OPTION AGREEMENT
dated as of August 12, 1999
between
BRADLEES, INC.
BRADLEES STORES, INC.
and
CERTAIN HOLDERS OF 9% SECURED CONVERTIBLE
NOTES OF BRADLEES STORES, INC. DUE 2004
TABLE OF CONTENTS
1. Reference to Indenture; Definitions......................... 2
2. Call Option................................................. 2
2.1 Grant of Call Option................................ 2
2.2 Option Premium...................................... 2
2.3 Call Option Exercise Price.......................... 3
2.4 Expiration of Call Option........................... 4
2.5 Exercise of Call Option............................. 5
2.6 Closing............................................. 5
3. Put Option.................................................. 8
3.1 Grant of Put Option................................. 8
3.2 Put Option Purchase Price........................... 8
3.3 Exercise of Put Option.............................. 8
3.4 Closing............................................. 9
4. Grant of Security; Substitution of Security................. 10
5. Conditions to Effectiveness of Agreement.................... 11
6. Representations and Warranties of Noteholders................ 13
6A. Covenants of Noteholders.................................... 15
7. Representations and Warranties of Bradlees and BSI.......... 16
8. Notices..................................................... 17
9. Miscellaneous............................................... 18
9.1 Assignment.......................................... 18
9.2 Further Assurances.................................. 19
9.3 Choice of Law....................................... 19
9.4 Survival............................................ 19
9.5 Successors and Assigns.............................. 20
9.6 Counterpart Execution............................... 20
9.7 Amendments; Waivers................................. 20
9.8 Integration......................................... 21
9.9 Captions and Headings............................... 21
9.10 Restrictive Legend................................. 21
9.11 Expenses........................................... 21
9.12 Reaffirmation of Indebtedness Under Notes.......... 22
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Schedules
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Schedule A - Noteholders and Principal Amounts of Discount Option Notes
Schedule B - Wire Instructions
Exhibits
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Exhibit A - Call Option Exercise Notice
Exhibit B - Put Option Exercise Notice
Exhibit C - Mortgage
Exhibit D - Credit Agreement Consent
Exhibit E - Collateral Agency Agreement
Exhibit F - Assignment Notice
ii
OPTION AGREEMENT
----------------
THIS OPTION AGREEMENT (this "AGREEMENT") made as of the 12th day of August,
1999 by and between certain holders of 9% Secured Convertible Notes Due 2004
(the "NOTES") of Bradlees Stores, Inc. ("BSI") listed on Schedule A attached
hereto and their successors and assigns (the "NOTEHOLDERS"), BSI and Bradlees,
Inc. ("BRADLEES").
W I T N E S S E T H:
- - - - - - - - - --
WHEREAS, BSI, as issuer, Bradlees, as guarantor, New Horizons of Yonkers,
Inc., as guarantor and IBJ Whitehall Bank & Trust Company, as trustee (the
"TRUSTEE") have entered into an Indenture dated February 2, 1999 pursuant to
which BSI issued the Notes (the "INDENTURE");
WHEREAS, Bradlees and BSI have requested that the Noteholders grant
Bradlees a Call Option (as defined below) for Notes held by the Noteholders on
the terms set forth herein and have agreed (a) that BSI and Bradlees shall grant
the Noteholders a Put Option (as defined below) with respect to such Notes held
by the Noteholders on the terms set forth herein, and (b) that BSI shall grant
additional collateral to secure such Notes and the obligations of Bradlees and
BSI under the Call Option and the Put Option;
WHEREAS, the Noteholders have agreed to grant the Call Option in exchange
for (a) an option premium on the terms set forth herein, (b) the grant of the
Put Option, and (c) the grant of additional collateral to secure the Call
Option, the Put Option and the Discount Option Notes;
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NOW, THEREFORE, in consideration of the premises and of the mutual
agreement herein contained and other good and valuable consideration each to the
other in hand paid, the receipt and legal sufficiency whereof is hereby
acknowledged, the parties hereto covenant and agree as follows:
1. Reference to Indenture; Definitions. Terms used herein and not defined
-----------------------------------
herein are used as defined in the Indenture.
2. Call Option.
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2.1 Grant of Call Option. In consideration of the Option Premium (as
--------------------
defined below), the grant of the Put Option, the grant of additional collateral
to secure the Call Option, the Put Option and the Discount Option Notes, and
other good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, each of the Noteholders does hereby grant, bargain and sell
to Bradlees an option (the "CALL OPTION") to purchase all of the Notes labeled
with a restrictive legend as provided in Section 9.10 hereof held by each of
such Noteholders in a principal amount as set forth on Schedule A attached
hereto with respect to such Noteholder (the "DISCOUNT OPTION NOTES").
2.2 Option Premium. On the Effective Date (as defined below), Bradlees
--------------
shall pay to each Noteholder an option premium equal to one half of one percent
(.5%) of the principal amount of the Discount Option Notes as set forth with
respect to such Noteholder on Schedule A attached hereto, less, in the case of
each Noteholder other than a Majority Noteholder (as defined below), an amount
equal to the Majority Noteholder Expenses (as defined below) paid by Bradlees or
BSI to the Majority Noteholders pursuant Section 9.11 hereof, multiplied by a
fraction the numerator of which is the principal amount of Discount
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Option Notes of such Noteholder as set forth on Schedule A attached hereto and
the denominator of which is the principal amount of Discount Option Notes of all
Noteholders other than the Majority Noteholders as set forth on Schedule A
attached hereto (the "OPTION PREMIUM").
2.3 Call Option Exercise Price. On the Call Option Closing Date (as
--------------------------
defined below) Bradlees shall pay to each Noteholder an amount equal to (a) the
principal amount of Discount Option Notes specified in a Call Option Exercise
Notice (as defined below) multiplied by a percentage (the "DISCOUNT PERCENTAGE")
as set forth below based upon the date on which the Call Option Closing Date
occurs, plus (b) unpaid interest accrued through the date preceding the Call
Option Closing Date on the principal amount specified in the Call Option
Exercise Notice (the "CALL OPTION PURCHASE PRICE"):
If the Call Option Closing Date
occurs during the following periods: Then the Discount Percentage shall be:
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On or after December 1, 1999 but before
January 1, 2000 86%
On or after January 1, 2000 but before
February 1, 2000 87%
On or after February 1, 2000 but before
March 1, 2000 88%
On or after March 1, 2000 but before
April 1, 2000 89%
On or after April 1, 2000 but before
May 1, 2000 90%
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On or after May 1, 2000 but before
June 1, 2000 91%
On or after June 1, but before
July 1, 2000 92%
On or after July 1, 2000, but before
August 1, 2000 93%
On or after August 1, 2000 but before
September 1, 2000 94%
On or after September 1, 2000 but
before October 1, 2000 95%
On or after October 1, 2000 but before
November 1, 2000 96%
On or after November 1, 2000 but before
December 1, 2000 97%
On or after December 1, 2000 but before
January 1, 2001 98%
On or after January 1, 2001 but before
February 1, 2001 99%
On or after February 1, 2001 100%
2.4 Expiration of Call Option. The Call Option shall be exercisable in
-------------------------
whole, or from time to time in part as provided in Section 2.5 hereof,
commencing on or after December 1, 1999 and shall expire on the earliest to
occur of the following (the "CALL OPTION EXPIRATION DATE"): (a) February 3,
2004, or (b) the date of any accelerated maturity of the Notes as provided in
Section 8.2 of the Indenture. Nothing herein is intended to limit or modify
BSI's right to redeem Notes pursuant to Section 3.2 of the Indenture.
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2.5 Exercise of Call Option. The Call Option shall be a one-time
-----------------------
option that is exercisable only with respect to all outstanding Discount Option
Notes. From time to time after December 1, 1999 and until the Call Option
Expiration Date, Bradlees may exercise the Call Option by delivering a notice
(the "CALL OPTION EXERCISE NOTICE") to each of the Noteholders at the addresses
and in the manner provided in Section 8 hereof. The Call Option Exercise Notice
shall be substantially in the form of Exhibit A hereto and shall state: (i) that
the Call Option is exercised in respect of all outstanding Discount Option
Notes, (ii) the principal amount of the Discount Option Notes of such Noteholder
for which the Call Option is being exercised, (iii) the Scheduled Call Option
Closing Date (as defined below) and (iv) the Call Option Purchase Price payable
to such Noteholder based on the Scheduled Call Option Closing Date. The Call
Option may not be exercised in connection with any mandatory redemptions of the
Notes pursuant to Section 3.1 of the Indenture and no proceeds of collateral
securing the Notes or the Discount Option Notes may be applied to the payment of
the Call Option Exercise Price.
2.6 Closing. (a) If Bradlees timely delivers the Call Option
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Exercise Notice in accordance with the terms hereof and the conditions to the
Noteholders' obligation to close hereunder are satisfied, then the Noteholders
shall be, and remain, obligated to transfer and assign to Bradlees all of such
Noteholders' right, title and interest in, to and under the Discount Option
Notes (the "CALL OPTION ASSIGNMENT") in accordance with the terms of this
Agreement. The closing of the Call Option Assignment (the "CALL OPTION CLOSING")
shall take place on the Business Day specified in the Call Option Exercise
Notice, which shall be no earlier than the fifth Business Day after receipt of
the Call Option Exercise Notice by the
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Noteholders (the "SCHEDULED CALL OPTION CLOSING DATE"), at the offices of
Xxxxxxx, Procter & Xxxx XXX, Xxxxxxxx Xxxxx, Xxxxxx, XX 00000. At the Call
Option Closing, each Noteholder shall sell, transfer, assign, grant, set over
and convey to Bradlees, and its successors and assigns, without recourse,
representation or warranty of any kind (except that such Noteholder shall
represent that it is the only legal and beneficial owner of, and has good title
to the Discount Option Notes specified in the Put Option Exercise Notice and
that such Discount Option Notes have not been pledged, encumbered, assigned,
transferred, conveyed, disposed of or terminated, in whole or in part), all of
such Noteholder's right, title and interest in, to and under the Discount Option
Notes that are subject to the Call Option Exercise Notice in accordance with the
terms of this Agreement for and in consideration of the Call Option Purchase
Price.
(b) At the Call Option Closing, and as a condition to each
Noteholder's obligation to close:
(i) Bradlees shall deliver to such Noteholder an amount equal to
the Call Option Purchase Price payable to such Noteholder by wire
transfer in accordance with wire instructions set forth on Schedule B
hereto or such other wire instructions specified in a notice by such
Noteholder to Bradlees received on or before the Scheduled Call Option
Closing Date;
(ii) the Noteholders that are original signatories to this
Agreement shall have received and be entitled to retain the Option
Premium, and
(iii) the Call Option Expiration Date shall not have occurred.
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(c) At the Call Option Closing, and as a condition to Bradlees=
obligation to close with respect to each Discount Option Note, the Noteholder of
such Discount Option Note shall deliver to Bradlees (i) the original Discount
Option Note, or (ii) if the Noteholder represents that such note cannot be
located after diligent search, a lost note affidavit and indemnification in
customary form.
(d) As used herein the term "CALL OPTION CLOSING DATE" shall refer to
the date not earlier than the Scheduled Call Option Closing Date on which all of
the Noteholders' conditions to close pursuant to Section 2.6(b) hereof have been
satisfied.
(e) In the event any Noteholder fails to deliver to Bradlees at the
Call Option Closing Date any original Discount Option Note or lost note
affidavit and indemnification as required by Section 2.6(c) (the "UNDELIVERED
NOTES"), then Bradlees shall deliver the Call Option Purchase Price payable to
such Noteholder with respect to such Undelivered Notes to a national bank
selected by Bradlees (the "PAYING AGENT"), to be held by the Paying Agent in an
interest bearing account for such Noteholder. Such Noteholder, and any
successor or assign of such Noteholder, shall thereupon cease to have any rights
with respect to the Undelivered Notes (including any rights to convert or
otherwise enforce the Undelivered Notes against Bradlees or BSI or to collect
and receive from BSI any principal, interest or other amount under the
Undelivered Notes), and the sole right of such Noteholder, and any successor or
assign of such Noteholder, with respect thereto shall be the right to receive
from the Paying Agent the Call Option Purchase Price, with any interest accrued
thereon.
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3. Put Option.
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3.1 Grant of Put Option. In consideration of the grant of the Call
-------------------
Option and other good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged, BSI and Bradlees do hereby grant, bargain and sell
to each Noteholder an option (the "PUT OPTION") to sell to BSI or Bradlees a
principal amount of the Discount Option Notes held by such Noteholder.
3.2 Put Option Purchase Price. Upon exercise of the Put Option by a
-------------------------
Noteholder, BSI or Bradlees shall pay to such Noteholder an amount equal to (a)
the principal amount of the Discount Option Notes held by such Noteholder on the
Put Option Closing Date (as defined below), plus (b) unpaid interest on the
Discount Option Notes held by such Noteholder accrued through the date preceding
the Put Option Closing Date (the "PUT OPTION PURCHASE PRICE").
3.3 Exercise of Put Option. The Put Option shall be deemed exercised
----------------------
on earlier of (a) February 3, 2004, or (b) the date of any accelerated maturity
of the Notes as provided in Section 8.2 of the Indenture. In addition, any
Noteholder may exercise the Put Option by delivering notice of the exercise of
the Put Option to BSI and Bradlees on or after February 3, 2003 at the address
and in the manner provided in Section 8 hereof (the "PUT OPTION EXERCISE
NOTICE"). The Put Option Exercise Notice shall be substantially in the form of
Exhibit B hereto and shall state: (i) that the Put Option has been exercised
with respect to all Discount Option Notes held by such Noteholder, (ii) the
principal amount of all Discount Option Notes of such Noteholder, (iii) the
Scheduled Put Option Closing Date (as defined
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below), and (iv) the Put Option Purchase Price payable based on the Scheduled
Put Option Closing Date.
3.4 Closing. (a) If a Noteholder delivers the Put Option Exercise
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Notice in accordance with the terms hereof or if the Put Option is deemed
exercised pursuant to Section 3.3 hereof, BSI and Bradlees may by notice to such
Noteholder elect whether BSI or Bradlees shall receive an assignment of the
Discount Option Notes but shall each be, and remain, jointly and severally
obligated to pay to such Noteholder the Put Option Purchase Price. The closing
of the Put Option (the "PUT OPTION CLOSING") shall take place on (i) the day
that the Put Option is deemed exercised pursuant to the first sentence of this
Section 3.4 or (ii) the Business Day specified in the Put Option Exercise
Notice, which shall be no earlier than the fifth Business Day after receipt of
the Put Option Exercise Notice by BSI and Bradlees (the "SCHEDULED PUT OPTION
CLOSING DATE"), at the offices of Xxxxxxx, Procter & Xxxx XXX, Xxxxxxxx Xxxxx,
Xxxxxx, XX 00000. At the Put Option Closing, each Noteholder shall sell,
transfer, assign, grant, set over and convey to BSI (or Bradlees if BSI and
Bradlees have by notice to the Noteholders elected Bradlees to receive an
assignment of the Discount Option Notes), and its successors and assigns,
without recourse, representation or warranty of any kind (except that such
Noteholder shall represent that it is the only legal and beneficial owner of,
and has good title to the Discount Option Notes, specified in the Put Option
Exercise Notice and that such Discount Option Notes have not been pledged,
encumbered, assigned, transferred, conveyed, disposed of or terminated, in whole
or in part), all of such Noteholders's right, title and interest in, to and
under the Discount Option Notes held by such Noteholder for and in consideration
of the Put Option Purchase Price.
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(b) At the Put Option Closing, and as a condition to each
Noteholder's obligation to close, BSI or Bradlees shall deliver to such
Noteholder an amount equal to the Put Option Purchase Price by wire transfer in
accordance with wire instructions set forth on Schedule B hereto or such other
wire instructions specified in a notice by such Noteholder to Bradlees received
on or before the Scheduled Put Option Closing Date;
(c) At the Put Option Closing, and as a condition to BSI's obligation
to close with respect to each Discount Option Note, the Noteholder of such
Discount Option Note shall deliver to BSI (i) the original Discount Option Note,
or (ii) if the Noteholder represents that such Discount Option Note cannot be
located after diligent search, a lost note affidavit and indemnification in
customary form.
(d) As used herein, the term "PUT OPTION CLOSING DATE" shall refer to
the date not earlier than the Scheduled Put Option Closing Date on which all of
the conditions to close set forth in Sections 3.4(a), (b) and (c) hereof have
been satisfied.
4. Grant of Security; Substitution of Security. As security for the punctual
-------------------------------------------
payment and performance of the obligations of Bradlees and BSI under the
Discount Option Notes and this Agreement, including obligations in respect of
the Put Option and the Call Option, BSI will execute and deliver to SND Holding
Corporation, as collateral agent for the benefit of the Noteholders (the
"COLLATERAL AGENT"), a Leasehold Mortgage, Security Agreement, Assignment of
Leases, Rents and Profits and Fixture Financing Statement with respect to BSI's
leasehold interests in property located in Norwalk, Connecticut, Saddlebrook,
New Jersey and Danbury, Connecticut in the form of Exhibit C hereto (the
"MORTGAGE"). At BSI's request and at BSI's sole cost and expense, the Collateral
Agent shall amend the
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Mortgage to release the lien of the Mortgage with respect to the BSI's
leasehold interest in property located in Danbury, Connecticut (the "DANBURY
LEASEHOLD INTEREST") in connection with the grant to the Collateral Agent of a
first priority mortgage or other security interest on property of a value equal
to the greater of $3.7 million or the value of the Danbury Leasehold Interest
provided that, BSI shall have no right to substitute collateral in connection
with a sale of the Danbury Leasehold Interest. At the request of the Collateral
Agent, BSI shall provide current appraisals, from an appraisal firm reasonably
acceptable to the Collateral Agent, of the value of the Danbury Leasehold
Interest and any proposed substitute collateral.
5. Conditions to Effectiveness of Agreement. This Agreement shall be effective
----------------------------------------
on the date on or before August 31, 1999 on which this Agreement has been
executed and the following conditions are satisfied (the "EFFECTIVE DATE"):
(a) Credit Agreement Consent. BSI, Bradlees and the lenders party to
------------------------
the Revolving Credit and Guaranty Agreement among BSI, Bradlees and certain
lenders party thereto dated February 2, 1999 (the "Credit Agreement") shall have
entered into a consent to the transactions contemplated herein in the form of
Exhibit F attached hereto ("CREDIT AGREEMENT CONSENT").
(b) Collateral Agency Agreement. Each of the Noteholders and the
---------------------------
Collateral Agent shall have executed and delivered a Collateral Agency Agreement
in the form of Exhibit G attached hereto (the "COLLATERAL AGENCY AGREEMENT").
(c) Security Documents. BSI shall have executed and delivered
------------------
Mortgage and the Collateral Agent shall have recorded the Mortgage, UCC
financing statements and other
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documents sufficient to perfect a security interest in the collateral described
therein in favor of the Collateral Agent, subject only to liens in favor of the
Trustee.
(d) Option Premium and Majority Noteholder Expenses. Each Noteholder
-----------------------------------------------
shall have received the Option Premium applicable to such Noteholder and
Bradlees and BSI shall have paid the Majority Noteholder Expenses to the
Majority Noteholders.
(e) Restrictive Legend. Pursuant to Section 2.4(a) of the Indenture,
------------------
with respect to Notes held in physical form by the Noteholders, each Noteholder
shall have delivered Notes to BSI in principal amount equal to or exceeding the
principal amount set forth with respect to such Noteholder on Schedule A
attached hereto and BSI shall have delivered to such Noteholder (i) a Note in
such principal amount, having a legend as set forth in Section 9.10 hereof, and
(ii) if the principal amount of the Note delivered exceeds the principal amount
set forth with respect to such Noteholder on Schedule A attached hereto, a Note
in a principal amount equal to such excess amount, which shall not bear any
legend. Pursuant to Section 2.4(b) of the Indenture, with respect to Notes of
any Noteholder represented by Global Notes, (i) BSI shall have executed and
delivered to the Trustee an Issuer Order for the exchange of such Global Note,
in whole or part, for a Physical Note payable to such Noteholder in the
principal amount set forth in respect of such Noteholder on Schedule A attached
hereto and (ii) such Noteholder shall have delivered such Physical Note to BSI
and BSI shall have delivered such Note to such Noteholder, having a legend as
set forth in Section 9.10 hereof.
(f) Closing Certificates. Each of BSI and Bradlees shall have
--------------------
delivered to the Collateral Agent a customary closing certificate in form and
substance satisfactory to the Collateral Agent.
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(g) Legal Opinions of Counsel to Bradlees and BSI. The Collateral
-------------------------
Agent shall have received an opinion or opinions of counsel to Bradlees and BSI
in form and substance acceptable to the Collateral Agent concerning the
authorization, execution and delivery and enforceability of this Agreement and
the Collateral Agency Agreement, the authorization, execution, and delivery of
the Mortgage and the existence of no conflicts with respect to the Credit
Agreement and the Indenture.
(h) Legal Opinions of Counsel to Noteholders. Bradlees and BSI shall
----------------------------------------
have received an opinion or opinions of counsel to each of the Noteholders in
form and substance acceptable to Bradlees and BSI concerning the authorization,
execution, delivery and enforceability of this Agreement and the Collateral
Agency Agreement and the existence of no conflicts with respect to the charter,
By-laws, partnership agreement, limited liability company agreement or other
organizational documents of the Noteholder.
(i) Title Insurance. The Collateral Agent shall have received
---------------
mortgagee's title insurance policies with respect to each of the leasehold
interests subject to the Mortgage and shall be satisfied with the condition of
such title.
6. Representations and Warranties of Noteholders.
-------------------------------------------------
Each Noteholder hereby represents and warrants to Bradlees and BSI that:
(a) Such Noteholder is a duly organized, validly existing and in good
standing in its respective jurisdiction of formation under the laws of such
jurisdiction and has the requisite power and authority to enter into, execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery or performance of this Agreement
will not result in any breach of any provision of, or constitute a
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default (or an event which with notice or lapse of time or both would constitute
a default) under, any organizational documents or bylaws such Noteholder, or any
material agreement or instrument to which Noteholder is a party or by which it
is bound, or any statute, order, rule or regulation of any court or other
governmental authority applicable to it.
(b) This Agreement has been duly and validly authorized, executed and
delivered by such Noteholder, and constitutes the legal, valid and binding
obligation of such Noteholder enforceable against such Noteholder in accordance
with its terms.
(c) Such Noteholder is the only legal and beneficial owner of, and has
good title to, the Discount Option Notes in a principal amount as set forth on
Schedule A attached hereto. Such Discount Option Notes have not been pledged,
encumbered, assigned, transferred, conveyed, disposed of or terminated in whole
or in part. The principal amount of the Discount Option Notes of such
Noteholder set forth on Schedule A attached hereto is equal to (i) the principal
amount of all Notes held by such Noteholder on the Effective Date, if a sale of
the Yonkers Property for a price of $15 million or more has occurred and such
Noteholder has received its pro rata share of the Net Proceeds of such sale as a
mandatory prepayment of the Notes pursuant to Section 3.1 of the Indenture, or
(ii) 48.27% of the principal amount of the Notes held by such Noteholder on the
Effective Date (rounded down to the nearest $1,000), if a sale of the Yonkers
Property for a price of $15 million or more has not occurred or such Noteholder
has not received its pro rata share of the Net Proceeds of such sale as a
mandatory prepayment of the Notes pursuant to Section 3.1 of the Indenture.
(d) No registration with, or consent or approval of, or any other
action by, any federal, state or governmental agency, authority, administrative
or regulatory body,
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arbitrator, court or other tribunal, foreign or domestic, is required for the
execution, delivery and performance of this Agreement by such Noteholder or the
sale by such Noteholder of the Discount Option Notes that has not been obtained.
(e) Such Noteholder is an "accredited investor" as defined in Rule 501
of the Securities Act of 1933, as amended. Such Noteholder has such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of this Agreement. Such Noteholder is entering
into this Agreement for its own account, for investment only and not with a view
to, or any present intention of, effecting a distribution of the securities
subject to this Agreement.
6A. Covenants of Noteholders .
------------------------
Each Noteholder covenants and agrees that such Noteholder will not declare
an Event of Default or deliver an Acceleration Notice, nor request or encourage
any other party (including, without limitation, the Trustee) to declare an Event
of Default or deliver an Acceleration Notice under the Indenture due to the
execution, delivery or performance by Bradlees or BSI of this Agreement, any
Mortgage or the Collateral Agency Agreement, or any of the transactions
contemplated hereby or thereby. Each Noteholder further covenants and agrees
that, notwithstanding anything to the contrary in Section 2.4 hereof, should any
party to the Indenture declare an Event of Default or deliver an Acceleration
Notice under the Indenture due solely to the execution, delivery or performance
by Bradlees or BSI of this Agreement, any Mortgage or the Collateral Agency
Agreement, or any of the transactions contemplated hereby or thereby, each
Noteholder will continue to be bound by the terms of this Agreement, including,
without limitation, the terms of the Call Option, and that the principal due in
respect
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of any Notes held by a Noteholder which is accelerated and immediately due and
payable under the Indenture as a result of the Event of Default shall be equal
to the principal amount then due in respect of such Notes multiplied by the then
applicable Discount Percentage (provided that during the period between the date
hereof and December 1, 1999, the applicable Discount Percentage shall be deemed
to be 86%).
7. Representations and Warranties of Bradlees and BSI.
--------------------------------------------------
Bradlees and BSI hereby represent and warrant to each Noteholder that:
(a) Each of Bradlees and BSI is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and each has the requisite corporate power and authority to enter
into, execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery or performance of
this Agreement will not result in any breach of any provision of, or constitute
a default (or an event which with notice or lapse of time or both would
constitute a default) under, any charter documents or bylaws of Bradlees or BSI,
or any material agreement or instrument to which Bradlees or BSI is a party or
by which it is bound, or any statute, order, rule or regulation of any court or
other governmental authority applicable to it.
(b) This Agreement has been duly and validly authorized, executed and
delivered by Bradlees and BSI and constitutes the legal, valid and binding
obligation of Bradlees and BSI, enforceable against Bradlees and BSI in
accordance with its terms.
(c) No registration with, or consent or approval of, or any other
action by, any federal, state or governmental agency, authority, administrative
or regulatory body, arbitrator, court or other tribunal, foreign or domestic, is
required in connection with the
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execution, delivery and performance of this Agreement by Bradlees or BSI or the
purchase by Bradlees or BSI of the Discount Option Notes, that has not been
obtained.
8. Notices. All waivers, elections, notices, demands and consents which either
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party may be required or may desire to give under this Option Agreement, the
Collateral Agency Agreement, the Mortgage or any mortgage or security agreement
entered into in connection herewith ("NOTICES") shall be in writing and shall be
deemed to have been duly given (i) on the third business day after deposit in an
official United States Postal Service office if mailed by certified mail, return
receipt requested, postage prepaid, or (ii) on the date received, or refused, if
delivered by prepaid overnight delivery service or by telecopy if followed
promptly by delivery by overnight delivery service, to the party to whom the
same is so given or made, at the address of such party as set forth below as
follows:
To the Noteholders: At the address set forth for each Noteholder on the
signature pages hereto.
To the Collateral Agent: c/o Morgens, Waterfall, Vintiadis &
Company, Inc.
00 X. 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxxxx
Telecopy No.: (000) 000-0000
with a copy to the Collateral Agent's
attorneys: Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. XxXxxxxx, Esq.
Telecopy No.: (000) 000-0000
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To Bradlees or BSI: Xxx Xxxxxxxx Xxxxxx
X.X. Xxx 000000
Xxxxxxxxx, XX 00000-0000
Attn: Xxxxx Xxxxxxx, Esq.
Telecopy No.: (000) 000-0000
With a copy to Bradlees'
and BSI's attorneys: Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
Either party may designate by Notice to the other a new address to which Notices
shall thereafter be mailed or delivered.
9. Miscellaneous.
-------------
1. 9.1 Assignment. Bradlees and BSI shall not be entitled to assign their
----------
rights under this Agreement, without the prior written consent of all of the
Noteholders, which each Noteholder shall be entitled to grant or withhold in its
sole discretion, provided that, Bradlees or BSI shall be entitled to assign
their rights in connection with (a) any sale, transfer or other disposition of
all or substantially all of the assets of Bradlees or BSI, or (b) any
consolidation or merger of Bradlees or BSI with or into any other entity, if the
purchaser of such assets or such entity consolidated or merged with or into
Bradlees or BSI assumes in a writing delivered to the Noteholders the
obligations of Bradlees or BSI hereunder and under the Discount Option Notes.
Any Noteholder shall be entitled to assign its rights hereunder in connection
with any sale or assignment of the Discount Option Notes provided that any
successor or assign of a Noteholder shall deliver a Notice to Bradlees and BSI
of such succession, sale or assignment in the form of Exhibit H attached hereto
(an "ASSIGNMENT NOTICE"). Upon delivery of an Assignment Notice, any successor
or assign of a Noteholder shall be considered a Noteholder,
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shall have all rights and assume all obligations and liabilities of the
assigning Noteholder hereunder with respect to any assigned Discount Option
Notes and the assigning Noteholder shall have no further obligations or
liabilities under the Option Agreement with respect to such assigned Discount
Option Notes. Any assignment made in violation of the provisions of this Section
9.1 shall be null, void and of no effect whatsoever.
9.2 Further Assurances. From and after the date hereof, each
------------------
Noteholder and Bradlees and BSI each covenant and agree to execute and deliver
all such documents and to take all such further actions as the other party
hereto may reasonably deem necessary, from time to time, to carry out the intent
and purposes of this Agreement and to consummate the transactions contemplated
hereby with each party's costs and expenses associated therewith, including
legal expenses, to be borne individually by each party, except as otherwise
provided in this Agreement. The provisions of this Section 9.2 shall survive the
expiration or termination of this Agreement.
9.3 Choice of Law. This Agreement shall be governed and construed in
-------------
accordance with the internal laws of the State of New York without giving effect
to the principles of conflicts of law.
9.4 Survival. All representations, warranties, and covenants made by
--------
parties hereto in this Agreement and the documents delivered on the Effective
Date shall be considered to have been relied upon by the parties hereto, shall
be true when made and as of the Effective Date, and shall survive the execution,
performance and delivery of this Agreement and the Closing.
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9.5 Successors and Assigns. Subject to the provisions of Section 9.1
----------------------
hereof, this Agreement, including, without limitation, the representations,
warranties and covenants contained herein, shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their respective
successors and assigns.
9.6 Counterpart Execution. This Agreement may be executed in any
---------------------
number of counterparts, each of which, when so executed and delivered, shall be
an original, but all of which together shall constitute one agreement binding
both parties hereto.
9.7 Amendments; Waivers.
--- -------------------
(a) No amendment or waiver of any provision of this Agreement shall be
effective unless it is in writing and signed by each Noteholder and Bradlees and
BSI, provided that, Schedule A and Schedule B hereto shall be amended to reflect
changes of ownership of Discount Option Notes or wire transfer instructions of
Noteholders upon Notice to Bradlees and BSI by any Noteholder.
(b) No failure on the part of any party to exercise, and no delay in
exercising, any right hereunder or under any related document shall operate as a
waiver thereof by such party, nor shall any single or partial exercise of any
right hereunder or under any other related document preclude any other or
further exercise thereof or the exercise of any other right. The rights and
remedies of each party provided herein and in other related documents are
cumulative and are in addition to, and not exclusive or in lieu of, any rights
or remedies provided by law (except as otherwise expressly set forth herein) and
are not conditioned or contingent on any attempt by such party to exercise any
of its rights under any other related document against the other party or any
other entity.
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9.8 Integration. This Agreement, together with the exhibits hereto and
-----------
the documents delivered or executed in connection herewith, constitutes the
entire agreement and understanding between the parties hereto with respect to
the transactions contemplated herein and supersedes all prior agreements,
understandings or representations pertaining thereto, whether oral or written.
There are no warranties, representations or other agreements between the parties
in connection with the subject matter hereof except as specifically set forth or
incorporated herein.
9.9 Captions and Headings. The section captions and headings in this
---------------------
Agreement are for convenience only and are not intended to be full or accurate
descriptions of the contents thereof. The section captions shall not be deemed
to be part of this Agreement and in no way define, limit, extend or describe the
scope or intent of any provisions hereof.
9.10 Restrictive Legend. Each Discount Option Note shall bear a legend
------------------
in substantially the following form:
"THIS NOTE IS SUBJECT TO THE TERMS OF AN OPTION AGREEMENT BETWEEN
BRADLEES, INC., BRADLEES STORES, INC. AND CERTAIN HOLDERS OF 9%
SECURED CONVERTIBLE NOTES OF BRADLEES STORES, INC. DUE 2004. SUCH
OPTION AGREEMENT, AMONG OTHER THINGS, OBLIGATES THE HOLDER HEREOF TO
SELL THIS NOTE AT A DISCOUNT IN CERTAIN CIRCUMSTANCES AND SUBJECT TO
CERTAIN CONDITIONS."
9.11 Expenses. On the Effective Date, Bradlees or BSI shall pay to MWV
--------
Separate Account Alpha, Morgens Waterfall Income Partners, Restart Partners,
L.P., Restart Partners II, L.P., Restart Partners III, L.P., Restart Partners
IV, L.P., Restart Partners V, L.P. and MWV International, Ltd. (the "MAJORITY
NOTEHOLDERS") an amount equal to all
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reasonable expenses incurred by the Majority Noteholders in connection with the
negotiation and documentation of this Agreement, the Collateral Agency
Agreement, the Mortgage and the consummation of the transactions contemplated
hereby, including without limitation, reasonable attorneys' fees and costs,
multiplied by a fraction the numerator of which is the aggregate principal
amount of all Discount Option Notes of Noteholders other than the Majority
Noteholders and the denominator of which is the aggregate principal amount of
all Discount Option Notes of all Noteholders (collectively, the "MAJORITY
NOTEHOLDER EXPENSES"). Notwithstanding the foregoing, Bradlees and BSI shall not
be obligated to pay Majority Noteholder Expenses in excess of an amount equal to
the aggregate Option Premium that would otherwise have been payable to
Noteholders other than the Majority Noteholders but for the payment of such
Majority Noteholder Expenses by Bradlees and BSI. Bradlees and BSI shall pay all
filing fees, title insurance premiums, recording fees, documentary stamp taxes
or other fees and costs associated with any tender offer made in connection with
this Agreement and the recording of the Mortgage.
9.12 Reaffirmation of Indebtedness Under Notes. BSI and Bradlees
-----------------------------------------
hereby acknowledge and reaffirm the indebtedness evidenced by the Notes and the
Indenture, including the indebtedness evidenced by the Discount Option Notes.
Bradlees acknowledges and reaffirms its guaranty of indebtedness evidenced by
the Notes and the Indenture pursuant to Article 13 of the Indenture, including
its guaranty of the indebtedness evidenced by the Discount Option Notes.
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IN WITNESS WHEREOF, Bradlees, BSI and the Noteholders have executed this
Option Agreement as of the date and year first above written.
BRADLEES, INC.
By: /s/ Xxxxx X. Xxxxxxx
-------------------------
Name: Xxxxx X. Xxxxxxx
Title: Senior Vice President
and General Counsel
BRADLEES STORES, INC.
By: /s/ Xxxxx X. Xxxxxxx
-------------------------
Name: Xxxxx X. Xxxxxxx
Title: Senior Vice President
and General Counsel
NOTEHOLDERS: See Schedule A attached hereto.
----------
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Schedule A
----------
Noteholders Principal Amount of
----------- -------------------
Discount Option Notes Option Premium
---------------------- --------------
MWV SEPARATE ACCOUNT ALPHA $ 487,694 $2,438.47
By: /s/ Xxxx X. Xxxxxxxxx
-----------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Authorized Agent
MORGENS WATERFALL INCOME PARTNERS $ 431,664 $2,158.32
By: MW Capital L.L.C., its General Partner
By: /s/ Xxxx X. Xxxxxxxxx
-----------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Authorized Agent
RESTART PARTNERS, L.P. $1,277,115 $6,385.57
By: Prime Group, L.P., its General Partner
RESTART PARTNERS II, L.P. $1,917,889 $9,589.44
By: Prime Group II, L.P.
RESTART PARTNERS III, L.P. $1,315,001 $6,575.00
By: Prime Group III, L.P., its General Partner
RESTART PARTNERS IV, L.P. $1,466,390 $7,331.95
By: Prime Group IV, L.P., its General Partner
RESTART PARTNERS V, L.P. $ 531,966 $2,659.83
By: Prime Group V, L.P., its General Partner
By: Prime, Inc., their General Partner
By: /s/ Xxxx X. Xxxxxxxxx
-----------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Authorized Agent
MWV INTERNATIONAL, LTD. $1,129,281 $5,646.40
By: /s/ Xxxx X. Xxxxxxxxx
-----------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Authorized Agent
Schedule A
----------
Noteholders Principal Amount of
--------------------------------- -------------------
Discount Option Notes Option Premium
--------------------- --------------
BANK OF BOSTON $111,000 $0
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Assistant Secretary
BEAR XXXXXXX $ 76,000 $0
By: /s/ Xxxx X. Xxxxxxx
-----------------------------
Name:
Title:
FLEET NATIONAL BANK $141,000 $0
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President
MITSUI LEASING $111,000 $0
By: Seijchiro Nozaki
-----------------------------
Name: Seijchiro Nozaki
Title: President
Schedule B
----------
Noteholders Wire Instructions
------------------------------------ --------------------------------------
MWV Separate Account Alpha CITIBANK, NY
Morgens Waterfall Income Partners NEW YORK, NY
Restart Partners, L.P. ABA #000000000
Restart Partners II, L.P. For the Account of: XXXXXX XXXXXXX &
Restart Partners III, L.P. COMPANY
Restart Partners IV, L.P. Account #: 00000000
Restart Partners V, L.P. For Further Credit of: Xxx Xxxxxxx & Xxxxx
MWV International, Ltd. Waterfall as Agents
Account #: 038-30008
Exhibit A
---------
Call Option Exercise Notice
---------------------------
To: [Name of Noteholder]
[address of Noteholder]
Pursuant to Section 2.5 of the Option Agreement dated August 12, 1999 (the
"Option Agreement") between Bradlees, Inc., Bradlees Stores, Inc.,and certain
holders of 9% Secured Convertible Notes of Bradlees Stores, Inc. Due 2004,
Bradlees hereby exercises the Call Option to purchase the Discount Option Notes
on the terms set forth herein. Capitalized terms used but not defined herein
shall have meanings as defined in the Option Agreement.
1. The Call Option has been exercised with respect to all outstanding Discount
Option Notes.
2. Discount Option Notes of [Name of Noteholder] in principal amount of
$________ are subject to the Call Option.
3. The Scheduled Call Option Closing Date is __________.
4. If the closing occurs on the Scheduled Call Option Closing Date, the
Call Option Purchase Price payable to [Name of Noteholder], is $_________.
Dated: ___________________
BRADLEES, INC.
By: _____________________
Name:
Title:
Exhibit B
---------
Put Option Exercise Notice
--------------------------
To: Bradlees Stores, Inc.
Xxx Xxxxxxxx Xxxxxx
X.X. Xxx 000000
Xxxxxxxxx, XX 00000-0000
Pursuant to Section 3.3 of the Option Agreement dated August 12, 1999 (the
"Option Agreement") between Bradlees, Inc., Bradlees Stores, Inc. and certain
holders of 9% Secured Convertible Notes of Bradlees Stores, Inc. Due 2004, the
undersigned hereby exercises the Put Option. Capitalized terms used but not
defined herein shall have meanings as defined in the Option Agreement.
1. The Put Option has been exercised with respect to $___________
principal amount of Discount Option Notes held by [Name of
Noteholder], which constitute all Discount Option Notes held by such
Noteholder.
2. The Scheduled Put Option Closing Date is ___________.
3. If the closing occurs on the Scheduled Put Option Closing Date, the
Put Option Purchase Price payable to [Name of Noteholder] is
$__________.
Dated: __________________
[Name of Noteholder]
[address of Noteholder]
By: _____________________
Name:
Title:
Exhibit F
---------
ASSIGNMENT NOTICE
-----------------
To: Bradlees, Inc.
Bradlees Stores, Inc.
Xxx Xxxxxxxx Xxxxxx
X.X. Xxx 000000
Xxxxxxxxx, XX 00000-0000
Pursuant to Section 9.1 of the Option Agreement dated August 12, 1999 (the
"Option Agreement") between Bradlees, Inc., Bradlees Stores, Inc. and certain
holders of 9% Secured Convertible Notes of Bradlees Stores, Inc. due 2004,
notice is hereby given that the undersigned is the successor or assign of [Name
of Assigning Noteholder] (the "Assignor") and is the beneficial owner of
Discount Option Notes (as such term is defined in the Option Agreement) in the
principal amount of $____________. The undersigned acknowledges that such
Discount Option Notes are subject to the terms of the Option Agreement and
agrees to assume all obligations and liabilities of the Assignor under the
Option Agreement with respect to such Discount Option Notes.
The undersigned further represents that it is an "accredited investor" as
defined in Rule 501 of the Securities Act of 1933, as amended. The undersigned
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the Option Agreement. The
undersigned is entering into the Option Agreement for its own account, for
investment only and not with a view to, or any present intention of, effecting a
distribution of the securities subject to the Option Agreement.
Notices delivered to the undersigned as a Noteholder pursuant to Section 8
of the Option Agreement shall be mailed or delivered to the address set forth
below.
Dated: ____________________
[Name of Assignee]
By:__________________________________
Name:
Title:
[Address of Assignee]
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