Exhibit C
Bradlees Inc.
Bradlees Stores, Inc.
One Bradlees Circle
P.O. Box 859051
Braintree, MA 02185-9051
Morgens, Waterfall, Vintiadis & Co., Inc.
00 X. 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxxxxx
Re: 9% Secured Convertible Notes Due 2004 (the "Convertible Notes")
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Dear Xx. Xxxxxxxxx:
This letter will confirm the agreement of Bradlees Stores, Inc. (the
"Company") to purchase an option to acquire Convertible Notes held by advisory
affiliates of Morgens, Waterfall, Vintiadis & Company, Inc. ("MWV") and to grant
MWV a put option in respect of the Convertible Notes that it holds on the terms
attached hereto as Annex A (the "Transaction"). The Company and Bradlees Inc.
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have obtained consent in the Transaction from their Boards of Directors.
If MWV is in agreement with the foregoing, please so indicate by signing
below and returning a copy of this letter to me.
Very truly yours,
BRADLEES INC.
BRADLEES STORES, INC.
By: /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
Title: Sr. VP and General Counsel
Agreed:
MORGENS, WATERFALL, VINTIADIS & CO., INC.,
on behalf of its advisory affiliates that are
holders of Convertible Notes
By: /s/ Xxxx X. Xxxxxxxxx
Xxxx X. Xxxxxxxxx
Xxxx Authorized
Portfolio Group Manager
Annex A
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BRADLEES STORES, INC.
MORGENS, WATERFALL, VINTIADIS & CO., INC.
9% Secured Convertible Notes due '04 (the "Notes") Restructuring
May 19, 1999
Discount Options: Certain affiliates of Morgens, Waterfall, Vintiadis &
Company, Inc. ("MWV") and other participating
Noteholders (collectively with MWV, the "Discount Option
Noteholders") will grant to Bradlees Stores, Inc. (the
"Company") an option (the "Discount Option") to acquire
Notes held by the Discount Option Noteholders (the
"Discount Option Notes") at a discount prior to
maturity. The Discount Option shall apply (i) to all of
the outstanding Discount Option Notes, if at the time of
exercise of the Option the existing Yonkers leasehold
has been sold for a price of $15 million or more and the
Discount Option Noteholders have received their pro rata
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share of proceeds of such sale, or (ii) to 48.27% of the
outstanding Discount Option Notes, if at the time of
exercise of the Discount Option the existing Yonkers
leasehold has not been sold for a price of $15 million
or more or the Discount Option Noteholders have not
received their pro rata share of proceeds of such sale.
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The Company will initially have the option to purchase
the Discount Option Notes at a price equal to 86% of the
outstanding principal amount of the Discount Option
Notes, plus accrued interest, exercisable for a one
month time period from December 1, 1999 through
December 31, 1999. Each month thereafter the discount
will decrease by 1% such that the discount will be fully
eliminated by January 31, 2001. The Discount Option may
be exercised from time to time to acquire all or part of
the outstanding Discount Options Notes. The Discount
Option may not be exercised in connection with mandatory
redemptions of the Notes pursuant to Section 3.1 of the
Note Indenture (i.e. proceeds of the sale of the Yonkers
leasehold or other Additional Collateral required to be
used to redeem the Notes may not be applied to the
strike price of the Discount Option) or with proceeds of
any Discount Option Noteholder Collateral (as defined
below).
Option Premium: In consideration of the Discount Option, the Company
shall pay the Discount Option Noteholders a premium on
the closing date of the grant of the Option equal to
0.5% of (i) the outstanding principal amount of the
Discount Option Notes (after application of repayments
pursuant to Section 3.1 of the Note Indenture received
through the date of closing), if at the time of such
closing the existing Yonkers leasehold has been sold for
a price of $15 million or more and the Discount Option
Noteholders have received their pro rata share of
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proceeds of such sale,
or (ii) 48.27% of the outstanding Discount Option Notes,
if at the time of exercise of such closing the existing
Yonkers leasehold has not been sold for a price of
$15 million or more or the Discount Option Noteholders
have not received their pro rata share of proceeds of
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such sale.
Discount Option
Noteholder Collateral: As additional security for the Discount Option Notes and
the Company's obligations under the put option referred
to below, the Company shall grant the Discount Option
Noteholders second priority leasehold mortgages on the
Additional Collateral which secure the full amount of
principal plus accrued interest of the Discount Option
Notes and which are subordinate only to the existing
leasehold mortgages on the Additional Collateral that
secure the 9% Secured Convertible Notes. With respect to
the Danbury, CT lease, the Company will use reasonable
efforts to obtain any requisite landlord consents to the
new leasehold mortgage with respect to such property
and, if such consents cannot be obtained, will cooperate
with MWV to seek to amend the indenture to eliminate any
dollar limitation on the amount secured by the existing
Danbury, CT leasehold mortgage and to ensure to the
extent permissible under the indenture that the Discount
Option Noteholders receive the benefit of such increased
collateral value. MWV shall have the right to terminate
this proposal and to withdraw from participation in the
transaction at any time prior to closing if MWV is not
satisfied, in its sole discretion, with title and other
due diligence matters related to the Additional
Collateral.
Put Option: The Company shall grant the Discount Option Noteholders
a put option exercisable on or after February 3, 2003 to
sell the Discount Option Notes to the Company at a price
equal to the then outstanding principal amount of the
Discount Option Notes, plus accrued interest.
Representations,
Warranties and
Covenants: Documentation shall contain usual and customary
representations, warranties and covenants by the Company
and the Discount Option Noteholders.
Consents Required: Board of Directors and verbal commitment of BankBoston
to support transaction (both to be obtained on or before
May 19, 1999), consent of the lenders under the
Revolving Credit and Guaranty Agreement dated
February 2, 1999 (to be obtained prior to closing and no
later than May 28, 1999) and, to the extent required,
the 9% Secured Convertible
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Noteholders and parties to any lease, mortgage or other
contract constituting or relating to Additional
Collateral. If amendment of the redemption provisions of
the indenture for the 9% Secured Convertible Notes is
required to permit the exercise of the Discount Option
and the consent of all holders of the 9% Secured
Convertible Noteholders is required for such amendment,
Bradlees Inc. shall enter into the Discount Option in
place of the Company.
Closing: The Company shall enter into a binding commitment on or
prior to May 19, 1999 at 5:00 p.m., with closing to
occur by the earlier of (i) the date of closing of any
sale of the existing Yonkers leasehold, or (ii) June 18,
1999.
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