under
this Agreement and (ii) except as otherwise specifically provided herein or in
the Tax Disaffiliation Agreement, other Liabilities that arise from or in
connection with a Third Party Claim, whether arising before, on or after the
Initial Public Offering Date, and that are of or relate to the CVS Group or
arise from or in connection with the conduct of the businesses of the CVS Group
(other than the Linens Business) or the ownership or use of assets in connection
therewith. Notwithstanding the foregoing, "CVS Liabilities" shall exclude (x)
any Liabilities for Taxes (since such Liabilities shall be governed by the Tax
Disaffiliation Agreement) and (y) any Liabilities specifically retained or
assumed by Linens pursuant to this Agreement.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, permits, licenses and governmental
restrictions, whether now or hereafter in effect, relating to the environment,
the effect of the environment on human health or to emissions, discharges,
releases, manufacturing, storage, processing, distribution, use, treatment,
disposal, transportation or handling of pollutants, contaminants, petroleum or
petroleum products, chemicals or industrial, toxic, radioactive or hazardous
substances or wastes or the clean-up or other remediation thereof.
"Finally Determined" means, with respect to any Action
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or other matter, that the outcome or resolution of such Action or matter has
been judicially determined by judgment or order not subject to further appeal or
discretionary review.
"Group" means, as the context requires, the Linens Group or the CVS
Group.
"Guaranteed Lease" has the meaning assigned to such term in Section
3.01.
"Indemnified Party" has the meaning set forth in Section 2.04.
"Indemnifying Party" has the meaning set forth in Section 2.04.
"Initial Public Offering Date" means the date on which the closing
of the Initial Public Offering is consummated.
"Lease Guarantee" has the meaning assigned to such term in Section
3.01.
"Liabilities" means any and all claims, debts, liabilities and
obligations, absolute or contingent, matured or not matured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising,
including all costs and expenses relating thereto, and including, without
limitation, those debts, liabilities and obligations arising under this
Agreement, any law, rule, regulation, any action, order, injunction or consent
decree of any governmental agency or entity, or any award of any arbitrator of
any kind, and those arising under any agreement, commitment or undertaking.
"Linens Business" means the businesses and operations (including,
without limitation, the home textiles and housewares-related purchasing,
distribution and sales operations and activities) associated with Linens or
otherwise of the Linens Group, in each case whether conducted prior to, on or
after the Initial Public Offering Date.
"Linens Charter" means the Amended and Restated Certificate of
Incorporation of Linens in effect as of the date hereof.
"Linens Group" means Linens and its Subsidiaries as of (and, except
where the context clearly indicates otherwise, after) the Initial Public
Offering Date (including all predecessors to such Persons).
"Linens Liabilities" means all (i) Liabilities of the
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Linens Group under this Agreement and (ii) except as otherwise specifically
provided herein or in the Tax Disaffiliation Agreement, other Liabilities that
arise from or in connection with a Third Party Claim, whether arising before, on
or after the Initial Public Offering Date, and that are of or relate to the
Linens Group or arise from or in connection with the conduct of the Linens
Business or the ownership or use of assets in connection therewith, including
without limitation any such Liabilities that arise under or relate to
Environmental Laws. Notwithstanding the foregoing, "Linens Liabilities" shall
exclude: (x) any Liabilities for Taxes (since such Liabilities shall be governed
by the Tax Disaffiliation Agreement), (y) any Liabilities arising from
shareholder derivative lawsuits against CVS, and (z) any Liabilities
specifically retained or assumed by CVS pursuant to this Agreement.
"Losses" means, with respect to any Person, any and all damage,
loss, liability and expense incurred or suffered by such Person (including,
without limitation, reasonable expenses of investigation and reasonable
attorneys' fees and expenses in connection with any and all Actions or
threatened Actions).
"1933 Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Person" means an individual, corporation, limited liability
company, partnership, association, trust or other entity or organization,
including a governmental or political subdivision or an agency or
instrumentality thereof.
"Principal Stockholder" has the meaning assigned to such term in the
Linens Charter.
"Prospectus" means the prospectus relating to the Registration
Statement in the form first used to confirm the sale of shares of Common Stock
in the Initial Public Offering.
"Registration Statement" means the registration statement on Form
S-1 filed with the Commission relating to the offering and sale of the shares of
Common Stock of Linens in the Initial Public Offering.
"Stockholder Documents" means all of the agreements and other
documents entered into between Linens and CVS in connection with the Initial
Public Offering as contemplated hereby, including, without limitation, this
Agreement, the Transitional Services Agreement and the Tax Disaffiliation
Agreement.
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"Subsidiary" means, with respect to any Person, any other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person.
"Tax" means Tax as such term is defined in the Tax Disaffiliation
Agreement.
"Tax Disaffiliation Agreement" means the Tax Disaffiliation
Agreement dated as of the date hereof between CVS and Linens.
"Third-Party Claim" has the meaning set forth in Section 2.05.
ARTICLE II
INDEMNIFICATION
Section 2.01. Linens Indemnification of the CVS Group. (a) Subject
to Section 2.03, on and after the Initial Public Offering Date, Linens shall
indemnify, defend and hold harmless the CVS Group and the respective directors,
officers and Affiliates of each Person in the CVS Group (the "CVS Indemnitees")
from and against any and all Losses incurred or suffered by any of the CVS
Indemnitees arising out of, or due to the failure of any Person in the Linens
Group to pay, perform or otherwise discharge, any of the Linens Liabilities.
(b) Subject to Section 2.03, Linens shall indemnify, defend and hold
harmless each of the CVS Indemnitees and each Person, if any, who controls any
CVS Indemnitee within the meaning of either Section 15 of the 1933 Act or
Section 20 of the 1934 Act from and against any and all Losses caused by any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof, any preliminary prospectus or
the Prospectus (as amended or supplemented if Linens shall have furnished any
amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
Losses are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information furnished to Linens in writing by
CVS expressly for use therein.
(c) Subject to Section 2.03, on and after the Initial Public
Offering Date, Linens shall indemnify, defend and hold
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harmless each of the CVS Indemnitees and each Person, if any, who controls any
CVS Indemnitee from and against any and all Losses incurred or suffered by any
of the CVS Indemnitees (i) due to the failure of any Person in the Linens Group
to pay, perform or otherwise discharge its obligations under any of the
Guaranteed Leases or (ii) otherwise arising out of or with respect to any of the
Guaranteed Leases or Lease Guarantees, except in the case of this clause (ii),
to the extent Losses are attributable to any breach of any agreement or covenant
by the CVS Group under any Lease Guarantee.
Section 2.02. CVS Indemnification of Linens Group. (a) Subject to
Section 2.03, on and after the Initial Public Offering Date, CVS shall
indemnify, defend and hold harmless the Linens Group and the respective
directors, officers and Affiliates of each Person in the Linens Group (the
"Linens Indemnitees") from and against any and all Losses incurred or suffered
by any of the Linens Indemnitees and arising out of, or due to the failure of
any Person in the CVS Group to pay, perform or otherwise discharge, any of the
CVS Liabilities.
(b) Subject to Section 2.03, CVS shall indemnify, defend and hold
harmless each of the Linens Indemnities and each Person, if any, who controls
any Linens Indemnitee within the meaning of either Section 15 of the 1933 Act or
Section 20 of the 1934 Act from and against any and all Losses caused by any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof, any preliminary prospectus or
the Prospectus (as amended or supplemented if Linens shall have furnished any
amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such Losses are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information furnished to Linens in writing by CVS expressly for use therein.
(c) The parties agree that, for purposes of Sections 2.01(b) and
2.02(b) hereof, the only information furnished to Linens in writing by CVS
expressly for use in the Registration Statement or any amendment thereof, any
preliminary prospectus or the Prospectus (as amended or supplemented if Linens
shall have furnished any amendments or supplements thereto) is the information
contained therein under the following captions: "Risk Factors--Control of the
Company by CVS" and "Relationship with CVS and Related Party Transactions".
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Section 2.03. Insurance; Third Party Obligations; Tax Benefits. Any
indemnification pursuant to Sections 2.01 or 2.02 shall be paid net of the
amount of any insurance or other amounts that would be payable by any third
party to the Indemnified Party (as defined below) in the absence of this
Agreement (irrespective of time of receipt of such insurance or other amounts)
and net of any tax benefit to the Indemnified Party attributable to the relevant
payment or Liability. It is expressly agreed that no insurer or any other third
party shall be (i) entitled to a benefit it would not be entitled to receive in
the absence of the foregoing indemnification provisions, (ii) relieved of the
responsibility to pay any claims to which it is obligated or (iii) entitled to
any subrogation rights with respect to any obligation hereunder.
Section 2.04. Notice and Payment of Claims. If any CVS Indemnitee or
Linens Indemnitee (the "Indemnified Party") determines that it is or may be
entitled to indemnification by any party (the "Indemnifying Party") under
Article II (other than in connection with any Action subject to Section 2.05),
the Indemnified Party shall deliver to the Indemnifying Party a written notice
specifying, to the extent reasonably practicable, the basis for its claim for
indemnification and the amount for which the Indemnified Party reasonably
believes it is entitled to be indemnified. Within 30 days after receipt of such
notice, the Indemnifying Party shall pay the Indemnified Party such amount in
cash or other immediately available funds unless the Indemnifying Party objects
to the claim for indemnification or the amount thereof. If the Indemnifying
Party does not give the Indemnified Party written notice objecting to such
indemnity claim and setting forth the grounds therefore within such 30-day
period, the Indemnifying Party shall be deemed to have acknowledged its
liability for such claim and the Indemnified Party may exercise any and all of
its rights under applicable law to collect such amount. In the event of such a
timely objection by the Indemnifying Party, the amount, if any, that is Finally
Determined to be required to be paid by the Indemnifying Party in respect of
such indemnity claim shall be paid by the Indemnifying Party to the Indemnified
Party in cash within 15 days after such indemnity claim has been so Finally
Determined.
Section 2.05. Notice and Defense of Third-Party Claims. Promptly
following the earlier of (i) receipt of notice of the commencement by a third
party of any Action against or otherwise involving any Indemnified Party or (ii)
receipt of information from a third party alleging the existence of a claim
against an Indemnified Party, in either case, with respect to which
indemnification may be sought pursuant to this Agreement (a "Third-Party
Claim"), the Indemnified Party shall give the Indemnifying Party written notice
thereof. The failure of the
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Indemnified Party to give notice as provided in this Section 2.05 shall not
relieve the Indemnifying Party of its obligations under this Agreement, except
to the extent that the Indemnifying Party is prejudiced by such failure to give
notice. Within 30 days after receipt of such notice, the Indemnifying Party may
(i) by giving written notice thereof to the Indemnified Party, acknowledge
liability for such indemnification claim and at its option elect to assume the
defense of such Third-Party Claim at its sole cost and expense or (ii) object to
the claim for indemnification set forth in the notice delivered by the
Indemnified Party pursuant to the first sentence of this Section 2.05; provided
that if the Indemnifying Party does not within such 30-day period give the
Indemnified Party written notice objecting to such indemnification claim and
setting forth the grounds therefor, the Indemnifying Party shall be deemed to
have acknowledged its liability for such indemnification claim. If the
Indemnifying Party has elected to assume the defense of a Third-Party Claim, (x)
the defense shall be conducted by counsel retained by the Indemnifying Party and
reasonably satisfactory to the Indemnified Party, provided that the Indemnified
Party shall have the right to participate in such proceedings and to be
represented by counsel of its own choosing at the Indemnified Party's sole cost
and expense; and (y) the Indemnifying Party may settle or compromise the Third
Party Claim without the prior written consent of the Indemnified Party so long
as such settlement includes an unconditional release of the Indemnified Party
from all claims that are the subject of such Third Party Claim, provided that
the Indemnifying Party may not agree to any such settlement pursuant to which
any remedy or relief, other than monetary damages for which the Indemnifying
Party shall be responsible hereunder, shall be applied to or against the
Indemnified Party, without the prior written consent of the Indemnified Party,
which consent shall not be unreasonably withheld. If the Indemnifying Party does
not assume the defense of a Third-Party Claim for which it has acknowledged
liability for indemnification hereunder, the Indemnified Party may require the
Indemnifying Party to reimburse it on a current basis for its reasonable
expenses of investigation, reasonable attorney's fees and reasonable
out-of-pocket expenses incurred in defending against such Third-Party Claim and
the Indemnifying Party shall be bound by the result obtained with respect
thereto by the Indemnified Party; provided that the Indemnifying Party shall not
be liable for any settlement effected without its consent, which consent shall
not be unreasonably withheld. The Indemnifying Party shall pay to the
Indemnified Party in cash the amount, if any, for which the Indemnified Party is
entitled to be indemnified hereunder within 15 days after such Third Party Claim
has been Finally Determined, in the case of an indemnity claim as to which the
Indemnifying Party has acknowledged liability or, in the case of any indemnity
claim as to which the Indemnifying
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Party has not acknowledged liability, within 15 days after such Indemnifying
Party's objection to liability hereunder has been Finally Determined.
Section 2.06. Certain Limitations on Claims. Notwithstanding
anything else contained in this Agreement, no claim may be made under Section
2.01(a), 2.01 (b), 2.02(a) or 2.02(b): (a) in respect of any single Loss claim
or item of $500 or less, provided that this clause (a) shall not preclude a
claim under any such Section in an amount in excess of $500 that is made up of
several related claims or items that individually are less than $500 in amount,
or (b) if the Loss giving rise to such claim is incurred after the fifth
anniversary of the date hereof.
Section 2.07. Contribution. If for any reason the indemnification
provided for in Section 2.01 or 2.02 is unavailable to any Indemnified Party, or
insufficient to hold it harmless, then, subject to the provisions of the
Underwriting Agreement relating to the Initial Public Offering, the Indemnifying
Party shall contribute to the amount paid or payable by such Indemnified Party
as a result of such Losses in such proportion as is appropriate to reflect all
relevant equitable considerations.
Section 2.08. Non-Exclusivity of Remedies. The remedies provided for
in this Article II are not exclusive and shall not limit any rights or remedies
which may otherwise be available to any Indemnified Party at law or in equity.
ARTICLE III
CERTAIN AGREEMENTS RELATING TO LEASES; OTHER AGREEMENTS
Section 3.01. Continuity of Existing Lease Guarantees. With respect
to each real estate lease under which any Person in the Linens Group is a lessee
or sublessee and that is in effect prior to the date hereof (including, without
limitation, the leases set forth in Schedule 3.01 hereto (the "Scheduled
Leases")) and that remains in effect following the date hereof (i) without any
renewal option having been exercised or (ii) except in the case of the Scheduled
Leases (which will be guaranteed only through the initial term thereof), by
reason of the exercise of any renewal option provided for in the terms of such
lease as in effect as of the date hereof (collectively, the "Guaranteed
Leases"), any lease guarantee of such Guaranteed Lease provided by CVS or any of
its Affiliates and in effect as of the date hereof (a "Lease Guarantee") will
remain in effect after the date hereof for the duration of the term of such
lease
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and, except in the case of the Scheduled Leases (which will be guaranteed only
through the initial term thereof), any extension thereof pursuant to the
exercise of any such renewal option. CVS and its Affiliates shall be indemnified
against any Losses arising from such Guaranteed Leases or Lease Guarantees, as
provided in Section 2.01(c).
Section 3.02. No New CVS Lease Guarantees To be Furnished After The
Initial Public Offering. Except as expressly provided otherwise in Section 3.01,
to the extent that any guarantee is required to be provided after the date
hereof with respect to any real estate or other lease entered into by a Person
in the Linens Group, such guarantee shall not be furnished by any Person in the
CVS Group.
Section 3.03. Intercompany Accounts. All intercompany receivable,
payable and loan balances in existence as of the date hereof between the CVS
Group and Linens Group will be eliminated in the manner described in the
Registration Statement.
Section 3.04. Certain Rights Upon a Third Party Obtaining Above a
Specified Ownership Level of Linens Common Stock. (a) No Person or group (within
the meaning of Section 13(d) under the 1934 Act) of Persons shall become the
beneficial owner (within the meaning of Rule 13d-3 under the 1934 Act) of a
majority of the Common Stock (such beneficial ownership level being "Majority
Beneficial Ownership") unless (i) CVS shall have received prior written notice
that such Person or group proposes to acquire Majority Beneficial Ownership and
(ii) prior to such acquisition such Person or group provides to CVS (unless
waived by CVS in writing) a guarantee, in form and substance acceptable to CVS,
of the obligations of Linens under Section 2.01(c) of this Agreement. In
addition, upon any such Person or group acquiring Majority Beneficial Ownership,
CVS may, at its election, forthwith terminate its provision of any or all of the
Services under the Transitional Services Agreement.
(b) As soon as Linens is aware or has reason to believe that any
Person or group proposes to acquire (or is considering acquiring) Majority
Beneficial Ownership, (i) Linens shall promptly provide written notice thereof
to CVS and (ii) Linens shall promptly inform such Person or group in writing of
the provisions of this Section 3.04. So long as (x) Linens has a class of its
capital stock registered under Section 12 of the 1934 Act and (y) the aggregate
future minimum lease payments under the Guaranteed Leases is greater than $50
million, Linens shall disclose the provisions of this Section 3.04 in each
Linens' Annual Report on Form 10-K filed under the 1934 Act.
Section 3.05. Intellectual Property Rights and
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Licenses. Neither Group shall have any right or license in or to any technology,
software, intellectual property (including any trademark, service mark, patent
or copyright), know-how or other proprietary right owned, licensed or held for
use by the other Group.
ARTICLE IV
REGISTRATION RIGHTS
Section 4.01. General. Linens grants to CVS and each other Person in
the CVS Group that agrees to be bound by the terms of Appendix A hereto the
registration rights set forth in Appendix A hereto. CVS, Nashua Hollis and
Linens hereby agree to the terms and provisions set forth in Appendix A hereto.
ARTICLE V
ACCESS TO INFORMATION
Section 5.01. Provision of Corporate Records. Immediately prior to
or as soon as practicable following the Initial Public Offering Date, each Group
shall provide to the other Group all documents, contracts, books, records and
data (including but not limited to minute books, stock registers, stock
certificates and documents of title) in its possession relating to such other
Group or such other Group's business and affairs; provided that if any such
documents, contracts, books, records or data relate to both Groups or the
business and operations of both Groups, each such Group shall provide to the
other Group true and complete copies of such documents, contracts, books,
records or data.
Section 5.02. Access to Information. From and after the Initial
Public Offering Date until the later of (a) two years after the date hereof and
(b) the date CVS ceases to be a Principal Stockholder, each Group shall afford
promptly to the other Group and its accountants, counsel and other designated
representatives reasonable access during normal business hours to all documents,
contracts, books, records, computer data and other data in such Group's
possession relating to such other Group or the business and affairs of such
other Group (other than data and information subject to an attorney/client or
other privilege), insofar as such access is reasonably required by such other
Group, including, without limitation, for audit, accounting, litigation and
disclosure and reporting purposes.
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Section 5.03. Litigation Cooperation. Each Group shall use
reasonable efforts to make available to the other Group and its accountants,
counsel, and other designated representatives, upon written request, its
directors, officers, employees and representatives as witnesses, and shall
otherwise cooperate with the other Group, to the extent reasonably required in
connection with any legal, administrative or other proceedings arising out of
either Group's business and operations prior to the Initial Public Offering Date
in which the requesting party may from time to time be involved.
Section 5.04. Reimbursement. Each Group providing information or
witnesses to the other Group, or otherwise incurring any expense in connection
with cooperating, under Sections 5.01, 5.02 or 5.03 shall be entitled to receive
from the recipient thereof, upon the presentation of invoices therefor, payment
for all out-of-pocket costs and expenses (excluding charges for employee time)
as may be reasonably incurred in providing such information, witnesses or
cooperation.
Section 5.05. Retention of Records. Except as otherwise required by
law or agreed to in writing, each party shall, and shall cause the members of
its respective Group to, retain all information relating to the other Group's
business and operations in accordance with the past practice of such party.
Notwithstanding the foregoing, any party may destroy or otherwise dispose of any
such information at any time, provided that, prior to such destruction or
disposal, (i) such party shall provide not less than 90 days' prior written
notice to the other party, specifying the information proposed to be destroyed
or disposed of, and (ii) if the recipient of such notice shall request in
writing prior to the scheduled date for such destruction or disposal that any of
the information proposed to be destroyed or disposed of be delivered to such
requesting party, the party proposing the destruction or disposal shall promptly
arrange for the delivery of such of the information as was requested at the
expense of the requesting party.
Section 5.06. Confidentiality. Each party shall hold and shall cause
its directors, officers, employees, agents, consultants and advisors
("Representatives") to hold in strict confidence all information (other than any
such information relating solely to the business or affairs of such party)
concerning the other party unless (i) such party is compelled to disclose such
information by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law or (ii) such information can be shown to
have been (A) in the public domain through no fault of such party or (B)
lawfully acquired after the date hereof on a non-confidential basis from other
sources. Notwithstanding the foregoing, such party may
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disclose such information to its Representatives so long as such Persons are
informed by such party of the confidential nature of such information and are
directed by such party to treat such information confidentially. If such party
or any of its Representatives becomes legally compelled to disclose any
documents or information subject to this Section, such party will promptly
notify the other party so that the other party may seek a protective order or
other remedy or waive such party's compliance with this Section. If no such
protective order or other remedy is obtained or waiver granted, such party will
furnish only that portion of the information which it is advised by counsel is
legally required and will exercise its reasonable efforts to obtain reliable
assurance that confidential treatment will be accorded such information. Such
party agrees to be responsible for any breach of this Section by it and its
Representatives.
Section 5.07. Inapplicability of Article V to Tax Matters.
Notwithstanding anything to the contrary in Article V, Article V shall not apply
with respect to information, records and other matters relating to Taxes, all of
which shall be governed by the Tax Disaffiliation Agreement.
ARTICLE VI
EMPLOYEE MATTERS
Section 6.01. Employee Matters. With respect to employee matters and
employee benefit arrangements, the parties hereto agree as set forth in Schedule
6.01.
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ARTICLE VII
CVS' GOVERNANCE RIGHTS
Section 7.01. Appointment of Outside Directors. Within three months
after the date hereof, the Board of Directors of Linens (the "Linens Board")
shall fill two of the vacancies on the Linens Board with individuals who are not
officers or employees of any entity in the CVS Group or the Linens Group.
Section 7.02. CVS Designated Directors. CVS shall have the right to
designate the Applicable CVS Number of directors to the Linens Board and the
right to designate the class of the Linens Board to which each such CVS designee
shall be elected. In connection with each election of directors, Linens shall
nominate each of the Applicable CVS Number of individuals designated by CVS
(each, a "CVS Designee") as a director to the Board of Directors and shall
recommend to the stockholders the election of each CVS Designee as a director
(in the class so designated by CVS). Within three months after the date hereof,
the Linens Board shall fill one or more vacancies on the Linens Board with
individuals who are CVS Designees so that, after giving effect thereto, the
Applicable CVS Number of CVS Designees shall serve as directors on the Linens
Board.
Section 7.03. Removal of CVS Designees. In the event of a decrease
in the Applicable CVS Number at any time, (i) one or more (as appropriate) CVS
Designees (selected by CVS as provided in clause (ii)) shall automatically be
deemed removed from the Board effective at such time, and (ii) CVS shall have
the right to select the individual to be removed if any CVS Designee is to
remain as a director after giving effect to such decrease; provided that if
after giving effect to such decrease the Applicable CVS Number is zero, one CVS
Designee (selected by CVS) shall continue to serve as a director until the next
annual meeting of stockholders. Except as aforesaid or as provided in clause (g)
of Article FIFTH of the Linens Charter, no CVS Designee may be removed from the
Linens Board except with the written consent of CVS. CVS shall have the right to
remove any CVS Designee at any time (such removal to be effective upon delivery
of notice thereof to Linens), and the vacancy resulting from such removal shall
be filled as provided in Section 7.04.
Section 7.04. Filling of Vacancy of CVS Designee. In the event that
(i) there occurs at any time a vacancy in the Linens Board by reason of the
death, retirement, resignation, removal or other departure of any CVS Designee
and (ii) after giving effect to such vacancy the number of CVS Designees on the
Linens Board is less than the Applicable CVS Number at such time, the Linens
Board will act as promptly as practicable to fill such
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vacancy with a CVS Designee (and will so fill multiple vacancies, if necessary)
so that, after giving effect to the election of such CVS Designee as a director,
the Applicable CVS Number of CVS Designees shall serve as directors on the
Linens Board.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Notices. All notices and other communications to any
party hereunder shall be in writing (including telex, telecopy or similar
writing) and shall be deemed given when received addressed as follows:
If to CVS, to:
CVS Corporation
1 CVS Drive
Woonsocket, Rhode Island 02895
Telecopy: (401) 765-4128
Attention: Chief Financial Officer and
General Counsel
With a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: (212) 450-4800
Attention: Dennis S. Hersch
If to Linens, to:
Linens 'n Things, Inc.
6 Brighton Road
Clifton, New Jersey 07015
Telecopy: (201) 778-1300
Attention:
With a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: (212) 450-4800
Attention: Dennis S. Hersch
Any party may, by written notice so delivered to the other parties, change the
address to which delivery of any notice shall
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thereafter be made.
Section 8.02. Amendments; No Waivers. (a) Any provision of this
Agreement may be amended or waived if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, by CVS and Linens, or in the
case of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 8.03. Expenses. Except as specifically provided otherwise in
this Agreement, the Transitional Services Agreement or the Tax Disaffiliation
Agreement (including, without limitation, in Article II, Sections 3.03, 5.04,
5.05 and 8.08(c) and Schedule 6.01 of this Agreement), all costs and expenses
incurred in connection with the preparation, execution and delivery of the
Stockholder Documents and the consummation of the Initial Public Offering
(including the fees and expenses of all counsel, accountants and financial and
other advisors of both Groups in connection therewith, and all expenses in
connection with preparation, filing and printing of the Registration Statement
relating to the Initial Public Offering) shall be paid by CVS; provided that
Linens shall be responsible for and pay the fees, expenses and other amounts
payable to the lenders under Linens's credit facilities and all other fees and
expenses incurred in connection therewith (including the fees and expenses of
Linens's counsel in connection with the preparation and negotiation of all
documentation relating to such credit facilities).
Section 8.04. Successor 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; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto.
Section 8.05. Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of New York (except for
Article VII, which shall be construed in accordance with and governed by the law
of the State of Delaware), without regard to the conflicts of laws rules of
either such State.
16
<PAGE>
Section 8.06. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other parties hereto.
Section 8.07. Entire Agreement. This Agreement and the other
Stockholder Documents constitute the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements, understandings and negotiations, both written and oral, between the
parties with respect to the subject matter hereof and thereof. No
representation, inducement, promise, understanding, condition or warranty not
set forth herein or in the other Stockholder Documents has been made or relied
upon by any party hereto. Neither this Agreement nor any provision hereof is
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
Section 8.08. Tax Disaffiliation Agreement; Set-Off. (a) Except as
otherwise provided herein and not inconsistent with the Tax Disaffiliation
Agreement, this Agreement shall not govern any Tax, and any and all claims,
losses, damages, demands, costs, expenses or liabilities relating to Taxes shall
be exclusively governed by the Tax Disaffiliation Agreement.
(b) If, at the time Linens is required to make any payment to CVS
under this Agreement, CVS owes Linens any amount under this Agreement or the Tax
Disaffiliation Agreement, then such amounts shall be offset and the excess shall
be paid by the party liable for such excess. Similarly, if at the time CVS is
required to make any payment to Linens under this Agreement, Linens owes CVS any
amount under this Agreement or the Tax Disaffiliation Agreement, then such
amounts shall be offset and the excess shall be paid by the party liable for
such excess.
(c) If, pursuant to a Final Determination, any amount paid by CVS,
Linens or their respective Post-Distribution Affiliates pursuant to this
Agreement results in any increased Tax liability or reduction of any Tax Asset
of any member of the Linens Group, Linens or its Post-Distribution Affiliates,
or the CVS Group, CVS or its Post-Distribution Affiliates, respectively, then
CVS or Linens, as the case may be, shall indemnify the other party and hold it
harmless from any interest or penalty attributable to such increased Tax
liability or the reduction of such Tax asset and shall pay to the other party,
in addition to amounts otherwise owed, 100 percent of the After-Tax Amount. All
capitalized terms used in this Section 8.08(c) and not otherwise
17
<PAGE>
defined in this Agreement are used as defined in the Tax Disaffiliation
Agreement.
Section 8.09. Jurisdiction. Any suit, action or proceeding seeking
to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby may be
brought in the United States District Court for the Southern District of New
York or the United States District Court for the District of Delaware or any
other New York State court sitting in New York County or any other court of the
State of Delaware, and each of the parties hereby consents to the jurisdiction
of such courts (and of the appropriate appellate courts therefrom) in any such
suit, action or proceeding and 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 suit, action or proceeding in any such court or that
any such suit, action or proceeding which is brought in any such court has been
brought in an inconvenient form. Process in any such suit, action or proceeding
may be served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 8.01 shall
be deemed effective service of process on such party.
Section 8.10. Existing Arrangements. Except as otherwise
contemplated hereby, all prior agreements and arrangements, including those
relating to goods, rights or services provided or licensed, between the Linens
Group and the CVS Group shall be terminated effective as of the Initial Public
Offering Date, if not theretofore terminated. No such agreements or arrangements
shall be in effect after the Initial Public Offering Date unless embodied in the
Stockholder Documents.
Section 8.11. Further Assurances. In addition to the actions
specifically provided for elsewhere in the Stockholder Documents, each of the
parties hereto shall use its reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things, reasonably necessary,
proper or advisable under applicable laws, regulations and agreements or
otherwise to consummate and make effective the transactions contemplated by the
Stockholder Documents.
Section 8.12. Effective Date. This Agreement shall become effective
upon the closing of the Initial Public Offering.
Section 8.13. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
18
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Stockholder
Agreement to be duly executed by their respective authorized officers as of the
date first above written.
CVS CORPORATION
By
-----------------------------
Name:
Title:
LINENS 'N THINGS, INC.
By
-----------------------------
Name:
Title:
NASHUA HOLLIS CVS, INC.
By
-----------------------------
Name:
Title:
<PAGE>
SCHEDULE 6.01
EMPLOYEE MATTERS
Section 1. General. Except as otherwise set forth in this Schedule
6.01, (a) CVS shall retain (i) any and all liabilities relating to or arising
out of any employee benefit or compensation arrangement (a "Plan") in respect of
any employee or former employee of CVS and any Affiliate of CVS who is not a
Transferred Employee (as hereinafter defined), and (ii) any and all liabilities
relating to or arising out of any Plan in respect of all Transferred Employees
that were incurred or are otherwise related to any period prior to and including
the Initial Public Offering Date and (b) CVS shall have no liability relating to
or arising out of any Plan in respect of Transferred Employees to the extent
that any such liability is incurred or otherwise relates to any period after the
Initial Public Offering Date.
Section 2. Employees. With respect to Terrence Grossman or each
individual who, as of the Initial Public Offering Date, is employed (including
persons absent from active service by reason of Short Term Disability or Long
Term Disability, as hereinafter defined, or absence not relating to disability,
whether paid or unpaid) in the Linens Business ("Transferred Employees"), Linens
shall cause the employment of each Transferred Employee to be continued on the
Initial Public Offering Date, provided that nothing stated herein shall limit
the right of Linens or any Subsidiary to terminate the employment of any
Transferred Employee following the Initial Public Offering Date or to reduce or
otherwise modify the position, responsibilities, compensation or benefits of any
Transferred Employee at any time, and provided further that an individual who is
employed as of the Initial Public Offering Date by Linens or any of its
Subsidiaries, but on such date is absent from active service and (i) is
receiving Long Term Disability Benefits (as hereinafter defined) or (ii) is
absent by reason of Short Term Disability but subsequently begins to receive
Long Term Disability Benefits shall not be considered a Transferred Employee for
purposes of the CVS Long Term Disability Plan. The employee benefit plans and
arrangements maintained by Linens shall give full service credit for purposes of
eligibility and vesting (and in connection with any such severance or vacation
plan or policy, for purposes of determining the level of benefit) for any
service on or prior to the Initial Public Offering Date of a Transferred
Employee with CVS and its Subsidiaries. For purposes of this Agreement, (i)
"Short Term Disability" shall mean a condition with respect to which an employee
is receiving
20
<PAGE>
benefits, as of the Initial Public Offering Date, under either the CVS Short
Term Disability Plan or the CVS Salary Continuation Plan, and (ii) "Long Term
Disability Benefits" shall mean benefits under the CVS Long Term Disability
Plan.
Section 3. Qualified Plans. (a) CVS shall retain all liabilities and
obligations in respect to benefits accrued by Transferred Employees under CVS's
ESOP. CVS shall cause each Transferred Employee to become 100% vested in the
employee's account in CVS's ESOP as of the Initial Public Offering Date. As soon
as practicable after the Initial Public Offering Date, CVS shall take such
action as may be necessary, if any, to permit each Transferred Employee to
exercise his rights under CVS's ESOP to effect an immediate distribution of such
Transferred Employee's full account balances under CVS's ESOP or to effect a
tax-free rollover of the taxable portion of the account balances into an
eligible retirement plan (within the meaning of Section 401(a)(31) of the
Internal Revenue Code ("Code"), a "Direct Rollover") maintained by Linens (the
"Linens Plan") or to an individual retirement account. CVS and Linens shall work
together in order to facilitate any such distribution or rollover and to effect
a Direct Rollover for those participants who elect to roll over their account
balances directly into the Linens Plan; provided that nothing contained herein
shall obligate the Linens Plan to accept a Direct Rollover in a form other than
cash.
(b) On the Initial Public Offering Date, or as soon as practicable
thereafter, Linens shall establish or designate the Linens Plan in order to
accommodate the Direct Rollovers described above and shall take all action
necessary, if any, to qualify the Linens Plan under the applicable provisions of
the Code and shall make any and all filings and submissions to the appropriate
governmental authorities required to be made by it in connection with any Direct
Rollover.
(c) As soon as practicable after the Initial Public Offering Date,
Linens shall establish or designate an individual account plan (the "Successor
Individual Account Plan"), which may be the same plan as the Linens Plan, for
the benefit of Transferred Employees, shall take all necessary action, if any,
to qualify such plan under the applicable provisions of the Code and shall make
any and all filings and submissions to the appropriate governmental agencies
required to be made by it in connection with the transfer of assets described
below. CVS shall cause each Transferred Employee to be 100% vested in the
employee's account balance under CVS's 401(k) Profit Sharing Plan as of the
Initial Public Offering Date. No later than the date of the transfer described
herein, Linens shall make all applicable 401(k), profit sharing, matching
contributions and
21
<PAGE>
qualified non-elective contributions payable under CVS's 401(k) Profit Sharing
Plan with respect to Transferred Employees for periods on or prior to the
Initial Public Offering Date and shall be entitled to retain any applicable
reserves or accruals relating thereto. As soon as practicable following the
Initial Public Offering Date, CVS shall cause the trustee of CVS's 401(k) Profit
Sharing Plan to transfer in the form of cash or, to the extent applicable, notes
representing outstanding loans made to Transferred Employees under CVS's 401(k)
Profit Sharing Plan (or such other form as may be agreed to by CVS and Linens)
the full account balances of Transferred Employees (and beneficiaries thereof)
under CVS's 401(k) Profit Sharing Plan (which account balances will have been
credited with appropriate earnings attributable to the period from the Initial
Public Offering Date to the date of transfer described herein), reduced by any
necessary benefit or withdrawal payments to or in respect of Transferred
Employees occurring during the period from the Initial Public Offering Date to
the date of transfer described herein, to the appropriate trustee as designed by
Linens under the trust agreement forming a part of the Successor Individual
Account Plan, it being understood that CVS is under no obligation to effect a
distribution, payment or loan under CVS's 401(k) Profit Sharing Plan in respect
of a Transferred Employee who either requests a loan or terminates employment
after the Initial Public Offering Date but prior to the date of transfer
described herein if the required distribution, payment or loan, as the case may
be, forms have not been received by CVS prior to the last day of the month
preceding the month in which the transfer described herein occurs. CVS and
Linens agree to take such actions and enter into such agreements, if any, that
may be necessary to effect the transfer described herein. In consideration for
the transfer of assets described herein, Linens shall, effective as of the date
of transfer described herein, assume all of the obligations of CVS in respect of
the account balances accumulated by Transferred Employees under CVS's 401(k)
Profit Sharing Plan (exclusive of any portion of such account balances which are
paid or otherwise withdrawn prior to the date of transfer described herein) with
respect to the account balances transferred to the Successor Individual Account
Plan. CVS hereby indemnifies Linens, the Company and the Subsidiaries against
and agrees to hold them harmless from any liabilities or claims (including
claims for benefits or for breach of fiduciary duties, but excluding claims for
benefits to the extent of the assets transferred hereunder) relating to CVS's
401(k) Profit Sharing Plan (or the qualified status of that Plan) which arose
prior to the transfer of assets described herein or which relate to the
operation or administration of that Plan prior to the transfer of assets. Linens
hereby indemnifies CVS against and agrees to hold it harmless from any
liabilities or claims relating to the qualified status of the Successor
Individual Account Plan or the
22
<PAGE>
operation or administration of that Plan following the transfer of assets
described herein.
Section 4. Welfare Plans and Worker Compensation. (a) Linens and its
Affiliates shall each establish or designate welfare benefit plans, within the
meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended, and applicable workers compensation plans, for the benefit of their
respective Transferred Employees (the "Replacement Welfare Plans"). The
Replacement Welfare Plans shall be effective as of the Initial Public Offering
Date, provided, that at the request of Linens, CVS shall continue to provide, to
the extent applicable, services for (i) Transferred Employees (and eligible
spouses and dependents) and (ii) former employees of the Linens Business and
their qualified beneficiaries who as of the Initial Public Offering Date are
covered pursuant to Title X of the Consolidated Omnibus Budget Reconciliation
Act of 1985 and Section 4980B of the Code under its Plans which provide medical,
dental, life insurance, accidental death and dismemberment, pharmacy, eyecare
and disability benefits for such period of time from the Initial Public Offering
Date to not later than May 1, 1997 as Linens shall specify in such request (the
"Benefit Transition Period"). Linens shall pay the claim and claims processing
cost of such services during the Benefit Transition Period (including claims
runout in respect of claims incurred both before and after the Initial Public
Offering Date) and shall directly fund all medical and dental claims through a
bank account set up solely for such purposes. In addition, Linens shall be
entitled to retain any applicable reserves or accruals relating to such
benefits. Linens and its designated Affiliates shall retain or assume all of the
obligations for any retiree benefits under any welfare plan provided Transferred
Employees (and dependents) and retirees (and dependents) terminated while
employed by Linens and any Affiliate or while employed in the Linens Business
prior to the Initial Public Offering Date. Linens and its Affiliates shall
assume as of the end of the Benefit Transition Period all obligations to provide
coverage and benefits for Transferred Employees and former employees of the
Linens Business and their qualified beneficiaries under the Title X of the
Consolidated Omnibus Budget Reconciliation Act of 1985 and Section 4980B of the
Code.
(b) Linens shall be responsible for all workers compensation claims,
whether arising before or after the Initial Public Offering Date, with respect
to any employee or former employee of the Linens Business, including, but not
limited to, any Transferred Employee. In addition, Linens shall be entitled to
retain any applicable reserves or accruals relating thereto.
Section 5. Stock Options. Except as otherwise
23
<PAGE>
provided in any agreement with a Transferred Employee, as of the Initial Public
Offering Date all outstanding options issued to Transferred Employees to
purchase CVS Common Stock that have heretofore been granted under any employee
stock option plan of CVS and are exercisable on the Initial Public Offering Date
shall be exercisable for a period of 90 days from the Initial Public Offering
Date.
Section 6. Bonus and Profit Incentive Plans. Except as otherwise
provided in any agreement with a Transferred Employee, CVS shall have no
liability for any bonus or profit incentive awards and Linens shall be
responsible for all such awards relating to the period beginning on the Initial
Public Offering Date.
Section 7. Severance. The continued employment by Linens and its
Affiliates of Transferred Employees after the Initial Public Offering Date shall
not be deemed a severance of employment of such Transferred Employees from CVS
for purposes of any policy, Plan, program or agreement of CVS or any of its
Subsidiaries that provides for the payment of severance, salary continuation or
similar benefits.
Section 8. Supplemental Retirement Benefits and Deferred
Compensation. (a) Linens and its Affiliates shall assume as of the Initial
Public Offering Date all of the obligations and liabilities of CVS and any of
its Affiliates for any Transferred Employee under the Deferred Compensation Plan
of CVS Corporation and Affiliated Companies and any reserve or accrual in
respect of such Transferred Employees shall be retained by Linens.
(b) CVS shall have no liability for any obligation relating to
Transferred Employees under the Supplemental Retirement Plans I and II for
Select Senior Management of CVS Corporation and any Linens reserve or accrual in
respect of such Transferred Employees shall be transferred to CVS.
Section 9. No Third Party Beneficiaries. Neither Transferred
Employees nor any current, former or retired employee of CVS or its affiliates
shall be entitled to enforce the provisions of this Schedule 6.01 against the
respective parties as third party beneficiaries thereof.
24
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(I)7
<SEQUENCE>3
<DESCRIPTION>EX-10(I)7
<TEXT>
<PAGE>
TAX DISAFFILIATION AGREEMENT
between
CVS CORPORATION,
on behalf of itself and its
Post-Deconsolidation Affiliates
and
LINENS `N THINGS, INC.,
on behalf of itself and its
Post-Deconsolidation Affiliates
<PAGE>
1. Definitions
2.Federal and State Taxes--Administrative and Compliance Matters.
(a) Sole Tax Sharing Agreement.................................8
(b) Designation of Agent.......................................9
(c) Pre-Deconsolidation Period Returns........................10
3.Consolidated Federal, Consolidated State and Unitary State
Taxes -- Allocation of Taxes.
(a) General...................................................10
(b) Estimated Payments........................................11
(c) Payment of Taxes at Year-End..............................11
(d) Carrybacks and Certain Other Matters......................14
4. Other Taxes
5. Certain Covenants.
(a) Linens Covenants..........................................18
(b) CVS Covenants.............................................19
(c) Linens and CVS Covenant...................................20
6. Indemnities.
(a)(I) Linens Indemnity .........................................20
(a)(II) Linens Additional Indemnity ..............................21
(b) CVS Indemnity.............................................21
(c) Discharge of Indemnity....................................23
(d) Tax Benefits..............................................24
(e) Refunds...................................................25
(f) Clerical Errors...........................................25
(g) Method of Calculation.....................................25
7. Communication and Cooperation.
(a) Consult and Cooperate.....................................26
(b) Provide Information.......................................27
(c) Tax Attribute Matters.....................................28
i
<PAGE>
8. Audits and Contest.
9. Payments.
10. Notices.
11. Costs and Expenses.
12. Effectiveness; Termination and Survival.
13. Section Headings.
14. Entire Agreement; Amendments and Waivers.
(a) Entire Agreement. ........................................33
(b) Waiver....................................................34
15.Governing Law and Interpretation.
16. Dispute Resolution.
17. Counterparts.
18. Assignments; Third Party Beneficiaries.
Exhibit A
ii
<PAGE>
Exhibit B
TAX DISAFFILIATION AGREEMENT
This Agreement is entered into as of the seond day of December, 1996
between CVS Corporation ("CVS"), a Delaware corporation, on behalf of itself and
its Post-Deconsolidation Affiliates, and Linens 'n Things, Inc. ("Linens"), a
Delaware corporation, on behalf of itself and its Post-Deconsolidation
Affiliates.
W I T N E S S E T H:
WHEREAS CVS and Linens intend to offer shares of Linens Common Stock
to the public pursuant to which Linens will cease to be a member of the CVS
Consolidated Group, as defined below.
WHEREAS, CVS and Linens desire to set forth their agreement on the
rights and obligations of CVS, Linens and their respective Affiliates with
respect to the handling and allocation of federal, state, local and foreign
Taxes incurred in Taxable periods beginning prior to the Deconsolidation Date
and various other Tax matters;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties agree as follows:
1
<PAGE>
1. Definitions
(a) As used in this Agreement:
"Affiliate" of any person shall mean any individual, corporation,
partnership or other entity directly or indirectly owning more than 50 percent
of, owned more than 50 percent by, or under more than 50 percent common
ownership with, such person.
"After-Tax Amount" shall mean an additional amount necessary to
reflect the hypothetical Tax consequences of the receipt or accrual of any
payment, using the maximum statutory rate (or rates, in the case of an item that
affects more than one Tax) applicable to the recipient of such payment for the
relevant year, reflecting for example, the effect of the deductions available
for interest paid or accrued and for Taxes such as state and local income Taxes.
"CVS Consolidated Group" shall mean, with respect to any Taxable
period, (i) with respect to Consolidated Federal Taxes, the affiliated group of
corporations of which CVS or Melville Corporation ("Melville") (or a successor
of either) was or is the common parent (within the meaning of Section 1504 of
the Code), (ii) with respect to Consolidated State Taxes and Unitary State
Taxes, the consolidated, combined or unitary group of which CVS or Melville (or
a successor of either) or any of their Affiliates was or is a member, and (iii)
with respect to any Other Tax payable with respect to a group which includes or
included at least one member of the CVS Group and at least one member of the
Linens Group, such group.
2
<PAGE>
"CVS Group" shall mean, with respect to any Taxable period, CVS,
Melville and their Affiliates (including their predecessors and successors) at
any time prior to the Deconsolidation (including, without limitation, the
Non-Chain Corporations) other than those Affiliates comprising the Linens Group.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
any successor thereto.
"Consolidated Federal Tax" shall mean the consolidated Federal Tax
liability of the CVS Consolidated Group for any period as to which a
consolidated Federal Tax Return was or is filed by CVS or Melville, or any
successor to either, for such group.
"Consolidated State Tax" shall mean with respect to each State, any
income or franchise Tax payable with respect to a group of at least two
corporations, other than a Unitary State Tax.
"Deconsolidation" shall mean any event pursuant to which Linens
ceases to be a subsidiary corporation includible in a consolidated tax return of
CVS for Federal Tax purposes, or in a consolidated, combined or unitary return
with a member of the CVS Group.
"Deconsolidation Date" shall mean the date on which the
Deconsolidation shall be effected.
"Federal Tax" shall mean any Tax imposed under Subtitle A of the
Code and any related penalty imposed under Subtitle F of the Code.
3
<PAGE>
"Final Determination" shall mean (i) with respect to Federal Taxes,
(A) a "determination" as defined in Section 1313(a) of the Code, or (B) the date
of acceptance by or on behalf of the Internal Revenue Service of Form 870-AD (or
any successor form thereto), as a final resolution of Tax liability for any
Taxable period, except that a Form 870-AD (or successor form thereto) that
reserves the right of the taxpayer to file a claim for refund and/or the right
of the Internal Revenue Service to assert a further deficiency shall not
constitute a Final Determination with respect to the item or items so reserved;
(ii) with respect to Taxes other than Federal Taxes, any final determination of
liability in respect of a Tax provided for under applicable law; (iii) any final
disposition by reason of the expiration of the applicable statute of
limitations; and (iv) the payment of Tax by CVS, Linens, or any Affiliate of CVS
or Linens, whichever is responsible for payment of such Tax under applicable
law, with respect to any item disallowed or adjusted by a Taxing Authority,
provided that the provisions of Section 8 hereof have been complied with, or, if
such section is inapplicable, that the party responsible under the terms of this
Agreement for such Tax is notified by the party paying such Tax that it has
determined that no action should be taken to recoup such disallowed item, and
the other party agrees with such determination.
"Linens Group" shall mean Linens and its Affiliates immediately
after the Deconsolidation Date, including any predecessors thereto, and any
corporation that would have been an Affiliate of Linens immediately after
4
<PAGE>
the Deconsolidation Date if it had not been previously sold, liquidated or
otherwise disposed of.
"Non-Chain Corporations" shall mean Computer Development, Inc.,
Melville Equipment Leasing Corporation, MC Retail, Inc., Melville Realty Company
and their direct and indirect subsidiaries.
"Other Taxes" is defined in Section 4.
"Post-Deconsolidation Affiliate" shall mean with regard to CVS, any
person that is or that will be an Affiliate of CVS or a successor to CVS after
the Deconsolidation and, with regard to Linens, any person that is or that will
be an Affiliate of Linens or a successor to Linens after the Deconsolidation.
"Post-Deconsolidation Period" shall mean any taxable period (or
portion thereof) beginning after the close of business on the Deconsolidation
Date.
"Pre-Deconsolidation Period" shall mean any Taxable period ending on
or before the close of business on the Deconsolidation Date; provided that if a
Taxable period ending after the Deconsolidation Date contains any days which
fall prior to or on the Deconsolidation Date, any portion of such Taxable period
up to or including the Deconsolidation Date shall also be included in the
Pre-Deconsolidation Period.
"Pre-Deconsolidation Tax Liability" shall mean (i) the Consolidated
Federal Tax, and (ii) the Consolidated State Tax liability of any group that
includes at least one member of the CVS Group and at least one member of the
Linens Group, (iii) the Unitary State Tax liability of any group which includes
at least one member of the CVS Group and at least one
5
<PAGE>
member of the Linens Group, and (iv) any Other Taxes, in each case for any
Pre-Deconsolidation Period.
"Prime" shall mean the rate announced from time to time as "prime"
by Morgan Guaranty Trust Company as its prime rate.
"Referee" is defined in Section 16.
"Return" shall mean any Tax return, statement, report or form
(including estimated Tax returns and reports, extension requests and forms, and
information returns and reports) required to be filed with any Taxing Authority.
"Tax" (and the correlative meaning, "Taxes," "Taxing" and "Taxable")
shall mean (A) any tax imposed under Subtitle A of the Code, any net income,
gross income, gross receipts, alternative or add-on minimum, sales, use,
value-added, goods and services, ad valorem, franchise, profits, license,
withholding, payroll, employment, excise, transfer, recording, severance, stamp,
occupation, premium, property, environmental, custom duty, or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest and any penalty, addition to tax or additional amount
imposed by a Taxing Authority; (B) any liability of a member of the CVS Group or
the Linens Group, as the case may be, for the payment of any amounts of the type
described in clause (A) for any Taxable period resulting from the application of
Treasury Regulation Section 1.1502-6 or any similar
6
<PAGE>
provision applicable under state, local or foreign law; and (C) any liability of
a member of the CVS Group or the Linens Group for the payment of any amounts
described in clause (A) as a result of any express or implied obligation to
indemnify any other party.
"Tax Asset" shall mean any net operating loss, net capital loss,
investment Tax credit, foreign Tax credit, target jobs Tax credit, low income
housing credit, research and experimentation credit, charitable deduction or any
other credit or Tax attribute, including additions to basis of property, which
could reduce any Tax, including, without limitation, deductions, credits, or
alternative minimum net operating loss carryforwards related to alternative
minimum Taxes.
"Tax Packages" shall mean one or more packages of information,
including but not limited to the Corptax file and the divisional reconciliation,
that are (i) reasonably necessary for the purpose of preparing Federal Tax,
Consolidated State Tax, Unitary State Tax Returns or Other Tax returns of the
CVS Consolidated Group with respect to a Pre-Deconsolidation Period and (ii)
completed in all material respects in accordance with the standards that CVS has
established for its subsidiaries with respect to the relevant
Pre-Deconsolidation Period.
"Tax Proceeding" shall mean any Tax audit, dispute or proceeding
(whether administrative or judicial).
7
<PAGE>
"Taxing Authority" shall mean any governmental authority (domestic
or foreign) responsible for the imposition of any Tax.
"Unitary State Tax" shall mean, with respect to each State, any
income or franchise Tax payable with respect to a group of at least two
corporations and based upon a group apportionment percentage.
(b) Any term used in this Agreement which is not defined in this
Agreement shall, to the extent the context requires, have the meaning assigned
to it in the Code or the applicable Treasury regulations thereunder and, in the
case of Consolidated State Taxes, Unitary State Taxes, and Other Taxes, in
comparable provisions of applicable law.
2. Federal and State Taxes--Administrative and Compliance
Matters.
(a) Sole Tax Sharing Agreement. The parties acknowledge that there
has not been a Final Determination of the Pre-Deconsolidation Tax Liability, and
that members of the Linens Group are includible in the CVS Consolidated Group
for the Pre-Deconsolidation Period. This Agreement shall constitute the sole Tax
sharing agreement between CVS and its Post-Deconsolidation Affiliates, on one
hand, and Linens and its Post-Deconsolidation Affiliates, on the other hand,
and, to the extent there is any inconsistency between this Agreement and any
existing Tax sharing agreements or arrangements, written or unwritten, between
CVS and its Post-
8
<PAGE>
Deconsolidation Affiliates, on one hand, and Linens and its Post-Deconsolidation
Affiliates, on the other hand, this Agreement shall govern.
(b) Designation of Agent. Linens and each member of the Linens
Group, with respect to Consolidated Federal Taxes, each hereby irrevocably
designate CVS or Melville (to the extent required by applicable law) or a
successor of either as its agent, coordinator, and administrator, and, with
respect to Consolidated State Taxes, Unitary State Taxes and any Other Taxes
payable with respect to a group which includes at least one member of the CVS
Group and at least one member of the Linens Group, each hereby irrevocably
authorize CVS to designate a member of the CVS Group, or a successor of such
member, as its agent, coordinator, and administrator, for the purpose of taking
any and all actions (including the execution of waivers of applicable statutes
of limitation) necessary or incidental to the filing of any Return, any amended
Return, or any claim for refund (even where an item or Tax Asset giving rise to
an amended Return or refund claim arises in a Post-Deconsolidation Period),
credit or offset of Tax or any other proceedings, and for the purpose of making
payments to, or collecting refunds from, any Taxing Authority, in each case
relating to any Pre-Deconsolidation Period. CVS or the member of the CVS Group,
as the case may be, as agent, covenants to Linens that it shall be responsible
to see that all such administrative matters relating thereto shall be handled
promptly and appropriately. CVS shall inform and consult with Linens
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prior to taking any action on behalf of, or which will have any material impact
on the Tax liability of the Linens Group.
(c) Pre-Deconsolidation Period Returns. CVS and its
Post-Deconsolidation Affiliates will prepare, with the assistance of Linens and
its Post-Deconsolidation Affiliates, and file the Consolidated Federal Tax
Returns and the Consolidated State and Unitary State Tax Returns for all
Pre-Deconsolidation Periods. With respect to the 1996 year, Linens and its
Post-Deconsolidation Affiliates shall prepare and deliver to CVS all Tax
Packages within 120 days after the Deconsolidation Date.(1)
3. Consolidated Federal, Consolidated State and Unitary State
Taxes -- Allocation of Taxes.
(a) General. For the 1995 and 1996 Taxable years of the CVS
Consolidated Group,(2) Linens shall pay, or cause to be paid, to CVS or
Melville, with respect to 1995) an amount equal to (i) the Linens Group's share
of the CVS Consolidated Group's Consolidated Federal Tax and Consolidated State
Tax liability, determined in accordance with Exhibit A to this Agreement, and
(ii) the Linens Group's share of the CVS Consolidated Group's Unitary State Tax
liability, determined in accordance with Exhibit B to this Agreement.
- ----------
(1) Provide for 1997 if offering occurs in 1997 or if CVS continues to hold at
least 50% of Linens at any time in 1997.
(2) Provide for 1997 if offering occurs in 1997 or if CVS continues to hold at
least 50% of Linens at any time in 1997.
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(b) Estimated Payments. Promptly after CVS, Melville or any of their
Affiliates makes an estimated Tax payment with respect to the 1996 Taxable year
(other than a payment which relates solely to minimum Taxes due), whether or not
such payment is made prior to the Deconsolidation, CVS shall (i) in good faith
determine the amount of the Linens Group's share of such estimated Tax payment
(X) in accordance with the principles of Exhibit A to this Agreement, in the
case of an estimated Tax payment in respect of the Consolidated Federal Tax or
any Consolidated State Tax liability of the CVS Consolidated Group, and (Y) in
accordance with the principles of Exhibit B to this Agreement using 1995
apportionment factors, adjusted for significant dispositions or transfers of
assets, in the case of an estimated Tax payment in respect of any Unitary State
Tax liability of the CVS Consolidated Group and (ii) deliver a written statement
to Linens reflecting the determination described above. Linens shall pay to CVS
or CVS shall pay to Linens, as appropriate, the amount so determined in
accordance with Section 9 hereof.
(c) Payment of Taxes at Year-End.
(i) Promptly after CVS, Melville or any of their Affiliates files an
application to extend the due date of a Return for the 1995 or 1996
Taxable year, whether or not such application is filed prior to the
Deconsolidation, CVS shall (a) in good faith determine the estimated
amount of the Linens Group's share of the CVS Consolidated Group's
Consolidated Federal Tax or Consolidated State Tax liability for such
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Return in accordance with the principles of Exhibit A to this Agreement
or, in the case of a Unitary State Tax Return, in accordance with the
principles of Exhibit B to this Agreement using 1994 and 1995
apportionment factors for 1995 and 1996, respectively, adjusted for
significant dispositions or transfers of assets, and (b) deliver a written
statement to Linens reflecting the determination described above. Linens
shall pay to CVS, or CVS shall pay to Linens, as appropriate, in
accordance with Section 9 hereof, an amount equal to the difference, if
any, between (x) the amounts so determined and (y) the aggregate amount of
estimated installments paid with respect to the Linens Group's share of
such Tax liability for such year made pursuant to Section 3(b), adjusted
to take into account amounts previously paid or received by Linens or any
Affiliate in connection with any previous extension payments made either
before or after the Deconsolidation.
(ii) Promptly after CVS or a member of the CVS Consolidated Group
files a Consolidated Federal Tax Return, Consolidated State Tax Return or
Unitary State Tax Return, as the case may be, for which payments are to be
made under this Agreement, whether or not such Return is filed prior to
the Deconsolidation, CVS shall deliver to Linens a written statement
setting forth the difference between (x) the Linens Group's share of the
CVS Consolidated Group's Consolidated Federal Tax, Consolidated State Tax
or Unitary State Tax liability for such
12
<PAGE>
Return, determined in accordance with the principles of Exhibit A or B to
this Agreement, as the case may be, and (y) the aggregate amount of
payments with respect to the Linens Group's share of such Tax liability
for such year made pursuant to Section 3(b) or Section 3(c)(i). Linens
shall pay to CVS, or CVS shall pay to Linens, as appropriate, in
accordance with Section 9 hereof, an amount equal to such difference, if
any.
(iii) If the determination of the Linens Group's share of the CVS
Consolidated Group's Consolidated Federal Tax, Consolidated State Tax or
Unitary State Tax reflects a Tax Asset that may under applicable law be
used to reduce a Federal Tax, Consolidated State Tax or Unitary State Tax
liability, as the case may be, of any member of the CVS Group for any Tax
period, CVS shall pay to Linens, in accordance with Section 9 hereof, the
actual Tax saving produced by such Tax Asset; provided, however, that such
payment shall be made within 30 days of the receipt by CVS or any CVS
Affiliate of any refund, credit or other offset attributable thereto from
the relevant Taxing Authority. The amount of any such tax saving for any
tax period shall be the amount of the reduction in Taxes payable to a
Taxing Authority (or the increase in any Tax refund) with respect to such
period as compared to the Taxes that would have been payable to a Taxing
Authority (or the Tax refund that would have been received) with respect
to such period in the
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absence of such Tax Asset; provided, however, that in the event that the
use in a Pre-Deconsolidation Period of a Tax Asset attributable to any
member of the Linens Group, gives rise to, or increases, any alternative
minimum Tax liability, CVS shall pay to Linens, or Linens shall pay to
CVS, as the case may be, an amount equal to the difference between (i) the
maximum hypothetical Tax savings that could result from the use of such
Tax Asset determined using the maximum applicable regular tax rate in
effect for such Taxable year (or, in the case of a credit, 100 percent)
and (ii) the Linens Group's share of the alternative minimum Tax liability
or increase in alternative minimum Tax liability, as the case may be,
determined in accordance with Exhibit A to this Agreement.
(d) Carrybacks and Certain Other Matters.
(i) Subject to the provisions of Exhibit A hereto, CVS agrees to pay
Linens the actual benefit received by the CVS Consolidated Group in any
Tax period from the use in any Pre-Deconsolidation Period of any Tax Asset
arising in a Post-Deconsolidation Period. Such benefit shall be considered
equal to the excess of the amount of Tax that would have been payable (or
of the Tax refund that would have been receivable) by the CVS Consolidated
Group in such Tax period in the absence of such carryback over the amount
of Tax actually payable (or of the Tax refund actually receivable) by the
CVS Consolidated Group in such period; provided, however, that in the
event that the use in a Pre-
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<PAGE>
Deconsolidation Period of a Tax Asset, attributable to any member of the
Linens Group, gives rise to, or increases, any alternative minimum Tax
liability, CVS shall pay to Linens, or Linens shall pay to CVS, as the
case may be, an amount equal to the difference between (i) the maximum
hypothetical Tax savings that could result from the use of such Tax Asset
determined using the maximum applicable regular tax rate in effect for
such Taxable year and (ii) the Linens Group's share of the alternative
minimum Tax liability or increase in alternative minimum Tax liability, as
the case may be, determined in accordance with Exhibit A to this
Agreement. Payment of the amount of such benefit shall be made in
accordance with Section 9 hereof; provided, however, that any such payment
shall be made within 30 days of the receipt by any member of the CVS
Consolidated Group of any refund, credit or other offset attributable
thereto from the relevant Taxing Authority.
(ii) If, subsequent to the payment by CVS to Linens of any amount
referred to in Section 3(d)(i) above, there shall be (A) a Final
Determination which results in a disallowance or a reduction of the Tax
Asset so carried back or (B) a reduction in the amount of the benefit
realized by the CVS Consolidated Group from such carryback as a result of
a Final Determination or the use by the CVS Consolidated Group of a Tax
Asset of the CVS Group, Linens shall repay to CVS the amount which would
not have been payable to Linens pursuant to Section 3(d)(i)
15
<PAGE>
had the amount of the benefit been determined in light of such event. In
addition, Linens shall hold CVS and each of its Post-Deconsolidation
Affiliates harmless for any penalty or interest payable by any member of
the CVS Consolidated Group as a result of any such event referred to in
the preceding sentence. Any amounts payable under this Section 3(d)(ii)
shall be paid by Linens to CVS in accordance with Section 9 hereof. To the
extent Linens' repayment obligation arises due to the use by the CVS
Consolidated Group of a Tax asset of a member of the CVS Group, Linens
shall pay CVS interest on the amount repaid to CVS from the date such
amount was paid by CVS to Linens until such repayment at Prime.
(iii) The parties hereto acknowledge that, in connection with the
disposition or deconsolidation of certain members of the CVS Group, CVS or
Melville has entered into, and intends to enter into, agreements similar
to this Agreement (the "CVS Group Agreements") relating to Tax matters
involving such members. Notwithstanding anything to the contrary in this
Agreement, to the extent that (i) CVS would be required under Section 3 of
this Agreement to make a payment to Linens in respect of a Tax saving or
Tax benefit attributable to a Tax Asset of the Linens Group and (ii) CVS
would be required under a CVS Group Agreement or Agreements to make a
similar payment to a member or
16
<PAGE>
members of the CVS Group in respect of the same Tax saving or Tax benefit,
then the portion of such Tax saving or benefit attributable to a Tax Asset
of the Linens Group shall be calculated in accordance with Treasury
Regulation Section 1502-21A and any successor thereto.
4. Other Taxes
(a) Liability for all Taxes other than Consolidated Federal Taxes or
Consolidated State or Unitary Taxes ("Other Taxes") attributable to the Linens
Group shall be the sole responsibility of Linens and its Post-Deconsolidation
Affiliates. Liability for all Other Taxes attributable to the CVS Group shall be
the sole responsibility of CVS and its Post-Deconsolidation Affiliates. The
responsibility for preparing and filing all Returns, and for making all payments
to any Taxing Authority, relating solely to Other Taxes attributable to the
Linens Group shall be the sole responsibility of Linens and its
Post-Deconsolidation Affiliates. The responsibility for preparing and filing all
other Returns, and for making all payments to any Taxing Authority, relating to
Other Taxes for any Pre-Deconsolidation Period shall be the sole responsibility
of CVS and its Post-Deconsolidation Affiliates. Promptly after a payment of
Other Taxes by CVS, or any of its Post-Deconsolidation Affiliates on one hand,
or Linens or any of its Post-Deconsolidation Affiliates, on the other hand, the
paying party shall notify the non-paying party of the amount of such Other
Taxes, if any, which is attributable to the non-paying party, in accordance with
17
<PAGE>
Section 4(c). The non-paying party shall pay to the paying party, in accordance
with Section 9 hereof, such amount.
(b) Linens shall be entitled to all refunds and credits of Other
Taxes attributable to the Linens Group, and CVS shall be entitled to all refunds
and credits of Other Taxes attributable to the CVS Group.
(c) The determination of whether Other Taxes are attributable to the
CVS Group, on one hand, or the Linens Group, on the other hand, shall be made in
accordance with past practices.
5. Certain Covenants.
(a) Linens Covenants. Linens covenants to CVS that during the period
beginning on the Deconsolidation Date and ending upon the expiration of the
statute of limitations period applicable to the Taxable year in which the
Deconsolidation occurs (after giving effect to any extension, mitigation or
waiver thereof), Linens will not, nor will it permit any of its
Post-Deconsolidation Affiliates to make or change any accounting method, amend
any Tax Return or take any Tax position on any Tax Return, change the manner in
which it conducts its business, take any other action, omit to take any action
or enter into any transaction that results in any increased Tax liability with
respect to a Pre-Deconsolidation Period, or reduction of any Tax Asset which was
created in a Pre-Deconsolidation Period, of the CVS Group or any member thereof
without first obtaining the written consent of an authorized representative of
CVS; provided, however, that if a change in law (including the
18
<PAGE>
enactment of any statute or the issuance of any proposed, temporary or final
regulations, or administrative pronouncement or judicial decision) would have a
material adverse effect on the aggregate Tax liability of Linens and its
Post-Deconsolidation Affiliates, then, notwithstanding anything to the contrary
in this Section 5(a), Linens shall be entitled to take, or to permit its
Post-Deconsolidation Affiliates to take, such minimum action as is necessary to
eliminate or mitigate the effect of the change in law. Linens agrees to notify
CVS of any action taken under the proviso contained in the preceding sentence.
(b) CVS Covenants. CVS covenants to Linens that (i) it will not
change its year-end for any Tax year beginning prior to January 1, 1997 and (ii)
during the period beginning on the Deconsolidation Date and ending upon the
expiration of the statute of limitations period applicable to the Taxable year
in which the Deconsolidation occurs (after giving effect to any extension,
mitigation or waiver thereof), CVS will not, nor will it permit any of its
Post-Deconsolidation Affiliates to make or change any accounting method, amend
any Tax Return or take any Tax position on any Tax Return, change the manner in
which it conducts its business, take any other action, omit to take any action
or enter into any transaction that results in any increased Tax liability with
respect to a Pre-Deconsolidation Period, or reduction of any Tax Asset which was
created in a Pre-Deconsolidation Period, of the Linens Group or any member
thereof without first obtaining the written consent of an authorized
representative of Linens; provided, however, that if a change in law (including
19
<PAGE>
the enactment of any statute or the issuance of any proposed, temporary or final
regulations, or administrative pronouncement or judicial decision) would have a
material adverse effect on the aggregate Tax liability of CVS and its
Post-Deconsolidation Affiliates, then, notwithstanding anything to the contrary
in this clause (ii), CVS shall be entitled to take, or to permit its
Post-Deconsolidation Affiliates to take, such minimum action as is necessary to
eliminate or mitigate the effect of the change in law. CVS agrees to notify
Linens of any action taken under the proviso contained in the preceding
sentence.
(c) Linens and CVS Covenant. The parties hereto agree to act in good
faith in complying with the terms of this Agreement.
6. Indemnities.
(a)(I) Linens Indemnity. Linens and each corporation that is a
Post-Deconsolidation Affiliate of Linens will jointly and severally indemnify
CVS and its Post-Deconsolidation Affiliates against and hold them harmless from
(i) any Pre-Deconsolidation Tax Liability assessed pursuant to a
Final Determination, to the extent attributable to an adjustment of any
item of income, gain, gross receipts, loss, credit, deduction or other Tax
attribute of any member of the Linens Group; and
(ii) any liability or damage resulting from a breach by Linens or
any of its Post-Deconsolidation Affiliates of any covenant made by Linens
herein.
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<PAGE>
(iii) any liability or damage under the securities laws or otherwise
resulting from information furnished by Linens in connection with the
Deconsolidation.
If a Post-Deconsolidation Affiliate of Linens ceases to be an Affiliate of
Linens as a result of a sale of its stock to a third party (whether or not
treated as a sale of stock for Tax purposes), such Post-Deconsolidation
Affiliate shall be released from its obligations under this Agreement upon such
sale and neither Linens nor any of its other Post-Deconsolidation Affiliates
shall have any obligation to indemnify CVS or any of its Post-Deconsolidation
Affiliates under Section 6(a)(I)(ii) for any liability or damage attributable to
actions taken after such sale by such Post-Deconsolidation Affiliates.
Notwithstanding anything in this Agreement to the contrary, the preceding
sentence shall have no effect on Linens' obligation to indemnify CVS and its
Post-Deconsolidation Affiliates pursuant to Section 6(a)(II) of this Agreement.
(a)(II) Linens Additional Indemnity. Linens and each of its
Post-Deconsolidation Affiliates agree to continue to be bound by the terms of
the Tax Disaffiliation Agreement between Melville and Footstar, Inc. dated as of
September 24, 1996 (the "Footstar Tax Disaffiliation Agreement") after the
Deconsolidation. Linens will indemnify CVS and its Post-Deconsolidation
Affiliates for any liability incurred by CVS or any of its Post-Deconsolidation
Affiliates pursuant to Section 6(b)(iii) of the Footstar Tax Disaffiliation
21
<PAGE>
Agreement resulting from any action taken after the Deconsolidation by Linens or
any of its Post-Deconsolidation Affiliates.
(b) CVS Indemnity. CVS and each corporation that is a
Post-Deconsolidation Affiliate of CVS will jointly and severally indemnify
Linens and its Post-Deconsolidation Affiliates against and hold them harmless
from
(i) any Pre-Deconsolidation Tax Liability, or Tax liability
resulting from the Deconsolidation, other than any such liabilities
described in Section 6(a);
(ii) any Tax liability allocable to a member of the CVS Group which
is a liability of the Linens Group under clause (B) of the definition of
Tax with respect to any pre-Deconsolidation Period or any Tax year of the
CVS Consolidated Group which includes (but does not end on) the
Deconsolidation Date; and
(iii) any liability or damage resulting from a breach by CVS or any
of its Post-Deconsolidation Affiliates of any covenant made by CVS herein.
(iv) any liability of damage under the securities laws or otherwise
resulting from information furnished by CVS in connection with the
Deconsolidation.
For the purpose of avoiding ambiguity, the parties agree that CVS and its
Post-Deconsolidation Affiliates shall be responsible under this Agreement for
any Tax for a Pre-Deconsolidation Period attributable to (x) the corporations
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(domestic or foreign) comprising the CVS, Bob's, Footstar (including Footaction,
Meldisco, Melville (Europe) Purchasing Ltd. and Thom McAn), Wilsons, Kay-Bee,
Marshalls, This End Up, Prints Plus, Chess King, Foxmoor and Accessory Lady
retail chains, (y) the Non-Chain Corporations and (z) to any business activity
conducted by CVS or any of its Affiliates (domestic or foreign) which is or was
directly related to the businesses conducted by the corporations specified in
clauses (x) and (y). If a Post-Deconsolidation Affiliate of CVS ceases to be an
Affiliate of CVS as a result of a sale of its stock to a third party (whether or
not treated as a sale of stock for Tax purposes), such Post-Deconsolidation
Affiliate shall be released from its obligations under this Agreement upon such
sale and neither CVS nor any of its other Post-Deconsolidation Affiliates shall
have any obligation to indemnify Linens or any of its Post-Deconsolidation
Affiliates under Section 6(b)(iii) for any liability or damage attributable to
actions taken after such sale by such Post-Deconsolidation Affiliates.
(c) Discharge of Indemnity. Linens, CVS and their respective
Post-Deconsolidation Affiliates shall discharge their obligations under Section
6(a) and 6(b) hereof, respectively, by paying the relevant amount within 30 days
of demand therefor. After a Final Determination of an obligation of Linens or
any of its Post-Deconsolidation Affiliates under Section 6(a), CVS shall send a
statement to Linens showing the amount due thereunder. After a Final
Determination of an obligation of CVS or any of its Post-Deconsolidation
23
<PAGE>
Affiliates under Section 6(b), Linens shall send a statement to CVS showing the
amount due thereunder. Calculation mechanics relating to items described in
Section 6(a)(i) are set forth in Section 3(c). Notwithstanding the foregoing, if
either Linens, CVS or any of their respective Post-Deconsolidation Affiliates
disputes in good faith the fact or the amount of its obligation under Section
6(a) or Section 6(b), then no payment of the amount in dispute shall be required
until any such good faith dispute is resolved in accordance with Section 16
hereof; provided, however, that any amount not paid within 30 days of demand
therefor shall bear interest as provided in Section 9.
(d) Tax Benefits. If an indemnification obligation of CVS, Linens or
any of their respective Post-Deconsolidation Affiliates under this Section 6
arises in respect of an adjustment that makes allowable to CVS or its
Affiliates, or Linens or its Affiliates, respectively, any deduction,
amortization, exclusion from income or other allowance (a "Tax Benefit") which
would not, but for such adjustment, be allowable, then any payment by CVS,
Linens or any of their respective Post-Deconsolidation Affiliates, as the case
may be, pursuant to this Section 6 shall be an amount equal to (X) the amount
otherwise due but for this subsection (d), minus (Y) the present value of the
product of the Tax Benefit multiplied (i) by the maximum federal or state, as
the case may be, corporate tax rate in effect at the time such Tax Benefit
becomes allowable to CVS or its Affiliates, or Linens or its Affiliates (as the
case may be) or (ii) in the case of a credit, by 100 percent. The present value
of such product shall be
24
<PAGE>
determined by discounting such product from the time the Tax Benefit becomes
allowable at a rate equal to Prime.
(e) Refunds. Any refunds of Tax received by CVS or any of its
Post-Deconsolidation Affiliates relating to a Post-Deconsolidation Period, to
the extent attributable to any item of income, loss, credit, deduction or other
tax attribute of any member of the Linens Group shall be paid by CVS to Linens
within 30 days of receipt. Any amount not paid when due shall bear interest as
provided in Section 9.
(f) Clerical Errors If, as a result of a correction of a clerical
error made by booking any item at one member of the CVS Consolidated Group
instead of another, (i) the Pre-Deconsolidation Tax Liability allocable to the
Linens Group or the CVS Group, as the case may be, is increased, (ii) the
Pre-Deconsolidation Tax Liability allocable to the other group is decreased by
an offsetting amount, and (iii) no Tax payment is required to be made to a
Taxing Authority in respect of the correction of the clerical error, then the
group referred to in clause (ii) of this Section 6(f) shall be treated as having
made a Tax payment in an amount equal to the increased Pre-Deconsolidation Tax
Liability described in clause (i) of this Section 6(f) and shall be entitled to
indemnification therefor under this Section 6 without regard to Section 6(d).
(g) Method of Calculation. (i) Except as otherwise provided, the
amount of any liability of Linens and its Post-Deconsolidation Affiliates or of
CVS and its Post-Deconsolidation Affiliates under this Section 6 shall be
25
<PAGE>
calculated pursuant to the method described in Exhibit A hereto; provided,
however, that the calculation of any party's share of Unitary State Tax shall be
calculated pursuant to the method described in Exhibit B hereto.
(ii) For purposes of this Section 6, in the case of Taxes that are
imposed on a periodic basis and are payable for a Tax period that includes (but
does not end on) the Deconsolidation Date, the portion of such Tax related to
the portion of such Tax period ending on the Deconsolidation Date shall (x) in
the case of any Taxes other than Taxes based upon or related to income, sales,
gross receipts, wages, capital expenditures or expenses, be deemed to be the
amount of such Tax for the entire Tax period multiplied by a fraction the
numerator of which is the number of days in the Tax period ending on the
Deconsolidation Date and the denominator of which is the number of days in the
entire Tax period, and (y) in the case of any Tax based upon or related to
income, sales, gross receipts, wages, capital expenditures or expenses, be
deemed equal to the amount which would be payable if the relevant Tax period
ended on the Deconsolidation Date and applying the weighted average 1996 Tax
rate for the relevant Tax applicable to the corporation subject to such Tax.
7. Communication and Cooperation.
(a) Consult and Cooperate. Linens and CVS shall consult and
cooperate (and shall cause each of their Post-Deconsolidation Affiliates to
cooperate) fully at such time and to the extent reasonably requested by the
other
26
<PAGE>
party in connection with all matters subject to this Agreement. Such
cooperation shall include, without limitation,
(i) the retention and provision on reasonable request of any and all
information including all books, records, documentation or other
information pertaining to Tax matters relating to the CVS Group and the
Linens Group, any necessary explanations of information, and access to
personnel, until the expiration of the applicable statute of limitation
(giving effect to any extension, waiver, or mitigation thereof);
(ii) the execution of any document that may be necessary or helpful
in connection of any required Return or in connection with any audit,
proceeding, suit or action;
(iii) reporting to the other party, on a quarterly basis, on the
status of any Tax audit relating to a Pre-Deconsolidation Period; and
(iv) the use of the parties' best efforts to obtain any
documentation from a governmental authority or a third party that may be
necessary or helpful in connection with the foregoing.
(b) Provide Information. CVS and Linens shall keep each other fully
informed with respect to any material development relating to the matters
subject to this Agreement. CVS shall provide to Linens copies of all Information
Document Requests relating to a Pre-Deconsolidation Period issued by the
Internal Revenue Services on Form 4564 or any successor thereto and any
analogous requests issued by any other Tax Authority (collectively,
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<PAGE>
"Requests"), and (to the extent practicable in light of the relevant Taxing
Authority's requirements) shall use reasonable efforts to provide copies of the
response to each Request more than two business days prior to filing such
response; provided, however, that CVS's failure to deliver a copy of a response
to a Request before such two-day period shall not relieve Linens of its
obligations under this Agreement. CVS shall not be required to provide Linens
with copies of any Requests or the responses thereto unless specifically related
to the Linens group; provided, however, Linens shall not be entitled to review
or receive the portion of any response which does not specifically relate to the
Linens Group.
(c) Tax Attribute Matters. CVS and Linens shall advise and consult
with each other with respect to any proposed Tax adjustments relating to the CVS
Consolidated Group or, with respect to Other Taxes, any group which includes at
least one member of the CVS Group and at least one member of the Linens Group,
which are the subject of an audit or investigation, or are the subject of any
proceeding or litigation, and which may affect any Tax attribute of CVS, Linens,
the CVS Group, the Linens Group or any Post-Deconsolidation Affiliate of CVS or
Linens (including, but not limited to, basis in an asset or the amount of
earnings and profits).
8. Audits and Contest.
(a) Notwithstanding anything in this Agreement to the contrary, CVS
shall have full control over all matters relating to any Federal Tax return
28
<PAGE>
filed by the CVS Consolidated Group, any Consolidated State or Unitary State Tax
Return, any Other Tax Return (other than one relating solely to the Linens
Group), or any Tax Proceeding relating to any Tax matters of at least one member
of the CVS Group. Except as provided in Section 8(b), CVS shall have absolute
discretion with respect to any decisions to be made, or the nature of any action
to be taken, with respect to any matter described in the preceding sentence.
(b) No settlement of any Tax Proceeding relating to any matter which
would cause a payment obligation under Sections 6(a) or 6(b) shall be accepted
or entered into by or on behalf of the party entitled to receive a payment under
either Section 6(a) or Section 6(b), whichever is applicable, unless the party
ultimately responsible for such payment under either Section 6(a) or Section
6(b), whichever is applicable (the "Indemnitor"), consents thereto in writing
(which consent shall not be unreasonably withheld). If such consent is
unreasonably withheld, all expenses relating to the contest of such matter shall
be borne by the Indemnitor, and otherwise they shall be borne equally by the
Indemnitor and the indemnified party. If the Indemnitor does not respond to the
indemnified party's request for consent within 30 days, the Indemnitor will be
deemed to have consented to the settlement. Notwithstanding anything to the
contrary herein, the indemnified party shall have the right, without the consent
of the Indemnitor, to settle any Tax Proceeding relating to any matter which
would cause a payment obligation under Sections 6(a) or 6(b),
29
<PAGE>
provided, however, that in such event the Indemnitor shall have no liability
under Section 6(a) or (b), as the case may be, with respect to such matter.
(c) The indemnified party agrees to give prompt notice to the
Indemnitor of the assertion of any claim, or the commencement of any suit,
action or proceeding in respect of which indemnity may be sought hereunder. The
failure of the indemnified party to give notice as provided in this Section 8(c)
shall not relieve the Indemnitor of its obligations under this Agreement, except
to the extent that the Indemnitor is materially prejudiced by such failure to
give notice.
(d) With respect to Returns relating to Other Taxes solely
attributable to the Linens Group, Linens and its Post-Deconsolidation Affiliates
shall have full control over all matters relating to any Tax Proceeding in
connection therewith. Linens and its Post-Deconsolidation Affiliates shall have
absolute discretion with respect to any decisions to be made, or the nature of
any action to be taken, with respect to any matter described in the preceding
sentence.
9. Payments.
All payments to be made hereunder shall be made in immediately
available funds. Except as otherwise provided, all payments required to be made
pursuant to this Agreement will be due 30 days after the receipt of notice of
such payment or, where no notice is required, 30 days after the fixing of
liability or the resolution of a dispute. Payments shall be deemed made when
30
<PAGE>
received. Any payment that is not made when due shall bear interest at the rate
per annum determined, from time to time, under the provision of Section
6621(a)(2) of the Code for each day until paid; provided, however, that, if an
obligation or the amount thereof is being disputed in good faith, any payment
required after resolution of such dispute shall bear interest at Prime until and
including the thirtieth day after such resolution. If, pursuant to a Final
Determination, any amount paid by CVS, Linens or their respective
Post-Deconsolidation Affiliates pursuant to this Agreement results in any
increased Tax liability or reduction of any Tax Asset of any member of the
Linens Group, Linens or its Post-Deconsolidation Affiliates, or the CVS Group,
CVS or its Post-Deconsolidation Affiliates, respectively, then CVS or Linens, as
the case may be, shall indemnify the other party and hold it harmless from any
interest or penalty attributable to such increased Tax liability or the
reduction of such Tax asset and shall pay to the other party, in addition to
amounts otherwise owed, 50 percent of the After-Tax Amount; provided, however,
that with respect to any amount paid pursuant to Section 3(d)(ii) (other than as
a result of the use by the CVS Consolidated Group of a Tax Asset of the CVS
Group), Section 6(a)(ii) or (iii) or Section 6(b)(iii) or (iv), CVS or Linens,
as the case may be, shall pay to the other party 100 percent of the After-Tax
Amount.
10. Notices.
Any notice, demand, claim, or other communication under this
Agreement shall be in writing and shall be deemed to have been given upon the
31
<PAGE>
delivery or mailing thereof, as the case may be, if delivered personally or sent
by certified mail, return receipt requested, postage prepaid, to the parties at
the following addresses (or at such other address as a party may specify by
notice to the other):
If to CVS, to:
Charles Conaway
1 CVS Drive
Woonsocket, RI 02895
James E. Alward
Michael Golub
67 Millbrook Street
Worcester, MA 01606
If to Linens, to:
James Tomaszewski
William Giles
David Dick
6 Brighton Road
Clifton, NJ 07015
11. Costs and Expenses.
Except as expressly set forth in this Agreement, each party shall
bear its own costs and expenses incurred pursuant to this Agreement. For
purposes of this Agreement, "out-of-pocket" expenses shall include reasonable
attorney fees, accountant fees and other related professional fees and
disbursements.
32
<PAGE>
12. Effectiveness; Termination and Survival.
This Agreement shall become effective upon the consummation of the
Deconsolidation. Notwithstanding anything in this Agreement to the contrary,
this Agreement shall remain in effect and its provisions shall survive for the
full period of all applicable statutes of limitation (giving effect to any
extension, waiver or mitigation thereof).
13. Section Headings.
The headings contained in this Agreement are inserted for
convenience only and shall not constitute a part hereof or in any way affect the
meaning or interpretation of this Agreement.
14. Entire Agreement; Amendments and Waivers.
(a) Entire Agreement. This Agreement contains the entire
understanding of the parties hereto with respect to the subject matter contained
herein. No alteration, amendment, modification, or waiver of any of the terms of
this Agreement shall be valid unless made by an instrument signed by an
authorized officer of CVS and Linens, or in the case of a waiver, by the party
against whom the waiver is to be effective.
(b) Waiver. No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver hereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any right, power or privilege.
33
<PAGE>
15. Governing Law and Interpretation. This Agreement has been made
in and shall be construed and enforced in accordance with the laws of the
Commonwealth of Massachusetts.
16. Dispute Resolution. If the parties hereto are unable to resolve
any disagreement or dispute relating to this Agreement within 20 days, such
disagreement or dispute shall be resolved by a nationally recognized law firm or
accounting firm expert in Tax matters that is mutually acceptable to the parties
hereto (a "Referee"). A Referee so chosen shall resolve any such disagreement
pursuant to such procedures as it may deem advisable. Any such resolution shall
be binding on the parties hereto without further recourse. Except as otherwise
provided herein, the costs of any Referee shall be apportioned between CVS and
Linens as determined by such Referee in such manner as the Referee deems
reasonable, taking into account the circumstances of the dispute, the conduct of
the parties and the result of the dispute.
17. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
18. Assignments; Third Party Beneficiaries.
Except as provided below, this Agreement shall be binding upon and shall inure
only to the benefit of the parties hereto and their respective successors and
assigns. This Agreement is not intended to benefit any person other than the
34
<PAGE>
parties hereto and such successors and assigns, and no such other person shall
be a third party beneficiary hereof. If, during the period beginning on the
Deconsolidation Date and ending upon the expiration of all statute of
limitations periods applicable to Pre-Deconsolidation Periods, any corporation
becomes an Affiliate of either CVS or Linens, as the case may be, then upon the
request of either Linens or CVS, as the case may be, the other party shall
provide evidence of such Affiliate's agreement to be bound by the terms of this
Agreement. During the period beginning on the Deconsolidation Date and ending
upon the expiration of all statute of limitations periods applicable to
Pre-Deconsolidation Periods, no entity shall be entitled to acquire a
controlling interest in CVS or Linens unless such entity agrees to be bound by
the terms of this Agreement.
35
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year first written above.
CVS on its own behalf and on
behalf of its Post-Deconsolidation
Affiliates
By:__________________________
Title:_______________________
Linens on its own behalf and
on behalf of its
Post-Deconsolidation
Affiliates
By:___________________________
Title:________________________
LNT, Inc., Divisional
Agent for the Linens Group
By: __________________________
Title: _______________________
36
<PAGE>
Exhibit A
1. The Linens Group's share of any Pre-Deconsolidation Consolidated Federal
or Consolidated State Tax liability shall be, with respect to such Federal
or Consolidated State Taxes, as applicable, calculated as if Linens were
the parent of a group filing its own consolidated return for all
Pre-Deconsolidation Periods; provided, however, that (i) income,
deductions, credits and losses shall be computed in a manner consistent
with past practices, (ii) the applicable Tax rate shall be the appropriate
maximum statutory rate in effect during the relevant year, (iii) in no
event shall the Linens Group's share of any Consolidated Federal or
Consolidated State Tax liability exceed the amount that would have
constituted the Linens Group's share of such liability if such share had
been calculated in accordance with the allocation principles set forth in
Treas. Reg.ss.1.1552-1(a)(2) and Treas. Reg.ss. 1.1502-33(d)(2)(ii) as in
effect prior to Treasury Decision 8597, except to the extent consistent
with past practice, and (iv) notwithstanding anything to the contrary in
this Agreement, any deduction attributable to the exercise of an option to
acquire CVS stock by a person who is an employee of a member of the Linens
Group at the time of such exercise shall be treated as a deduction
allocable to the member of the Linens Group employing such person.
2. For purposes of paragraph 1 above, "Tax liability" (1) shall exclude any
liability for the payment of alternative minimum tax; and (2) shall refer
to an actual out-of-pocket payment to any Taxing Authority, after taking
into account the utilization of net operating losses and any other Tax
Assets.
3. Any alternative minimum Tax liability (and any Tax Assets attributable to
such liability) and any environmental Tax imposed under Section 59A of the
Code shall be allocated among the members of the CVS Consolidated Group in
accordance with the formulas referenced in Proposed Treasury Regulation
Section 1.1502-5(b)(6).
4. For all Pre-Deconsolidation Periods, CVS or Melville (as appropriate)
shall have the right, in its sole discretion, to elect (in an original or
an amended return) to deduct currently any Taxes of foreign countries and
of possessions of the United States. In the event that CVS or Melville, as
the case may be, elects not to deduct currently such Taxes but instead to
elect to take a foreign tax credit under the provisions of Part III of
Subchapter N of the Code, any consolidated unused foreign tax credit of
37
<PAGE>
the CVS Consolidated Group shall be apportioned to the members of such
group pursuant to Treas. Reg.ss. 1.1502-79(d).
5. Any interest imposed in connection with any Tax liability shall be
allocated in the same manner as the underlying Tax liability, as provided
above.
6. Any penalty imposed in connection with any Tax liability shall be the
responsibility of the party whose action or inaction resulted in the
imposition of such penalty; provided, however, that if such a
determination cannot be made, the penalty shall be allocated in the same
manner as the underlying Tax liability, as provided above.
38
<PAGE>
Exhibit B
1. The Linens Group's share of any Pre-Deconsolidation Unitary State Tax
Liability shall be, with respect to each State, the aggregate amount of
Unitary State Tax Liability of all members of the Linens Group that are
members of the relevant CVS Consolidated Group. A member's liability for
its share of Pre-Deconsolidation Unitary State Tax shall be determined in
accordance with paragraph 3 of this Exhibit B; provided, however, that (i)
income, deductions, credits and losses shall be computed in a manner
consistent with past practices, (ii) credits and any minimum taxes shall
be allocated to the member responsible for the generation of such credit
or taxes, and (iii) notwithstanding anything to the contrary in this
Agreement, any deduction attributable to the exercise of an option to
acquire CVS stock by a person who is an employee of a member of the Linens
Group at the time of such exercise shall be treated as a deduction
allocable to the member of the Linens Group employing such person.
2. The Linens Group's share of any Pre-Deconsolidation Unitary State Tax
Assets shall be, with respect to each State, the aggregate amount of
Unitary State Tax Assets of all members of the Linens Group. A member's
share of such Unitary State Tax Assets shall be determined in accordance
with paragraph 3 of this Exhibit B.
3. A member of the Linens Group's share of any Pre-Deconsolidation Unitary
State Tax Liability or Pre-Deconsolidation Unitary State Tax Asset shall
be the product of (i) such Unitary State Tax Liability or Unitary State
Tax Asset, as the case may be, and (ii) the percentage of the numerator
used in determining the apportionment percentage of the CVS Consolidated
Group for such Unitary State which is attributable to such member of the
Linens Group.
4. Any interest imposed in connection with any Tax liability shall be
allocated in the same manner as the underlying Tax liability, as provided
above.
5. Any penalty imposed in connection with any Tax liability shall be the
responsibility of the party whose action or inaction resulted in the
imposition of such penalty; provided, however, that if such a
determination cannot be made, the penalty shall be allocated in the same
manner as the underlying Tax liability, as provided above.
39
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(I)8
<SEQUENCE>4
<DESCRIPTION>EX-10(I)8
<TEXT>
<PAGE>
================================================================================
FIVE YEAR CREDIT AGREEMENT
Dated as of May 23, 1997
by and among
CVS CORPORATION,
THE LENDERS PARTY THERETO,
FLEET NATIONAL BANK,
as Documentation Agent,
JP MORGAN SECURITIES INC.,
as Syndication Agent,
and
THE BANK OF NEW YORK,
as Administrative Agent,
--------------------------
$670,000,000
--------------------------
Effective Date: May 30, 1997
CLOSING DOCUMENTS
================================================================================
EMMET, MARVIN & MARTIN, LLP
120 BROADWAY
NEW YORK, N.Y. 10271
<PAGE>
INDEX
Five Year Credit Agreement
Dated as of May 23, 1997,
by and among
CVS Corporation,
the Lenders party thereto,
Fleet National Bank,
as Documentation Agent,
JP Morgan Securities Inc.,
as Syndication Agent,
and
The Bank of New York,
as Administrative Agent
Capitalized terms used herein which are not otherwise defined herein shall have
the respective meanings ascribed thereto in the Credit Agreement.
1. FIVE YEAR CREDIT AGREEMENT, dated as of May 23, 1997, by and among CVS
CORPORATION, (the "Borrower"), the Lenders party thereto, FLEET NATIONAL
BANK, as documentation agent (the "Documentation Agent"), JP MORGAN
SECURITIES INC. as syndication agent (the "Syndication Agent"), and THE
BANK OF NEW YORK, as administrative agent (the "Administrative Agent"),
and arranged by BNY CAPITAL MARKETS, INC.
2. Revolving Credit Notes, Competitive Bid Notes, and Swing Line Note.*
3. Certificate, dated May 30, 1997, of the Secretary of the Borrower,
certifying as to the incumbency of its officers who may sign the Loan
Documents and all other documents in connection therewith, including
therein a signature specimen of such officers, and attaching:
(a) a true and complete copy of its Certificate of Incorporation;
(b) a true and complete copy of its By-Laws;
(c) a certificate of good standing of the Secretary of State of the
State of Delaware; and
- ------------------
* previously delivered to each applicable Lender
<PAGE>
(d) a true and complete copy of the resolutions of its Board of
Directors.
4. Good Standing Telegram from the Secretary of State of the State of
Delaware.
5. Certificate, dated May 30, 1997, of the Treasurer of the Borrower,
certifying (i) as to the consummation of the CVS/Revco Merger, (ii) that
the representations and warranties contained in the Credit Agreement are
correct and that no Default or Event of Default exists, and (iii) that
immediately before and after giving effect to the consummation of the CVS/
Revco Merger, the Borrower is Solvent, and attaching:
(a) the CVS/Revco Merger Documents.*
6. Opinion of Davis Polk & Wardwell, special New York Counsel to the
Borrower, dated May 30, 1997.
7. Opinion of Zenon Lankowsky, General Counsel to the Borrower, dated May 30,
1997.
8. Opinion of Special Counsel, dated May 30, 1997.
- ----------
* lodged with the Administrative Agent
- 2 -
<PAGE>
FIVE YEAR CREDIT AGREEMENT
by and among
CVS CORPORATION,
THE LENDERS PARTY HERETO,
FLEET NATIONAL BANK,
as Documentation Agent,
JP MORGAN SECURITIES INC.,
as Syndication Agent,
and
THE BANK OF NEW YORK,
as Administrative Agent,
--------------------------
$670,000,000
--------------------------
Dated as of May 23, 1997
Arranged by: BNY CAPITAL MARKETS, INC.
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION .............................. 1
1.1 Definitions ....................................................... 1
1.2 Principles of Construction ....................................... 15
2. AMOUNT AND TERMS OF LOANS .............................................. 16
2.1 Revolving Credit Loans ........................................... 16
2.2 Swing Line Loans ................................................. 17
2.3 Notice of Borrowing-Revolving Credit Loans and Swing
Line Loans ....................................................... 19
2.4 Competitive Bid Loans and Procedure .............................. 20
2.5 Use of Proceeds .................................................. 22
2.6 Termination or Reduction of Commitments .......................... 22
2.7 Prepayments of Loans ............................................. 23
2.8 Letter of Credit Sub-facility .................................... 24
2.9 Letter of Credit Participation ................................... 25
2.10 Absolute Obligation with respect to Letter of
Credit Payments ................................................. 26
3. PROCEEDS, PAYMENTS, CONVERSIONS, INTEREST, YIELD
PROTECTION AND FEES .................................................... 26
3.1 Disbursement of the Proceeds of the Loans ........................ 26
3.2 Payments ......................................................... 27
3.3 Conversions; Other Matters ....................................... 28
3.4 Interest Rates and Payment Dates ................................. 29
3.5 Indemnification for Loss ......................................... 30
3.6 Reimbursement for Costs, Etc. .................................... 31
3.7 Illegality of Funding ............................................ 32
3.8 Option to Fund; Substituted Interest Rate ........................ 32
3.9 Certificates of Payment and Reimbursement ........................ 33
3.10 Taxes; Net Payments ............................................. 33
3.11 Facility Fee .................................................... 34
3.12 Letter of Credit Participation Fee .............................. 35
3.13 Replacement of Lender ........................................... 35
4. REPRESENTATIONS AND WARRANTIES ......................................... 36
4.1 Existence and Power .............................................. 36
4.2 Authority ........................................................ 36
4.3 Binding Agreement ................................................ 37
4.4 Litigation ....................................................... 37
4.5 No Conflicting Agreements ........................................ 37
4.6 Taxes ............................................................ 38
4.7 Compliance with Applicable Laws; Filings ......................... 38
4.8 Governmental Regulations ......................................... 38
4.9 Federal Reserve Regulations; Use of Proceeds ..................... 38
4.10 No Misrepresentation ............................................ 39
4.11 Plans ........................................................... 39
<PAGE>
4.12 Environmental Matters ........................................... 39
4.13 Financial Statements ............................................ 40
5. CONDITIONS OF LENDING - FIRST LOANS AND LETTERS OF CREDIT
ON THE FIRST BORROWING DATE ............................................ 41
5.1 Evidence of Corporate Action ..................................... 41
5.2 Notes ............................................................ 41
5.3 Opinion of Special Counsel ....................................... 41
5.4 Opinion of Counsel to the Borrower ............................... 41
5.5 CVS/Revco Merger ................................................. 41
5.6 Existing Credit Agreements ....................................... 42
6. CONDITIONS OF LENDING - ALL LOANS AND LETTERS OF CREDIT ................ 42
6.1 Compliance ....................................................... 42
6.2 Requests ......................................................... 42
6.3 Loan Closings .................................................... 43
7. AFFIRMATIVE COVENANTS .................................................. 43
7.1 Legal Existence .................................................. 43
7.2 Taxes ............................................................ 43
7.3 Insurance ........................................................ 43
7.4 Performance of Obligations ....................................... 43
7.5 Condition of Property ............................................ 44
7.6 Observance of Legal Requirements ................................. 44
7.7 Financial Statements and Other Information ....................... 44
7.8 Records .......................................................... 45
7.9 Authorizations ................................................... 46
7.10 Revco 10 1/8% Indenture Debt .................................... 46
8. NEGATIVE COVENANTS ..................................................... 46
8.1 Subsidiary Indebtedness .......................................... 46
8.2 Liens ............................................................ 46
8.3 Dispositions ..................................................... 47
8.4 Merger or Consolidation, Etc. .................................... 47
8.5 Acquisitions ..................................................... 47
8.6 Restricted Payments .............................................. 48
8.7 Limitation on Upstream Dividends by Subsidiaries ................. 48
8.8 Limitation on Negative Pledges ................................... 49
8.9 CVS/Revco Merger Documents ....................................... 49
8.10 Ratio of Consolidated Indebtedness to Total
Capitalization .................................................. 49
9. DEFAULT ................................................................ 49
9.1 Events of Default ................................................ 49
9.2 Remedies ......................................................... 51
10. AGENT ................................................................. 52
10.1 Appointment ..................................................... 52
10.2 Delegation of Duties ............................................ 53
10.3 Exculpatory Provisions .......................................... 53
- ii -
<PAGE>
10.4 Reliance by Administrative Agent ................................ 53
10.5 Notice of Default ............................................... 54
10.6 Non-Reliance .................................................... 54
10.7 Indemnification ................................................. 55
10.8 Administrative Agent in Its Individual Capacity ................. 55
10.9 Successor Administrative Agent .................................. 55
10.10 Documentation Agent and Syndication Agent ...................... 56
11. OTHER PROVISIONS ...................................................... 56
11.1 Amendments, Waivers, Etc. ....................................... 56
11.2 Notices ......................................................... 57
11.3 No Waiver; Cumulative Remedies .................................. 59
11.4 Survival of Representations and Warranties ...................... 59
11.5 Payment of Expenses and Taxes; Indemnified
Liabilities ..................................................... 59
11.6 Lending Offices ................................................. 60
11.7 Successors and Assigns .......................................... 60
11.8 Counterparts .................................................... 61
11.9 Set-off and Sharing of Payments ................................. 62
11.10 Indemnity ...................................................... 63
11.11 Governing Law .................................................. 63
11.12 Severability ................................................... 64
11.13 Integration .................................................... 64
11.14 Treatment of Certain Information ............................... 64
11.15 Acknowledgments ................................................ 65
11.16 Consent to Jurisdiction ........................................ 65
11.17 Service of Process ............................................. 65
11.18 No Limitation on Service or Suit ............................... 66
11.19 WAIVER OF TRIAL BY JURY ........................................ 66
11.20 Effective Date ................................................. 66
EXHIBITS
- --------
Exhibit A List of Commitments and Lending and Notice Offices
Exhibit B-1 Form of Revolving Credit Note
Exhibit B-2 Form of Competitive Bid Note
Exhibit B-3 Form of Swing Line Note
Exhibit C Form of Borrowing Request
Exhibit D Form of Opinion of counsel to the Borrower
Exhibit E Form of Opinion of Special Counsel
Exhibit F Form of Assignment and Acceptance Agreement
Exhibit G Form of Competitive Bid Request
Exhibit H Form of Invitation to Bid
Exhibit I Form of Competitive Bid
Exhibit J Form of Competitive Bid Accept/Reject Letter
Exhibit K Form of Letter of Credit Request
- iii -
<PAGE>
SCHEDULES
Schedule 4.4 List of Litigation
Schedule 8.2 List of Liens
- iv -
<PAGE>
FIVE YEAR CREDIT AGREEMENT, dated as of May 23, 1997, by and among CVS
CORPORATION, a Delaware corporation (the "Borrower"), the Lenders party hereto
from time to time (each a "Lender" and, collectively, the "Lenders"), FLEET
NATIONAL BANK, as documentation agent (in such capacity, the Documentation
Agent"), JP MORGAN SECURITIES INC. as syndication agent (in such capacity, the
"Syndication Agent"), and THE BANK OF NEW YORK ("BNY"), as administrative agent
for the Lenders (in such capacity, the "Administrative Agent"), and arranged by
BNY CAPITAL MARKETS, INC.
1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION
1.1 Definitions
When used in any Loan Document (as defined below), each of the following
terms shall have the meaning ascribed thereto unless the context otherwise
specifically requires:
"ABR Advances": the Revolving Credit Loans (or any portions thereof) at
such time as they (or such portions) are made or are being maintained at a rate
of interest based upon the Alternate Base Rate.
"Accumulated Funding Deficiency": as defined in Section 302 of ERISA.
"Acquisition": with respect to any Person, the purchase or other
acquisition by such Person, by any means whatsoever (including by devise,
bequest, gift, through a dividend or otherwise), of (a) stock of, or other
equity securities of, any other Person if, immediately thereafter, such other
Person would be either a consolidated subsidiary of such Person or otherwise
under the control of such Person, (b) any business, going concern or division or
segment thereof, or (c) the Property of any other Person other than in the
ordinary course of business, provided that (i) no acquisition of substantially
all of the assets, or any division or segment, of such other Person shall be
deemed to be in the ordinary course of business and (ii) no redemption,
retirement, purchase or acquisition by any Person of the stock or other equity
securities of such Person shall be deemed to constitute an Acquisition.
"Administrative Agent": as defined in the preamble.
"Affected Advance": as defined in Section 3.8(b).
"Affiliate": with respect to any Person at any time and from time to time,
any other Person (other than a wholly-owned subsidiary of such Person) which, at
such time (a) controls such Person, (b) is controlled by such Person or (c) is
under common control with such Person. The term "control", as used in this
definition with respect to any Person, means the power, whether direct or
indirect through one or more intermediaries, to direct or cause the direction of
the management and policies of such Person, whether through the ownership of
voting securities or other interests, by contract or otherwise.
"Aggregate Commitment Amount": at any time, the sum of the Commitment
Amounts of the Lenders at such time under this Agreement.
<PAGE>
"Aggregate Credit Exposure": at any time, the sum at such time of (a) the
aggregate Committed Credit Exposure of the Lenders at such time under this
Agreement and (b) the aggregate outstanding principal balance of all Competitive
Bid Loans at such time under this Agreement.
"Agreement": this Credit Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"Alternate Base Rate": for any day, a rate per annum equal to the greater
of (a) the BNY Rate in effect on such day, or (b) 0.50% plus the Federal Funds
Effective Rate (rounded, if necessary, to the nearest 1/100th of 1% or, if there
is no nearest 1/100 of 1%, then to the next higher 1/100 of 1%) in effect on
such day.
"Applicable Margin": (i) with respect to the unpaid principal balance of
ABR Advances, the applicable percentage set forth below in the column entitled
"ABR Advances", (ii) with respect to the unpaid principal balance of Eurodollar
Advances, the applicable percentage set forth below in the column entitled
"Eurodollar Advances", (iii) with respect to the Facility Fee, the applicable
percentage set forth below in the column entitled "Facility Fee" and (iv) with
respect to the Letter of Credit Participation Fee, the applicable percentage set
forth below in the column entitled "Letters of Credit", in each case opposite
the applicable Pricing Level:
- --------------------------------------------------------------------------------
ABR Eurodollar Facility Letters of
Pricing Level Advances Advances Fee Credit
- ------------- -------- -------- --- ------
Pricing Level I 0% 0.130% 0.060% 0.130%
Pricing Level II 0% 0.135% 0.065% 0.135%
Pricing Level III 0% 0.145% 0.065% 0.145%
Pricing Level IV 0% 0.155% 0.070% 0.155%
Pricing Level V 0% 0.185% 0.090% 0.185%
Pricing Level VI 0% 0.225% 0.125% 0.225%
Pricing Level VII 0% 0.2625% 0.1875% 0.2625%
- --------------------------------------------------------------------------------
Decreases in the Applicable Margin resulting from a change in Pricing Level
shall become effective upon the delivery by the Borrower to the Administrative
Agent of a notice pursuant to Section 7.7(d). Increases in the Applicable Margin
resulting from a change in Pricing Level shall become effective on the effective
date of any downgrade or withdrawal in the rating by Moody's or S&P of the
senior unsecured long term debt rating of the Borrower.
"Assignment": as defined in Section 11.7(c).
"Assignment and Acceptance Agreement": an assignment and acceptance
agreement executed by an assignor and an assignee pursuant to which, subject to
the terms and conditions hereof and thereof, the assignor assigns to the
assignee all or any portion of such assignor's Loans, Notes and Commitment,
substantially in the form of Exhibit F.
"Assignment Fee": as defined in Section 11.7(c).
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<PAGE>
"Benefited Lender": as defined in Section 11.9(b).
"BNY": as defined in the preamble.
"BNY Rate": a rate of interest per annum equal to the rate of interest
publicly announced in New York City by BNY from time to time as its prime
commercial lending rate, such rate to be adjusted automatically (without notice)
on the effective date of any change in such publicly announced rate.
"Borrower": as defined in the preamble.
"Borrower Audited Financial Statements": as defined in Section 4.13.
"Borrower Pro Forma Financial Statements": as defined in Section 4.13.
"Borrowing Date": (i) in respect of Revolving Credit Loans, any Business
Day on which the Lenders shall make Revolving Credit Loans pursuant to a
Borrowing Request or pursuant to a Mandatory Borrowing, (ii) in respect of
Competitive Bid Loans, any Business Day on which a Lender shall make a
Competitive Bid Loan pursuant to a Competitive Bid Request, (iii) in respect of
Swing Line Loans, any Business Day on which the Swing Line Lender shall make a
Swing Line Loan pursuant to a Borrowing Request and (iv) in respect of Letters
of Credit, any Business Day on which the Issuer shall issue a Letter of Credit
pursuant to a Letter of Credit Request.
"Borrowing Request": a request for Revolving Credit Loans or Swing
Line Loans in the form of Exhibit C.
"Change of Control": any of the following:
(i) any Person or group (as such term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended, (a) shall have or acquire
beneficial ownership of securities having 30% or more of the ordinary voting
power of the Borrower or (b) shall possess, directly or indirectly, the power to
direct or cause the direction of the management and policies of the Borrower,
whether through the ownership of voting securities, by contract or otherwise; or
(ii) the Continuing Directors shall cease for any reason to
constitute a majority of the board of directors of the Borrower then in office.
"Commitment": in respect of any Lender, such Lender's undertaking to make
Revolving Credit Loans, subject to the terms and conditions hereof, in an
aggregate outstanding principal amount not to exceed the Commitment Amount of
such Lender.
"Commitment Amount": at any time and with respect to any Lender, the
amount set forth adjacent to such Lender's name under the heading "Commitment
Amount" in Exhibit A at such time or, in the event that such Lender is not
listed on Exhibit A, the "Commitment Amount" which such Lender shall have
assumed from another Lender in accordance with Section 11.7 on or prior to such
time, as the same may be adjusted from time to time pursuant to Sections 2.6 and
11.7(c).
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"Commitment Percentage": at any time and with respect to any Lender, a
fraction the numerator of which is such Lender's Commitment Amount at such time,
and the denominator of which is the Aggregate Commitment Amount at such time.
"Commitment Period": the period commencing on the Effective Date and
ending on the Commitment Termination Date, or on such earlier date as all of the
Commitments shall have been terminated in accordance with the terms hereof.
"Commitment Termination Date": the earlier of the fifth anniversary of the
Effective Date and the date on which the Loans shall become due and payable,
whether by acceleration, notice of intention to prepay or otherwise.
"Committed Credit Exposure": with respect to any Lender at any time, the
sum at such time of (a) the outstanding principal balance of such Lender's
Revolving Credit Loans, (b) the Swing Line Exposure of such Lender and (c) the
Letter of Credit Exposure of such Lender.
"Competitive Bid": an offer by a Lender, in the form of Exhibit I, to make
one or more Competitive Bid Loans.
"Competitive Bid Accept/Reject Letter": a notification made by the
Borrower pursuant to Section 2.4(d) in the form of Exhibit J.
"Competitive Bid Loan": as defined in Section 2.4(a).
"Competitive Bid Note": as defined in Section 2.4(h).
"Competitive Bid Rate": as to any Competitive Bid made by a Lender
pursuant to Section 2.4(b), the fixed rate of interest (which shall be expressed
in the form of a decimal to no more than four decimal places) offered by such
Lender and accepted by the Borrower.
"Competitive Bid Request": a request by the Borrower, in the form of
Exhibit G, for Competitive Bids.
"Competitive Interest Period": as to any Competitive Bid Loan, the period
commencing on the date of such Competitive Bid Loan and ending on the date
requested in the Competitive Bid Request with respect thereto, which shall not
be earlier than 3 days after the date of such Competitive Bid Loan or later than
180 days after the date of such Competitive Bid Loan; provided that if any
Competitive Interest Period would end on a day other than a Domestic Business
Day, such Interest Period shall be extended to the next succeeding Domestic
Business Day, unless such next succeeding Domestic Business Day would be a date
on or after the Commitment Termination Date, in which case such Competitive
Interest Period shall end on the next preceding Domestic Business Day. Interest
shall accrue from and including the first day of a Competitive Interest Period
to but excluding the last day of such Competitive Interest Period.
"Consolidated": the Borrower and the Subsidiaries on a consolidated
basis in accordance with GAAP.
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"Contingent Obligation": as to any Person (the "secondary obligor"), any
obligation of such secondary obligor (a) guaranteeing or in effect guaranteeing
any return on any investment made by another Person, or (b) guaranteeing or in
effect guaranteeing any Indebtedness, lease, dividend or other obligation
("primary obligation") of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, including any obligation of such
secondary obligor, whether or not contingent, (i) to purchase any such primary
obligation or any Property constituting direct or indirect security therefor,
(ii) to advance or supply funds (A) for the purchase or payment of any such
primary obligation or (B) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase Property, securities or services primarily
for the purpose of assuring the beneficiary of any such primary obligation of
the ability of the primary obligor to make payment of such primary obligation,
(iv) otherwise to assure or hold harmless the beneficiary of such primary
obligation against loss in respect thereof, and (v) in respect of the
Indebtedness of any partnership in which such secondary obligor is a general
partner, except to the extent that such Indebtedness of such partnership is
nonrecourse to such secondary obligor and its separate Property; provided that
the term "Contingent Obligation" shall not include the indorsement of
instruments for deposit or collection in the ordinary course of business.
"Continuing Director": any member of the board of directors of the
Borrower who (i) is a member of that board of directors on the Effective Date or
(ii) was nominated for election by the board of directors a majority of whom
were directors on the Effective Date or whose election or nomination for
election was previously approved by one or more of such directors.
"Control Person": as defined in Section 3.6.
"Convert", "Conversion" and "Converted": each, a reference to a conversion
pursuant to Section 3.3 of one Type of Revolving Credit Loan into another Type
of Revolving Credit Loan.
"Costs": as defined in Section 3.6.
"CVS Existing Credit Agreement": the Credit Agreement, dated as of July
10, 1996, by and among the Borrower, the lenders party thereto and The Bank of
New York, as agent.
"CVS/Revco Merger": the merger of Revco into and with CVS Sub, with Revco
as the surviving corporation.
"CVS/Revco Merger Date": the date on which the CVS/Revco Merger shall be
consummated.
"CVS/Revco Merger Documents": the S-4 Registration Statement of the
Borrower, as filed with the Securities and Exchange Commission on March 28,
1997, and the Agreement and Plan of Merger, dated as of February 6, 1997, among
the Borrower, Revco and CVS Sub, as amended by the First Amendment, dated as of
March 19, 1997, in each case as the same may be amended, supplemented or
otherwise modified from time to time in accordance with Section 8.9.
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"CVS Sub": North Acquisition Corp., a Delaware corporation and a
wholly-owned Subsidiary of the Borrower formed for the purpose of effecting the
CVS/Revco Merger. Prior to the CVS/Revco Merger, CVS Sub shall have no assets
(other than as required by law) and no liabilities (other than liabilities
arising under, or pursuant to, the CVS/Revco Merger Documents).
"Default": any of the events specified in Section 9.1, whether any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.
"Disposition": with respect to any Person, any sale, assignment, transfer
or other disposition by such Person by any means, of:
(a) the Stock of, or other equity interests of, any other Person,
(b) any business, operating entity, division or segment thereof, or
(c) any other Property of such Person, other than (i) the sale of
inventory (other than in connection with bulk transfers), (ii) the
disposition of equipment and (iii) the sale of cash investments.
"Dividend Restrictions": as defined in Section 8.7.
"Documentation Agent": as defined in the preamble.
"Dollar or "$": lawful currency of the United States of America.
"Domestic Business Day": any day (other than a Saturday, Sunday or legal
holiday in the State of New York) on which banks are open for business in New
York City.
"Effective Date": as defined in Section 11.20.
"Employee Benefit Plan": an employee benefit plan, within the meaning of
Section 3(3) of ERISA, maintained, sponsored or contributed to by the Borrower,
any Subsidiary or any ERISA Affiliate.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended
from time to time, or any successor thereto, and the rules and regulations
issued thereunder, as from time to time in effect.
"ERISA Affiliate": when used with respect to an Employee Benefit Plan,
ERISA, the PBGC or a provision of the Internal Revenue Code pertaining to
employee benefit plans, any Person that is a member of any group of
organizations within the meaning of Sections 414(b) or (c) of the Internal
Revenue Code or, solely with respect to the applicable provisions of the
Internal Revenue Code, Sections 414(m) or (o) of the Internal Revenue Code, of
which the Borrower or any Subsidiary is a member.
"ESOP Guaranty": the guaranty of the 8.52% ESOP Note maturing 2008 in the
aggregate unpaid principal amount, as of December 31, 1996, of $309,400,000.
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"Eurodollar Advance": a portion of the Revolving Credit Loans selected by
the Borrower to bear interest during a Eurodollar Interest Period selected by
the Borrower at a rate per annum based upon a Eurodollar Rate determined with
reference to such Interest Period, all pursuant to and in accordance with
Section 2.1 or 3.3.
"Eurodollar Business Day": any Domestic Business Day, other than a
Domestic Business Day on which banks are not open for dealings in Dollar
deposits in the interbank eurodollar market.
"Eurodollar Interest Period": the period commencing on any Eurodollar
Business Day selected by the Borrower in accordance with Section 2.1 or Section
3.3 and ending one, two, three or six months thereafter, as selected by the
Borrower in accordance with either such Sections, subject to the following:
(i) if any Interest Period would otherwise end on a day which is not
a Eurodollar Business Day, such Interest Period shall be extended to the
immediately succeeding Eurodollar Business Day unless the result of such
extension would be to carry the end of such Interest Period into another
calendar month, in which event such Interest Period shall end on the Eurodollar
Business Day immediately preceding such day; and
(ii) if any Interest Period shall begin on the last Eurodollar
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),
such Interest Period shall end on the last Eurodollar Business Day of such
latter calendar month.
"Eurodollar Rate": with respect to each Eurodollar Advance and as
determined by the Administrative Agent, the rate of interest per annum (rounded,
if necessary, to the nearest 1/100 of 1% or, if there is no nearest 1/100 of 1%,
then to the next higher 1/100 of 1%) equal to a fraction, the numerator of which
is the rate per annum quoted by BNY at approximately 11:00 A.M. (or as soon
thereafter as practicable) two Eurodollar Business Days prior to the first day
of such Interest Period to leading banks in the interbank eurodollar market as
the rate at which BNY is offering Dollar deposits in an amount approximately
equal to its Commitment Percentage of such Eurodollar Advance and having a
period to maturity approximately equal to the Interest Period applicable to such
Eurodollar Advance, and the denominator of which is an amount equal to 1.00
minus the aggregate of the then stated maximum rates during such Interest Period
of all reserve requirements (including marginal, emergency, supplemental and
special reserves), expressed as a decimal, established by the Board of Governors
of the Federal Reserve System and any other banking authority to which BNY and
other major United States money center banks are subject, in respect of
eurocurrency liabilities.
"Event of Default": any of the events specified in Section 9.1, provided
that any requirement for the giving of notice, the lapse of time, or both, or
any other condition has been satisfied.
"Existing Credit Agreements": the CVS Existing Credit Agreement and the
Revco Existing Credit Agreement.
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"Expiration Date": the first date, occurring after the Commitments shall
have terminated or been terminated in accordance herewith, upon which there
shall be no Loans or Letters of Credit outstanding.
"Facility Fee": as defined in Section 3.11.
"Federal Funds Effective Rate": for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Domestic Business Day, for the next preceding Domestic
Business Day) by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day which is a Domestic Business Day, the average (rounded,
if necessary, to the nearest 1/100 of 1% or, if there is no nearest 1/100 of 1%,
then to the next higher 1/100 of 1%) of the quotations for such day on such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by the Administrative Agent.
"Fees": as defined in Section 3.2.
"Financial Statements": as defined in Section 4.13.
"GAAP": generally accepted accounting principles set forth 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 such other principles as may be approved
by a significant segment of the accounting profession, which are applicable to
the circumstances as of the date of determination, consistently applied.
"Governmental Authority": any foreign, federal, state, municipal or other
government, or any department, commission, board, bureau, agency, public
authority or instrumentality thereof, or any court or arbitrator.
"Highest Lawful Rate": as to any Lender, the maximum rate of interest, if
any, which at any time or from time to time may be contracted for, taken,
charged or received on the Loans or the Notes or which may be owing to such
Lender pursuant to this Agreement under the laws applicable to such Lender and
this Agreement.
"Indebtedness": as to any Person at a particular time, all items of such
Person which constitute, without duplication, (a) indebtedness for borrowed
money or the deferred purchase price of Property (other than trade payables and
accrued expenses incurred in the ordinary course of business), (b) indebtedness
evidenced by notes, bonds, debentures or similar instruments, (c) indebtedness
with respect to any conditional sale or other title retention agreement, (d)
indebtedness arising under acceptance facilities and the amount available to be
drawn under all letters of credit (excluding for purposes of Sections 8.1 and
8.10 letters of credit obtained in the ordinary course of business by the
Borrower or any Subsidiary) issued for the account of such Person and, without
duplication, all drafts drawn thereunder to the extent such Person shall not
have reimbursed the issuer in respect of the issuer's payment of such drafts,
(e) that portion of any obligation of such Person, as lessee, which in
accordance with GAAP is required to be capitalized on a balance sheet of such
Person, (f) all indebtedness described in (a) - (e) above secured by
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any Lien on any Property owned by such Person even though such Person shall not
have assumed or otherwise become liable for the payment thereof (other than
carriers', warehousemen's, mechanics', repairmen's or other like non-consensual
Liens arising in the ordinary course of business), and (g) Contingent
Obligations in respect of any indebtedness described in items (a) - (f) above;
provided that, for purposes of this definition, Indebtedness shall not include
Intercompany Debt and obligations in respect of interest rate caps, collars,
exchanges, swaps or other, similar agreements.
"Indemnified Liabilities": as defined in Section 11.5.
"Indemnified Person": as defined in Section 11.10.
"Intercompany Debt": (i) Indebtedness of the Borrower to one or more of
the Subsidiaries of the Borrower and (ii) demand Indebtedness of one or more of
the Subsidiaries of the Borrower to the Borrower or any one or more of the other
Subsidiaries of the Borrower.
"Intercompany Disposition": a Disposition by the Borrower or any of the
Subsidiaries of the Borrower to the Borrower or to any of the other Subsidiaries
of the Borrower.
"Interest Payment Date": (i) as to any ABR Advance, the last day of each
March, June, September and December, commencing on the first of such days to
occur after such ABR Advance is made or any Eurodollar Advance is converted to
an ABR Advance, (ii) as to any Swing Line Loan, the day on which the outstanding
principal balance of such Swing Line Loan shall become due and payable in
accordance with Section 2.2(a), (iii) as to any Eurodollar Advance in respect of
which the Borrower has selected a Eurodollar Interest Period of one, two or
three months, the last day of such Eurodollar Interest Period, (iv) as to any
Competitive Bid Loan in respect of which the Borrower has selected a Competitive
Interest Period of 90 days or less the last day of such Competitive Interest
Period and (v) as to any Eurodollar Advance or Competitive Bid Loan in respect
of which the Borrower has selected an Interest Period greater than three months
or 90 days, as the case may be, the last day of the third month or the 90th day,
as the case may be, of such Interest Period and the last day of such Interest
Period.
"Interest Period": a Eurodollar Interest Period, a Swing Line Interest
Period or a Competitive Interest Period, as the case may be.
"Internal Revenue Code": the Internal Revenue Code of 1986, as amended
from time to time, or any successor thereto, and the rules and regulations
issued thereunder, as from time to time in effect.
"Invitation to Bid": an invitation by the Administrative Agent to the
Lenders to make Competitive Bids in the form of Exhibit H.
"Issuer": BNY.
"Lender": as defined in the preamble; such term to also include the Swing
Line Lender and the Issuer where the context hereof requires or permits such
inclusion.
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"Letter of Credit": as defined in Section 2.8.
"Letter of Credit Commitment": the commitment of the Issuer to issue
Letters of Credit in accordance with the terms hereof in an aggregate
outstanding face amount not exceeding $50,000,000 (or, if less, the Aggregate
Commitment Amount) at any time, as the same may be reduced pursuant to Section
2.6.
"Letter of Credit Exposure": at any time, (a) in respect of all Lenders,
the sum, without duplication, of (i) the maximum aggregate amount which may be
drawn under all unexpired Letters of Credit at such time (whether the conditions
for drawing thereunder have or may be satisfied), (ii) the aggregate amount, at
such time, of all unpaid drafts (which have not been dishonored) drawn under all
Letters of Credit, and (iii) the aggregate unpaid principal amount of the
Reimbursement Obligations at such time, and (b) in respect of any Lender, an
amount equal to such Lender's Commitment Percentage at such time multiplied by
the amount determined under clause (a) of this definition.
"Letter of Credit Participation": with respect to each Lender, its
obligations to the Issuer under Section 2.9.
"Letter of Credit Participation Fee": as defined in Section 3.12.
"Letter of Credit Request": a request in the form of Exhibit K.
"Lien": any mortgage, pledge, hypothecation, assignment, lien, deposit
arrangement, charge, encumbrance or other security arrangement or security
interest of any kind, or the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement.
"Loan": a Revolving Credit Loan, a Competitive Bid Loan or a Swing Line
Loan, as the case may be.
"Loan Documents": this Agreement and, upon the execution and delivery
thereof, the Notes and the Reimbursement Agreements.
"Loans": the Revolving Credit Loans, the Competitive Bid Loans and the
Swing Line Loans.
"Mandatory Borrowing": as defined in Section 2.2(c).
"Margin Stock": any "margin stock", as said term is defined in Regulation
U of the Board of Governors of the Federal Reserve System, as the same may be
amended or supplemented from time to time.
"Material Adverse": with respect to any change or effect, a material
adverse change in, or effect on, as the case may be, (i) the financial
condition, operations, business, or Property of the Borrower and the
Subsidiaries taken as a whole, (ii) the ability of the Borrower to perform its
obligations under the Loan Documents, or (iii) the ability of the Administrative
Agent, the Issuer or any Lender to enforce the Loan Documents.
"Moody's": Moody's Investors Service, Inc.
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"Multiemployer Plan": a Pension Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Negotiated Rate": with respect to each Swing Line Loan, the rate per
annum agreed to in writing by the Borrower and the Swing Line Lender as the
interest rate which such Swing Line Loan shall bear.
"Net Worth": at any date of determination, the sum of all amounts which
would be included under shareholders' equity on a Consolidated balance sheet of
the Borrower and the Subsidiaries determined in accordance with GAAP as at such
date.
"Note": a Revolving Credit Note, a Competitive Bid Note or the Swing Line
Note, as the case may be.
"Other Credit Agreement": the 364 Day Credit Agreement, dated as of May
23, 1997, by and among the Borrower, the lenders party thereto, Fleet National
Bank, as documentation agent, JP Morgan Securities Inc., as syndication agent,
and The Bank of New York, as administrative agent, as the same may be amended,
supplemented or otherwise modified from time to time.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA, or any Governmental Authority succeeding to the
functions thereof.
"Pension Plan": at any time, any Employee Benefit Plan (including a
Multiemployer Plan) subject to Section 302 of ERISA or Section 412 of the
Internal Revenue Code, the funding requirements of which are, or at any time
within the six years immediately preceding the time in question, were in whole
or in part, the responsibility of the Borrower, any Subsidiary or an ERISA
Affiliate.
"Person": any individual, firm, partnership, limited liability company,
joint venture, corporation, association, business trust, joint stock company,
unincorporated association, trust, Governmental Authority or any other entity,
whether acting in an individual, fiduciary, or other capacity, and for the
purpose of the definition of "ERISA Affiliate", a trade or business.
"Pricing Level": Pricing Level I, Pricing Level II, Pricing Level III,
Pricing Level IV, Pricing Level V, Pricing Level VI or Pricing Level VII, as the
case may be.
"Pricing Level I": any time when the senior unsecured long term debt
rating of the Borrower by (x) S&P is AA- or higher or (y) Moody's is Aa3 or
higher.
"Pricing Level II": any time when (i) the senior unsecured long term debt
rating of the Borrower by (x) S&P is A+ or higher or (y) Moody's is A1 or higher
and (ii) Pricing Level I does not apply.
"Pricing Level III": any time when (i) the senior unsecured long term debt
rating of the Borrower by (x) S&P is A or higher or (y) Moody's is A2 or higher
and (ii) neither Pricing Level I nor II applies.
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"Pricing Level IV": any time when (i) the senior unsecured long term debt
rating of the Borrower by (x) S&P is A- or higher or (y) Moody's is A3 or higher
and (ii) none of Pricing Level I, II or III applies.
"Pricing Level V": any time when (i) the senior unsecured long term debt
rating of the Borrower by (x) S&P is BBB+ or higher or (y) Moody's is Baa1 or
higher and (ii) none of Pricing Level I, II, III or IV applies.
"Pricing Level VI": any time when (i) the senior unsecured long term debt
rating of the Borrower by (x) S&P is BBB or higher or (y) Moody's is Baa2 or
higher and (ii) none of Pricing Level I, II, III, IV or V applies.
"Pricing Level VII": any time when none of Pricing Level I, II, III, IV, V
or VI applies.
Notwithstanding each definition of Pricing Level set forth above, if at any time
the senior unsecured long term debt ratings of the Borrower by S&P and Moody's
differ by more than one equivalent rating level, then the applicable Pricing
Level shall be determined based upon the lower such rating adjusted upwards to
the next higher rating level.
"Principal Office": from time to time, the principal office of BNY,
located on the date hereof in New York, New York.
"Prohibited Transaction": a transaction that is prohibited under Section
4975 of the Internal Revenue Code or Section 406 of ERISA and not exempt under
Section 4975 of the Internal Revenue Code or Section 408 of ERISA.
"Property": in respect of any Person, all types of real, personal or mixed
property and all types of tangible or intangible property owned or leased by
such Person.
"Regulatory Change": (a) the introduction or phasing in of any law, rule
or regulation after the date hereof, (b) the issuance or promulgation after the
date hereof of any directive, guideline or request from any central bank or
United States or foreign Governmental Authority (whether or not having the force
of law), or (c) any change after the date hereof in the interpretation of any
existing law, rule, regulation, directive, guideline or request by any central
bank or United States or foreign Governmental Authority charged with the
administration thereof, in each case applicable to the transactions contemplated
by this Agreement.
"Reimbursement Agreement": as defined in Section 2.8(b).
"Reimbursement Obligations": all obligations and liabilities of the
Borrower due and to become due (a) under the Reimbursement Agreements and (b)
hereunder in respect of Letters of Credit.
"Replaced Lender": as defined in Section 3.13.
"Replacement Lender": as defined in Section 3.13.
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"Reportable Event": with respect to any Pension Plan, (a) any event set
forth in Sections 4043(b) (other than a Reportable Event as to which the 30 day
notice requirement is waived by the PBGC under applicable regulations), 4062(e)
or 4063(a) of ERISA, or the regulations thereunder, (b) an event requiring the
Borrower, any Subsidiary or any ERISA Affiliate to provide security to a Pension
Plan under Section 401(a)(29) of the Internal Revenue Code, or (c) the failure
to make any payment required by Section 412(m) of the Internal Revenue Code.
"Required Lenders": (a) at any time prior to the Commitment Termination
Date or such earlier date as all of the Commitments shall have terminated or
been terminated in accordance herewith, Lenders having Commitment Amounts equal
to or more than 51% of the Aggregate Commitment Amount, and (b) at all other
times, Lenders holding Notes having an unpaid principal balance equal to or more
than 51% of all Loans outstanding.
"Restricted Payment": with respect to any Person, any of the following,
whether direct or indirect: (a) the declaration or payment by such Person of any
dividend or distribution on any class of Stock of such Person, other than a
dividend payable solely in shares of that class of Stock to the holders of such
class, (b) the declaration or payment by such Person of any distribution on any
other type or class of equity interest or equity investment in such Person, and
(c) any redemption, retirement, purchase or acquisition of, or sinking fund or
other similar payment in respect of, any class of Stock of, or other type or
class of equity interest or equity investment in, such Person.
'Restrictive Agreement": as defined in Section 8.7.
"Revco": Revco D.S., Inc., a Delaware corporation.
"Revco Audited Financial Statements": as defined in Section 4.13.
"Revco Existing Credit Agreement": collectively, the Amended and Restated
Credit Agreement dated as of July 27, 1995 among Revco, the financial
institutions party thereto, as revolving lenders, Banque Paribas and Bank of
America Illinois, as managing agents, and Bank of America National Trust and
Savings Association, as administrative agent, as amended, and the Credit
Agreement (364 Day Facility) dated as of November 15, 1996 among Revco, Banque
Paribas and Bank of America Illinois, as lenders, and Bank of America National
Trust and Savings Association, as administrative agent.
"Revco 9 1/8% Indenture Debt": the Indebtedness of Revco under the 9 1/8%
senior notes due 2000 issued under the Indenture, dated as of January 1, 1993,
between Revco and First Fidelity Bank, National Association, New Jersey, as
trustee, as amended by the First Amendment to Indenture, dated as of April 20,
1994.
"Revco 10 1/8% Indenture Debt": the Indebtedness of Hook SupeRx, Inc. (a
wholly-owned subsidiary of Revco), as issuer, and Revco, as guarantor, under the
10 1/8% senior notes due 2002 issued under the Indenture, dated as of June 1,
1992, between Hook SupeRx, Inc. and Star Bank, National Association, as trustee.
"Revolving Credit Loans": as defined in Section 2.1(a).
"Revolving Credit Note": as defined in Section 2.1(b).
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"S&P": Standard and Poor's Ratings Group, a division of McGraw-Hill, Inc.
"Solvent": with respect to any Person on a particular date, the condition
that on such date, (i) the fair value of the Property of such Person is greater
than the total amount of liabilities, including, without limitation, contingent
liabilities, of such Person, (ii) the present fair salable value of the assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (iii) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person's ability to pay as such
debts and liabilities mature, and (iv) such Person is not engaged in business or
a transaction, and is not about to engage in business or a transaction, for
which such Person's Property would constitute an unreasonably small amount of
capital. For purposes of this definition, the amount of any contingent liability
at any time shall be computed as the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability after taking into account
probable payments by co-obligors.
"Special Counsel": Emmet, Marvin & Martin, LLP.
"Subsidiary": at any time and from time to time, any corporation,
association, partnership, limited liability company, joint venture or other
business entity of which the Borrower and/or any Subsidiary of the Borrower,
directly or indirectly at such time, either (a) in respect of a corporation,
owns or controls more than 50% of the outstanding stock having ordinary voting
power to elect a majority of the board of directors or similar managing body,
irrespective of whether a class or classes shall or might have voting power by
reason of the happening of any contingency, or (b) in respect of an association,
partnership, limited liability company, joint venture or other business entity,
is entitled to share in more than 50% of the profits and losses, however
determined.
"Swing Line Commitment": the commitment of the Swing Line Lender to make
Swing Line Loans in accordance with the terms hereof in an aggregate outstanding
principal amount not exceeding $50,000,000 (or, if less, the Aggregate
Commitment Amount) at any time, as the same may be reduced pursuant to Section
2.6.
"Swing Line Commitment Period": the period from the Effective Date to, but
excluding, the Swing Line Termination Date.
"Swing Line Exposure": at any time, in respect of any Lender, an amount
equal to the aggregate principal balance of Swing Line Loans at such time
multiplied by such Lender's Commitment Percentage at such time.
"Swing Line Interest Period": as to any Swing Line Loan, the period
commencing on the date of such Swing Line Loan and ending on the date set forth
by the Borrower in the Borrowing Request with respect to such Swing Line Loan;
provided that the last day of any Swing Line Interest Period shall not be
earlier than one day after the date of such Swing Line Loan or later than 7 days
after the date of such Swing Line Loan and in no event later than the Swing Line
Termination Date; and provided further that if any Swing Line Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day.
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"Swing Line Lender": BNY.
"Swing Line Loan" and "Swing Line Loans": as defined in Section 2.2(a).
"Swing Line Maturity Date": as defined in Section 2.2(a).
"Swing Line Note": as defined in Section 2.2(b).
"Swing Line Participation Amount": as defined in Section 2.2(d).
"Swing Line Termination Date": the date which is 7 Domestic Business Days
prior to the Commitment Termination Date.
"Syndication Agent": as defined in the preamble.
"Tangible Net Worth": at any date of determination, Net Worth less all
assets of the Borrower and its Subsidiaries included in such Net Worth,
determined on a Consolidated basis at such date, that would be classified as
intangible assets in accordance with GAAP.
"Termination Event": with respect to any Pension Plan, (a) a Reportable
Event, (b) the termination of a Pension Plan under Section 4041(c) of ERISA, or
the filing of a notice of intent to terminate a Pension Plan under Section
4041(c) of ERISA, or the treatment of a Pension Plan amendment as a termination
under Section 4041(e) of ERISA (except an amendment made after such Pension Plan
satisfies the requirement for a standard termination under Section 4041(b) of
ERISA), (c) the institution of proceedings by the PBGC to terminate a Pension
Plan under Section 4042 of ERISA, or (d) the appointment of a trustee to
administer any Pension Plan under Section 4042 of ERISA.
"Total Capitalization": at any date, the sum of the Borrower's
Consolidated Indebtedness and shareholders' equity on such date, determined in
accordance with GAAP.
"Type": with respect to any Revolving Credit Loan, the characteristic of
such Loan as an ABR Advance or a Eurodollar Advance, each of which constitutes a
Type of Revolving Credit Loan.
"Unqualified Amount": as defined in Section 3.4(c).
"Upstream Dividends": as defined in Section 8.7.
1.2 Principles of Construction
(a) All capitalized terms defined in this Agreement shall have the
meanings given such capitalized terms herein when used in the other Loan
Documents or in any certificate, opinion or other document made or delivered
pursuant hereto or thereto, unless otherwise expressly provided therein.
(b) Unless otherwise expressly provided herein, the word "fiscal"
when used herein shall refer to the relevant fiscal period of the Borrower. As
used in the Loan
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Documents and in any certificate, opinion or other document made or delivered
pursuant thereto, accounting terms not defined in Section 1.1, and accounting
terms partly defined in Section 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof", "herein", "hereto" and "hereunder" and
similar words when used in each Loan Document shall refer to such Loan Document
as a whole and not to any particular provision of such Loan Document, and
Section, schedule and exhibit references contained therein shall refer to
Sections thereof or schedules or exhibits thereto unless otherwise expressly
provided therein.
(d) All references herein to a time of day shall mean the then
applicable time in New York, New York, unless otherwise expressly provided
herein.
(e) Section headings have been inserted in the Loan Documents for
convenience only and shall not be construed to be a part thereof. Unless the
context otherwise requires, words in the singular number include the plural, and
words in the plural include the singular.
(f) Whenever in any Loan Document or in any certificate or other
document made or delivered pursuant thereto, the terms thereof require that a
Person sign or execute the same or refer to the same as having been so signed or
executed, such terms shall mean that the same shall be, or was, duly signed or
executed by (i) in respect of any Person that is a corporation, any duly
authorized officer thereof, and (ii) in respect of any other Person (other than
an individual), any analogous counterpart thereof.
(g) The words "include" and "including", when used in each Loan
Document, shall mean that the same shall be included "without limitation",
unless otherwise specifically provided.
2. AMOUNT AND TERMS OF LOANS
2.1 Revolving Credit Loans
(a) Subject to the terms and conditions hereof, each Lender
severally (and not jointly) agrees to make loans under this Agreement (each a
"Revolving Credit Loan" and, collectively with each other Revolving Credit Loan
of such Lender and/or with each Revolving Credit Loan of each other Lender, the
"Revolving Credit Loans") to the Borrower from time to time during the
Commitment Period, during which period the Borrower may borrow, prepay and
reborrow in accordance with the provisions hereof. Immediately after making each
Revolving Credit Loan and after giving effect to all Swing Line Loans and
Competitive Bid Loans repaid and all Reimbursement Obligations paid on the same
date, the Aggregate Credit Exposure will not exceed the Aggregate Commitment
Amount. With respect to each Lender, at the time of the making of any Revolving
Credit Loan, the sum of (I) the principal amount of such Lender's Revolving
Credit Loan constituting a part of the Revolving Credit Loans to be made, (II)
the aggregate principal balance of all other Revolving Credit Loans (exclusive
of Revolving Credit Loans which are repaid with the proceeds of, and
simultaneously with the incurrence of, the Revolving Credit Loans to be made)
then outstanding from such Lender and (III) the product of (A) such Lender's
Commitment Percentage and (B) the sum of (1) the aggregate principal
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balance of all Swing Line Loans (exclusive of Swing Line Loans which are repaid
with the proceeds of, and simultaneously with the incurrence of, the respective
Revolving Credit Loans) then outstanding and (2) the Letter of Credit Exposure
of all Lenders, will not exceed the Commitment of such Lender at such time.
During the Commitment Period, the Borrower may borrow, prepay in whole or in
part and reborrow Revolving Credit Loans under the Commitments, all in
accordance with the terms and conditions hereof. At the option of the Borrower,
indicated in a Borrowing Request, Revolving Credit Loans may be made as ABR
Advances or Eurodollar Advances.
(b) Revolving Credit Loans made by each Lender shall be evidenced by a
promissory note of the Borrower, substantially in the form of Exhibit B-1 (each,
as indorsed or modified from time to time, a "Revolving Credit Note"), payable
to the order of such Lender, dated the first Borrowing Date, and in the maximum
stated principal amount equal to such Lender's Commitment Amount and evidencing
the obligation of the Borrower to pay such Commitment Amount, or, if less, the
aggregate unpaid principal balance of the Revolving Credit Loans made by such
Lender, with interest thereon as provided herein.
(c) The aggregate outstanding principal balance of all Revolving Credit
Loans shall be due and payable on the Commitment Termination Date or on such
earlier date upon which all of the Commitments shall have been voluntarily
terminated by the Borrower in accordance with Section 2.6.
2.2 Swing Line Loans
(a) Subject to the terms and conditions hereof, the Swing Line
Lender agrees to make loans under this Agreement (each a "Swing Line Loan" and,
collectively, the "Swing Line Loans") to the Borrower from time to time during
the Swing Line Commitment Period. Swing Line Loans (i) may be repaid and
reborrowed in accordance with the provisions hereof, (ii) shall not, immediately
after giving effect thereto, result in the Aggregate Credit Exposure exceeding
the Aggregate Commitment Amount, and (iii) shall not, immediately after giving
effect thereto, result in the aggregate outstanding principal balance of all
Swing Line Loans exceeding the Swing Line Commitment. The Swing Line Lender
shall not be obligated to make any Swing Line Loan at a time when any Lender
shall be in default of its obligations under this Agreement unless the Swing
Line Lender has entered into arrangements satisfactory to it and the Borrower to
eliminate the Swing Line Lender's risk with respect to such defaulting Lender's
participation in such Swing Line Loan. The Swing Line Lender will not make a
Swing Line Loan if the Administrative Agent, or any Lender by notice to the
Swing Line Lender and the Borrower no later than one Business Day prior to the
Borrowing Date with respect to such Swing Line Loan, shall have determined that
the conditions set forth in Sections 5 and 6 have not been satisfied and such
conditions remain unsatisfied as of the requested time of the making of such
Loan. Each Swing Line Loan shall be due and payable on the day (the "Swing Line
Maturity Date") being the earliest of the last day of the Swing Line Interest
Period applicable thereto, the date on which the Swing Line Commitment shall
have been voluntarily terminated by the Borrower in accordance with Section 2.6,
and the date on which the Loans shall become due and payable pursuant to the
provisions hereof, whether by acceleration or otherwise. Each Swing Line Loan
shall bear interest at the Negotiated Rate applicable thereto. The Swing Line
Lender shall disburse the proceeds of Swing Line
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Loans at its office designated in Section 11.2 by crediting such proceeds to an
account of the Borrower maintained with the Swing Line Lender.
(b) Swing Line Loans shall be evidenced by a promissory note of the
Borrower, substantially in the form of Exhibit B-3 (as indorsed or modified from
time to time, the "Swing Line Note"), payable to the order of the Swing Line
Lender, dated the first Borrowing Date, and in the maximum stated principal
amount equal to the Swing Line Commitment and evidencing the obligation of the
Borrower to pay the amount of the Swing Line Commitment or, if less, the
aggregate unpaid principal balance of the Swing Line Loans made by the Swing
Line Lender which shall not have been funded by a Mandatory Borrowing, together
with interest thereon as provided herein.
(c) On any Business Day on which a Swing Line Loan shall be due and
payable and shall remain unpaid, the Swing Line Lender may, in its sole
discretion, give notice to the Lenders and the Borrower that such outstanding
Swing Line Loan shall be funded with a borrowing of Revolving Credit Loans
(provided that such notice shall be deemed to have been automatically given upon
the occurrence of a Default or an Event of Default under Sections 9.1(h) or
(i)), in which case a borrowing of Revolving Credit Loans made as ABR Advances
(each such borrowing, a "Mandatory Borrowing"), shall be made by all Lenders pro
rata based on each such Lender's Commitment Percentage on the Business Day
immediately succeeding the giving of such notice. The proceeds of each Mandatory
Borrowing shall be remitted directly to the Swing Line Lender to repay such
outstanding Swing Line Loan. Each Lender irrevocably agrees to make a Revolving
Credit Loan pursuant to each Mandatory Borrowing in the amount and in the manner
specified in the preceding sentence and on the date specified in writing by the
Swing Line Lender notwithstanding: (i) whether the amount of such Mandatory
Borrowing complies with the minimum amount for Loans otherwise required
hereunder, (ii) whether any condition specified in Section 6 is then
unsatisfied, (iii) whether a Default or an Event of Default then exists, (iv)
the Borrowing Date of such Mandatory Borrowing, (v) the aggregate principal
amount of all Loans then outstanding, (vi) the Aggregate Credit Exposure at such
time and (vii) the amount of the Commitments at such time.
(d) Upon each receipt by a Lender of notice of an Event of Default
from the Administrative Agent pursuant to Section 10.5, such Lender shall
purchase unconditionally, irrevocably, and severally (and not jointly) from the
Swing Line Lender a participation in the outstanding Swing Line Loans (including
accrued interest thereon) in an amount equal to the product of its Commitment
Percentage and the outstanding balance of the Swing Line Loans (each, a "Swing
Line Participation Amount"). Each Lender shall also be liable for an amount
equal to the product of its Commitment Percentage and any amounts paid by the
Borrower pursuant to this Section that are subsequently rescinded or avoided, or
must otherwise be restored or returned. Such liabilities shall be unconditional
and without regard to the occurrence of any Default or Event of Default or the
compliance by the Borrower with any of its obligations under the Loan Documents.
(e) In furtherance of Section 2.2(d), upon each receipt by a Lender
of notice of an Event of Default from the Administrative Agent pursuant to
Section 10.5, such Lender shall promptly make available to the Administrative
Agent for the account of the Swing Line Lender its Swing Line Participation
Amount at the office of the Administrative Agent specified in Section 11.2, in
lawful money of the United States and in immediately available funds. The
Administrative Agent shall deliver the payments made
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by each Lender pursuant to the immediately preceding sentence to the Swing Line
Lender promptly upon receipt thereof in like funds as received. Each Lender
hereby indemnifies and agrees to hold harmless the Administrative Agent and the
Swing Line Lender from and against any and all losses, liabilities (including
liabilities for penalties), actions, suits, judgments, demands, costs and
expenses resulting from any failure on the part of such Lender to pay, or from
any delay in paying the Administrative Agent any amount such Lender is required
by notice from the Administrative Agent to pay in accordance with this Section
upon receipt of notice of an Event of Default from the Administrative Agent
pursuant to Section 10.5 (except in respect of losses, liabilities or other
obligations suffered by the Administrative Agent or the Swing Line Lender, as
the case may be, resulting from the gross negligence or willful misconduct of
the Administrative Agent or the Swing Line Lender, as the case may be), and such
Lender shall pay interest to the Administrative Agent for the account of the
Swing Line Lender from the date such amount was due until paid in full, on the
unpaid portion thereof, at a rate of interest per annum, whether before or after
judgment, equal to (i) from the date such amount was due until the third day
therefrom, the Federal Funds Effective Rate, and (ii) thereafter, the Federal
Funds Effective Rate plus 2%, payable upon demand by the Swing Line Lender. The
Administrative Agent shall distribute such interest payments to the Swing Line
Lender upon receipt thereof in like funds as received.
(f) Whenever the Administrative Agent is reimbursed by the Borrower
for the account of the Swing Line Lender for any payment in connection with
Swing Line Loans and such payment relates to an amount previously paid by a
Lender pursuant to this Section, the Administrative Agent will promptly remit
such payment to such Lender.
2.3 Notice of Borrowing-Revolving Credit Loans and Swing Line Loans
The Borrower agrees to notify the Administrative Agent (and with
respect to a Swing Line Loan, the Swing Line Lender), which notification shall
be irrevocable, no later than (a) 12:00 Noon on the proposed Borrowing Date in
the case of Swing Line Loans, (b) 10:00 A.M. on the proposed Borrowing Date in
the case of Revolving Credit Loans to consist of ABR Advances and (c) 10:00 A.M.
at least two Eurodollar Business Days prior to the proposed Borrowing Date in
the case of Revolving Credit Loans to consist of Eurodollar Advances. Each such
notice shall specify (i) the aggregate amount requested to be borrowed under the
Commitments or the Swing Line Commitment, (ii) the proposed Borrowing Date,
(iii) whether a borrowing of Revolving Credit Loans is to be of ABR Advances or
Eurodollar Advances, and the amount of each thereof (iv) the Interest Period for
such Eurodollar Advances and (v) the Swing Line Interest Period for, and the
amount of, each Swing Line Loan. Each such notice shall be promptly confirmed by
delivery to the Administrative Agent (and, with respect to a Swing Line Loan,
the Swing Line Lender) of a Borrowing Request. Each Eurodollar Advance to be
made on a Borrowing Date, when aggregated with all amounts to be Converted to
Eurodollar Advances on such date and having the same Interest Period as such
Eurodollar Advance, shall equal no less than $10,000,000, or an integral
multiple of $1,000,000 in excess thereof. Each ABR Advance made on each
Borrowing Date shall equal no less than $5,000,000 or an integral multiple of
$500,000 in excess thereof. Each Swing Line Loan made on each Borrowing Date
shall equal no less than $1,000,000 or an integral multiple of $500,000 in
excess thereof. The Administrative Agent shall promptly notify each Lender (by
telephone or otherwise, such notification to be confirmed by fax or other
writing) of each such Borrowing Request. Subject to its receipt of each such
notice from the Administrative Agent and
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subject to the terms and conditions hereof, (A) each Lender shall make
immediately available funds available to the Administrative Agent at the address
therefor set forth in Section 11.2 not later than 1:00 P.M. on each Borrowing
Date in an amount equal to such Lender's Commitment Percentage of the Revolving
Credit Loans requested by the Borrower on such Borrowing Date and/or (B) the
Swing Line Lender shall make immediately available funds available to the
Borrower on such Borrowing Date in an amount equal to the Swing Line Loan
requested by the Borrower.
2.4 Competitive Bid Loans and Procedure
(a) Subject to the terms and conditions hereof, the Borrower may
request competitive bid loans under this Agreement (each a "Competitive Bid
Loan") during the Commitment Period. In order to request Competitive Bids, the
Borrower shall deliver by hand or fax to the Administrative Agent a duly
completed Competitive Bid Request not later than 11:00 A.M., one Domestic
Business Day before the proposed Borrowing Date therefor. A Competitive Bid
Request that does not conform substantially to the format of Exhibit G may be
rejected by the Administrative Agent in the Administrative Agent's reasonable
discretion, and the Administrative Agent shall promptly notify the Borrower of
such rejection by fax and telephone. Each Competitive Bid Request shall specify
(x) the proposed Borrowing Date for the Competitive Bid Loans then being
requested (which shall be a Domestic Business Day) and the aggregate principal
amount thereof and (y) the Competitive Interest Period or Interest Periods
(which shall not exceed ten different Interest Periods in a single Competitive
Bid Request), with respect thereto (which may not end after the Domestic
Business Day immediately preceding the Commitment Termination Date). Promptly
after its receipt of each Competitive Bid Request that is not rejected as
aforesaid, the Administrative Agent shall invite by fax (in the form of Exhibit
H) the Lenders to bid, on the terms and conditions of this Agreement, to make
Competitive Bid Loans pursuant to such Competitive Bid Request.
(b) Each Lender, in its sole and absolute discretion, may make one
or more Competitive Bids to the Borrower responsive to a Competitive Bid
Request. Subject to subsection (f) below, each Competitive Bid by a Lender must
be received by the Administrative Agent not later than 10:00 A.M. on the
proposed Borrowing Date for the relevant Competitive Bid Loan. Multiple bids
will be accepted by the Administrative Agent. Bids to make Competitive Bid Loans
that do not conform substantially to the format of Exhibit I may be rejected by
the Administrative Agent after conferring with, and upon the instruction of, the
Borrower, and the Administrative Agent shall notify the Lender making such
nonconforming bid of such rejection as soon as practicable. Each Competitive Bid
shall be irrevocable and shall specify (x) the principal amount (which (1) shall
be in a minimum principal amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof, and (2) may equal the entire principal amount
requested by the Borrower) of the Competitive Bid Loan or Competitive Bid Loans
that the Lender is willing to make to the Borrower, (y) the Competitive Bid Rate
or Rates at which the Lender is prepared to make such Competitive Bid Loan or
Competitive Bid Loans, and (z) the Competitive Interest Period with respect to
each such Competitive Bid Loan and the last day thereof. If any Lender shall
elect not to make a Competitive Bid, such Lender shall so notify the
Administrative Agent by fax not later than 10:00 A.M. on the proposed Borrowing
Date therefor, provided that the failure by any Lender to give any such notice
shall not obligate such Lender to make any Competitive Bid Loan in connection
with the relevant Competitive Bid Request.
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(c) With respect to each Competitive Bid Request, the Administrative
Agent shall (i) notify the Borrower by fax by 11:00 A.M. on the proposed
Borrowing Date with respect thereto of each Competitive Bid made, the
Competitive Bid Rate applicable thereto and the identity of the Lender that made
such Competitive Bid, and (ii) send a list of all Competitive Bids to the
Borrower for its records as soon as practicable after completion of the bidding
process. Each notice and list sent by the Administrative Agent pursuant to this
Section 2.4(c) shall list the Competitive Bids in ascending yield order.
(d) The Borrower may in its sole and absolute discretion, subject
only to the provisions of this Section 2.4(d), accept or reject any Competitive
Bid made in accordance with the procedures set forth in this Section 2.4, and
the Borrower shall notify the Administrative Agent by telephone, confirmed by
fax in the form of a Competitive Bid Accept/Reject Letter, whether and to what
extent it has decided to accept or reject any or all of such Competitive Bids
not later than 12:00 Noon on the proposed Borrowing Date therefor, provided that
the failure by the Borrower to give such notice shall be deemed to be a
rejection of all such Competitive Bids. In connection with each acceptance of
one or more Competitive Bids by the Borrower:
(1) the Borrower shall not accept a Competitive Bid made at a
particular Competitive Bid Rate if the Borrower has decided to reject a
Competitive Bid made at a lower Competitive Bid Rate unless the acceptance
of such lower Competitive Bid would subject the Borrower to any
requirement to withhold any taxes or deduct any amount from any amounts
payable under the Loan Documents, in which case the Borrower may reject
such lower Competitive Bid,
(2) the aggregate amount of the Competitive Bids accepted by the
Borrower shall not exceed the principal amount specified in the
Competitive Bid Request therefor,
(3) if the Borrower shall desire to accept a Competitive Bid made at
a particular Competitive Bid Rate, it must accept all other Competitive
Bids at such Competitive Bid Rate, except for any such Competitive Bid the
acceptance of which would subject the Borrower to any requirement to
withhold any taxes or deduct any amount from any amounts payable under the
Loan Documents, provided that if the acceptance of all such other
Competitive Bids would cause the aggregate amount of all such accepted
Competitive Bids to exceed the amount requested, then such acceptance
shall be made pro rata in accordance with the amount of each such
Competitive Bid at such Competitive Bid Rate,
(4) except pursuant to clause (3) above, no Competitive Bid shall be
accepted unless the Competitive Bid Loan with respect thereto shall be in
a minimum principal amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof, and
(5) no Competitive Bid shall be accepted and no Competitive Bid Loan
shall be made, if immediately after giving effect thereto, the Aggregate
Credit Exposure would exceed the Aggregate Commitment Amount.
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(e) The Administrative Agent shall promptly fax to each bidding
Lender (with a copy to the Borrower) a Competitive Bid Accept/Reject Letter
advising such Lender whether its Competitive Bid has been accepted (and if
accepted, in what amount and at what Competitive Bid Rate), and each successful
bidder so notified will thereupon become bound, subject to the other applicable
conditions hereof, to make the Competitive Bid Loan in respect of which each of
its Competitive Bids has been accepted by making immediately available funds
available to the Administrative Agent at its address set forth in Section 11.2
not later than 1:00 P.M. on the Borrowing Date for such Competitive Bid Loan in
the amount thereof.
(f) Anything herein to the contrary notwithstanding, if the
Administrative Agent shall elect to submit a Competitive Bid in its capacity as
a Lender, it shall submit such bid directly to the Borrower not later than 9:30
A.M. on the relevant proposed Borrowing Date.
(g) All notices required by this Section shall be given in
accordance with Section 11.2.
(h) The Competitive Bid Loans made by each Lender shall be evidenced
by a promissory note of the Borrower, substantially in the form of Exhibit B-2
(each, as indorsed or modified from time to time, a "Competitive Bid Note"),
payable to the order of such Lender, dated the first Borrowing Date evidencing
the obligation of the Borrower to pay the aggregate unpaid principal balance of
all Competitive Bid Loans made by such Lender to the Borrower, together with
interest thereon as provided herein. Each Competitive Bid Loan shall be due and
payable on the last day of the Interest Period applicable thereto or on such
earlier date upon which the Loans shall become due and payable hereunder,
whether by acceleration or otherwise.
2.5 Use of Proceeds
The Borrower agrees that the proceeds of the Loans and Letters of
Credit shall be used solely for its general corporate purposes not inconsistent
with the provisions hereof, including as a backup for the Borrower's commercial
paper and to refinance all outstanding Indebtedness (excluding letters of credit
issued under the Revco Existing Credit Agreement) under the Existing Credit
Agreements. Notwithstanding anything to the contrary contained in any Loan
Document, the Borrower further agrees that no part of the proceeds of any Loan
or Letter of Credit will be used, directly or indirectly, for a purpose which
violates any law, rule or regulation of any Governmental Authority, including
the provisions of Regulations G, U or X of the Board of Governors of the Federal
Reserve System, as amended or any provision of this Agreement, including,
without limitation, the provisions of Section 4.9.
2.6 Termination or Reduction of Commitments
(a) Voluntary Termination or Reductions. At the Borrower's option
and upon at least three Domestic Business Days' prior irrevocable notice to the
Administrative Agent, the Borrower may (i) terminate the Commitments, the Swing
Line Commitment and the Letter of Credit Commitment, at any time, or (ii)
permanently reduce the Aggregate Commitment Amount, the Swing Line Commitment or
the Letter of Credit Commitment, in part at any time and from time to time,
provided that (1) each such partial
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reduction shall be in an amount equal to at least (i) in the case of the
Aggregate Commitment Amount, $10,000,000 or an integral multiple of $1,000,000
in excess thereof, (ii) in the case of the Swing Line Commitment, $1,000,000, or
an integral multiple of $1,000,000 in excess thereof, and (iii) in the case of
the Letter of Credit Commitment, $1,000,000, or an integral multiple of
$1,000,000 in excess thereof, and (2) immediately after giving effect to each
such reduction, (i) the Aggregate Commitment Amount shall equal or exceed the
sum of the aggregate outstanding principal balance of all Loans and the Letter
of Credit Exposure, (ii) the Swing Line Commitment shall equal or exceed the
aggregate outstanding principal balance of all Swing Line Loans and (iii) the
Letter of Credit Commitment shall equal or exceed the Letter of Credit Exposure
of all Lenders, and provided further that a notice of termination of the
Commitments, the Swing Line Commitment and the Letter of Credit Commitment
delivered by the Borrower may state that such notice is conditioned upon the
effectiveness of other credit facilities (such notice to specify the proposed
effective date), in which case such notice may be revoked by the Borrower (by
notice to the Administrative Agent on or prior to such specified effective date)
if such condition is not satisfied and the Borrower shall indemnify the Lenders
in accordance with Section 3.5.
(b) In General. Each reduction of the Aggregate Commitment Amount
shall be made by reducing each Lender's Commitment Amount by a sum equal to such
Lender's Commitment Percentage of the amount of such reduction.
2.7 Prepayments of Loans
(a) Voluntary Prepayments. The Borrower may prepay Revolving Credit
Loans, Competitive Bid Loans and Swing Line Loans, in whole or in part, without
premium or penalty, but subject to Section 3.5 at any time and from time to
time, by notifying the Administrative Agent, which notification shall be
irrevocable, at least two Eurodollar Business Days, in the case of a prepayment
of Eurodollar Advances, two Business Days, in the case of Competitive Bid Loans,
or one Domestic Business Day, in the case of a prepayment of Swing Line Loans
and ABR Advances, prior to the proposed prepayment date specifying (i) the Loans
to be prepaid, (ii) the amount to be prepaid, and (iii) the date of prepayment.
Upon receipt of each such notice, the Administrative Agent shall promptly notify
each Lender thereof. Each such notice given by the Borrower pursuant to this
Section shall be irrevocable, provided that, if a notice of prepayment is given
in connection with a conditional notice of termination of the Commitments, the
Swing Line Commitment and the Letter of Credit Commitment as contemplated by
Section 2.6, then such notice of prepayment may be revoked if such notice of
termination is revoked in accordance with Section 2.6, and the Borrower shall
indemnify the Lenders in accordance with Section 3.5. Each partial prepayment
under this Section shall be in a minimum amount of $1,000,000 ($500,000 in the
case of ABR Advances and Swing Line Loans) or an integral multiple of $1,000,000
($100,000 in the case of ABR Advances and Swing Line Loans) in excess thereof.
(b) In General. Simultaneously with each prepayment hereunder, the
Borrower shall prepay all accrued interest on the amount prepaid through the
date of prepayment and indemnify the Lenders in accordance with Section 3.5.
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2.8 Letter of Credit Sub-facility
(a) Subject to the terms and conditions hereof and the payment by
the Borrower to the Issuer of such fees as the Borrower and the Issuer shall
have agreed in writing, the Issuer agrees, in reliance on the agreement of the
other Lenders set forth in Section 2.9, to issue standby letters of credit (each
a "Letter of Credit" and, collectively, the "Letters of Credit") during the
Commitment Period for the account of the Borrower, provided that immediately
after the issuance of each Letter of Credit (i) the Letter of Credit Exposure of
all Lenders shall not exceed the Letter of Credit Commitment, and (ii) the
Aggregate Credit Exposure shall not exceed the Aggregate Commitment Amount. Each
Letter of Credit shall have an expiration date which shall be not later than the
earlier to occur of one year from the date of issuance thereof or 5 days prior
to the Commitment Termination Date. No Letter of Credit shall be issued if the
Administrative Agent, or any Lender by notice to the Administrative Agent and
the Issuer no later than 3:00 P.M. one Domestic Business Day prior to the
requested date of issuance of such Letter of Credit, shall have determined that
the conditions set forth in Sections 5 and 6 have not been satisfied.
(b) Each Letter of Credit shall be issued for the account of the
Borrower in support of an obligation of the Borrower in favor of a beneficiary
who has requested the issuance of such Letter of Credit as a condition to a
transaction entered into in connection with the Borrower's ordinary course of
business. The Borrower shall give the Administrative Agent a Letter of Credit
Request for the issuance of each Letter of Credit by 12:00 Noon at least two
Domestic Business Days prior to the requested date of issuance. Such Letter of
Credit Request shall be accompanied by the Issuer's standard Application and
Agreement for Standby Letter of Credit (each a "Reimbursement Agreement")
executed by the Borrower, and shall specify (i) the beneficiary of such Letter
of Credit and the obligations of the Borrower in respect of which such Letter of
Credit is to be issued, (ii) the Borrower's proposal as to the conditions under
which a drawing may be made under such Letter of Credit and the documentation to
be required in respect thereof, (iii) the maximum amount to be available under
such Letter of Credit, and (iv) the requested date of issuance. Upon receipt of
such Letter of Credit Request from the Borrower, the Administrative Agent shall
promptly notify the Issuer and each other Lender thereof. The Issuer shall, on
the proposed date of issuance and subject to the other terms and conditions of
this Agreement, issue the requested Letter of Credit. Each Letter of Credit
shall be in form and substance reasonably satisfactory to the Issuer, with such
provisions with respect to the conditions under which a drawing may be made
thereunder and the documentation required in respect of such drawing as the
Issuer shall reasonably require. Each Letter of Credit shall be used solely for
the purposes described therein.
(c) Each payment by the Issuer of a draft drawn under a Letter of
Credit shall give rise to the obligation of the Borrower to immediately
reimburse the Issuer for the amount thereof. The Issuer shall promptly notify
the Borrower of such payment by the Issuer of a draft drawn under a Letter of
Credit, but any failure to so notify shall not in any manner affect the
obligation of the Borrower to make reimbursement when due. In lieu of such
notice, if the Borrower has not made reimbursement prior to the end of the
Business Day when due, the Borrower hereby authorizes the Issuer to deduct the
amount of any such reimbursement from such account(s) as the Borrower may from
time to time designate in writing to the Issuer, upon which the Issuer shall
apply the amount of such deduction to such reimbursement. If all or any portion
of any reimbursement obligation in
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respect of a Letter of Credit shall not be paid when due (whether at the stated
maturity thereof, by acceleration or otherwise), such overdue amount shall bear
interest, payable upon demand, at a rate per annum equal to the Alternate Base
Rate plus the Applicable Margin applicable to ABR Advances plus 2%, from the
date of such nonpayment until paid in full (whether before or after the entry of
a judgment thereon).
2.9 Letter of Credit Participation
(a) Each Lender hereby unconditionally and irrevocably, severally
(and not jointly) takes an undivided participating interest in the obligations
of the Issuer under and in connection with each Letter of Credit in an amount
equal to such Lender's Commitment Percentage of the amount of such Letter of
Credit. Each Lender shall be liable to the Issuer for its Commitment Percentage
of the unreimbursed amount of any draft drawn and honored under each Letter of
Credit. Each Lender shall also be liable for an amount equal to the product of
its Commitment Percentage and any amounts paid by the Borrower pursuant to
Sections 2.8 and 2.10 that are subsequently rescinded or avoided, or must
otherwise be restored or returned. Such liabilities shall be unconditional and
without regard to the occurrence of any Default or Event of Default or the
compliance by the Borrower with any of its obligations under the Loan Documents.
(b) The Issuer shall promptly notify the Administrative Agent, and
the Administrative Agent shall promptly notify each Lender (which notice shall
be promptly confirmed in writing), of the date and the amount of each draft paid
under each Letter of Credit with respect to which full reimbursement payment
shall not have been made by the Borrower as provided in Section 2.8(c), and
forthwith upon receipt of such notice, such Lender shall promptly make available
to the Administrative Agent for the account of the Issuer its Commitment
Percentage of the amount of such unreimbursed draft at the office of the
Administrative Agent specified in Section 11.2 in lawful money of the United
States and in immediately available funds. The Administrative Agent shall
distribute the payments made by each Lender pursuant to the immediately
preceding sentence to the Issuer promptly upon receipt thereof in like funds as
received. Each Lender shall indemnify and hold harmless the Administrative Agent
and the Issuer from and against any and all losses, liabilities (including
liabilities for penalties), actions, suits, judgments, demands, costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses) resulting from any failure on the part of such Lender to provide, or
from any delay in providing, the Administrative Agent with such Lender's
Commitment Percentage of the amount of any payment made by the Issuer under a
Letter of Credit in accordance with this clause (b) above (except in respect of
losses, liabilities or other obligations suffered by the Administrative Agent or
the Issuer, as the case may be, resulting from the gross negligence or willful
misconduct of the Administrative Agent or the Issuer, as the case may be). If a
Lender does not make available to the Administrative Agent when due such
Lender's Commitment Percentage of any unreimbursed payment made by the Issuer
under a Letter of Credit, such Lender shall be required to pay interest to the
Administrative Agent for the account of the Issuer on such Lender's Commitment
Percentage of such payment at a rate of interest per annum equal to (i) from the
date such Lender should have made such amount available until the third day
therefrom, the Federal Funds Effective Rate, and (ii) thereafter, the Federal
Funds Effective Rate plus 2%, in each case payable upon demand by the Issuer.
The Administrative Agent shall distribute such interest payments to the Issuer
upon receipt thereof in like funds as received.
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(c) Whenever the Administrative Agent is reimbursed by the Borrower,
for the account of the Issuer, for any payment under a Letter of Credit and such
payment relates to an amount previously paid by a Lender in respect of its
Commitment Percentage of the amount of such payment under such Letter of Credit,
the Administrative Agent (or the Issuer, if such payment by a Lender was paid by
the Administrative Agent to the Issuer) will promptly pay over such payment to
such Lender.
2.10 Absolute Obligation with respect to Letter of Credit Payments
The Borrower's obligation to reimburse the Administrative Agent for
the account of the Issuer for each payment under or in respect of each Letter of
Credit shall be absolute and unconditional under any and all circumstances and
irrespective of any set-off, counterclaim or defense to payment which the
Borrower may have or have had against the beneficiary of such Letter of Credit,
the Administrative Agent, the Issuer, the Swing Line Lender, any Lender or any
other Person, including, without limitation, any defense based on the failure of
any drawing to conform to the terms of such Letter of Credit, any drawing
document proving to be forged, fraudulent or invalid, or the legality, validity,
regularity or enforceability of such Letter of Credit, provided, however, that,
with respect to any Letter of Credit, the foregoing shall not relieve the Issuer
of any liability it may have to the Borrower for any actual damages sustained by
the Borrower arising from a wrongful payment (or failure to pay) under such
Letter of Credit made as a result of the Issuer's gross negligence or willful
misconduct.
3. PROCEEDS, PAYMENTS, CONVERSIONS, INTEREST, YIELD PROTECTION AND FEES
3.1 Disbursement of the Proceeds of the Loans
The Administrative Agent shall disburse the proceeds of the Loans
(other than the Swing Line Loans) at its office specified in Section 11.2 by
crediting to the Borrower's general deposit account with the Administrative
Agent the funds received from each Lender. Unless the Administrative Agent shall
have received prior notice from a Lender (by telephone or otherwise, such notice
to be confirmed by fax or other writing) that such Lender will not make
available to the Administrative Agent such Lender's Commitment Percentage of the
Revolving Credit Loans, or the amount of any Competitive Bid Loan, to be made by
it on a Borrowing Date, the Administrative Agent may assume that such Lender has
made such amount available to the Administrative Agent on such Borrowing Date in
accordance with this Section, provided that, in the case of a Revolving Credit
Loan, such Lender received notice thereof from the Administrative Agent in
accordance with the terms hereof, and the Administrative Agent may, in reliance
upon such assumption, make available to the Borrower on such Borrowing Date a
corresponding amount. If and to the extent such Lender shall not have so made
such amount available to the Administrative Agent, such Lender and the Borrower
severally agree to pay to the Administrative Agent, forthwith on demand, such
corresponding amount (to the extent not previously paid by the other), together
with interest thereon for each day from the date such amount is made available
to the Borrower until the date such amount is paid to the Administrative Agent,
at a rate per annum equal to, in the case of the Borrower, the applicable
interest rate set forth in Section 3.4(a) and, in the case of such Lender, the
Federal Funds Effective Rate from the date such payment is due until the third
day after such date and, thereafter, at the Federal Funds Effective Rate plus
2%. Any such payment by
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the Borrower shall be without prejudice to its rights against such Lender. If
such Lender shall pay to the Administrative Agent such corresponding amount,
such amount so paid shall constitute such Lender's Loan as part of such Loans
for purposes of this Agreement, which Loan shall be deemed to have been made by
such Lender on the Borrowing Date applicable to such Loans.
3.2 Payments
(a) Each borrowing of Revolving Credit Loans by the Borrower from
the Lenders, any Conversion of Revolving Credit Loans from one Type to another,
and any reduction in the Commitments shall be made pro rata according to the
Commitment Percentage of each Lender. Each payment, including each prepayment,
of principal and interest on the Loans and of the Facility Fee and the Letter of
Credit Participation Fee (collectively, together with all of the other fees to
be paid to the Administrative Agent, the Lenders, the Issuer and the Swing Line
Lender in connection with the Loan Documents, the "Fees"), and of all of the
other amounts to be paid to the Administrative Agent and the Lenders in
connection with the Loan Documents shall be made by the Borrower to the
Administrative Agent at its office specified in Section 11.2 in funds
immediately available in New York by 3:00 P.M. on the due date for such payment.
The failure of the Borrower to make any such payment by such time shall not
constitute a default hereunder, provided that such payment is made on such due
date, but any such payment made after 3:00 P.M. on such due date shall be deemed
to have been made on the next Domestic Business Day or Eurodollar Business Day,
as the case may be, for the purpose of calculating interest on amounts
outstanding on the Loans. If the Borrower has not made any such payment prior to
3:00 P.M., the Borrower hereby authorizes the Administrative Agent to deduct the
amount of any such payment from such account(s) as the Borrower may from time to
time designate in writing to the Administrative Agent, upon which the
Administrative Agent shall apply the amount of such deduction to such payment.
Promptly upon receipt thereof by the Administrative Agent, each payment of
principal and interest on the: (i) Revolving Credit Loans shall be remitted by
the Administrative Agent in like funds as received to each Lender (a) first, pro
rata according to the amount of interest which is then due and payable to the
Lenders, and (b) second, pro rata according to the amount of principal which is
then due and payable to the Lenders, (ii) Competitive Bid Loans shall be
remitted by the Administrative Agent in like funds as received to each
applicable Lender and (iii) Swing Line Loans shall be remitted by the
Administrative Agent in like funds as received to the Swing Line Lender. Each
payment of the Fees payable to the Lenders shall be promptly transmitted by the
Administrative Agent in like funds as received to each Lender pro rata according
to such Lender's Commitment Amount or, if the Commitments shall have terminated
or been terminated, according to the outstanding principal amount of such
Lender's Revolving Credit Loans.
(b) If any payment hereunder or under the Loans shall be due and
payable on a day which is not a Domestic Business Day or Eurodollar Business
Day, as the case may be, the due date thereof (except as otherwise provided in
the definition of Eurodollar Interest Period or Competitive Interest Period)
shall be extended to the next Domestic Business Day or Eurodollar Business Day,
as the case may be, and (except with respect to payments in respect of the
Facility Fee and in respect of the Letter of Credit Participation Fee) interest
shall be payable at the applicable rate specified herein during such extension.
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3.3 Conversions; Other Matters
(a) The Borrower may elect at any time and from time to time to
Convert one or more Eurodollar Advances to an ABR Advance by giving the
Administrative Agent at least one Domestic Business Day's prior irrevocable
notice of such election, specifying the amount to be so Converted. In addition,
the Borrower may elect at any time and from time to time to Convert an ABR
Advance to any one or more new Eurodollar Advances or to Convert any one or more
existing Eurodollar Advances to any one or more new Eurodollar Advances by
giving the Administrative Agent at least two Eurodollar Business Days' prior
irrevocable notice, in the case of a Conversion to Eurodollar Advances, of such
election, specifying the amount to be so Converted and the initial Interest
Period relating thereto, provided that any Conversion of an ABR Advance to
Eurodollar Advances shall only be made on a Eurodollar Business Day. The
Administrative Agent shall promptly provide the Lenders with notice of each such
election. ABR Advances and Eurodollar Advances may be Converted pursuant to this
Section in whole or in part, provided that the amount to be Converted to each
Eurodollar Advance, when aggregated with any Eurodollar Advance to be made on
such date in accordance with Section 2.1 and having the same Interest Period as
such first Eurodollar Advance, shall equal no less than $10,000,000 or an
integral multiple of $1,000,000 in excess thereof.
(b) Notwithstanding anything in this Agreement to the contrary, upon
the occurrence and during the continuance of a Default or an Event of Default,
the Borrower shall have no right to elect to Convert any existing ABR Advance to
a new Eurodollar Advance or to Convert any existing Eurodollar Advance to a new
Eurodollar Advance. In such event, such ABR Advance shall be automatically
continued as an ABR Advance or such Eurodollar Advance shall be automatically
Converted to an ABR Advance on the last day of the Interest Period applicable to
such Eurodollar Advance. The foregoing shall not affect any other rights or
remedies that the Administrative Agent or any Lender may have under this
Agreement or any other Loan Document.
(c) Each Conversion shall be effected by each Lender by applying the
proceeds of each new ABR Advance or Eurodollar Advance, as the case may be, to
the existing Advance (or portion thereof) being Converted (it being understood
that such Conversion shall not constitute a borrowing for purposes of Sections
4, 5 or 6).
(d) Notwithstanding any other provision of any Loan Document:
(i) if the Borrower shall have failed to elect a Eurodollar
Advance under Section 2.3 or this Section 3.3, as the case may be, in
connection with any borrowing of new Revolving Credit Loans or expiration
of an Interest Period with respect to any existing Eurodollar Advance, the
amount of the Revolving Credit Loans subject to such borrowing or such
existing Eurodollar Advance shall thereafter be an ABR Advance until such
time, if any, as the Borrower shall elect a new Eurodollar Advance
pursuant to this Section 3.3,
(ii) the Borrower shall not be permitted to select a
Eurodollar Advance the Interest Period in respect of which ends later than
the Commitment Termination Date or such earlier date upon which all of the
Commitments shall have been voluntarily terminated by the Borrower in
accordance with Section 2.6, and
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(iii) the Borrower shall not be permitted to have more than 10
Eurodollar Advances and Competitive Bid Loans, in the aggregate,
outstanding at any one time, it being understood and agreed that each
borrowing of Eurodollar Advances or Competitive Bid Loans pursuant to a
single Borrowing Request or Competitive Bid Request, as the case may be,
shall constitute the making of one Eurodollar Advance or Competitive Bid
Loan for the purpose of calculating such limitation.
3.4 Interest Rates and Payment Dates
(a) Prior to Maturity. Except as otherwise provided in Sections
3.4(b) and 3.4(c), the Loans shall bear interest on the unpaid principal balance
thereof at the applicable interest rate or rates per annum set forth below:
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LOANS RATE
Revolving Credit Loans Alternate Base Rate applicable
constituting ABR Advances thereto plus the Applicable Margin.
Revolving Credit Loans Eurodollar Rate applicable
constituting Eurodollar thereto
Advances plus the Applicable Margin.
Competitive Bid Fixed rate of interest applicable
Loans thereto accepted by the Borrower
pursuant to Section 2.4(d).
Swing Line Loans Negotiated Rate applicable
thereto as provided in Section 2.2(a).
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(b) After Maturity, Late Payment Rate. After maturity, whether by
acceleration, notice of intention to prepay or otherwise, the outstanding
principal balance of the Loans shall bear interest at the Alternate Base Rate
plus 2% per annum until paid (whether before or after the entry of any judgment
thereon). Any payment of principal, interest or any Fees not paid on the date
when due and payable shall bear interest at the Alternate Base Rate plus 2% per
annum from the due date thereof until the date such payment is made (whether
before or after the entry of any judgment thereon).
(c) Highest Lawful Rate. Notwithstanding anything to the contrary
contained in this Agreement, at no time shall the interest rate payable to any
Lender on any of its Loans, together with the Fees and all other amounts payable
hereunder to such Lender to the extent the same constitute or are deemed to
constitute interest, exceed the Highest Lawful Rate. If in respect of any period
during the term of this Agreement, any amount paid to any Lender hereunder, to
the extent the same shall (but for the provisions of this Section 3.4)
constitute or be deemed to constitute interest, would exceed the maximum amount
of interest permitted by the Highest Lawful Rate during such period (such amount
being hereinafter referred to as an "Unqualified Amount"), then
(i) such Unqualified
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Amount shall be applied or shall be deemed to have been applied as a prepayment
of the Loans of such Lender, and (ii) if, in any subsequent period during the
term of this Agreement, all amounts payable hereunder to such Lender in respect
of such period which constitute or shall be deemed to constitute interest shall
be less than the maximum amount of interest permitted by the Highest Lawful Rate
during such period, then the Borrower shall pay to such Lender in respect of
such period an amount (each a "Compensatory Interest Payment") equal to the
lesser of (x) a sum which, when added to all such amounts, would equal the
maximum amount of interest permitted by the Highest Lawful Rate during such
period, and (y) an amount equal to the aggregate sum of all Unqualified Amounts
less all other Compensatory Interest Payments.
(d) General. Interest shall be payable in arrears on each Interest
Payment Date, on the Commitment Termination Date and, to the extent provided in
Section 2.7(b), upon each prepayment of the Loans. Any change in the interest
rate on the Loans resulting from an increase or a decrease in the Alternate Base
Rate or any reserve requirement shall become effective as of the opening of
business on the day on which such change shall become effective. The
Administrative Agent shall, as soon as practicable, notify the Borrower and the
Lenders of the effective date and the amount of each change in the BNY Rate, but
any failure to so notify shall not in any manner affect the obligation of the
Borrower to pay interest on the Loans in the amounts and on the dates set forth
herein. Each determination by the Administrative Agent of the Alternate Base
Rate, the Eurodollar Rate and the Competitive Rate pursuant to this Agreement
shall be conclusive and binding on the Borrower absent manifest error. The
Borrower acknowledges that to the extent interest payable on the Loans is based
on the Alternate Base Rate, such rate is only one of the bases for computing
interest on loans made by the Lenders, and by basing interest payable on ABR
Advances on the Alternate Base Rate, the Lenders have not committed to charge,
and the Borrower has not in any way bargained for, interest based on a lower or
the lowest rate at which the Lenders may now or in the future make extensions of
credit to other Persons. All interest (other than interest calculated with
reference to the BNY Rate) shall be calculated on the basis of a 360-day year
for the actual number of days elapsed, and all interest determined with
reference to the BNY Rate shall be calculated on the basis of a 365/366-day year
for the actual number of days elapsed.
3.5 Indemnification for Loss
Notwithstanding anything contained herein to the contrary, if: (i)
the Borrower shall fail to borrow a Eurodollar Advance or if the Borrower shall
fail to Convert a Eurodollar Advance after it shall have given notice to do so
in which it shall have requested a Eurodollar Advance pursuant to Section 2.3 or
3.3, as the case may be, (ii) the Borrower shall fail to borrow a Competitive
Bid Loan after it shall have accepted any offer with respect thereto in
accordance with Section 2.4 or a Swing Line Loan after it shall have agreed to a
Negotiated Rate with respect thereto in accordance with Section 2.2(a), (iii) a
Eurodollar Advance, Competitive Bid Loan or Swing Line Loan shall be terminated
for any reason prior to the last day of the Interest Period applicable thereto,
(iv) any repayment or prepayment of the principal amount of a Eurodollar
Advance, Competitive Bid Loan or Swing Line Loan is made for any reason on a
date which is prior to the last day of the Interest Period applicable thereto,
or (v) the Borrower shall have revoked a notice of prepayment or notice of
termination of the Commitments, the Swing Line Commitment and the Letter of
Credit Commitments that was conditioned upon the effectiveness of other credit
facilities pursuant to Section 2.6 or 2.7, the Borrower agrees
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to indemnify each Lender (or the Swing Line Lender, as applicable) against, and
to pay on demand directly to such Lender the amount (calculated by such Lender
using any method chosen by such Lender which is customarily used by such Lender
for such purpose) equal to any loss or expense suffered by such Lender as a
result of such failure to borrow or Convert, or such termination, repayment,
prepayment or revocation, including any loss, cost or expense suffered by such
Lender in liquidating or employing deposits acquired to fund or maintain the
funding of such Eurodollar Advance, Competitive Bid Loan or Swing Line Loan, as
the case may be, or redeploying funds prepaid or repaid, in amounts which
correspond to such Eurodollar Advance, Competitive Bid Loan or Swing Line Loan,
as the case may be, and any reasonable internal processing charge customarily
charged by such Lender in connection therewith.
3.6 Reimbursement for Costs, Etc.
If at any time or from time to time there shall occur a Regulatory
Change and the Issuer or any Lender shall have reasonably determined that such
Regulatory Change (i) shall have had or will thereafter have the effect of
reducing (A) the rate of return on the Issuer's or such Lender's capital or the
capital of any Person directly or indirectly owning or controlling the Issuer or
such Lender (each a "Control Person"), or (B) the asset value (for capital
purposes) to the Issuer or such Lender or such Control Person, as applicable, of
the Reimbursement Obligations, or any participation therein, or the Loans, or
any participation therein, in any case to a level below that which the Issuer or
such Lender or such Control Person could have achieved or would thereafter be
able to achieve but for such Regulatory Change (after taking into account the
Issuer's, such Lender's or such Control Person's policies regarding capital),
(ii) will impose, modify or deem applicable any reserve, asset, special deposit
or special assessment requirements on deposits obtained in the interbank
eurodollar market in connection with the Loan Documents (excluding, with respect
to any Eurodollar Advance, any such requirement which is included in the
determination of the rate applicable thereto), (iii) will subject the Issuer, or
such Lender or such Control Person, as applicable, to any tax (documentary,
stamp or otherwise) with respect to this Agreement, any Note, or any
Reimbursement Agreement, or (iv) will change the basis of taxation of payments
to the Issuer or such Lender or such Control Person, as applicable, of
principal, interest or fees payable under the Loan Documents (except, in the
case of clauses (iii) and (iv) above, for any tax or changes in the rate of tax
on the Issuer's, or such Lender's or such Control Person's net income) then, in
each such case, within ten days after demand by the Issuer or such Lender, as
applicable, the Borrower shall pay to the Issuer, such Lender or such Control
Person, as the case may be, such additional amount or amounts as shall be
sufficient to compensate the Issuer, such Lender or such Control Person, as the
case may be, for any such reduction, reserve or other requirement, tax, loss,
cost or expense (excluding general administrative and overhead costs)
(collectively, "Costs") attributable to the Issuer's, such Lender's or such
Control Person's compliance during the term hereof with such Regulatory Change.
The Issuer and each Lender may make multiple requests for compensation under
this Section.
Notwithstanding the foregoing, the Borrower will not be required to
compensate any Lender for any Costs under this Section 3.6 arising prior to 45
days preceding the date of demand, unless the applicable Regulatory Change
giving rise to such Costs is imposed retroactively. In the case of
retroactivity, such notice shall be provided to the Borrower not later than 45
days from the date that such Lender learned of such
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Regulatory Change. The Borrower's obligation to compensate such Lender shall be
contingent upon the provision of such timely notice (but any failure by such
Lender to provide such timely notice shall not affect the Borrower's obligations
with respect to (i) Costs incurred from the date as of which such Regulatory
Change became effective to the date that is 45 days after the date such Lender
reasonably should have learned of such Regulatory Change and (ii) Costs incurred
following the provision of such notice).
3.7 Illegality of Funding
Notwithstanding any other provision hereof, if any Lender shall
reasonably determine that any law, regulation, treaty or directive, or any
change therein or in the interpretation or application thereof, shall make it
unlawful for such Lender to make or maintain any Eurodollar Advance as
contemplated by this Agreement, such Lender shall promptly notify the Borrower
and the Administrative Agent thereof, and (a) the commitment of such Lender to
make such Eurodollar Advances or Convert ABR Advances to such Eurodollar
Advances shall forthwith be suspended, (b) such Lender shall fund its portion of
each requested Eurodollar Advance as an ABR Advance and (c) such Lender's Loans
then outstanding as such Eurodollar Advances, if any, shall be Converted
automatically to an ABR Advance on the last day of the then current Interest
Period applicable thereto or at such earlier time as may be required. If the
commitment of any Lender with respect to Eurodollar Advances is suspended
pursuant to this Section and such Lender shall have obtained actual knowledge
that it is once again legal for such Lender to make or maintain Eurodollar
Advances, such Lender shall promptly notify the Administrative Agent and the
Borrower thereof and, upon receipt of such notice by each of the Administrative
Agent and the Borrower, such Lender's commitment to make or maintain Eurodollar
Advances shall be reinstated. If the commitment of any Lender with respect to
Eurodollar Advances is suspended pursuant to this Section, such suspension shall
not otherwise affect such Lender's Commitment.
3.8 Option to Fund; Substituted Interest Rate
(a) Each Lender has indicated that, if the Borrower requests a Swing
Line Loan, a Eurodollar Advance or a Competitive Bid Loan, such Lender may wish
to purchase one or more deposits in order to fund or maintain its funding of its
Commitment Percentage of such Eurodollar Advance or its Swing Line Loan or
Competitive Bid Loan during the Interest Period with respect thereto; it being
understood that the provisions of this Agreement relating to such funding are
included only for the purpose of determining the rate of interest to be paid in
respect of such Swing Line Loan, Eurodollar Advance or Competitive Bid Loan and
any amounts owing under Sections 3.5 and 3.6. The Swing Line Lender and each
Lender shall be entitled to fund and maintain its funding of all or any part of
each Swing Line Loan, Eurodollar Advance and Competitive Bid Loan in any manner
it sees fit, but all such determinations hereunder shall be made as if such
Lender had actually funded and maintained its Commitment Percentage of each
Eurodollar Advance or its Swing Line Loan or Competitive Bid Loan, as the case
may be, during the applicable Interest Period through the purchase of deposits
in an amount equal to the amount of its Commitment Percentage of such Eurodollar
Advance or the amount of such Swing Line Loan or Competitive Bid Loan, as the
case may be, and having a maturity corresponding to such Interest Period. Each
Lender may fund its Loans from or for the account of any branch or office of
such Lender as such Lender may choose from time to time, subject to Section
3.10.
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(b) In the event that (i) the Administrative Agent shall have
determined in good faith (which determination shall be conclusive and binding
upon the Borrower) that by reason of circumstances affecting the interbank
eurodollar market either adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate applicable pursuant to Section 2.3 or Section
3.3, or (ii) the Required Lenders shall have notified the Administrative Agent
that they have in good faith determined (which determination shall be conclusive
and binding on the Borrower) that the applicable Eurodollar Rate will not
adequately and fairly reflect the cost to such Lenders of maintaining or funding
loans bearing interest based on such Eurodollar Rate with respect to any portion
of the Loans that the Borrower has requested be made as Eurodollar Advances or
any Eurodollar Advance that will result from the requested conversion of any
portion of the Loans into Eurodollar Advances (each, an "Affected Advance"), the
Administrative Agent shall promptly notify the Borrower and the Lenders (by
telephone or otherwise, to be promptly confirmed in writing) of such
determination on or, to the extent practicable, prior to the requested Borrowing
Date or conversion date for such Affected Advances. If the Administrative Agent
shall give such notice, (A) any Affected Advances shall be made as ABR Advances
(or, subject to the terms and conditions hereof, Competitive Bid Loans), (B) the
Loans (or any portion thereof) that were to have been Converted to Affected
Advances shall be Converted to or continued as ABR Advances (or, subject to the
terms and conditions hereof, Competitive Bid Loans), and (C) any outstanding
Affected Advances shall be Converted, on the last day of the then current
Interest Period with respect thereto, to ABR Advances (or, subject to the terms
and conditions hereof, Competitive Bid Loans). Until any notice under clauses
(i) or (ii), as the case may be, of this Section 3.8(b) has been withdrawn by
the Administrative Agent (by notice to the Borrower) promptly upon either (x)
the Administrative Agent having determined that such circumstances affecting the
relevant market no longer exist and that adequate and reasonable means do exist
for determining the Eurodollar Rate pursuant to Section 2.3 or Section 3.3, or
(y) the Administrative Agent having been notified by such Required Lenders that
circumstances no longer render the Loans (or any portion thereof) Affected
Advances, no further Eurodollar Advances shall be required to be made by the
Lenders nor shall the Borrower have the right to Convert all or any portion of
the Loans to Eurodollar Advances.
3.9 Certificates of Payment and Reimbursement
Each of the Issuer and each Lender agrees, in connection with any
request by it for payment or reimbursement pursuant to Section 3.5 or 3.6, to
provide the Borrower with a certificate, signed by an officer of the Issuer or
such Lender, as the case may be, setting forth a description in reasonable
detail of any such payment or reimbursement. Each determination by the Issuer
and each Lender of such payment or reimbursement shall be conclusive absent
manifest error.
3.10 Taxes; Net Payments
(a) All payments made by the Borrower under the Loan Documents shall
be made free and clear of, and without reduction for or on account of, any taxes
required by law to be withheld from any amounts payable under the Loan
Documents. In the event that the Borrower is prohibited by law from making such
payments free of deductions or withholdings, then the Borrower shall pay such
additional amounts to the Administrative Agent, for the benefit of the Issuer
and the Lenders, as may be necessary
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in order that the actual amounts received by the Issuer and the Lenders in
respect of interest and any other amounts payable under the Loan Documents after
deduction or withholding (and after payment of any additional taxes or other
charges due as a consequence of the payment of such additional amounts) shall
equal the amount that would have been received if such deduction or withholding
were not required. In the event that any such deduction or withholding can be
reduced or nullified as a result of the application of any relevant double
taxation convention, the Lenders, the Issuer and the Administrative Agent will,
at the expense of the Borrower, cooperate with the Borrower in making
application to the relevant taxing authorities seeking to obtain such reduction
or nullification, provided that the Lenders, the Issuer and the Administrative
Agent shall have no obligation to (i) engage in any litigation, hearing or
proceeding with respect thereto or (ii) disclose any tax return or other
confidential information. If the Borrower shall make any payment under this
Section or shall make any deduction or withholding from amounts paid under any
Loan Document, the Borrower shall forthwith forward to the Administrative Agent
original or certified copies of official receipts or other evidence acceptable
to the Administrative Agent establishing each such payment, deduction or
withholding, as the case may be, and the Administrative Agent in turn shall
distribute copies thereof to the Issuer and each Lender. If any payment to the
Issuer or any Lender under any Loan Document is or becomes subject to any
withholding, the Issuer or such Lender, as the case may be, shall (unless
otherwise required by a Governmental Authority or as a result of any law, rule,
regulation, order or similar directive applicable to the Issuer or such Lender,
as the case may be) designate a different office or branch to which such payment
is to be made from that initially selected thereby, if such designation would
avoid such withholding and would not be otherwise disadvantageous to the Issuer
or such Lender, as the case may be, in any respect. In the event that the Issuer
or any Lender determines that it received a refund or credit for taxes paid by
the Borrower under this Section, the Issuer or such Lender, as the case may be,
shall promptly notify the Administrative Agent and the Borrower of such fact and
shall remit to the Borrower the amount of such refund or credit applicable to
the payments made by the Borrower in respect of the Issuer or such Lender, as
the case may be, under this Section.
(b) So long as it is lawfully able to do so, each Lender not
incorporated under the laws of the United States or any State thereof shall
deliver to the Borrower such certificates, documents, or other evidence as the
Borrower may reasonably require from time to time as are necessary to establish
that such Lender is not subject to withholding under Section 1441, 1442 or 3406
of the Internal Revenue Code or as may be necessary to establish, under any law
imposing upon the Borrower, hereafter, an obligation to withhold any portion of
the payments made by the Borrower under the Loan Documents, that payments to the
Administrative Agent on behalf of such Lender are not subject to withholding.
Notwithstanding any provision herein to the contrary, the Borrower shall have no
obligation to pay to the Issuer, the Swing Line Lender or any Lender any amount
which the Borrower is liable to withhold due to the failure of the Issuer, the
Swing Line Lender or such Lender, as the case may be, to file any statement of
exemption required by the Internal Revenue Code.
3.11 Facility Fee
The Borrower agrees to pay to the Administrative Agent for the pro
rata account of each Lender a fee (the "Facility Fee") during the period
commencing on the Effective Date and ending on the Expiration Date, payable
quarterly in arrears on the last
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day of each March, June, September and December of each year, commencing on the
last day of the calendar quarter in which the Effective Date shall have
occurred, and on the Expiration Date, at a rate per annum equal to the
Applicable Margin of (a) prior to the Commitment Termination Date or such
earlier date upon which all of the Commitments shall have been voluntarily
terminated by the Borrower in accordance with Section 2.6, the Commitment Amount
of such Lender (whether used or unused), and (b) thereafter, the sum of (i) the
outstanding principal balance of all Revolving Credit Loans of such Lender, (ii)
such Lender's Swing Line Exposure and (iii) such Lender's Letter of Credit
Exposure. Notwithstanding anything to the contrary contained in this Section, on
and after the Commitment Termination Date, the Facility Fee shall be payable
upon demand. In addition, upon each reduction of the Aggregate Commitment
Amount, the Borrower shall pay the Facility Fee accrued on the amount of such
reduction through the date of such reduction. The Facility Fee shall be computed
on the basis of a 360-day year for the actual number of days elapsed.
3.12 Letter of Credit Participation Fee
The Borrower agrees to pay to the Administrative Agent for the pro
rata account of each Lender a fee (the "Letter of Credit Participation Fee")
with respect to the Letters of Credit during the period commencing on the
Effective Date and ending on the Commitment Termination Date or, if later, the
date when the Letter of Credit Exposure of all Lenders is $0, payable quarterly
in arrears on the last day of each March, June, September and December of each
year, commencing on the last day of the calendar quarter in which the Effective
Date shall have occurred, and on the last date of such period, at a rate per
annum equal to the Applicable Margin of the average daily aggregate amount which
may be drawn under the Letters of Credit during such period (whether or not the
conditions for drawing thereunder have or may be satisfied) multiplied by such
Lender's Commitment Percentage. The Letter of Credit Participation Fee shall be
computed on the basis of a 360-day year for the actual number of days elapsed.
3.13 Replacement of Lender
If the Borrower is obligated to pay to any Lender any amount under
Section 3.6 or 3.10, the Borrower shall have the right within 90 days
thereafter, in accordance with the requirements of Section 11.7(c), if no
Default or Event of Default shall exist, to replace such Lender (the "Replaced
Lender") with one or more other assignees (each a "Replacement Lender"),
reasonably acceptable to the Swing Line Lender and the Issuer, provided that (i)
at the time of any replacement pursuant to this Section, the Replacement Lender
shall enter into one or more Assignment and Acceptance Agreements pursuant to
Section 11.7(c) (with the Assignment Fee payable pursuant to said Section
11.7(c) to be paid by the Replacement Lender) pursuant to which the Replacement
Lender shall acquire the Commitment, the outstanding Loans, the Swing Line
Exposure and the Letter of Credit Exposure of the Replaced Lender and, in
connection therewith, shall pay the following: (a) to the Replaced Lender, an
amount equal to the sum of (A) an amount equal to the principal of, and all
accrued interest on, all outstanding Loans and Swing Line Participation Amounts
of the Replaced Lender, (B) an amount equal to all drawings on all Letters of
Credit that have been funded by (and not reimbursed to) such Replaced Lender,
together with all then unpaid interest with respect thereto at such time, and
(C) an amount equal to all accrued, but unpaid, fees owing to the Replaced
Lender, (b) to the Issuer, an amount equal to such Replaced Lender's Commitment
Percentage of all drawings (which at such time remain
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unpaid drawings) to the extent such amount was not funded by such Replaced
Lender, (c) to the Swing Line Lender, an amount equal to such Replaced Lender's
Commitment Percentage of any Mandatory Borrowing to the extent such amount was
not funded by such Replaced Lender, and (d) to the Administrative Agent an
amount equal to all amounts owed by such Replaced Lender to the Administrative
Agent under this Agreement, including, without limitation, an amount equal to
the principal of, and all accrued interest on, all outstanding Loans of the
Replaced Lender, a corresponding amount of which was made available by the
Administrative Agent to the Borrower pursuant to Section 3.1 and which has not
been repaid to the Administrative Agent by such Replaced Lender or the Borrower,
and (ii) all obligations of the Borrower owing to the Replaced Lender (other
than those specifically described in clause (i) above in respect of which the
assignment purchase price has been, or is concurrently being, paid) shall be
paid in full to such Replaced Lender concurrently with such replacement. Upon
the execution of the respective Assignment and Acceptance Agreements and the
payment of amounts referred to in clauses (i) and (ii) of this Section 3.13, the
Replacement Lender shall become a Lender hereunder and the Replaced Lender shall
cease to constitute a Lender hereunder, except with respect to indemnification
provisions under this Agreement that are intended to survive the termination of
the Commitments.
4. REPRESENTATIONS AND WARRANTIES
In order to induce the Administrative Agent, the Lenders and the Issuer to
enter into this Agreement, the Lenders to make the Loans and the Issuer to issue
Letters of Credit, the Borrower hereby makes the following representations and
warranties to the Administrative Agent, the Lenders and the Issuer:
4.1 Existence and Power
Each of the Borrower and the Subsidiaries is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation (except, in the case of the Subsidiaries, where the
failure to be in such good standing could not reasonably be expected to have a
Material Adverse effect), has all requisite corporate power and authority to own
its Property and to carry on its business as now conducted, and is qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction in which it owns or leases real Property or in which the nature of
its business requires it to be so qualified (except those jurisdictions where
the failure to be so qualified or to be in good standing could not reasonably be
expected to have a Material Adverse effect).
4.2 Authority
The Borrower has full corporate power and authority to enter into,
execute, deliver and perform the terms of the Loan Documents and to consummate
the CVS/Revco Merger in accordance with the CVS/Revco Merger Documents, all of
which have been duly authorized by all proper and necessary corporate action and
are not in contravention of any applicable law or the terms of its Certificate
of Incorporation and By-Laws. No consent or approval of, or other action by,
shareholders of the Borrower, any Governmental Authority, or any other Person
(which has not already been obtained) is required to authorize in respect of the
Borrower, or is required in connection with the
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execution, delivery, and performance by the Borrower of the Loan Documents or in
connection with the consummation of the CVS/Revco Merger, or is required as a
condition to the enforceability of the Loan Documents against the Borrower or as
a condition to the CVS/Revco Merger.
4.3 Binding Agreement
The Loan Documents and the CVS/Revco Merger Documents constitute the
valid and legally binding obligations of the Borrower, enforceable in accordance
with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by equitable
principles relating to the availability of specific performance as a remedy.
4.4 Litigation
Except as set forth on Schedule 4.4, there are no actions, suits,
arbitration proceedings or claims (whether purportedly on behalf of the
Borrower, any Subsidiary or otherwise) pending or, to the knowledge of the
Borrower, threatened against the Borrower or any Subsidiary or any of their
respective Properties, or maintained by the Borrower or any Subsidiary, at law
or in equity, before any Governmental Authority which could reasonably be
expected to have a Material Adverse effect. There are no proceedings pending or,
to the knowledge of the Borrower, threatened against the Borrower or any
Subsidiary (a) which call into question the validity or enforceability of any
Loan Document, or otherwise seek to invalidate, any Loan Document or invalidate
or prevent the consummation of the CVS/Revco Merger, or (b) which might,
individually or in the aggregate, materially and adversely affect any of the
transactions contemplated by any Loan Document or materially and adversely
affect the CVS/Revco Merger.
4.5 No Conflicting Agreements
(a) Neither the Borrower nor any Subsidiary is in default under any
agreement to which it is a party or by which it or any of its Property is bound
the effect of which could reasonably be expected to have a Material Adverse
effect. No notice to, or filing with, any Governmental Authority is required for
the due execution, delivery and performance by the Borrower of the Loan
Documents or to effect the CVS/Revco Merger, except for notices and filings
required in connection with the CVS/Revco Merger which have been given and made.
(b) No provision of any existing material mortgage, material
indenture, material contract or material agreement or of any existing statute,
rule, regulation, judgment, decree or order binding on the Borrower or any
Subsidiary or affecting the Property of the Borrower or any Subsidiary conflicts
with, or requires any consent which has not already been obtained under, or
would in any way prevent the execution, delivery or performance by the Borrower
of the terms of, any Loan Document or the CVS/Revco Merger. The execution,
delivery or performance by the Borrower of the terms of each Loan Document and
the consummation of the CVS/Revco Merger will not constitute a default under, or
result in the creation or imposition of, or obligation to create, any Lien upon
the Property of the Borrower or any Subsidiary pursuant to the terms of any such
mortgage, indenture, contract or agreement.
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4.6 Taxes
The Borrower and each Subsidiary has filed or caused to be filed all
tax returns, and has paid, or has made adequate provision for the payment of,
all taxes shown to be due and payable on said returns or in any assessments made
against them, the failure of which to file or pay could reasonably be expected
to have a Material Adverse effect, and no tax Liens (other than Liens permitted
under Section 8.2) have been filed against the Borrower or any Subsidiary and no
claims are being asserted with respect to such taxes which are required by GAAP
to be reflected in the Financial Statements and are not so reflected, except for
taxes which have been assessed but which are not yet due and payable. The
charges, accruals and reserves on the books of the Borrower and each Subsidiary
with respect to all federal, state, local and other taxes are considered by the
management of the Borrower to be adequate, and the Borrower knows of no unpaid
assessment which (a) could reasonably be expected to have a Material Adverse
effect, or (b) is or might be due and payable against it or any Subsidiary or
any Property of the Borrower or any Subsidiary, except such thereof as are being
contested in good faith and by appropriate proceedings diligently conducted, and
for which adequate reserves have been set aside in accordance with GAAP or which
have been assessed but are not yet due and payable.
4.7 Compliance with Applicable Laws; Filings
Neither the Borrower nor any Subsidiary is in default with respect
to any judgment, order, writ, injunction, decree or decision of any Governmental
Authority which default could reasonably be expected to have a Material Adverse
effect. The Borrower and each Subsidiary is complying with all applicable
statutes, rules and regulations of all Governmental Authorities, a violation of
which could reasonably be expected to have a Material Adverse effect. The
Borrower and each Subsidiary has filed or caused to be filed with all
Governmental Authorities all reports, applications, documents, instruments and
information required to be filed pursuant to all applicable laws, rules,
regulations and requests which, if not so filed, could reasonably be expected to
have a Material Adverse effect.
4.8 Governmental Regulations
Neither the Borrower nor any Subsidiary nor any corporation
controlling the Borrower or any Subsidiary or under common control with the
Borrower or any Subsidiary is subject to regulation under the Investment Company
Act of 1940, as amended, or is subject to any statute or regulation which
regulates the incurrence of Indebtedness.
4.9 Federal Reserve Regulations; Use of Proceeds
The Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying any margin stock within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System, as amended. No part of the proceeds of
the Loans or the Letters of Credit has been or will be used, directly or
indirectly, for a purpose which violates any law, rule or regulation of any
Governmental Authority, including, without limitation, the provisions of
Regulations G, T, U or X of the Board of Governors of the Federal Reserve
System, as amended. Anything in this Agreement to the contrary notwithstanding,
neither
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the Issuer nor any Lender shall be obligated to extend credit to or on behalf of
the Borrower in violation of any limitation or prohibition provided by any
applicable law, regulation or statute, including said Regulation U. Following
application of the proceeds of each Loan and the issuance of each Letter of
Credit, not more than 25% (or such greater or lesser percentage as is provided
in the exclusions from the definition of "Indirectly Secured" contained in said
Regulation G and Regulation U as in effect at the time of the making of such
Loan or issuance of such Letter of Credit) of the value of the assets of the
Borrower and the Subsidiaries on a Consolidated basis that are subject to
Section 8.2 will be Margin Stock.
4.10 No Misrepresentation
No representation or warranty contained in any Loan Document and
no certificate or written report furnished by the Borrower to the Administrative
Agent or any Lender contains or will contain, as of its date, a misstatement of
material fact, or omits or will omit to state, as of its date, a material fact
required to be stated in order to make the statements therein contained not
misleading in the light of the circumstances under which made.
4.11 Plans
Each Employee Benefit Plan of the Borrower, each Subsidiary and each
ERISA Affiliate is in compliance with ERISA and the Internal Revenue Code, where
applicable, except where the failure to so comply would not be material. The
Borrower, each Subsidiary and each ERISA Affiliate have complied with the
material requirements of Section 515 of ERISA with respect to each Pension Plan
which is a Multiemployer Plan, except where the failure to so comply would not
be material. The Borrower, each Subsidiary and each ERISA Affiliate has, as of
the date hereof, made all contributions or payments to or under each such
Pension Plan required by law or the terms of such Pension Plan or any contract
or agreement. No liability to the PBGC has been, or is reasonably expected by
the Borrower, any Subsidiary or any ERISA Affiliate to be, incurred by the
Borrower, any Subsidiary or any ERISA Affiliate. Liability, as referred to in
this Section 4.11, includes any joint and several liability, but excludes any
liability for premiums under Section 4007 of ERISA. Each Employee Benefit Plan
which is a group health plan within the meaning of Section 5000(b)(1) of the
Internal Revenue Code is in material compliance with the continuation of health
care coverage requirements of Section 4980B of the Internal Revenue Code.
4.12 Environmental Matters
Neither the Borrower nor any Subsidiary (a) has received written
notice or otherwise learned of any claim, demand, action, event, condition,
report or investigation indicating or concerning any potential or actual
liability which individually or in the aggregate could reasonably be expected to
have a Material Adverse effect, arising in connection with (i) any
non-compliance with or violation of the requirements of any applicable federal,
state or local environmental health or safety statute or regulation, or (ii) the
release or threatened release of any toxic or hazardous waste, substance or
constituent, or other substance into the environment, (b) to the best knowledge
of the Borrower, has any threatened or actual liability in connection with the
release or threatened release of any toxic or hazardous waste, substance or
constituent, or other substance into the environment which individually or in
the aggregate could reasonably be expected to have a Material Adverse effect,
(c) has received notice of any federal or state investigation evaluating whether
any remedial action is needed to respond to a release or threatened release of
any
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toxic or hazardous waste, substance or constituent or other substance into the
environment for which the Borrower or any Subsidiary is or would be liable,
which liability would reasonably be expected to have a Material Adverse effect,
or (d) has received notice that the Borrower or any Subsidiary is or may be
liable to any Person under the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. Section 9601 et seq., or
any analogous state law, which liability would reasonably be expected to have a
Material Adverse effect. The Borrower and each Subsidiary is in compliance with
the financial responsibility requirements of federal and state environmental
laws to the extent applicable, including those contained in 40 C.F.R., parts 264
and 265, subpart H, and any analogous state law, except in those cases in which
the failure so to comply would not reasonably be expected to have a Material
Adverse effect.
4.13 Financial Statements
The Borrower has heretofore delivered to the Lenders through the
Administrative Agent copies of (i) the audited Consolidated Balance Sheet of the
Borrower and its Subsidiaries as of December 31, 1996, and the related
Consolidated Statement of Income and Retained Earnings, and Consolidated
Statement of Cash Flows, for the fiscal year then ended (the "Borrower Audited
Financial Statements"), (ii) the audited consolidated Balance Sheet of Revco and
its subsidiaries as of December 31, 1996, and the related consolidated
Statements of Income and Retained Earnings, and consolidated Statement of Cash
Flows, for the fiscal year then ended (the "Revco Audited Financial Statements")
and (iii) the unaudited pro-forma (after giving effect to the CVS/Revco Merger)
Consolidated Balance Sheet of the Borrower as of the proposed CVS/Revco Merger
Date, and the related pro-forma (after giving effect to the CVS/Revco Merger)
Consolidated Statement of Income and Retained Earnings for the period from
January 1, 1997 to the proposed CVS/Revco Merger Date (the "Borrower Pro Forma
Financial Statements") and, together with the Borrower Audited Statements and
the Revco Audited Statements, including any related notes and schedules, the
"Financial Statements"). The Borrower Audited Financial Statements fairly
present the Consolidated financial condition and results of the operations of
the Borrower and the Subsidiaries, and the Borrower Pro Forma Financial
Statements fairly present, on a pro forma basis after giving effect to the
consummation of the CVS/Revco Merger, the Consolidated financial condition and
results of the operations of the Borrower and the Subsidiaries, in each case as
of the dates and for the periods indicated therein and, except as noted therein,
have been prepared in conformity with GAAP as then in effect. Neither the
Borrower nor any of the Subsidiaries, with respect to the Borrower Audited
Financial Statements, and neither the Borrower nor any of the Subsidiaries
(after giving effect to the CVS/Revco Merger), with respect to the Borrower Pro
Forma Financial Statements, has any obligation or liability of any kind (whether
fixed, accrued, contingent, unmatured or otherwise) which, in accordance with
GAAP as then in effect, should have been disclosed in the Financial Statements
and was not. During the period from December 31, 1996 to and including the
Effective Date there has been no Material Adverse change, including as a result
of any change in law, in the consolidated financial condition, operations,
business or Property of the Borrower and the Subsidiaries taken as a whole
(after giving effect to the CVS/Revco Merger).
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5. CONDITIONS OF LENDING - FIRST LOANS AND LETTERS OF CREDIT ON THE FIRST
BORROWING DATE
In addition to the requirements set forth in Section 6, the obligation of
each Lender on the first Borrowing Date to make one or more Revolving Credit
Loans, the Swing Line Lender to make one or more Swing Line Loans, the Issuer to
issue one or more Letters of Credit and any Lender to make a Competitive Bid
Loan are subject to the fulfillment of the following conditions precedent prior
to or simultaneously with the Effective Date:
5.1 Evidence of Corporate Action
The Administrative Agent shall have received a certificate, dated
the Effective Date, of the Secretary or an Assistant Secretary of the Borrower
(i) attaching a true and complete copy of the resolutions of its Board of
Directors and of all documents evidencing all other necessary corporate action
(in form and substance reasonably satisfactory to the Administrative Agent)
taken by the Borrower to authorize the Loan Documents, the CVS/Revco Merger and
the transactions contemplated thereby, (ii) attaching a true and complete copy
of its Certificate of Incorporation and By-Laws, (iii) setting forth the
incumbency of the officer or officers of the Borrower who may sign the Loan
Documents and any other certificates, requests, notices or other documents now
or in the future required thereunder, including therein a signature specimen of
such officers, and (iv) attaching a certificate of good standing of the
Secretary of State of the State of Delaware.
5.2 Notes
The Borrower shall have delivered to the Administrative Agent (for
delivery to the Lenders) the Notes, executed by the Borrower.
5.3 Opinion of Special Counsel
The Administrative Agent shall have received from Special Counsel an
opinion, dated the Effective Date, and in the form of Exhibit E.
5.4 Opinion of Counsel to the Borrower
The Administrative Agent shall have received an opinion of Davis
Polk & Wardwell, special counsel to the Borrower, and Zenon Lankowsky, counsel
to the Borrower, dated the Effective Date, and in the form of Exhibit D.
5.5 CVS/Revco Merger
The CVS/Revco Merger shall have been consummated substantially in
accordance with the CVS/Revco Merger Documents, with no amendment or waiver of
any term or condition thereto which would have a Material Adverse effect with
respect to the Borrower and the Subsidiaries taken as a whole (after giving
effect to the CVS/Revco Merger) since December 31, 1996 or which would
materially and adversely affect the interest of the Administrative Agent or the
Lenders under the Loan Documents and in connection therewith: the Administrative
Agent shall have received a certificate from the Treasurer of the Borrower
stating that (i) the CVS/Revco Merger has been consummated
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substantially in accordance with the CVS/Revco Merger Documents, with no
amendment or waiver of any term or condition thereto which would have a Material
Adverse effect with respect to the Borrower and the Subsidiaries taken as a
whole (after giving effect to the CVS/Revco Merger) since December 31, 1996 or
which would materially and adversely affect the interest of the Administrative
Agent or the Lenders under the Loan Documents, (ii) the CVS/Revco Merger has
become effective, (iii) all representations and warranties contained in this
Agreement shall be true and correct and no Default or Event of Default shall
exist, in each case immediately before and after giving effect to the
consummation of the CVS/Revco Merger, and attaching a true and complete copy of
the CVS/Revco Merger Documents, and (iv) immediately before and after giving
effect to the consummation of the CVS/Revco Merger, the Borrower is Solvent.
5.6 Existing Credit Agreements
All commitments to lend under the Existing Credit Agreements shall
have been terminated, all letters of credit issued thereunder (other than
letters of credit issued under the Revco Existing Credit Agreement) shall have
been cancelled and all loans, interest, fees and other amounts owing thereunder
shall have been paid in full. In order to facilitate the satisfaction of the
condition set forth in this Section 5.6, each Lender hereunder which is a party
to the Existing CVS Credit Agreement waives the requirement in Section 2.6
thereof that a notice terminating the commitments of the lenders thereunder must
be given by the Borrower at least three Domestic Business Days prior to such
termination, and agrees that the termination of the commitments thereunder shall
be contingent upon, and effective upon, the occurrence of the Effective Date
hereunder, provided that, if for any reason such termination shall not occur on
the date proposed by the Borrower as the Effective Date hereunder, the Borrower
shall indemnify the Lenders in accordance with Section 3.5 thereof.
6. CONDITIONS OF LENDING - ALL LOANS AND LETTERS OF CREDIT
The obligation of each Lender on any Borrowing Date to make each Revolving
Credit Loan (other than a Revolving Credit Loan constituting a Mandatory
Borrowing), the Swing Line Lender to make each Swing Line Loan, the Issuer to
issue each Letter of Credit and any Lender to make a Competitive Bid Loan are
subject to the fulfillment of the following conditions precedent:
6.1 Compliance
On each Borrowing Date, and after giving effect to the Loans to be
made or the Letters of Credit to be issued on such Borrowing Date, (a) there
shall exist no Default or Event of Default, and (b) the representations and
warranties contained in this Agreement shall be true and correct with the same
effect as though such representations and warranties had been made on such
Borrowing Date, except those which are expressly specified to be made as of an
earlier date.
6.2 Requests
The Administrative Agent shall have received either or both, as
applicable, of a Borrowing Request or a Letter of Credit Request from the
Borrower.
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6.3 Loan Closings
All documents required by the provisions of this Agreement to have
been executed or delivered by the Borrower to the Administrative Agent, any
Lender or the Issuer on or before the applicable Borrowing Date shall have been
so executed or delivered on or before such Borrowing Date.
7. AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that on and after the Effective Date and
until the later to occur of (a) the Commitment Termination Date and (b) the
payment in full of the Loans, the Reimbursement Obligations, the Fees and all
other sums payable under the Loan Documents, the Borrower will:
7.1 Legal Existence
Except as may otherwise be permitted by Sections 8.3 and 8.4,
maintain, and cause each Subsidiary to maintain, its corporate existence in good
standing in the jurisdiction of its incorporation or formation and in each other
jurisdiction in which the failure so to do could reasonably be expected to have
a Material Adverse effect, except that the corporate existence of Subsidiaries
operating closing or discontinued operations may be terminated.
7.2 Taxes
Pay and discharge when due, and cause each Subsidiary so to do, all
taxes, assessments, governmental charges, license fees and levies upon or with
respect to the Borrower and such Subsidiary, and upon the income, profits and
Property thereof unless, and only to the extent, that either (i)(a) such taxes,
assessments, governmental charges, license fees and levies shall be contested in
good faith and by appropriate proceedings diligently conducted by the Borrower
or such Subsidiary, and (b) such reserve or other appropriate provision as shall
be required by GAAP shall have been made therefor, or (ii) the failure to pay or
discharge such taxes, assessments, governmental charges, license fees and levies
could not reasonably be expected to have a Material Adverse effect.
7.3 Insurance
Keep, and cause each Subsidiary to keep, insurance with responsible
insurance companies in such amounts and against such risks as is usually carried
by the Borrower or such Subsidiary.
7.4 Performance of Obligations
Pay and discharge promptly when due, and cause each Subsidiary so to
do, all lawful Indebtedness, obligations and claims for labor, materials and
supplies or otherwise which, if unpaid, could reasonably be expected to (a) have
a Material Adverse effect, or (b) become a Lien on the Property of the Borrower
or any Subsidiary, except
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those Liens permitted under Section 8.2, provided that neither the Borrower nor
such Subsidiary shall be required to pay or discharge or cause to be paid or
discharged any such Indebtedness, obligation or claim so long as (i) the
validity thereof shall be contested in good faith and by appropriate proceedings
diligently conducted by the Borrower or such Subsidiary, and (ii) such reserve
or other appropriate provision as shall be required by GAAP shall have been made
therefor.
7.5 Condition of Property
Except for ordinary wear and tear, at all times, maintain, protect
and keep in good repair, working order and condition, all material Property
necessary for the operation of its business (other than Property which is
replaced with similar Property) as then being operated, and cause each
Subsidiary so to do.
7.6 Observance of Legal Requirements
Observe and comply in all material respects, and cause each
Subsidiary so to do, with all laws, ordinances, orders, judgments, rules,
regulations, certifications, franchises, permits, licenses, directions and
requirements of all Governmental Authorities, which now or at any time hereafter
may be applicable to it or to such Subsidiary, a violation of which could
reasonably be expected to have a Material Adverse effect.
7.7 Financial Statements and Other Information
Maintain, and cause each Subsidiary to maintain, a standard system
of accounting in accordance with GAAP, and furnish to each Lender:
(a) As soon as available and, in any event, within 120 days after
the close of each fiscal year, a copy of (x) the Borrower's 10-K in respect of
such fiscal year, and (y) (i) the Borrower's Consolidated Balance Sheet as of
the end of such fiscal year, and (ii) the related Consolidated Statements of
Earnings, Shareholders' Equity and Cash Flows, as of and through the end of such
fiscal year, setting forth in each case in comparative form the corresponding
figures in respect of the previous fiscal year, all in reasonable detail, and
accompanied by a report of the Borrower's auditors, which report shall state
that (A) such auditors audited such financial statements, (B) such audit was
made in accordance with generally accepted auditing standards in effect at the
time and provides a reasonable basis for such opinion, and (C) said financial
statements have been prepared in accordance with GAAP;
(b) As soon as available, and in any event within 60 days after the
end of each of the first three fiscal quarters of each fiscal year, a copy of
(x) the Borrower's 10-Q in respect of such fiscal quarter, and (y) (i) the
Borrower's Consolidated Balance Sheet as of the end of such quarter and (ii) the
related Consolidated Statements of Earnings, Shareholders' Equity and Cash Flows
for (A) such quarter and (B) the period from the beginning of the then current
fiscal year to the end of such quarter, in each case in comparable form with the
prior fiscal year, all in reasonable detail and prepared in accordance with GAAP
(without footnotes and subject to year-end adjustments);
(c) Simultaneously with the delivery of the financial statements
required by clauses (a) and (b) above, a certificate of the chief financial
officer or treasurer of the
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Borrower certifying that no Default or Event of Default shall have occurred or
be continuing or, if so, specifying in such certificate all such Defaults and
Events of Default, and setting forth computations in reasonable detail
demonstrating compliance with Sections 8.1 and 8.10.
(d) Prompt notice upon the Borrower becoming aware of any change in
a Pricing Level;
(e) Promptly upon becoming available, copies of all regular or
periodic reports (including, without limitation, current reports on Form 8-K)
which the Borrower or any Subsidiary may now or hereafter be required to file
with or deliver to the Securities and Exchange Commission, or any other
Governmental Authority succeeding to the functions thereof, and copies of all
material news releases sent to all stockholders;
(f) Prompt written notice of: (i) any citation, summons, subpoena,
order to show cause or other order naming the Borrower or any Subsidiary a party
to any proceeding before any Governmental Authority which could reasonably be
expected to have a Material Adverse effect, and include with such notice a copy
of such citation, summons, subpoena, order to show cause or other order, (ii)
any lapse or other termination of any license, permit, franchise or other
authorization issued to the Borrower or any Subsidiary by any Governmental
Authority, (iii) any refusal by any Governmental Authority to renew or extend
any license, permit, franchise or other authorization, and (iv) any dispute
between the Borrower or any Subsidiary and any Governmental Authority, which
lapse, termination, refusal or dispute, referred to in clause (ii), (iii) or
(iv) above, could reasonably be expected to have a Material Adverse effect;
(g) Prompt written notice of the occurrence of (i) each Default (ii)
each Event of Default and (iii) each Material Adverse change;
(h) Promptly upon receipt thereof, copies of any audit reports and
management letters delivered in connection with the statements referred to in
Section 7.7(a); and
(i) From time to time, such other information regarding the
financial position or business of the Borrower and the Subsidiaries as the
Administrative Agent, at the request of any Lender, may reasonably request.
7.8 Records
Upon reasonable notice and during normal business hours, permit
representatives of the Administrative Agent and each Lender to visit the offices
of the Borrower and each Subsidiary, to examine the books and records (other
than tax returns and work papers related to tax returns) thereof and auditors'
reports relating thereto, to discuss the affairs of the Borrower and each
Subsidiary with the respective officers thereof, and to meet and discuss the
affairs of the Borrower and each Subsidiary with the Borrower's auditors.
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7.9 Authorizations
Maintain and cause each Subsidiary to maintain, in full force and
effect, all copyrights, patents, trademarks, trade names, franchises, licenses,
permits, applications, reports, and other authorizations and rights, which, if
not so maintained, would individually or in the aggregate have a Material
Adverse effect.
7.10 Revco 10 1/8% Indenture Debt
Within three Business Days of the Effective Date, notify (or request
the trustee to notify) the holders of the Revco 10 1/8% Indenture Debt of
Revco's election to redeem all of the Revco 10 1/8% Indenture Debt on a
redemption date no later than 60 days from the Effective Date.
8. NEGATIVE COVENANTS
The Borrower covenants and agrees that on and after the Effective Date and
until the later to occur of (a) the Commitment Termination Date and (b) the
payment in full of the Loans, the Reimbursement Obligations, the Fees and all
other sums which are payable under the Loan Documents, the Borrower will not:
8.1 Subsidiary Indebtedness
Permit the Indebtedness of all Subsidiaries (excluding the ESOP
Guaranty, the Revco 9 1/8% Indenture Debt and the Revco 10 1/8% Indenture Debt)
to exceed (on a combined basis) 10% of Tangible Net Worth.
8.2 Liens
Create, incur, assume or suffer to exist any Lien against or on any
Property now owned or hereafter acquired by the Borrower or any of the
Subsidiaries, or permit any of the Subsidiaries so to do, except any one or more
of the following types of Liens: (a) Liens in connection with workers'
compensation, unemployment insurance or other social security obligations (which
phrase shall not be construed to refer to ERISA or the minimum funding
obligations under Section 412 of the Code), (b) Liens to secure the performance
of bids, tenders, letters of credit, contracts (other than contracts for the
payment of Indebtedness), leases, statutory obligations, surety, customs,
appeal, performance and payment bonds and other obligations of like nature, in
each such case arising in the ordinary course of business, (c) mechanics',
workmen's, carriers', warehousemen's, materialmen's, landlords' or other like
Liens arising in the ordinary course of business with respect to obligations
which are not due or which are being contested in good faith and by appropriate
proceedings diligently conducted, (d) Liens for taxes, assessments, fees or
governmental charges the payment of which is not required by Section 7.2, (e)
easements, rights of way, restrictions, leases of Property to others, easements
for installations of public utilities, title imperfections and restrictions,
zoning ordinances and other similar encumbrances affecting Property which in the
aggregate do not materially impair its use for the operation of the business of
the Borrower or such Subsidiary, (f) Liens on Property as set forth on Schedule
8.2 and any renewals thereof, provided that any such renewals attach only to
such Property, (g) Liens on Property of the Subsidiaries under capital leases
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and Liens on Property of the Subsidiaries acquired (whether as a result of
purchase, capital lease, merger or other acquisition) and either existing on
such Property when acquired, or created contemporaneously with or within 12
months of such acquisition to secure the payment or financing of the purchase
price of such Property (including the construction, development, substantial
repair, alteration or improvement thereof), and any renewals thereof, provided
that such Liens attach only to the Property so purchased or acquired (including
any such construction, development, substantial repair, alteration or
improvement thereof) and provided further that the Indebtedness secured by such
Liens is permitted by Section 8.1, (h) statutory Liens in favor of lessors
arising in connection with Property leased to the Borrower or any of the
Subsidiaries, (i) Liens of attachments, judgments or awards against the Borrower
or any of the Subsidiaries with respect to which an appeal or proceeding for
review shall be pending or a stay of execution or bond shall have been obtained,
or which are otherwise being contested in good faith and by appropriate
proceedings diligently conducted, and in respect of which adequate reserves
shall have been established in accordance with GAAP on the books of the Borrower
or such Subsidiary, (j) Liens securing Indebtedness of a Subsidiary to the
Borrower or another Subsidiary, (k) Liens (other than Liens permitted by any of
the foregoing clauses) arising in the ordinary course of its business which do
not secure Indebtedness and do not, in the aggregate, materially detract from
the value of the business of the Borrower and its Subsidiaries, taken as a
whole, and (l) additional Liens securing Indebtedness of the Borrower and the
Subsidiaries in an aggregate outstanding Consolidated principal amount not
exceeding 10% of Tangible Net Worth.
8.3 Dispositions
Make any Disposition, or permit any of its Subsidiaries so to do, of
all or substantially all of the assets of the Borrower and the Subsidiaries on a
Consolidated basis.
8.4 Merger or Consolidation, Etc.
The Borrower will not consolidate with, be acquired by, or merge
into or with any Person unless (x) immediately after giving effect thereto no
Default or Event of Default shall or would exist and (y) either (i) the Borrower
or (ii) a corporation organized and existing under the laws of one of the States
of the United States of America shall be the survivor of such consolidation or
merger, provided that if the Borrower is not the survivor, the corporation which
is the survivor shall expressly assume, pursuant to an instrument executed and
delivered to the Administrative Agent, and in form and substance satisfactory to
the Administrative Agent, all obligations of the Borrower under the Loan
Documents and the Administrative Agent shall have received such documents,
opinions and certificates as it shall have reasonable requested in connection
therewith.
8.5 Acquisitions
Make any Acquisition, or permit any of the Subsidiaries so to do,
except any one or more of the following: (a) Intercompany Dispositions permitted
by Section 8.3, (b) Acquisitions by the Borrower or any of the Subsidiaries,
provided that immediately before and after giving effect to each such
Acquisition no Default or Event of Default shall or would exist, and (c) the
CVS/Revco Merger.
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8.6 Restricted Payments
Make any Restricted Payment or permit any of the Subsidiaries so to
do, except any one or more of the following Restricted Payments: (a) any direct
or indirect Subsidiary may make dividends or other distributions to the Borrower
or to any other direct or indirect Subsidiary, and (b) the Borrower may make
Restricted Payments provided that, in the case of this clause (b), immediately
before and after giving effect thereto, no Event of Default shall or would
exist. Nothing in this Section 8.6 shall prohibit or restrict the declaration or
payment of dividends in respect of the Series One ESOP Convertible Preferred
Stock of the Borrower.
8.7 Limitation on Upstream Dividends by Subsidiaries
Permit or cause any of the Subsidiaries to enter into or agree, or
otherwise be or become subject, to any agreement, contract or other arrangement
(other than this Agreement and the indenture with respect to the Revco 10 1/8%
Indenture Debt) with any Person (each a "Restrictive Agreement") pursuant to the
terms of which (a) such Subsidiary is or would be prohibited from declaring or
paying any cash dividends on any class of its stock owned directly or indirectly
by the Borrower or any of the other Subsidiaries or from making any other
distribution on account of any class of any such stock (herein referred to as
"Upstream Dividends"), or (b) the declaration or payment of Upstream Dividends
by a Subsidiary to the Borrower or another Subsidiary, on an annual or
cumulative basis, is or would be otherwise limited or restricted ("Dividend
Restrictions"). Notwithstanding the foregoing, nothing in this Section 8.7 shall
prohibit:
(i) Dividend Restrictions set forth in any Restrictive Agreement in
effect on the date hereof and any extensions, refinancings, renewals or
replacements thereof; provided that the Dividend Restrictions in any such
extensions, refinancings, renewals or replacements are no less favorable in any
material respect to the Lenders than those Dividend Restrictions that are then
in effect and that are being extended, refinanced, renewed or replaced;
(ii) Dividend Restrictions existing with respect to any Person
acquired by the Borrower or any Subsidiary and existing at the time of such
acquisition, which Dividend Restrictions are not applicable to any Person or the
property or assets of any Person other than such Person or its property or
assets acquired, and any extensions, refinancings, renewals or replacements of
any of the foregoing; provided that the Dividend Restrictions in any such
extensions, refinancings, renewals or replacements are no less favorable in any
material respect to the Lenders than those Dividend Restrictions that are then
in effect and that are being extended, refinanced, renewed or replaced; or
(iii) Dividend Restrictions consisting of customary net worth,
leverage and other financial covenants, customary covenants regarding the merger
of or sale of assets of a Subsidiary, customary restrictions on transactions
with affiliates, and customary subordination provisions governing Indebtedness
owed to the Borrower or any Subsidiary contained in, or required by, any
agreement governing Indebtedness owed to the Borrower or any Subsidiary
contained in, or required by, any agreement governing Indebtedness incurred by a
Subsidiary in accordance with Section 8.1.
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8.8 Limitation on Negative Pledges
Enter into any agreement, other than (i) this Agreement and (ii)
purchase money mortgages or capital leases permitted by this Agreement (in which
cases, any prohibition or limitation shall only be effective against the assets
financed thereby), or permit any Subsidiary so to do, which prohibits or limits
the ability of the Borrower or such Subsidiary to create, incur, assume or
suffer to exist any Lien upon any of its Property or revenues, whether now owned
or hereafter acquired.
8.9 CVS/Revco Merger Documents
Amend, modify or otherwise change any of the CVS/Revco Merger
Documents if such change would have a Material Adverse effect with respect to
the Borrower and the Subsidiaries taken as a whole (after giving effect to the
CVS/Revco Merger) since December 31, 1996 or would materially and adversely
affect the interest of the Administrative Agent or the Lenders under the Loan
Documents.
8.10 Ratio of Consolidated Indebtedness to Total Capitalization
Permit its ratio of Consolidated Indebtedness to Total
Capitalization at the end of any fiscal quarter to exceed 0.6:1.0.
9. DEFAULT
9.1 Events of Default
The following shall each constitute an "Event of Default" hereunder:
(a) The failure of the Borrower to make any payment of principal on
any Loan or any reimbursement payment in respect of any Letter of Credit when
due and payable; or
(b) The failure of the Borrower to make any payment of interest on
any Loan or of any Fee on any date when due and payable and such default shall
continue unremedied for a period of 5 Domestic Business Days after the same
shall be due and payable; or
(c) The failure of the Borrower to observe or perform any covenant
or agreement contained in Sections 2.5 and 7.1 or in Section 8; or
(d) The failure of the Borrower to observe or perform any other
covenant or agreement contained in this Agreement, and such failure shall have
continued unremedied for a period of 30 days after the Borrower shall have
become aware of such failure; or
(e) An Event of Default (as defined in any Reimbursement Agreement)
shall occur under any Reimbursement Agreement; or
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(f) Any representation or warranty of the Borrower (or of any of its
officers on its behalf) made in any Loan Document, or made in any certificate,
report, opinion (other than an opinion of counsel) or other document delivered
on or after the date hereof shall in any such case prove to have been incorrect
or misleading (whether because of misstatement or omission) in any material
respect when made; or
(g) (i) Obligations in an aggregate Consolidated amount in excess of
$25,000,000 of the Borrower (other than its obligations hereunder and under the
Notes) and the Subsidiaries, whether as principal, guarantor, surety or other
obligor, for the payment of any Indebtedness or any net liability under interest
rate swap, collar, exchange or cap agreements, (A) shall become or shall be
declared to be due and payable prior to the expressed maturity thereof, or (B)
shall not be paid when due or within any grace period for the payment thereof,
or (ii) any holder of any such obligations shall have the right to declare the
Indebtedness evidenced thereby due and payable prior to its stated maturity; or
(h) The Borrower or any Subsidiary shall (i) suspend or discontinue
its business (except for store closings in the ordinary course of business and
except in connection with a permitted Disposition under Section 8.3 and as may
otherwise be expressly permitted herein), or (ii) make an assignment for the
benefit of creditors, or (iii) generally not be paying its debts as such debts
become due, or (iv) admit in writing its inability to pay its debts as they
become due, or (v) file a voluntary petition in bankruptcy, or (vi) become
insolvent (however such insolvency shall be evidenced), or (vii) file any
petition or answer seeking for itself any reorganization, arrangement,
composition, readjustment of debt, liquidation or dissolution or similar relief
under any present or future statute, law or regulation of any jurisdiction
(including under any law applicable to insurance companies), or (viii) petition
or apply to any tribunal, or any other Governmental Authority, for any receiver,
custodian or any trustee for any substantial part of its Property, or (ix) be
the subject of any proceeding specified in clause (vii) or (viii) filed against
it which remains undismissed for a period of 60 consecutive days, or (x) file
any answer admitting or not contesting the material allegations of any such
petition filed against it, or of any order, judgment or decree approving such
petition in any such proceeding, or (xi) seek, approve, consent to, or acquiesce
in any such proceeding, or in the appointment of any trustee, receiver,
custodian, liquidator, or fiscal agent for it, or any substantial part of its
Property, or an order is entered appointing any such trustee, receiver,
custodian, liquidator or fiscal agent and such order remains unstayed and in
effect for 60 consecutive days, or (xii) take any formal action for the purpose
of effecting any of the foregoing (except as may otherwise be expressly
permitted herein); or
(i) An order for relief is entered under the United States
bankruptcy laws or any other decree or order is entered by a court or other
Governmental Authority having jurisdiction and continues unstayed and in effect
for a period of 60 consecutive days (i) adjudging the Borrower or any Subsidiary
bankrupt or insolvent, or (ii) approving as properly filed a petition seeking
reorganization, liquidation, arrangement, adjustment or composition of, or in
respect of the Borrower or any Subsidiary under the United States bankruptcy
laws or any other applicable Federal or state law, or (iii) appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Borrower or any Subsidiary or of substantially all of
the Property of any thereof, or (iv) ordering the winding up or liquidation of
the affairs of the Borrower or any Subsidiary; or
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(j) Judgments or decrees in an aggregate Consolidated amount in
excess of $25,000,000 against the Borrower and the Subsidiaries shall remain
unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period
of 60 days; or
(k) After the Effective Date a Change of Control shall occur; or
(l) (i) Any Termination Event shall occur (x) with respect to any
Pension Plan (other than a Multiemployer Plan) or (y) with respect to any other
retirement plan subject to Section 302 of ERISA or Section 412 of the Internal
Revenue Code, which plan, during the five year period prior to such Termination
Event, was the responsibility in whole or in part of the Borrower, any
Subsidiary or any ERISA Affiliate, provided that this clause (y) shall only
apply if, in connection with such Termination Event, it is reasonably likely
that liability under Section 4069 of ERISA in an aggregate Consolidated amount
in excess of $25,000,000 will be imposed upon the Borrower, any Subsidiary or
any ERISA Affiliate; (ii) any Accumulated Funding Deficiency, whether or not
waived, in an aggregate Consolidated amount in excess of $25,000,000 shall exist
with respect to any Pension Plan with respect to any Pension Plan (other than a
Multiemployer Plan); (iii) any Person shall engage in any Prohibited Transaction
involving any Employee Benefit Plan; (iv) the Borrower, any Subsidiary or any
ERISA Affiliate shall fail to pay when due an amount which is payable by it to
the PBGC or to a Pension Plan (including a Multiemployer Plan) under Title IV of
ERISA; (v) the imposition of any tax under Section 4980(B)(a) of the Internal
Revenue Code; or (vi) the assessment of a civil penalty with respect to any
Employee Benefit Plan under Section 502(c) of ERISA; in each case, to the extent
such event or condition would have a Material Adverse effect.
9.2 Remedies
(a) Upon the occurrence of an Event of Default or at any time
thereafter during the continuance of an Event of Default, the Administrative
Agent, at the written request of the Required Lenders, shall notify the Borrower
that the Commitments, the Swing Line Commitment and the Letter of Credit
Commitment have been terminated and/or that all of the Loans, the Notes and the
Reimbursement Obligations and all accrued and unpaid interest on any thereof and
all other amounts owing under the Loan Documents have been declared immediately
due and payable, provided that upon the occurrence of an Event of Default under
Section 9.1(h) or (i) with respect to the Borrower, the Commitments, the Swing
Line Commitment and the Letter of Credit Commitment shall automatically
terminate and all of the Loans, the Notes and the Reimbursement Obligations and
all accrued and unpaid interest on any thereof and all other amounts owing under
the Loan Documents shall become immediately due and payable without declaration
or notice to the Borrower. To the fullest extent not prohibited by law, except
for the notice provided for in the preceding sentence, the Borrower expressly
waives any presentment, demand, protest, notice of protest or other notice of
any kind in connection with the Loan Documents and its obligations thereunder.
To the fullest extent not prohibited by law, the Borrower further expressly
waives and covenants not to assert any appraisement, valuation, stay, extension,
redemption or similar law, now or at any time hereafter in force which might
delay, prevent or otherwise impede the performance or enforcement of the Loan
Documents.
(b) In the event that the Commitments, the Swing Line Commitment and
the Letter of Credit Commitment shall have been terminated or all of the Loans,
the Notes
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and the Reimbursement Obligations shall have been declared due and payable
pursuant to the provisions of this Section, (i) the Borrower shall forthwith
deposit an amount equal to the Letter of Credit Exposure in a cash collateral
account with and under the exclusive control of the Administrative Agent, and
(ii) the Administrative Agent, the Issuer and the Lenders agree, among
themselves, that any funds received from or on behalf of the Borrower under any
Loan Document by the Issuer or any Lender (except funds received by the Issuer
or any Lender as a result of a purchase from the Issuer or such Lender, as the
case may be, pursuant to the provisions of Section 11.9) shall be remitted to
the Administrative Agent, and shall be applied by the Administrative Agent in
payment of the Loans, the Reimbursement Obligations and the other obligations of
the Borrower under the Loan Documents in the following manner and order: (1)
first, to reimburse the Administrative Agent, the Issuer and the Lenders, in
that order, for any expenses due from the Borrower pursuant to the provisions of
Section 11.5 and the Reimbursement Agreements, (2) second, to the payment of the
Fees, (3) third, to the payment of any expenses or amounts (other than the
principal of and interest on the Loans and the Notes and the Reimbursement
Obligations) payable by the Borrower to the Administrative Agent, the Issuer or
any of the Lenders under the Loan Documents, (4) fourth, to the payment, pro
rata according to the outstanding principal balance of the Loans and the Letter
of Credit Exposure of each Lender, of interest due on the Loans and the
Reimbursement Obligations, (5) fifth, to the payment, pro rata according to the
sum of (A) the aggregate outstanding principal balance of the Loans plus (B) the
aggregate outstanding balance of the Reimbursement Obligations, of the aggregate
outstanding principal balance of the Loans and the aggregate outstanding balance
of the Reimbursement Obligations, and (6) sixth, any remaining funds shall be
paid to whosoever shall be entitled thereto or as a court of competent
jurisdiction shall direct.
(c) In the event that the Loans and the Notes and the Reimbursement
Obligations shall have been declared due and payable pursuant to the provisions
of this Section 9.2, the Administrative Agent upon the written request of the
Required Lenders, shall proceed to enforce the Reimbursement Obligations and the
rights of the holders of the Notes by suit in equity, action at law and/or other
appropriate proceedings, whether for payment or the specific performance of any
covenant or agreement contained in the Loan Documents. In the event that the
Administrative Agent shall fail or refuse so to proceed, the Issuer and each
Lender shall be entitled to take such action as the Required Lenders shall deem
appropriate to enforce its rights under the Loan Documents.
10. AGENT
10.1 Appointment
Each Lender hereby irrevocably designates and appoints BNY as the
Administrative Agent of such Lender under the Loan Documents and each Lender
irrevocably authorizes the Administrative Agent to take such action on its
behalf under the provisions of the Loan Documents and to exercise such powers
and perform such duties as are expressly delegated to the Administrative Agent
by the terms of the Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained in the Loan Documents, the Administrative Agent shall not have any
duties or responsibilities except those expressly set forth in the Loan
Documents, or any fiduciary relationship with any Lender, and no implied
covenants,
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functions, responsibilities, duties, obligations or liabilities shall be read
into the Loan Documents or otherwise exist against the Administrative Agent.
10.2 Delegation of Duties
The Administrative Agent may execute any of its duties under the
Loan Documents by or through agents or attorneys-in-fact and shall be entitled
to rely upon the advice of counsel concerning all matters pertaining to such
duties, and shall not be liable for any action taken or omitted to be taken in
good faith upon the advice of such counsel.
10.3 Exculpatory Provisions
None of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any
action lawfully taken or omitted to be taken by the Administrative Agent or such
Person under or in connection with the Loan Documents (except the Administrative
Agent for its own gross negligence or willful misconduct), or (ii) responsible
in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by any party contained in the Loan Documents
or in any certificate, report, statement or other document referred to or
provided for in, or received by the Administrative Agent under or in connection
with, the Loan Documents or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of any of the Loan Documents or for any failure of
the Borrower or any other Person to perform its obligations thereunder. The
Administrative Agent shall not be under any obligation to any Lender to
ascertain or to inquire into the observance or performance of any of the
covenants or agreements contained in, or conditions of, the Loan Documents, or
to inspect the Property, books or records of the Borrower or any Subsidiary. The
Administrative Agent shall not be under any liability or responsibility to the
Borrower or any other Person as a consequence of any failure or delay in
performance, or any breach, by any Lender of any of its obligations under any of
the Loan Documents. The Lenders acknowledge that the Administrative Agent shall
not be under any duty to take any discretionary action permitted under the Loan
Documents unless the Administrative Agent shall be requested in writing to do so
by the Required Lenders.
10.4 Reliance by Administrative Agent
The Administrative Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, request,
consent, certificate, affidavit, opinion, letter, cablegram, telegram, fax,
telex or teletype message, statement, order or other document or conversation
reasonably 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 Borrower), independent accountants and
other experts selected by the Administrative Agent. The Administrative Agent may
treat each Lender, or the Person designated in the last notice filed under
Section 11.7, as the holder of all of the interests of such Lender in its Loans
and Notes until written notice of transfer, signed by such Lender (or the Person
designated in the last notice filed with the Administrative Agent) and by the
Person designated in such written notice of transfer, in form and substance
satisfactory to the Administrative Agent, shall have been filed with the
Administrative Agent and all requirements of Section 11.7 have been satisfied.
The Administrative Agent shall not be under any duty to examine or pass upon the
validity, effectiveness or genuineness of the Loan Documents or any
instrument,
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document or communication furnished pursuant thereto or in connection therewith,
and the Administrative Agent shall be entitled to assume that the same are
valid, effective and genuine, have been signed or sent by the proper parties and
are what they purport to be. The Administrative Agent shall be fully justified
in failing or refusing to take any action not expressly required under the Loan
Documents unless it shall first receive such advice or concurrence of the
Required Lenders as it deems appropriate. The Administrative Agent shall in all
cases be fully protected in acting, or in refraining from acting, under the Loan
Documents in accordance with a request of the Required Lenders or, if required
by Section 11.1, all Lenders, and such request and any action taken or failure
to act pursuant thereto shall be binding upon the Borrower, all the Lenders and
all future holders of the Notes.
10.5 Notice of Default
The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default unless the
Administrative Agent shall have received written notice thereof from a Lender or
the Borrower referring to this Agreement, describing such Default or Event of
Default and stating such notice is a "Notice of Default." In the event that the
Administrative Agent receives such a notice, the Administrative Agent shall
promptly give notice thereof to the Lenders. The Administrative Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders, provided that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action or give such
directions, or refrain from taking such action or giving such directions, with
respect to such Default or Event of Default as it shall deem to be in the best
interests of the Lenders.
10.6 Non-Reliance
Each Lender expressly acknowledges that neither the Administrative
Agent nor any of its officers, directors, employees, agents, attorneys-in-fact
or Affiliates has made any representations or warranties to such Lender and that
no act by the Administrative Agent hereafter, including any review of the
affairs of the Borrower or the Subsidiaries, shall be deemed to constitute any
representation or warranty by the Administrative Agent to any Lender. Each
Lender represents to the Administrative Agent that such Lender has,
independently and without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own evaluation of and investigation into the business,
operations, Property, financial and other condition and creditworthiness of the
Borrower and the Subsidiaries and has made its own decision to enter into this
Agreement. Each Lender also represents that it will, independently and without
reliance upon the Administrative Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, evaluations and decisions in taking or not taking
action under the Loan Documents, and to make such investigation as it deems
necessary to inform itself as to the business, operations, Property, financial
and other condition and creditworthiness of the Borrower and the Subsidiaries.
Each Lender acknowledges that a copy of this Agreement and all exhibits and
schedules hereto have been made available to it and its individual counsel for
review, and each Lender acknowledges that it is satisfied with the form and
substance thereof. Except for notices, reports and other documents expressly
required to be furnished to the Lenders by the
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Administrative Agent hereunder, the Administrative Agent shall have no duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, Property, financial and other condition or
creditworthiness of the Borrower or the Subsidiaries which may come into the
possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
10.7 Indemnification
Each Lender agrees to indemnify the Administrative Agent in its
capacity as such (to the extent not promptly reimbursed by the Borrower and
without limiting the obligation of the Borrower to do so), pro rata according to
(i) at any time when no Loans are outstanding, its Commitment Percentage, or if
no Commitments then exist, its Commitment Percentage on the last day on which
Commitments did exist, and (ii) at any time when Loans are outstanding (x) if
the Commitments then exist, its Commitment Percentage or (y) if the Commitments
have been terminated or otherwise no longer exist, the percentage equal to the
fraction (A) the numerator of which is such Lender's share of the Aggregate
Credit Exposure and (B) the denominator of which is the Aggregate Credit
Exposure, from and against any and all liabilities, obligations, claims, losses,
damages, penalties, actions, judgments, suits, costs, expenses and disbursements
of any kind whatsoever, including any amounts paid to the Lenders by or for the
account of the Borrower pursuant to the terms of the Loan Documents that are
subsequently rescinded or avoided (or must otherwise be restored or returned),
which may at any time (including at any time following the payment of the Loans
and the Notes) be imposed on, incurred by or asserted against the Administrative
Agent in any way relating to or arising out of the Loan Documents or any other
document contemplated by or referred to therein or the transactions contemplated
thereby or any action taken or omitted to be taken by the Administrative Agent
under or in connection therewith; provided that no Lender shall be liable for
the payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements to the
extent resulting solely from the gross negligence or willful misconduct of the
Administrative Agent. The agreements in this Section shall survive the payment
of the Loans and the Notes and all other amounts payable under the Loan
Documents. If the Administrative Agent is subsequently reimbursed by the
Borrower for such amounts, the Administrative Agent shall remit to the Lenders
their pro rata shares of such reimbursement to the extent they previously paid
such amounts.
10.8 Administrative Agent in Its Individual Capacity
BNY and each Affiliate thereof, may make loans to, accept deposits
from, issue letters of credit for the account of and generally engage in any
kind of business with the Borrower and the Subsidiaries as though it were not
the Administrative Agent. With respect to the Commitment made or renewed by BNY
and each Note issued to BNY, BNY shall have the same rights and powers under the
Loan Documents as any Lender and may exercise the same as though it were not the
Administrative Agent, the Issuer and the Swing Line Lender, and the term
"Lender" shall include BNY.
10.9 Successor Administrative Agent
If at any time the Administrative Agent deems it advisable, in its
sole discretion, it may submit to each Lender a written notification of its
resignation as
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Administrative Agent under the Loan Documents, such resignation to be effective
on the earlier to occur of (a) the thirtieth day after the date of such notice,
and (b) the date upon which any successor to the Administrative Agent, in
accordance with the provisions of this Section, shall have accepted in writing
its appointment as successor Administrative Agent. Upon any such resignation,
the Required Lenders shall have the right to appoint from among the Lenders a
successor Administrative Agent, which successor Administrative Agent, provided
that no Default or Event of Default shall then exist, shall be reasonably
satisfactory to the Borrower. If no such successor Administrative Agent shall
have been so appointed by the Required Lenders and accepted such appointment
within 30 days after the retiring Administrative Agent's giving of notice of
resignation, then the retiring Administrative Agent may, on behalf of the
Lenders, appoint a successor Administrative Agent, which successor
Administrative Agent shall be a commercial bank organized and licensed under the
laws of the United States of America or of any State thereof and having a
combined capital and surplus of at least $500,000,000. Upon the written
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall automatically
become a party to this Agreement and shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent's rights, powers,
privileges and duties as Administrative Agent under the Loan Documents shall be
terminated. The Borrower and the Lenders shall execute such documents as shall
be necessary to effect such appointment. After any retiring Administrative
Agent's resignation as Administrative Agent, the provisions of this Section 10
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was the Administrative Agent. If at any time there shall not be a duly
appointed and acting Administrative Agent, upon notice duly given, the Borrower
agrees to make each payment when due under the Loan Documents directly to the
Lenders entitled thereto during such time.
10.10 Documentation Agent and Syndication Agent
The Documentation Agent and Syndication Agent shall have no duties
or obligations under the Loan Documents in their capacity as Documentation Agent
and Syndication Agent.
11. OTHER PROVISIONS
11.1 Amendments, Waivers, Etc.
With the written consent of the Required Lenders, the Administrative
Agent and the Borrower may, from time to time, enter into written amendments,
supplements or modifications of the Loan Documents and, with the written consent
of the Required Lenders, the Administrative Agent on behalf of the Lenders may
execute and deliver to any such parties a written instrument waiving or
consenting to the departure from, on such terms and conditions as the
Administrative Agent may specify in such instrument, any of the requirements of
the Loan Documents or any Default or Event of Default and its consequences,
provided that no such amendment, supplement, modification, waiver or consent
shall, without the consent of all of the Lenders (i) increase the Commitment
Amount of any Lender (provided that no waiver of a Default or Event of Default
shall be deemed to constitute such an increase), (ii) extend the Commitment
Period, (iii) reduce the amount, or extend the time of payment, of the Fees,
(iv) reduce the rate,
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or extend the time of payment of, interest on any Revolving Credit Loan, any
Revolving Credit Note or any Reimbursement Obligation (other than the
applicability of any post-default increase in such rate of interest), (v) reduce
the amount, or extend the time of payment of any payment of any Reimbursement
Obligation or principal on any Revolving Credit Loan or any Revolving Credit
Note, (vi) decrease or forgive the principal amount of any Revolving Credit
Loan, any Revolving Credit Note or any Reimbursement Obligation, (vii) consent
to any assignment or delegation by the Borrower of any of its rights or
obligations under any Loan Document, (viii) change the provisions of this
Section 11.1, (ix) change the definition of Required Lenders, (x) change the
several nature of the obligations of the Lenders, (xi) change the sharing
provisions among Lenders, or (xii) extend the expiration date of a Letter of
Credit beyond the Commitment Termination Date. Notwithstanding the foregoing, no
such amendment, supplement, modification, waiver or consent shall (A) amend,
modify or waive any provision of Section 10 or otherwise change any of the
rights or obligations of the Administrative Agent, the Issuer or the Swing Line
Lender under any Loan Document without the written consent of the Administrative
Agent, the Issuer or the Swing Line Lender, as the case may be, (B) change the
Letter of Credit Commitment, change the amount or the time of payment of the
Letter of Credit Commissions, or change any other term or provision which
relates to the Letter of Credit Commitment or the Letters of Credit without the
written consent of the Issuer, (C) change the Swing Line Commitment, change the
amount or the time of payment of the Swing Line Loans or interest thereon or
change any other term or provision which relates to the Swing Line Commitment or
the Swing Line Loans without the written consent of the Swing Line Lender or (D)
change the amount or the time of payment of any Competitive Bid Loan or interest
thereon without the written consent of the Lender holding such Competitive Bid
Loan. Any such amendment, supplement, modification, waiver or consent shall
apply equally to each of the Lenders and shall be binding upon the parties to
the applicable Loan Document, the Lenders, the Administrative Agent and all
future holders of the Notes and the Reimbursement Obligations. In the case of
any waiver, the Borrower, the Lenders and the Administrative Agent shall be
restored to their former position and rights under the Loan Documents, but any
Default or Event of Default waived shall not extend to any subsequent or other
Default or Event of Default, or impair any right consequent thereon.
11.2 Notices
Except as otherwise expressly provided herein, all notices, requests
and demands to or upon the respective parties hereto to be effective shall be in
writing and, if in writing, shall be deemed to have been duly given or made (a)
when delivered by hand, (b) one Domestic Business Day after having been sent by
overnight courier service at the cost of the sender, (c) five Domestic Business
Days after having been deposited in the mail, first-class postage prepaid, or
(d) in the case of fax notice, when sent, addressed as follows in the case of
the Borrower, the Administrative Agent, the Issuer and the Swing Line Lender,
and as set forth in Exhibit A in the case of each of the Lenders, or to such
other addresses as to which the Administrative Agent may be hereafter notified
by the respective parties hereto or any future holders of the Notes:
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The Borrower:
CVS Corporation
1 CVS Drive
Woonsocket, Rhode Island 02895
Attention: Philip C. Galbo,
Vice President and Treasurer
Facsimile: (401) 769-2211
Telephone: (401) 765-1500
with a copy, in the case of a notice of Default
or Event of Default, to:
CVS Corporation
1 CVS Drive
Woonsocket, Rhode Island 02895
Attention: Legal Department
Facsimile: (401) 765-7887 or 9304
Telephone: (401) 765-1500
The Administrative Agent, the Swing Line Lender and the Issuer:
in the case of each Borrowing Request, each notice of
prepayment under Section 2.7, each Letter of Credit Request,
each Competitive Bid Request, each Competitive Bid, and each
Competitive Bid Accept/Reject Letter:
The Bank of New York
One Wall Street
New York, New York 10286
Attention: Carol Surles,
Agency Function Administration
Facsimile: (212) 635-6365,6366 or 6367
Telephone: (212) 635-4695,
in all other cases:
The Bank of New York
Retailing Industry Division
8th Floor
One Wall Street
New York, New York 10286
Attention: Howard F. Bascom,
Vice President
Facsimile: (212) 635-1481
Telephone: (212) 635-7894,
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except that any notice, request or demand by the Borrower to or upon the
Administrative Agent or the Lenders pursuant to Sections 2.3, 2.4, 2.6, 2.7,
2.8, 2.9 or 3.3 shall not be effective until received. Any party to a Loan
Document may rely on signatures of the parties thereto which are transmitted by
fax or other electronic means as fully as if originally signed.
11.3 No Waiver; Cumulative Remedies
No failure to exercise and no delay in exercising, on the part of
the Administrative Agent, any Lender or the Issuer, any right, remedy, power or
privilege under any Loan Document shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, remedy, power or privilege under
any Loan Document preclude any other or further exercise thereof or the exercise
of any other right, remedy, power or privilege. The rights, remedies, powers and
privileges under the Loan Documents are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
11.4 Survival of Representations and Warranties
All representations and warranties made in the Loan Documents and in
any document, certificate or statement delivered pursuant thereto or in
connection therewith shall survive the execution and delivery of the Loan
Documents.
11.5 Payment of Expenses and Taxes; Indemnified Liabilities
The Borrower agrees, promptly upon presentation of a statement or
invoice therefor setting forth in reasonable detail the items thereof, and
whether any Loan is made or Letter of Credit is issued, (a) to pay or reimburse
the Administrative Agent and its Affiliates for all its reasonable costs and
expenses actually incurred in connection with the development, syndication,
preparation and execution of, and any amendment, waiver, consent, supplement or
modification to, the Loan Documents, any documents prepared in connection
therewith and the consummation of the transactions contemplated thereby, whether
such Loan Documents or any such amendment, waiver, consent, supplement or
modification to the Loan Documents or any documents prepared in connection
therewith are executed and whether the transactions contemplated thereby are
consummated, including the reasonable fees and disbursements of Special Counsel,
(b) to pay, indemnify, and hold the Administrative Agent, the Lenders and the
Issuer harmless from any and all recording and filing fees and any and all
liabilities and penalties with respect to, or resulting from any delay (other
than penalties to the extent attributable to the negligence of the
Administrative Agent, the Lenders or the Issuer, as the case may be, in failing
to pay such fees or other liabilities when due) in paying, stamp, excise and
other similar taxes, if any, which may be payable or determined to be payable in
connection with the execution and delivery of, or consummation of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, the Loan Documents and any such
other documents, and (c) to pay, reimburse, indemnify and hold each Indemnified
Person harmless from and against any and all other liabilities, obligations,
claims, losses, damages, penalties, actions, judgments, suits, costs, expenses
and disbursements of any kind or nature whatsoever (including reasonable counsel
fees and disbursements of counsel (including the allocated costs of internal
counsel) and such local counsel as may be required) actually incurred with
respect to the
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enforcement, performance of, and preservation of rights under, the Loan
Documents (all the foregoing, collectively, the "Indemnified Liabilities") and,
if and to the extent that the foregoing indemnity may be unenforceable for any
reason, the Borrower agrees to make the maximum payment permitted under
applicable law; provided that the Borrower shall have no obligation hereunder to
pay Indemnified Liabilities to an Indemnified Person to the extent arising from
its gross negligence or willful misconduct. The agreements in this Section shall
survive the termination of the Commitments and the payment of the Loans and the
Notes and all other amounts payable under the Loan Documents.
11.6 Lending Offices
Each Lender shall have the right at any time and from time to time
to transfer any Loan to a different office of such Lender, subject to Section
3.10.
11.7 Successors and Assigns
(a) The Loan Documents shall be binding upon and inure to the
benefit of the Borrower, the Lenders, the Administrative Agent, the Issuer, all
future holders of the Notes and the Reimbursement Obligations and their
respective successors and assigns; provided that the Borrower shall not assign,
transfer or delegate any of its rights or obligations under the Loan Documents
without the prior consent of the Administrative Agent, the Issuer and all of the
Lenders.
(b) Notwithstanding Section 11.7(c), but subject to Section 11.7(e),
each Lender may at any time assign all or any portion of its rights under any
Loan Document to any Federal Reserve Bank.
(c) In addition to its rights under Section 11.7(b), each Lender
shall have the right, at any time, upon written notice to the Administrative
Agent of its intent to do so, to sell, assign, transfer or negotiate (each an
"Assignment") all or any portion of all of its Loans, its Commitment and its
Notes and its interest in the Loan Documents to any subsidiary or Affiliate of
such Lender, to any other Lender or, with the prior written consent of the
Borrower, the Swing Line Lender and the Issuer (which consents shall not be
unreasonably withheld and shall not be required of the Borrower if, at the time
of such Assignment, an Event of Default shall exist), to any other bank,
insurance company, pension fund, mutual or other similar fund or other financial
institution, provided that (i) the assigning Lender shall simultaneously assign
to the same assignee the same percentage of its interest under the Other Credit
Agreement, unless otherwise consented to by the Borrower, (ii) each such
Assignment shall be of a constant, and not varying, percentage of all of the
assigning Lender's rights and obligations under the Loan Documents and be in a
minimum amount (together with the simultaneous assignment made under the Other
Credit Agreement) of $5,000,000 (which minimum amount shall not be applicable to
an Assignment by a Lender to a subsidiary or Affiliate of such Lender) or the
full amount of such Lender's Commitment, and (iii) the parties to each such
Assignment (excluding the Borrower if the Borrower is a party to such
assignment) shall execute and deliver to the Administrative Agent an Assignment
and Acceptance Agreement, together with a fee (the "Assignment Fee"), payable to
the Administrative Agent, of $1,750 ($3,500 if no simultaneous assignment is
being made by such parties under the Other Credit Agreement). Upon receipt of
each such executed Assignment and Acceptance Agreement together with the
Assignment Fee therefor, the Administrative Agent shall execute the
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same and, in the event that either the assignee thereunder is a Lender (or a
subsidiary or Affiliate thereof) or the Borrower shall have consented to such
assignment (to the extent that such consent was not unreasonably withheld and is
required as aforesaid), (i) record the same and execute two copies of such
Assignment and Acceptance Agreement in the appropriate place, deliver one copy
to the assignor and one copy to the assignee, and (ii) request the Borrower to
execute and deliver (1) to such assignee, one or more Notes, in an aggregate
principal amount equal to the Loans assigned to, and Commitment assumed by, such
assignee, and (2) to such assignor, in the event that such assignor shall retain
any Loans and Commitment, one or more Notes in an aggregate principal amount
equal to the balance of such assignor Lender's Loans and Commitment, in each
case against receipt of such assignor Lender's existing Note or Notes, as the
case may be, appropriately marked to indicate their substitution. The Borrower
agrees that it shall, upon each such request of the Administrative Agent,
execute and deliver such new Notes at its own cost and expense. Upon such
delivery, acceptance and recording by the Administrative Agent, from and after
the effective date specified in such Assignment and Acceptance Agreement, the
assignee thereunder shall be a party hereto and shall for all purposes of the
Loan Documents be deemed a "Lender" and, to the extent provided in such
Assignment and Acceptance Agreement, the assignor Lender thereunder shall be
released from its obligations under the Loan Documents.
(d) In addition to the participations provided for in Section
11.9(b), each Lender may grant participations in all or any part of its Loans,
its Notes and its Commitment to one or more banks, insurance companies, pension
funds, mutual funds or other financial institutions, provided that (i) such
Lender's obligations under the Loan Documents shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties to the Loan
Documents for the performance of such obligations, (iii) the Borrower, the
Administrative Agent, the Issuer and the Lenders shall continue to deal solely
and directly with such Lender in connection with such Lender's rights and
obligations under the Loan Documents, (iv) no sub-participations shall be
permitted, and (v) the voting rights of any holder of any participation shall be
limited to decisions that in accordance with Section 11.1 require the consent of
all of the Lenders. The Borrower acknowledges and agrees that any such
participant shall for purposes of Section 3.5, 3.6, 3.10 and 11.5 be deemed to
be a "Lender", provided that in no event shall the Borrower be liable for any
amounts under said Sections in excess of the amounts for which it would be
liable but for such participation.
(e) No Lender shall, as between and among the Borrower, the
Administrative Agent, the Issuer, the Swing Line Lender and such Lender, be
relieved of any of its obligations under the Loan Documents as a result of any
assignment of or granting of participations in, all or any part of its Loans,
its Commitment and its Notes, except that a Lender shall be relieved of its
obligations to the extent of any such assignment of all or any part of its
Loans, its Commitment or its Notes pursuant to Section 11.7(c).
11.8 Counterparts
Each of the Loan Documents (other than the Notes) may be executed on
any number of separate counterparts and all of said counterparts taken together
shall be deemed to constitute one and the same agreement. It shall not be
necessary in making proof of any Loan Document to produce or account for more
than one counterpart signed
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<PAGE>
by the party to be charged. A set of the copies of this Agreement signed by all
of the parties hereto shall be lodged with each of the Borrower and the
Administrative Agent. Any party to a Loan Document may rely upon the signatures
of any other party thereto which are transmitted by fax or other electronic
means to the same extent as if originally signed.
11.9 Set-off and Sharing of Payments
(a) In addition to any rights and remedies of the Lenders and the
Issuer provided by law, upon the occurrence of an Event of Default under Section
9.1(a) or (b) or upon the acceleration of the payment of the Notes, each Lender
and the Issuer shall have the right, without prior notice to the Borrower, any
such notice being expressly waived by the Borrower, to set-off and apply against
any indebtedness or other liability, whether matured or unmatured, of the
Borrower to such Lender or the Issuer arising under the Loan Documents, any
amount owing from such Lender or the Issuer to the Borrower. To the extent
permitted by applicable law, the aforesaid right of set-off may be exercised by
such Lender or the Issuer against the Borrower or against any trustee in
bankruptcy, custodian, debtor in possession, assignee for the benefit of
creditors, receiver, or execution, judgment or attachment creditor of the
Borrower, or against anyone else claiming through or against the Borrower or
such trustee in bankruptcy, custodian, debtor in possession, assignee for the
benefit of creditors, receivers, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set-off shall not have been
exercised by such Lender or the Issuer prior to the making, filing or issuance
of, service upon such Lender or the Issuer of, or notice to such Lender or the
Issuer of, any petition, assignment for the benefit of creditors, appointment or
application for the appointment of a receiver, or issuance of execution,
subpoena, order or warrant. Each Lender and the Issuer agree promptly to notify
the Borrower and the Administrative Agent after each such set-off and
application made by such Lender or the Issuer, provided that the failure to give
such notice shall not affect the validity of such set-off and application.
(b) If any Lender or the Issuer (each a "Benefited Lender") shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) on account of its Loans or its Notes or the
Reimbursement Obligations in excess of its pro rata share (in accordance with
the outstanding principal balance of all Loans or the Reimbursement Obligations
) of payments then due and payable on account of the Loans and Notes received by
all the Lenders or the Reimbursement Obligations, such Lender or the Issuer, as
the case may be, shall forthwith purchase, without recourse, for cash, from the
other Lenders such participations in their Loans and Notes or the Reimbursement
Obligations as shall be necessary to cause such purchasing Lender or the Issuer
to share the excess payment with each of them according to their pro rata share
(in accordance with the outstanding principal balance of all Loans or the
Reimbursement Obligations), provided that if all or any portion of such excess
payment is thereafter recovered from such purchasing Lender or the Issuer, such
purchase from each Lender shall be rescinded and each such Lender shall repay to
the purchasing Lender or the Issuer the purchase price to the extent of such
recovery, together with an amount equal to such Lender's pro rata share
(according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender or
the Issuer) of any interest or other amount paid or payable by the purchasing
Lender in respect of the total amount so recovered. The Borrower agrees, to the
fullest extent permitted by law, that any Lender or the Issuer so purchasing a
participation from another
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<PAGE>
Lender pursuant to this Section may exercise such rights to payment (including
the right of set-off) with respect to such participation as fully as if such
Lender or the Issuer were the direct creditor of the Borrower in the amount of
such participation.
11.10 Indemnity
The Borrower agrees to indemnify and hold harmless each of the
Administrative Agent, the Issuer, each Lender and their respective Affiliates,
officers, directors, employees, agents and representatives (each an "Indemnified
Person") from and against any loss, cost, liability, damage or expense,
including the reasonable fees and disbursements of counsel (including the
allocated costs of internal counsel) and such local counsel as may be required
to represent such Indemnified Person actually incurred by such Indemnified
Person in preparing for, defending against, or providing evidence, producing
documents or taking any other action in respect of, any litigation,
administrative proceeding or investigation under any federal securities law or
any other statute of any jurisdiction, or any regulation, or at common law or
otherwise, which is alleged to arise out of or is based upon (1) any untrue
statement or alleged untrue statement of any material fact by or on behalf of
the Borrower or any Subsidiary, in any document or schedule executed or filed
with any Governmental Authority by or on behalf of the Borrower or any
Subsidiary which relates to the transactions contemplated by the Loan Documents,
(2) any omission or alleged omission by or on behalf of the Borrower or any
Subsidiary to state any material fact required to be stated in such document or
schedule, or necessary to make the statements made therein, in light of the
circumstances under which made, not misleading, (3) any acts, practices or
omissions or alleged acts, practices or omissions of the Borrower or its agents
relating to the use of the proceeds of any Loan or Letter of Credit which is
alleged to be in violation of Section 2.5, or in violation of any federal
securities law or of any other statute, regulation or other law of any
jurisdiction applicable thereto, or (4) any Loan Document or any other document
contemplated by or referred to therein or the transactions contemplated thereby
or any action taken or omitted to be taken by such Indemnified Person under or
in connection with any of the foregoing. Notwithstanding the above, the Borrower
shall have no liability under clause (4) of this Section to indemnify or hold
harmless any Indemnified Person for any loss, cost, liability, damage or expense
relating to income or withholding taxes or any tax in lieu of such taxes. The
indemnity set forth herein shall be in addition to any other obligations or
liabilities of the Borrower to each Indemnified Person hereunder or at common
law or otherwise, shall include the reasonable fees and disbursements of counsel
(including the allocated costs of internal counsel) and such local counsel as
may be required in connection with establishing liability under this Section or
collecting amounts payable under this Section and shall survive any termination
of this Agreement, the expiration of the Commitments and the payment of all
indebtedness of the Borrower under the Loan Documents, provided that the
Borrower shall not have any liability under this Section to any Indemnified
Person with respect to indemnified liabilities which are determined by a final
and nonappealable judgment of a court of competent jurisdiction to have arisen
primarily from the gross negligence or willful misconduct of such Indemnified
Person.
11.11 Governing Law
The Loan Documents and the rights and obligations of the parties
thereto shall be governed by, and construed and interpreted in accordance with,
the laws of the State of New York, without regard to principles of conflict of
laws.
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<PAGE>
11.12 Severability
Every provision of the Loan Documents is intended to be severable,
and if any term or provision thereof shall be invalid, illegal or unenforceable
for any reason, the validity, legality and enforceability of the remaining
provisions thereof shall not be affected or impaired thereby, and any
invalidity, illegality or unenforceability in any jurisdiction shall not affect
the validity, legality or enforceability of any such term or provision in any
other jurisdiction.
11.13 Integration
All exhibits to the Loan Documents shall be deemed to be a part
thereof. Each Loan Document embodies the entire agreement and understanding
between or among the parties thereto with respect to the subject matter thereof
and supersedes all prior agreements and understandings between or among the
parties thereto with respect to the subject matter thereof.
11.14 Treatment of Certain Information
Each Lender, the Issuer and the Administrative Agent agrees to
maintain as confidential and not to disclose, publish or disseminate to any
third parties any financial or other information relating to the business,
operations and condition, financial or otherwise, of the Borrower provided to
it, except if and to the extent that:
(a) such information is in the public domain at the time of
disclosure;
(b) such information is required to be disclosed by subpoena or
similar process or applicable law or regulations;
(c) such information is required or requested to be disclosed to any
regulatory or administrative body or commission to whose jurisdiction it
may be subject;
(d) such information is disclosed to its counsel, auditors or other
professional advisors;
(e) such information is disclosed to (and, unless and until it
receives written objection from the Borrower, the Borrower shall be deemed
to have consented to disclosure of such information to) its affiliates;
provided that such information shall be used in connection with this
Agreement and the transactions contemplated hereby;
(f) such information is disclosed to its officers, directors and
employees;
(g) such information is disclosed with the prior written consent of
the party furnishing the information;
(h) such information is disclosed in connection with any litigation
or dispute involving the Borrower and/or it;
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<PAGE>
(i) such information is disclosed in connection with the sale of a
participation or other disposition by it of any of its interest in this
Agreement, provided that such information shall not be disclosed unless
and until the party to whom it shall be disclosed shall have agreed to
keep such information confidential as set forth herein;
(j) such information was in its possession or in its affiliate's
possession as shown by clear and convincing evidence prior to any of the
Borrower and/or any or the Borrower's representatives or agents furnishing
such information to it; or
(k) such information is received by it, without restriction as to
its disclosure or use, from a Person who, to its knowledge or reasonable
belief, was not prohibited from disclosing such information by any duty of
confidentiality.
Except to the extent prohibited or restricted by law or Governmental
Authority, each Lender shall notify the Borrower promptly of any disclosures of
information made by it as permitted pursuant to (h) above.
11.15 Acknowledgments
The Borrower acknowledges that (a) it has been advised by counsel in
the negotiation, execution and delivery of the Loan Documents, (b) by virtue of
the Loan Documents, none of the Administrative Agent, the Issuer, or any Lender
has any fiduciary relationship to the Borrower, and the relationship between the
Administrative Agent, the Issuer, and the Lenders, on the one hand, and the
Borrower, on the other hand, is solely that of debtor and creditor, and (c) by
virtue of the Loan Documents, no joint venture exists among the Lenders or among
the Borrower and the Lenders.
11.16 Consent to Jurisdiction
The Borrower irrevocably submits to the non-exclusive jurisdiction
of any New York State or Federal Court sitting in the City of New York over any
suit, action or proceeding arising out of or relating to the Loan Documents. The
Borrower 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 suit, action or proceeding brought in such a court and any claim that any
such suit, action or proceeding brought in such a court has been brought in an
inconvenient forum. The Borrower agrees that a final judgment in any such suit,
action or proceeding brought in such a court, after all appropriate appeals,
shall be conclusive and binding upon it.
11.17 Service of Process
The Borrower agrees that process may be served against it in any
suit, action or proceeding referred to in Section 11.16 by sending the same by
first class mail, return receipt requested or by overnight courier service, with
receipt acknowledged, to the address of the Borrower set forth in Section 11.2.
The Borrower agrees that any such service (i) shall be deemed in every respect
effective service of process upon it in any such suit, action, or proceeding,
and (ii) shall to the fullest extent enforceable by law, be taken and held to be
valid personal service upon and personal delivery to it.
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<PAGE>
11.18 No Limitation on Service or Suit
Nothing in the Loan Documents or any modification, waiver, or
amendment thereto shall affect the right of the Administrative Agent, the Issuer
or any Lender to serve process in any manner permitted by law or limit the right
of the Administrative Agent, the Issuer or any Lender to bring proceedings
against the Borrower in the courts of any jurisdiction or jurisdictions.
11.19 WAIVER OF TRIAL BY JURY
THE ADMINISTRATIVE AGENT, THE ISSUER, THE LENDERS AND THE BORROWER
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN
CONNECTION WITH THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.
FURTHER, THE BORROWER HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF THE
ADMINISTRATIVE AGENT, THE ISSUER, OR THE LENDERS, OR COUNSEL TO THE
ADMINISTRATIVE AGENT, THE ISSUER, OR THE LENDERS, HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT THE ADMINISTRATIVE AGENT, THE ISSUER, OR THE LENDERS WOULD NOT,
IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY
TRIAL PROVISION. THE BORROWER ACKNOWLEDGES THAT THE ADMINISTRATIVE AGENT, THE
ISSUER, AND THE LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, INTER
ALIA, THE PROVISIONS OF THIS SECTION.
11.20 Effective Date
This Agreement shall be effective at such time (the "Effective
Date") as the Administrative Agent shall have received executed counterparts
hereof by the Borrower, the Administrative Agent, the Issuer, and each Lender
and the conditions set forth in Sections 5.1 through 5.6 have been or
simultaneously will be satisfied, provided that this Agreement shall not become
effective or be binding on any party hereto unless all of such conditions are
satisfied not later than June 15, 1997.
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<PAGE>
CVS CORPORATION
Five Year Credit Agreement
AS EVIDENCE of the agreement by the parties hereto to the terms and
conditions herein contained, each such party has caused this Agreement to be
executed on its behalf.
CVS CORPORATION
By: /s/ Philip C. Galbro
---------------------------------------
Name: Philip C. Galbro
-------------------------------------
Title: Vice President and Treasurer
------------------------------------
<PAGE>
CVS CORPORATION
Five Year Credit Agreement
THE BANK OF NEW YORK, in its capacity
as a Lender and in its capacity
as the Administrative Agent
By: /s/ Howard F. Bascom, Jr.
---------------------------------------
Name: Howard F. Bascom, Jr.
-------------------------------------
Title: Vice President
------------------------------------
- 2 -
<PAGE>
CVS CORPORATION
Five Year Credit Agreement
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Robert L. Barrett
---------------------------------------
Name: Robert L. Barrett
-------------------------------------
Title: Vice President
------------------------------------
- 3 -
<PAGE>
CVS CORPORATION
Five Year Credit Agreement
FLEET NATIONAL BANK
By: /s/ Thomas J. Bullard
---------------------------------------
Name: Thomas J. Bullard
-------------------------------------
Title: Vice President
------------------------------------
- 4 -
<PAGE>
CVS CORPORATION
Five Year Credit Agreement
BANKBOSTON, N.A.
By: /s/ Peter L. Griswold
---------------------------------------
Name: Peter L. Griswold
-------------------------------------
Title: Director
------------------------------------
- 5 -
<PAGE>
CVS CORPORATION
Five Year Credit Agreement
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By: /s/ Patrick D. Bonebrake
---------------------------------------
Name: Patrick D. Bonebrake
-------------------------------------
Title: Assistant Vice President
------------------------------------
- 6 -
<PAGE>
CVS CORPORATION
Five Year Credit Agreement
BANCA POPOLARE DI MILANO
By: /s/ Anthony Franco
---------------------------------------
Name: Anthony Franco
-------------------------------------
Title: Executive Vice President
& General Manager
------------------------------------
By: /s/ [ILLEGIBLE]
---------------------------------------
Name: [ILLEGIBLE]
-------------------------------------
Title: First Vice President
------------------------------------
- 7 -
<PAGE>
CVS CORPORATION
Five Year Credit Agreement
BANK OF AMERICA ILLINOIS
By: /s/ Dale Robert Mason
---------------------------------------
Name: Dale Robert Mason
-------------------------------------
Title: Vice President
------------------------------------
- 8 -
<PAGE>
CVS CORPORATION
Five Year Credit Agreement
THE BANK OF NOVA SCOTIA
By: /s/ [ILLEGIBLE]
---------------------------------------
Name: [ILLEGIBLE]
-------------------------------------
Title: Authorized Signatory
------------------------------------
- 9 -
<PAGE>
CVS CORPORATION
Five Year Credit Agreement
THE CHASE MANHATTAN BANK
By: /s/ Neil R. Boylan
---------------------------------------
Name: Neil R. Boylan
-------------------------------------
Title: Vice President
------------------------------------
- 10 -
<PAGE>
CVS CORPORATION
Five Year Credit Agreement
CORESTATES BANK, N.A.
By: /s/ Thomas I. McDonnell
---------------------------------------
Name: Thomas I. McDonnell
-------------------------------------
Title: Vice President
------------------------------------
- 11 -
<PAGE>
CVS CORPORATION
Five Year Credit Agreement
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Robert Ivosevich
---------------------------------------
Name: Robert Ivosevich
-------------------------------------
Title: Authorized Signature
------------------------------------
- 12 -
<PAGE>
CVS CORPORATION
Five Year Credit Agreement
CREDIT SUISSE FIRST BOSTON
By: /s/ Joel Glodowski
---------------------------------------
Name: Joel Glodowski
-------------------------------------
Title: Managing Director
------------------------------------
By: /s/ Chris Hargan
---------------------------------------
Name: Chris Hargan
-------------------------------------
Title: Vice President
------------------------------------
- 13 -
<PAGE>
CVS CORPORATION
Five Year Credit Agreement
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By: /s/ Mark M. Harden
---------------------------------------
Name: Mark M. Harden
-------------------------------------
Title: Vice President
------------------------------------
- 14 -
<PAGE>
CVS CORPORATION
Five Year Credit Agreement
KEY BANK NATIONAL ASSOCIATION
By: /s/ Marianne T. Mail
---------------------------------------
Name: Marianne T. Mail
-------------------------------------
Title: Vice President
------------------------------------
- 15 -
<PAGE>
CVS CORPORATION
Five Year Credit Agreement
PNC BANK, N.A.
By: /s/ Patrick H. Kinzler
---------------------------------------
Name: Patrick H. Kinzler
-------------------------------------
Title: Vice President
------------------------------------
- 16 -
<PAGE>
CVS CORPORATION
Five Year Credit Agreement
THE SUMITOMO BANK, LIMITED
By: /s/ John C. Kissinger
---------------------------------------
Name: John C. Kissinger
-------------------------------------
Title: Joint General Manager
------------------------------------
- 17 -
<PAGE>
CVS CORPORATION
Five Year Credit Agreement
WACHOVIA BANK OF GEORGIA, N.A.
By: /s/ Henry H. Hagan
---------------------------------------
Name: Henry H. Hagan
-------------------------------------
Title: SVP
------------------------------------
- 18 -
<PAGE>
CVS CORPORATION
Five Year Credit Agreement
CRESTAR BANK
By: /s/ Julian N. Holland, Jr.
---------------------------------------
Name: Julian N. Holland, Jr.
-------------------------------------
Title: Vice President
------------------------------------
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<PAGE>
CVS CORPORATION
Five Year Credit Agreement
THE DAI-ICHI KANGYO BANK, LTD.,
New York Branch
By: /s/ Kim P. Leary
---------------------------------------
Name: Kim P. Leary
-------------------------------------
Title: Vice President
------------------------------------
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<PAGE>
CVS CORPORATION
Five Year Credit Agreement
FIRST HAWAIIAN BANK
By: /s/ Scott Nahme
---------------------------------------
Name: Scott Nahme
-------------------------------------
Title: Assistant Vice President
------------------------------------
- 21 -
<PAGE>
CVS CORPORATION
Five Year Credit Agreement
THE FUJI BANK, LIMITED
By: /s/ Kazuaki Kirabatake
---------------------------------------
Name: Kazuaki Kirabatake
-------------------------------------
Title: Senior Vice President
------------------------------------
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<PAGE>
CVS CORPORATION
Five Year Credit Agreement
MELLON BANK, N.A.
By: /s/ Maribeth Donnelly
---------------------------------------
Name: Maribeth Donnelly
-------------------------------------
Title: Vice President
------------------------------------
- 23 -
<PAGE>
CVS CORPORATION
Five Year Credit Agreement
THE SAKURA BANK, LIMITED
By: /s/ Yasumasa Kikuchi
---------------------------------------
Name: Yasumasa Kikuchi
-------------------------------------
Title: Senior Vice President
------------------------------------
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<PAGE>
CVS CORPORATION
Five Year Credit Agreement
SUNTRUST BANK, ATLANTA
By: /s/ James D. McQueen, III
---------------------------------------
Name: James D. McQueen, III
-------------------------------------
Title: Banking Officer
------------------------------------
By: /s/ [ILLEGIBLE]
[ILLEGIBLE]
Vice President & Manager
- 25 -
<PAGE>
CVS CORPORATION
Five Year Credit Agreement
THE SANWA BANK, LIMITED
By: /s/ Yutaka Higashino
---------------------------------------
Name: Yutaka Higashino
-------------------------------------
Title: Senior Vice President
------------------------------------
- 26 -
<PAGE>
EXHIBIT A
LIST OF COMMITMENTS, APPLICABLE LENDING OFFICES
AND ADDRESSES FOR NOTICES
A. LIST OF COMMITMENTS
Lender Commitment Amount
- ----------------- -----------------
THE BANK OF NEW YORK $ 50,250,000
MORGAN GUARANTY TRUST COMPANY 41,875,000
OF NEW YORK
FLEET NATIONAL BANK 41,875,000
BANKBOSTON, N.A. 26,800,000
BANK OF TOKYO-MITSUBISHI TRUST COMPANY 26,800,000
BANCA POPOLARE DI MILANO 26,800,000
BANK OF AMERICA ILLINOIS 26,800,000
THE BANK OF NOVA SCOTIA 26,800,000
THE CHASE MANHATTAN BANK 26,800,000
CORESTATES BANK, N.A. 26,800,000
CREDIT LYONNAIS NEW YORK BRANCH 26,800,000
CREDIT SUISSE FIRST BOSTON 26,800,000
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA 26,800,000
KEY BANK NATIONAL ASSOCIATION 26,800,000
PNC BANK, N.A. 26,800,000
THE SUMITOMO BANK, LIMITED 26,800,000
WACHOVIA BANK OF GEORGIA, N.A. 26,800,000
CRESTAR BANK 20,100,000
THE DAI-ICHI KANGYO BANK, LTD., 20,100,000
NEW YORK BRANCH
FIRST HAWAIIAN BANK 20,100,000
THE FUJI BANK, LIMITED 20,100,000
<PAGE>
MELLON BANK, N.A. 20,100,000
THE SAKURA BANK, LIMITED 20,100,000
SUNTRUST BANK, ATLANTA 20,100,000
THE SANWA BANK, LIMITED 20,100,000
TOTAL $670,000,000
<PAGE>
B. LIST OF APPLICABLE LENDING OFFICES AND ADDRESSES FOR NOTICES
THE BANK OF NEW YORK
Applicable Lending Office for each Eurodollar Advance :
The Bank of New York
One Wall Street
New York, NY 10286
Applicable Lending Office for all other Advances:
The Bank of New York
One Wall Street
New York, NY 10286
Address for Notices:
The Bank of New York
One Wall Street
22nd Floor
New York, NY 10286
Attention: Howard F.Bascom,
Vice President
Telephone: (212) 635-7894
Facsimile: (212) 635-1481
<PAGE>
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
Applicable Lending Office for each Eurodollar Advance :
Morgan Guaranty Trust Company
of New York
Nassau Bahamas Office
c/o J.P. Morgan Services, Inc.
Loan Operations - 3rd Floor
500 Stanton Christiana Road
Newark, Delaware 19713
Applicable Lending Office for all other Advances:
Morgan Guaranty Trust Company
of New York
60 Wall Street
New York, New York 10260-0060
Address for Notices:
Morgan Guaranty Trust Company
of New York
Nassau Bahamas Office
c/o J.P. Morgan Services, Inc.
Loan Operations - 3rd Floor
500 Stanton Christiana Road
Newark, Delaware 19713
Attention: Victoria A. Fedele
Telephone: (302) 634-4225
Facsimile: (302) 634-1852
<PAGE>
FLEET NATIONAL BANK
Applicable Lending Office for each Eurodollar Advance:
Fleet National Bank
One Federal Street
Boston, Massachusetts 02211
Attn: Christopher Kampe
Telephone: (617) 346-0238
Facsimile: (617) 346-0689
Applicable Lending Office for all other Advances:
Fleet National Bank
One Federal Street
Boston, Massachusetts 02211
Attn: Christopher Kampe
Telephone: (617) 346-0238
Facsimile: (617) 346-0689
Address for Notices:
Fleet National Bank
One Federal Street
Boston, Massachusetts 02211
Attention: Thomas Bullard
Telephone: (617) 346-0146
Facsimile: (617) 346-0580
<PAGE>
BANKBOSTON , N.A.
Applicable Lending Office for each Eurodollar Advance :
BankBoston, N.A.
100 Federal Street, 01-09-05
Boston, Massachusetts 02100
Applicable Lending Office for all other Advances:
BankBoston, N.A.
100 Federal Street, 01-09-05
Boston, Massachusetts 02100
Address for Notices:
BankBoston, N.A.
100 Federal Street, 01-09-05
Boston, Massachusetts 02100
Attention: Judith C.E. Kelly
Telephone: (617) 434-5280
Facsimile: (617) 434-0630
<PAGE>
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
Applicable Lending Office for each Eurodollar Advance :
Bank of Tokyo-Mitsubishi Trust Company
1251 Avenue of the Americas
New York, New York 10020
Applicable Lending Office for all other Advances:
Bank of Tokyo-Mitsubishi Trust Company
1251 Avenue of the Americas
New York, New York 10020
Address for Notices:
Bank of Tokyo-Mitsubishi Trust Company
125 Summer Street, Suite 1170
Boston, Massachusetts 02110
Attention: Patrick Bonebrake
Telephone: (617) 330-7437
Facsimile: (617) 330-7422
<PAGE>
BANCA POPOLARE DI MILANO
Applicable Lending Office for each Eurodollar Advance :
Banca Popolare Di Milano
375 Park Avenue
New York, New York 10152
Applicable Lending Office for all other Advances:
Banca Popolare Di Milano
375 Park Avenue
New York, New York 10152
Address for Notices:
Banca Popolare Di Milano
375 Park Avenue
New York, New York 10152
Attention: Fulvio Montanari
Telephone: (212) 758-5040
Facsimile: (212) 838-1077
<PAGE>
BANK OF AMERICA ILLINOIS
Applicable Lending Office for each Eurodollar Advance :
Bank of America Illinois
231 S. LaSalle Street
Chicago, Illinois 60697
Applicable Lending Office for all other Advances:
Bank of America Illinois
231 S. LaSalle Street
Chicago, Illinois 60697
Address for Notices:
Bank of America Illinois
231 S. LaSalle Street
Chicago, Illinois 60697
Attention: Jody Pritchard
Telephone: (312) 828-5258
Facsimile: (312) 974-0732
<PAGE>
THE BANK OF NOVA SCOTIA
Applicable Lending Office for each Eurodollar Advance :
The Bank of Nova Scotia
Atlanta Agency
600 Peachtree Street, Suite 2700
Atlanta, Georgia 30308
Applicable Lending Office for all other Advances:
The Bank of Nova Scotia
Atlanta Agency
600 Peachtree Street, Suite 2700
Atlanta, Georgia 30308
Address for Notices:
The Bank of Nova Scotia
101 Federal Street, 16th Floor
Boston, Massachusetts 02100
Attention: Michael Bradley
Telephone: (617) 737-6312
Facsimile: (617) 951-2177
<PAGE>
THE CHASE MANHATTAN BANK
Applicable Lending Office for each Eurodollar Advance:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Applicable Lending Office for all other Advances:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Address for Notices:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: Neil Boylan
Telephone: (212) 270-1410
Facsimile: (212) 270-1474
<PAGE>
CORESTATES BANK, N.A.
Applicable Lending Office for each Eurodollar Advance :
Corestates Bank, N.A.
P.O. Box 7618
Philadelphia, PA 19101
Applicable Lending Office for all other Advances:
Corestates Bank, N.A.
P.O. Box 7618
Philadelphia, PA 19101
Address for Notices:
Corestates Bank, N.A.
1345 Chestnut Street
Philadelphia, PA 19102
Attention: Thomas J. McDonnell
Telephone: (215) 973-7667
Facsimile: (215) 973-7820
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH
Applicable Lending Office for each Eurodollar Advance :
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, New York 10019
Applicable Lending Office for all other Advances:
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, New York 10019
Address for Notices:
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, New York 10019
Attention: Heidi Rosen
Telephone: (212) 261-7241
Facsimile: (212) 459-3179
<PAGE>
CREDIT SUISSE FIRST BOSTON
Applicable Lending Office for each Eurodollar Advance :
Credit Suisse First Boston
11 Madison Avenue, 19th Floor
New York, New York 10010
Applicable Lending Office for all other Advances:
Credit Suisse First Boston
11 Madison Avenue, 19th Floor
New York, New York 10010
Address for Notices:
Credit Suisse First Boston
11 Madison Avenue, 19th Floor
New York, New York 10010
Attention: Joel Glodowski
Telephone: (212) 325-9171
Facsimile: (212) 325-8309
<PAGE>
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
Applicable Lending Office for each Eurodollar Advance :
First Union National Bank of North Carolina
One First Union Center
301 South College Street, DC5
Charlotte, North Carolina 28288-0745
Applicable Lending Office for all other Advances:
First Union National Bank of North Carolina
One First Union Center
301 South College Street, DC5
Charlotte, North Carolina 28288-0745
Address for Notices:
First Union National Bank of North Carolina
One First Union Center
301 South College Street, DC5
Charlotte, North Carolina 28288-0745
Attention: Chris Klos
Telephone: (704) 383-7629
Facsimile: (704) 383-0634
<PAGE>
KEY BANK NATIONAL ASSOCIATION
Applicable Lending Office for each Eurodollar Advance :
Key Bank National Association
127 Public Square
Cleveland, Ohio 44114
Applicable Lending Office for all other Advances:
Key Bank National Association
127 Public Square
Cleveland, Ohio 44114
Address for Notices:
Key Bank National Association
127 Public Square
Cleveland, Ohio 44114
Attention: Marianne Meil
Telephone: (216) 689-3549
Facsimile: (216) 689-4981
<PAGE>
PNC BANK, N.A.
Applicable Lending Office for each Eurodollar Advance :
PNC Bank, N.A.
Two Tower Center Boulevard
East Brunswick, New Jersey 08816
Applicable Lending Office for all other Advances:
PNC Bank, N.A.
Two Tower Center Boulevard
East Brunswick, New Jersey 08816
Address for Notices:
PNC Bank, N.A.
2 Tower Center
East Brunswick, New Jersey 08816
Attention: Michael Richards
Telephone: (908) 220-3228
Facsimile: (908) 220-3231
<PAGE>
THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH
Applicable Lending Office for each Eurodollar Advance :
The Sumitomo Bank, Limited, New York Branch
277 Park Avenue
New York, New York 10172
Applicable Lending Office for all other Advances:
The Sumitomo Bank, Limited, New York Branch
277 Park Avenue
New York, New York 10172
Address for Notices:
The Sumitomo Bank, Limited, New York Branch
277 Park Avenue
New York, New York 10172
Attention: Thomas Miressi
Telephone: (212) 224-____
Facsimile: (212) 224-5188
<PAGE>
WACHOVIA BANK OF GEORGIA, N.A.
Applicable Lending Office for each Eurodollar Advance :
Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Applicable Lending Office for all other Advances:
Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Address for Notices:
Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Jeffrey S. Nurkiewiez
Telephone: (404) 332-1288
Facsimile: (404) 332-6898
<PAGE>
CRESTAR BANK
Applicable Lending Office for each Eurodollar Advance :
Crestar Bank
919 E. Main Street, 22nd Floor
Richmond, Virginia 23219
Applicable Lending Office for all other Advances:
Crestar Bank
919 E. Main Street, 22nd Floor
Richmond, Virginia 23219
Address for Notices:
Crestar Bank
919 E. Main Street, 22nd Floor
Richmond, Virginia 23219
Attention: Julian N. Holland, Jr.
Telephone: (804) 782-7346
Facsimile: (804) 782-5413
<PAGE>
THE DAI-ICHI KANGYO BANK, LTD., NEW YORK BRANCH
Applicable Lending Office for each Eurodollar Advance :
The Dai-Ichi Kangyo Bank, Ltd.,
New York Branch
One World Trade Center
Suite 4911
New York, New York 10048
Applicable Lending Office for all other Advances:
The Dai-Ichi Kangyo Bank, Ltd.,
New York Branch
One World Trade Center
Suite 4911
New York, New York 10048
Address for Notices:
The Dai-Ichi Kangyo Bank, Ltd.,
New York Branch
One World Trade Center
Suite 4911
New York, New York 10048
Attention: Kim Leary
Telephone: (212) 432-6641
Facsimile: (212) 912-1879
<PAGE>
FIRST HAWAIIAN BANK
Applicable Lending Office for each Eurodollar Advance :
First Hawaiian Bank
999 Bishop Street, 11th Floor
Honolulu, Hawaii 96813
Applicable Lending Office for all other Advances:
First Hawaiian Bank
999 Bishop Street, 11th Floor
Honolulu, Hawaii 96813
Address for Notices:
First Hawaiian Bank
999 Bishop Street, 11th Floor
Honolulu, Hawaii 96813
Attention: Scott R. Nahme
Telephone: (808) 525-8781
Facsimile: (808) 525-6372
<PAGE>
THE FUJI BANK, LIMITED
Applicable Lending Office for each Eurodollar Advance :
The Fuji Bank, Limited
New York Branch
Two World Trade Center
New York, New York 10048
Applicable Lending Office for all other Advances:
The Fuji Bank, Limited
New York Branch
Two World Trade Center
New York, New York 10048
Address for Notices:
The Fuji Bank, Limited
New York Branch
Two World Trade Center
New York, New York 10048
Attention: Chigusa Tada
Telephone: (212) 898-2067
Facsimile: (212) 912-0516
<PAGE>
MELLON BANK, N.A.
Applicable Lending Office for each Eurodollar Advance :
Mellon Bank, N.A.
Three Mellon Bank Center, Room 305
Pittsburgh, PA 15259
Applicable Lending Office for all other Advances:
Mellon Bank, N.A.
Three Mellon Bank Center, Room 305
Pittsburgh, PA 15259
Address for Notices:
Mellon Bank, N.A.
Three Mellon Bank Center, Room 305
Pittsburgh, PA 15259
Attention: Manuel Burgueno
Telephone: (412) 234-6798
Facsimile: (412) 236-1914
<PAGE>
THE SAKURA BANK, LIMITED
Applicable Lending Office for each Eurodollar Advance :
The Sakura Bank, Ltd
New York Branch
277 Park Avenue - 46th Floor
New York, New York 10172
Applicable Lending Office for all other Advances:
The Sakura Bank, Ltd
New York Branch
277 Park Avenue - 46th Floor
New York, New York 10172
Address for Notices:
The Sakura Bank, Ltd
New York Branch
277 Park Avenue - 46th Floor
New York, New York 10172
Attention: Takehiro Matsamoto
Telephone: (212) 756-6745
Facsimile: (212) 888-7651
<PAGE>
SUNTRUST BANK, ATLANTA
Applicable Lending Office for each Eurodollar Advance :
SunTrust Bank, Atlanta
25 Park Place
Atlanta, Georgia 30303
Attention: Kathy Dorsey
Telephone: (404) 588-8375
Facsimile: (404) 658-4905
Applicable Lending Office for all other Advances:
SunTrust Bank, Atlanta
25 Park Place
Atlanta, Georgia 30303
Attention: Kathy Dorsey
Telephone: (404) 588-8375
Facsimile: (404) 658-4905
Address for Notices:
SunTrust Bank, Atlanta
711 Fifth Avenue - 16th Floor
New York, New York 10022
Attention: Jamie McQueen
Telephone: (212) 583-2611
Facsimile: (212) 371-9386
<PAGE>
THE SANWA BANK, LIMITED
Applicable Lending Office for each Eurodollar Advance :
The Sanwa Bank, Limited
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
Applicable Lending Office for all other Advances:
The Sanwa Bank, Limited
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
Address for Notices:
The Sanwa Bank, Limited
One Financial Center, Suite 2812
Boston, MA 02111
Attention: Dale C. Edmunds
Telephone: (617) 654-1430
Facsimile: (617) 350-7212
<PAGE>
EXHIBIT B-1
FORM OF REVOLVING CREDIT NOTE
$______________. _________ __, 1997
New York, New York
FOR VALUE RECEIVED, the undersigned, CVS CORPORATION, a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of
_________________________ (the "Lender") the lesser of $_________________ or the
outstanding principal balance of the Lender's Revolving Credit Loans, together
with interest thereon, at the rate or rates, in the amounts and at the time or
times set forth in the Five Year Credit Agreement (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
dated as of __________, 1997, by and among the Borrower, the Lenders party
thereto, Fleet National Bank, as Documentation Agent, JP Morgan Securities Inc.,
as Syndication Agent, and The Bank of New York, as the administrative agent (in
such capacity, the "Administrative Agent"), in each case at the office of the
Administrative Agent located at One Wall Street, New York, New York, or at such
other place as the Administrative Agent may specify from time to time, in lawful
money of the United States of America in immediately available funds.
Capitalized terms used herein that are not otherwise defined herein
shall have the respective meanings ascribed thereto in the Credit Agreement.
The Revolving Credit Loans evidenced by this Revolving Credit Note
are prepayable in the amounts, and on the dates, set forth in the Credit
Agreement. This Revolving Credit Note is one of the Revolving Credit Notes under
the Credit Agreement, and is subject to, and shall be construed in accordance
with, the provisions thereof, and is entitled to the benefits set forth in the
Loan Documents.
The Lender is hereby authorized to record on the schedule annexed
hereto, and any continuation sheets which the Lender may attach thereto (a) the
date and amount of each Revolving Credit Loan made by the Lender, (b) the
character of each Revolving Credit Loan as one or more ABR Advances, one or more
Eurodollar Advances, or a combination thereof, (c) the Interest Period and
Eurodollar Rate applicable to each Eurodollar Advance, and (d) the date and
amount of each Conversion of, and each payment or prepayment of principal of,
each Revolving Credit Loan. The failure to so record or any error in so
recording shall not affect the obligation of the Borrower to repay the Revolving
Credit Loans, together with interest thereon, as provided in the Credit
Agreement.
Except as specifically otherwise provided in the Credit Agreement,
the Borrower hereby waives presentment, demand, notice of dishonor, protest,
notice of protest and all other demands, protests and notices in connection with
the execution, delivery, performance, collection and enforcement of this
Revolving Credit Note.
This Revolving Credit Note is being delivered in, is intended to be
performed in, shall be construed and interpreted in accordance with, and be
governed
<PAGE>
by the internal laws of, the State of New York, without regard to principles of
conflict of laws.
This Revolving Credit Note may only be amended by an instrument in
writing executed pursuant to the provisions of Section 11.1 of the Credit
Agreement.
CVS CORPORATION
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
- 2 -
<PAGE>
SCHEDULE TO REVOLVING CREDIT NOTE
<TABLE>
<CAPTION>
Type of Amount of
Advance Interest Eurodollar Conversion
Amount of (Eurodollar Period (If Rate (If or Principal
Revolving or ABR Eurodollar Eurodollar Payment or Notation
Date Credit Loan Advance) Advance) Advance) Prepayment Made by
- ---- ----------- ----------- ---------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT B-2
FORM OF COMPETITIVE BID NOTE
_________ __, 1997
New York, New York
FOR VALUE RECEIVED, the undersigned, CVS CORPORATION, a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of
_________________________ (the "Lender") the outstanding principal balance of
the Lender's Competitive Bid Loans, together with the interest due thereon, in
the amounts, at the rate or rates, and at the time or times set forth in the
Five Year Credit Agreement (as the same may be amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), dated as of
__________, 1997, by and among the Borrower, the Lenders party thereto, Fleet
National Bank, as Documentation Agent, JP Morgan Securities Inc., as Syndication
Agent, and The Bank of New York, as administrative agent (in such capacity, the
"Administrative Agent"), in each case at the office of the Administrative Agent
located at One Wall Street, New York, New York, or at such other place as the
Administrative Agent may specify from time to time, in lawful money of the
United States of America in immediately available funds.
Capitalized terms used herein that are not otherwise defined herein
shall have the respective meanings ascribed thereto in the Credit Agreement.
This Competitive Bid Note is one of the Competitive Bid Notes under
the Credit Agreement, and is subject to, and shall be construed in accordance
with, the provisions thereof, and is entitled to the benefits set forth in the
Loan Documents.
The Lender is hereby authorized to record on the schedule annexed
hereto, and any continuation sheets which the Lender may attach thereto (a) the
date and amount of each Competitive Bid Loan made by the Lender, (b) the
Competitive Interest Period and the Competitive Bid Rate applicable to each such
Competitive Bid Loan, and (c) the date and amount of each payment or prepayment
of principal of each Competitive Bid Loan. The failure to so record or any error
in so recording shall not affect the obligation of the Borrower to repay the
Competitive Bid Loans, together with interest thereon, as provided in the Credit
Agreement.
Except as specifically otherwise provided in the Credit Agreement,
the Borrower hereby waives presentment, demand, notice of dishonor, protest,
notice of protest and all other demands, protests and notices in connection with
the execution, delivery, performance, collection and enforcement of this
Competitive Bid Note.
This Competitive Bid Note is being delivered in, is intended to be
performed in, shall be construed and interpreted in accordance with, and be
governed by the internal laws of, the State of New York, without regard to
principles of conflict of laws.
<PAGE>
This Competitive Bid Note may only be amended by an instrument in
writing executed pursuant to the provisions of Section 11.1 of the Credit
Agreement.
CVS CORPORATION
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
- 2 -
<PAGE>
SCHEDULE TO COMPETITIVE BID NOTE
Amount of
Amount of Competitive Principal
Competitive Interest Competitive Payment or Notation
Date Bid Loan Period Bid Rate Prepayment Made by
- ---- ----------- ----------- ----------- ---------- --------
<PAGE>
EXHIBIT B-3
FORM OF SWING LINE NOTE
$50,000,000. _________ __, 1997
New York, New York
FOR VALUE RECEIVED, the undersigned, CVS CORPORATION, a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of THE BANK OF
NEW YORK (the "Lender") the lesser of $50,000,000 or the outstanding principal
balance of the Lender's Swing Line Loans, together with interest thereon, at the
rate or rates, in the amounts and at the time or times set forth in the Five
Year Credit Agreement (as the same may be amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), dated as of __________,
1997, by and among the Borrower, the Lenders party thereto, Fleet National Bank,
as Documentation Agent, JP Morgan Securities Inc., as Syndication Agent, and The
Bank of New York, as administrative agent (in such capacity, the "Administrative
Agent"), in each case at the office of the Administrative Agent located at One
Wall Street, New York, New York, or at such other place as the Administrative
Agent may specify from time to time, in lawful money of the United States of
America in immediately available funds.
Capitalized terms used herein that are not otherwise defined herein
shall have the respective meanings ascribed thereto in the Credit Agreement.
The Swing Line Loans evidenced by this Swing Line Note are
prepayable in the amounts, and on the dates, set forth in the Credit Agreement.
This Swing Line Note is the Swing Line Note under the Credit Agreement, and is
subject to, and shall be construed in accordance with, the provisions thereof,
and is entitled to the benefits set forth in the Loan Documents.
The Lender is hereby authorized to record on the schedule annexed
hereto, and any continuation sheets which the Lender may attach thereto (a) the
date and amount of each Swing Line Loan made by the Lender, (b) the Swing Line
Interest Period and Negotiated Rate applicable to each Swing Line Loan, and (c)
the date and amount of each payment or prepayment of principal of each Swing
Line Loan. The failure to so record or any error in so recording shall not
affect the obligation of the Borrower to repay the Swing Line Loans, together
with interest thereon, as provided in the Credit Agreement.
Except as specifically otherwise provided in the Credit Agreement,
the Borrower hereby waives presentment, demand, notice of dishonor, protest,
notice of protest and all other demands, protests and notices in connection with
the execution, delivery, performance, collection and enforcement of this Swing
Line Note.
This Swing Line Note is being delivered in, is intended to be
performed in, shall be construed and interpreted in accordance with, and be
governed by the internal laws of, the State of New York, without regard to
principles of conflict of laws.
<PAGE>
This Swing Line Note may only be amended by an instrument in writing
executed pursuant to the provisions of Section 11.1 of the Credit Agreement.
CVS CORPORATION
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
- 2 -
<PAGE>
SCHEDULE TO SWING LINE NOTE
Amount of
Swing Interest Negotiated Notation
Date Line Loan Period Rate Made by
- ---- --------- -------- ---------- --------
<PAGE>
EXHIBIT C
FORM OF BORROWING REQUEST
[Date]
The Bank of New York, as Administrative Agent
One Wall Street
New York, New York 10286
Attention: ______________,
______________
Re: Five Year Credit Agreement, dated as of ___________, 1997, by
and among CVS Corporation, the Lenders party thereto, Fleet
National Bank, as Documentation Agent, JP Morgan Securities
Inc., as Syndication Agent, and The Bank of New York, as
Administrative Agent (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement")
Capitalized terms used herein that are not otherwise defined herein
shall have the respective meanings ascribed thereto in the Credit Agreement.
Pursuant to Section 2.3 of the Credit Agreement, the Borrower hereby
gives notice of its intention to borrow Revolving Credit Loans in the aggregate
sum of $____________ on ____________, and/or a Swing Line Loan in the sum of
$____________ on ____________, which borrowing shall consist of the following
type or types of Advances:
Type of
Advance(s) (ABR,
Eurodollar or
Swing Line) Amount Interest Period
- ---------------- ------ ---------------
The Borrower hereby certifies that on the Borrowing Date set forth
above, and after giving effect to the Loans requested hereby:
(a) The Borrower shall be in compliance with all of the terms,
covenants and conditions of each Loan Document.
(b) There shall exist no Default or Event of Default.
<PAGE>
(c) The representations and warranties contained in the Credit
Agreement shall be true and correct, except those which are expressly specified
to be made as of an earlier date.
IN EVIDENCE of the foregoing, the undersigned has caused this Borrowing
Request to be duly executed on its behalf.
CVS CORPORATION
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
- 2 -
<PAGE>
EXHIBIT D
FORM OF OPINION OF
COUNSEL TO THE BORROWER
In connection with the Five Year Credit Agreement, dated as of
____________, 1997, by and among CVS Corporation, the Lenders party thereto,
Fleet National Bank, as Documentation Agent, JP Morgan Securities Inc., as
Syndication Agent, and The Bank of New York, as Administrative Agent (the
"Credit Agreement"), set forth below are the opinions to be included in the
opinion letter referred to in Section 5.4 of the Credit Agreement (collectively,
the "Opinions"). Capitalized terms used in the Opinions and which are not
otherwise defined therein shall have the respective meanings ascribed thereto in
the Credit Agreement.
Opinions:
1. Each of the Borrower and the Subsidiaries is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation (except, in the case of the Subsidiaries, where the
failure to be in such good standing could not reasonably be expected to have a
Material Adverse effect), has all requisite corporate power and authority to own
its Property and to carry on its business as now conducted, and is qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction in which it owns or leases real Property or in which the nature of
its business requires it to be so qualified (except those jurisdictions where
the failure to be so qualified or to be in good standing could not reasonably be
expected to have a Material Adverse effect).
2. The Borrower has full corporate power and authority to enter into,
execute, deliver and perform the terms of the Loan Documents and to consummate
the CVS/Revco Merger in accordance with the CVS/Revco Merger Documents, all of
which have been duly authorized by all proper and necessary corporate action and
are not in contravention of its Certificate of Incorporation and By-Laws. No
consent or approval of, or other action by, shareholders of the Borrower, any
Governmental Authority or any other Person (which has not already been obtained)
is required to authorize in respect of the Borrower, or is required in
connection with the execution, delivery and performance by the Borrower, of the
Loan Documents or in connection with the consummation of the CVS/Revco Merger,
or is required as a condition to the enforceability of the Loan Documents
against the Borrower or as a condition to the CVS/Revco Merger.
3. The Loan Documents constitute the valid and legally binding obligations
of the Borrower, enforceable in accordance with their respective terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or similar laws affecting the enforcement of creditors' rights
generally and by equitable principles, whether considered in a proceeding at law
or in equity, and except to the extent that indemnification obligations may be
limited by federal or state securities laws or public policy relating thereto.
<PAGE>
4. Except as set forth on Schedule 4.4 to the Credit Agreement, to the
best of my/our knowledge, there are no actions, suits, arbitration proceedings
or claims (whether purportedly on behalf of the Borrower, any Subsidiary or
otherwise) pending or threatened against the Borrower or any Subsidiary or any
of their respective Properties, or maintained by the Borrower or any Subsidiary,
at law or in equity, before any Governmental Authority which could reasonably be
expected to have a Material Adverse effect. To the best of my/our knowledge,
there are no proceedings pending or threatened against the Borrower or any
Subsidiary (a) which call into question the validity or enforceability of, or
otherwise seek to invalidate, any Loan Document or invalidate or prevent the
consummation of the CVS/Revco Merger, or (b) which might, individually or in the
aggregate, materially and adversely affect any of the transactions contemplated
by any Loan Document or materially and adversely affect the CVS/Revco Merger.
5. To the best of my/our knowledge, neither the Borrower nor any
Subsidiary is in default under any agreement to which it is a party or by which
it or any of its Property is bound the effect of which could reasonably be
expected to have a Material Adverse effect. No notice to, or filing with, any
Governmental Authority is required for the due execution, delivery and
performance by the Borrower of the Loan Documents or to effect the CVS/Revco
Merger, except for notices and filings required in connection with the CVS/Revco
Merger which have been given and made.
6. No provision of any statute, rule, regulation, or, to the best of
my/our knowledge, any existing material mortgage, material indenture, material
contract, material agreement, judgment, decree or order, in each case binding on
the Borrower or any Subsidiary or affecting the Property of the Borrower or any
Subsidiary conflicts with, or requires any consent which has not already been
obtained under, or would in any way prevent the execution, delivery or
performance by the Borrower of the terms of, any Loan Document or the CVS/Revco
Merger. To the best of my/our knowledge, the execution, delivery or performance
by the Borrower of the terms of each Loan Document and the consummation of the
CVS/Revco Merger will not constitute a default under, or result in the creation
or imposition of, or obligation to create, any Lien upon the Property of the
Borrower or any Subsidiary pursuant to the terms of any such mortgage,
indenture, contract or agreement.
7. To the best of my/our knowledge, neither the Borrower nor any
Subsidiary is in default with respect to any judgment, order, writ, injunction,
decree or decision of any Governmental Authority which default could reasonably
be expected to have a Material Adverse effect. To the best of my/our knowledge,
the Borrower and each Subsidiary is complying with all applicable statutes,
rules and regulations of all Governmental Authorities, a violation of which
could reasonably be expected to have a Material Adverse effect. To the best of
my/our knowledge, the Borrower and each Subsidiary has filed or caused to be
filed with all Governmental Authorities all reports, applications, documents,
instruments and information required to be filed pursuant to all applicable
laws, rules, regulations and requests which, if not so filed, could reasonably
be expected to have a Material Adverse effect.
8. Neither the Borrower or any Subsidiary, nor any corporation controlling
the Borrower or any Subsidiary or under common control with the Borrower or any
Subsidiary, is subject to regulation under the Investment Company Act of 1940,
as
- 2 -
<PAGE>
amended, or is subject to any statute or regulation which regulates the
incurrence of Indebtedness.
9. The Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying any margin stock within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System, as amended. If used in accordance with
Section 2.5 of the Credit Agreement, no part of the proceeds of the Loans or the
Letters of Credit will be used, directly or indirectly, for a purpose which
violates the provisions of Regulations G, T, U or X of the Board of Governors of
the Federal Reserve System, as amended.
- 3 -
<PAGE>
EXHIBIT E
FORM OF OPINION OF
COUNSEL TO THE ADMINISTRATIVE AGENT
____________, 1997
TO THE LENDERS PARTY TO THE CREDIT
AGREEMENT (AS DEFINED BELOW)
Re: Five Year Credit Agreement, dated as of ________, 1997, by and among
CVS Corporation, the Lenders party thereto, Fleet National Bank, as
Documentation Agent, JP Morgan Securities Inc., as Syndication
Agent, and The Bank of New York, as Administrative Agent (the
"Agreement")
We have acted as Special Counsel to the Administrative Agent in connection
with the Agreement. Capitalized terms used herein that are not defined herein
shall have the respective meanings ascribed thereto in the Agreement.
We have examined originals or copies certified to our satisfaction of the
documents required to be delivered pursuant to the provisions of Section 5 of
the Agreement. In conducting such examination, we have assumed the genuineness
of all signatures, the authenticity of all documents submitted to us as
originals, and the conformity to originals of all documents submitted to us as
copies.
Based upon the foregoing examination, and (1) assuming with your
permission the accuracy of the opinion of _________________, _________ counsel
to the Borrower and (2) relying with your permission upon the representations
and warranties of the Borrower contained in the Agreement, we are of the opinion
that all legal preconditions to the effectiveness of the Agreement have been
satisfactorily met.
This opinion is rendered solely for your benefit in connection with the
transactions referred to herein and may not be relied upon by any other Person.
We express no opinion as to laws other than the laws of the State of New
York and the federal laws of the United States of America.
Very truly yours,
<PAGE>
EXHIBIT F
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
Assignment and Acceptance Agreement (as the same may be amended,
supplemented or otherwise modified from time to time, this "Agreement"), dated
as of ____________, by and between ____________ (the "Assignor") and
____________ (the "Assignee").
RECITALS
I. Reference is made to the Five Year Credit Agreement, dated as of
___________, 1997, by and among CVS Corporation, the Lenders party thereto,
Fleet National Bank, as Documentation Agent, JP Morgan Securities Inc., as
Syndication Agent, and The Bank of New York, as Administrative Agent (as the
same may be amended, supplemented or otherwise modified from time to time, the
"Credit Agreement").
II. The Assignor wishes to assign and delegate to the Assignee, and the
Assignee wishes to purchase and assume from the Assignor, some or all of the
Assignor's rights and obligations under the Loan Documents upon the terms, and
subject to the conditions, contained herein.
Therefore, in consideration of the Recitals, the terms and conditions
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Assignor and the Assignee
hereby agree as follows:
1. Defined Terms
(a) Each capitalized term used herein that is not defined herein
shall have the meaning ascribed thereto in the Credit Agreement.
(b) When used in this Agreement, each of the following capitalized
terms shall have the meaning ascribed thereto unless the context hereof
otherwise specifically requires:
"Assigned Percentage": _____%.
"Assignment Effective Date": as defined in Section 5.
"Assignor Rights and Obligations": as of the Assignment Effective
Date, the Assigned Percentage of all of the Assignor's rights and obligations
under the Loan Documents, including, without limitation, such percentage of
its Loans, its Commitment and its Notes.
"Purchase Price": an amount equal to the Assigned Percentage of the
aggregate unpaid principal amount of the Assignor's Loans as of the Assignment
Effective Date.
<PAGE>
2. Assignment; Payment by Assignee
The Assignor hereby assigns and delegates to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, without recourse or,
except as otherwise specifically provided herein, representation or warranty,
the Assignor Rights and Obligations. The Assignee agrees to pay to the Assignor
the Purchase Price on the Assignment Effective Date.
3. Representations and Warranties
(a) Assignor. The Assignor hereby represents and warrants to the
Assignee as follows:
(i) the aggregate unpaid principal amount of its Revolving Credit
Loans is $___________, and such Revolving Credit Loans are composed of the
following ABR Advances and Eurodollar Advances: (1) ABR Advances:
$__________, and (2) Eurodollar Advances: (A) $__________ for [length of
Interest Period], the last day of which is _______________, (B)
$__________ for [length of Interest Period], the last day of which is
_______________,
(ii) the aggregate unpaid principal amount of its Swing Line Loans
is $___________, and such Swing Line Loans are composed of the following:
(A) $__________ for [length of Swing Line Interest Period], the last day
of which is _______________, (B) $__________ for [length of Swing Line
Interest Period], the last day of which is _______________,
(iii) the aggregate unpaid principal amount of its Competitive Bid
Loans is $_________, and such Competitive Bid Loans are composed of the
following: (A) $__________ for [length of Competitive Interest Period],
the last day of which is _______________, (B) $__________ for [length of
Competitive Interest Period], the last day of which is _______________,
and
(iv) its Commitment Amount is $_______.
The Assignor makes no representation or warranty with respect to the
validity or enforceability of the Credit Agreement or any other Loan Document or
the financial condition or creditworthiness of the Borrower.
(b) Assignee. The Assignee hereby represents and warrants to the
Assignor that (i) it is legally authorized to enter into this Agreement, (ii) it
is an "accredited investor" within the meaning of Regulation D, as amended,
promulgated under the Securities Act of 1933, as amended, [and] (iii) it has,
independently and without reliance upon the Assignor or the Administrative
Agent, and based on such documents and information as it has deemed appropriate,
made its own evaluation of, and investigation into, the business, operations,
Property, financial and other condition and creditworthiness of the Borrower and
made its own decision to enter into this Agreement [, and (iv) it is a Lender or
a subsidiary or Affiliate of a Lender].
4. Covenants of the Assignee
The Assignee hereby covenants and agrees that it will, independently
and without reliance upon the Assignor or Administrative Agent, and based on
such
- 2 -
<PAGE>
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, evaluations and decisions in taking or not taking
action under the Loan Documents, and to make such investigation as it deems
necessary to inform itself as to the business, operations, Property, financial
and other condition and creditworthiness of the Borrower. The Assignee further
agrees to provide to the Administrative Agent any forms required by Section 3.10
of the Credit Agreement and any administrative questionnaire reasonably required
by the Administrative Agent.
5. Effectiveness of this Agreement
(a) Section 2 of this Agreement shall not become effective until
such date (the "Assignment Effective Date") as all of the following conditions
shall have been fulfilled:
(i) The Administrative Agent shall have executed a copy of this
Agreement and shall have received duly executed counterparts hereof by
each of the Assignor, the Assignee and, if required by the Credit
Agreement, the Borrower;
(ii) The Assignor shall have delivered to the Assignee (with a copy
to the Administrative Agent) a duly completed letter in the form of Annex
A hereto;
(iii) The Assignee shall have confirmed in writing to the Assignor
(with a copy to the Administrative Agent) that, on or before the
Assignment Effective Date, it shall have transferred (in accordance with
Section 6 hereof) the Purchase Price to the Assignor. At the time of such
confirmation, the Assignee shall be deemed to have remade the
representations and warranties contained in Section 3(b)(i), (ii) [and]
(iii) [, and (iv)] hereof on and as of the date of such confirmation;
(iv) The Administrative Agent shall have received, for its own
account, the assignment fee required to be paid pursuant to Section 11.7
of the Credit Agreement; and
(v) The Administrative Agent shall have received any forms required
by Section 3.10 of the Credit Agreement and any administrative
questionnaire reasonably required by the Administrative Agent.
(b) Upon the Assignment Effective Date, (i) the Administrative Agent
shall record the assignment contemplated hereby, (ii) the Assignee shall be a
Lender, and (iii) the Assignor, to the extent of the assignment provided for
herein, shall be released from its obligations under the Loan Documents.
(c) The Assignee hereby appoints and authorizes the Administrative
Agent to take such action, on and after the Assignment Effective Date, as agent
on its behalf and to exercise such powers under the Loan Documents as are
delegated to the Administrative Agent by the terms thereof, together with such
powers as are reasonably incidental thereto.
(d) From and after the Assignment Effective Date, the Administrative
Agent shall make all payments in respect of the interest assigned hereby
(including payments of principal, interest, fees and other amounts) to the
Assignee. The Assignor
- 3 -
<PAGE>
and the Assignee shall make all appropriate adjustments with respect to amounts
under the Loan Documents which accrued prior to the Assignment Effective Date,
and which were paid thereafter, directly between themselves.
6. Payment Instructions
All payments to be made to the Assignor by the Assignee hereunder
shall be made by wire transfer of immediately available funds to the Assignor
at: [Wire Instructions].
7. Notices
All notices, requests and demands to or upon the Assignee in
connection with this Agreement and the Loan Documents are to be sent or
delivered to the place set forth adjacent to its name on the signature page(s)
hereof.
8. Miscellaneous
(a) For purposes of this Agreement, all calculations and
determinations with respect to the outstanding principal amount of the
Assignor's Loans, the Assignor's Commitment Amount and all other similar
calculations and determinations, shall be made and shall be deemed to be made as
of the commencement of business on the date of such calculation or
determination, as the case may be.
(b) Section headings have been inserted herein for convenience only
and shall not be construed to be a part hereof.
(c) This Agreement embodies the entire agreement and understanding
among the parties hereto with respect to the subject matter hereof and
supersedes all other prior arrangements and understandings among the parties
hereto with respect to the subject matter hereof.
(d) This Agreement may be executed in any number of separate
counterparts and all of said counterparts taken together shall be deemed to
constitute one and the same agreement. It shall not be necessary in making proof
of this Agreement to produce or account for more than one counterpart signed by
the party to be charged.
(e) Every provision of this Agreement is intended to be severable,
and if any term or provision hereof shall be invalid, illegal or unenforceable
for any reason, the validity, legality and enforceability of the remaining
provisions hereof shall not be affected or impaired thereby, and any invalidity,
illegality or unenforceability in any jurisdiction shall not affect the
validity, legality or enforceability of any such term or provision in any other
jurisdiction.
(f) This Agreement shall be binding upon and inure to the benefit of
the Assignor and the Assignee and their respective successors and permitted
assigns, except that neither party may assign or transfer any of its rights or
obligations hereunder (i) without the prior written consent of the other party,
and (ii) in contravention of the Credit Agreement.
- 4 -
<PAGE>
(g) This Agreement and the rights and obligations of the parties
hereunder shall be governed by, and construed and interpreted in accordance
with, the internal laws of the State of New York without regard to principles of
conflicts of law.
- 5 -
<PAGE>
AS EVIDENCE of the agreement by the parties hereto to the terms and
conditions herein contained, each such party has caused this Agreement to be
duly executed on its behalf.
[NAME OF ASSIGNOR]
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Address for notices: [NAME OF ASSIGNEE]
- ---------------------------- By:
-------------------------------
- ---------------------------- Name:
-----------------------------
- ---------------------------- Title:
----------------------------
Attention: _________
Telephone:_____________
Facsimile:_____________
Consented to and Accepted this __ day
of __________, ____
THE BANK OF NEW YORK, as Administrative Agent
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
[Consented to this __ day
of __________, ____
CVS CORPORATION
By:
-------------------------------
Name:
-----------------------------
Title: ]
----------------------------
- 6 -
<PAGE>
ANNEX A TO ASSIGNMENT AND
ACCEPTANCE AGREEMENT
FORM OF LETTER
[Assignment Effective Date]
[Name and Address of Assignee]
Attention: _______________,
_______________
Re: Assignment and Acceptance Agreement, dated as of
_______________, by and between _______________ and
_______________ (as the same may be amended, supplemented or
otherwise modified from time to time, the "Agreement")
Ladies and Gentlemen:
This letter is being delivered pursuant to Section 5(a)(ii) of the
Agreement. Capitalized terms used herein that are not otherwise defined herein
shall have the respective meanings ascribed thereto in the Agreement.
The Assignor hereby represents and warrants to the Assignee as
follows:
(i) the aggregate unpaid principal amount of its Revolving Credit
Loans is $___________, and such Revolving Credit Loans are composed of the
following ABR Advances and Eurodollar Advances: (1) ABR Advances:
$__________, and (2) Eurodollar Advances: (A) $__________ for [length of
Interest Period], the last day of which is _______________, (B)
$__________ for [length of Interest Period], the last day of which is
_______________,
(ii) the aggregate unpaid principal amount of its Swing Line Loans
is $___________, and such Swing Line Loans are composed of the following:
(A) $__________ for [length of Swing Line Interest Period], the last day
of which is _______________, (B) $__________ for [length of Swing Line
Interest Period], the last day of which is _______________,
(iii) the aggregate unpaid principal amount of its Competitive Bid
Loans is $_________, and such Competitive Bid Loans are composed of the
following: (A) $__________ for [length of Competitive Interest Period],
the last day of which is _______________, (B) $__________ for [length of
Competitive Interest Period], the last day of which is _______________,
(iv) its Commitment Amount is $_______, and
<PAGE>
(v) it is the legal and beneficial owner of the Assignor Rights and
Obligations free and clear of any adverse claim created by it.
Very truly yours,
[NAME OF ASSIGNOR]
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
cc: [Name and title
of Administrative Agent contact]
- 2 -
<PAGE>
EXHIBIT G
FORM OF COMPETITIVE BID REQUEST
[Date]
The Bank of New York, as Administrative Agent
One Wall Street
New York, New York 10286
Attention: ______________,
______________
Re: Five Year Credit Agreement, dated as of ___________, 1997, by and
among CVS Corporation, the Lenders party thereto, Fleet National
Bank, as Documentation Agent, JP Morgan Securities Inc., as
Syndication Agent, and The Bank of New York, as Administrative Agent
(as amended, supplemented or otherwise modified from time to time,
the "Credit Agreement")
Capitalized terms used herein that are not otherwise defined herein
shall have the respective meanings ascribed thereto in the Credit Agreement.
Pursuant to Section 2.4 of the Credit Agreement, the Borrower hereby
gives notice of its request to borrow Competitive Bid Loans in the aggregate sum
of $____________ on ____________, which borrowing shall consist of the
following:
Competitive
Amount Interest Period
------ ---------------
The Borrower hereby certifies that on the Borrowing Date set forth
above, and after giving effect to the Competitive Bid Loans requested hereby:
(a) The Borrower shall be in compliance with all of the terms,
covenants and conditions of each Loan Document.
(b) There shall exist no Default or Event of Default.
<PAGE>
(c) The representations and warranties contained in the Credit
Agreement shall be true and correct, except those which are expressly specified
to be made as of an earlier date.
IN EVIDENCE of the foregoing, the undersigned has caused this Competitive
Bid Request to be duly executed on its behalf.
CVS CORPORATION
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
- 2 -
<PAGE>
EXHIBIT H
FORM OF INVITATION TO BID
[Date]
To the Lenders party
from time to time to the
captioned Credit Agreement
Re: Five Year Credit Agreement, dated as of ___________, 1997, by and
among CVS Corporation, the Lenders party thereto, Fleet National
Bank, as Documentation Agent, JP Morgan Securities Inc., as
Syndication Agent, and The Bank of New York, as Administrative Agent
(as amended, supplemented or otherwise modified from time to time,
"Credit Agreement")
Capitalized terms used herein that are not otherwise defined herein
shall have the respective meanings ascribed thereto in the Credit Agreement.
Pursuant to a Competitive Bid Request, the Borrower gave notice of
its request to borrow Competitive Bid Loans in the aggregate sum of
$____________ on ____________, which borrowing would consist of the following
type or types of Competitive Advances:
Competitive
Amount Interest Period
------ ---------------
The Lenders are hereby invited to bid, pursuant to the terms and
conditions of the Credit Agreement, on such requested Competitive Bid Loans.
THE BANK OF NEW YORK,
as Administrative Agent
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE>
EXHIBIT I
FORM OF COMPETITIVE BID
[Date]
The Bank of New York, as Administrative Agent
One Wall Street
New York, New York 10286
Attention: _________________,
_________________
Re: Five Year Credit Agreement, dated as of ___________, 1997, by and
among CVS Corporation, the Lenders party thereto, Fleet National
Bank, as Documentation Agent, JP Morgan Securities Inc., as
Syndication Agent, and The Bank of New York, as Administrative Agent
(as amended, supplemented or otherwise modified from time to time,
the "Credit Agreement")
Capitalized terms used herein that are not otherwise defined herein
shall have the respective meanings ascribed thereto in the Credit Agreement.
In response to a Competitive Bid Request, the undersigned Lender
hereby offers to make Competitive Loan(s) in the aggregate sum of $____________
on ____________:
Comptetitive
Interest Competitive
Amount Period Bid Rate
------ ------------ -----------
[fixed rate]
[LENDER]
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE>
EXHIBIT J
FORM OF COMPETITIVE BID ACCEPT/REJECT LETTER
[Date]
The Bank of New York, as Administrative Agent
One Wall Street
New York, New York 10286
Attention: ______________,
______________
Re: Five Year Credit Agreement, dated as of ___________, 1997, by and
among CVS Corporation, the Lenders party thereto, Fleet National
Bank, as Documentation Agent, JP Morgan Securities Inc., as
Syndication Agent, and The Bank of New York, as Administrative Agent
(as amended, supplemented or otherwise modified from time to time,
the "Credit Agreement")
Capitalized terms used herein that are not otherwise defined herein
shall have the respective meanings ascribed thereto in the Credit Agreement.
Pursuant to Section 2.4(d) of the Credit Agreement, the Borrower
hereby gives notice of its acceptance of the following Competitive Bids:
------------- ---------------
------------- ---------------,
and its rejection of all other Competitive Bids, in each case made pursuant to
the Competitive Bid Request, dated _______________.
IN EVIDENCE of the foregoing, the undersigned has caused this Competitive
Bid Accept/Reject Letter to be duly executed on its behalf.
CVS CORPORATION
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE>
EXHIBIT K
FORM OF LETTER OF CREDIT REQUEST
[Date]
The Bank of New York, as Administrative Agent
One Wall Street
New York, New York 10286
Attention: ______________,
______________
Re: Five Year Credit Agreement, dated as of ___________, 1997, by and
among CVS Corporation, the Lenders party thereto, Fleet National
Bank, as Documentation Agent, JP Morgan Securities Inc., as
Syndication Agent, and The Bank of New York, as Administrative Agent
(as amended, supplemented or otherwise modified from time to time,
the "Credit Agreement")
Capitalized terms used herein that are not otherwise defined herein
shall have the respective meanings ascribed thereto in the Credit Agreement.
Pursuant to Section 2.8(b) of the Credit Agreement, the Borrower
hereby gives notice of its intention to have issued by the Issuer a Letter of
Credit for the account of the Borrower and for the benefit of
______________________ on ____________ in connection with
___________________________ in the maximum amount of $_______________. A drawing
may be made under such Letter of Credit under the following conditions:
_______________________________________________.
The Borrower hereby certifies that on the above requested date of
issuance of such Letter of Credit, and after giving effect to the issuance of
such Letter of Credit:
(a) The Borrower shall be in compliance with all of the terms,
covenants and conditions of each Loan Document.
(b) There shall exist no Default or Event of Default.
(c) The representations and warranties contained in the Credit
Agreement shall be true and correct, except those which are expressly specified
to be made as of an earlier date.
<PAGE>
IN EVIDENCE of the foregoing, the undersigned has caused this Letter of
Credit Request to be duly executed on its behalf.
CVS CORPORATION
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
- 2 -
<PAGE>
SCHEDULE 4.4
LIST OF LITIGATION
NONE
<PAGE>
SCHEDULE 8.2
LIST OF LIENS
NONE
<PAGE>
PREVIOUSLY DELIVERED TO EACH APPLICABLE LENDER
<PAGE>
CERTIFICATE OF SECRETARY
I, Zenon P. Lankowsky, Secretary of CVS Corporation, a Delaware
corporation (the "Borrower"), do hereby certify, in my capacity as Secretary of
the Borrower (and not in my individual capacity) pursuant to Section 5.I of the
Five Year Credit Agreement by and among the Borrower, the lenders party thereto,
Fleet National Bank, as Documentation Agent, JP Morgan Securities Inc., as
Syndication Agent and The Bank of New York, as Administrative Agent dated as of
May 23, 1997 (the "Credit Agreement") that:
1. Attached hereto as Exhibit A is a true and complete copy of the
Certificate of Incorporation of the Borrower as in full force and effect on the
date hereof.
2. Attached hereto as Exhibit B is a true and complete copy of the By-Laws
of the Borrower as in full force and effect on the date hereof.
3. Attached her