<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 2, 1997
OR
[ ] 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 000-21543
-----------
Wilsons The Leather Experts Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-1839933
- -------------------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7401 Boone Ave. N., Brooklyn Park, MN 55428
- -------------------------------------------- ----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 391-4000
----------------
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
----- -----
The number of shares outstanding of the Registrant's common stock as of
September 11, 1997 was 9,532,083 shares.
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WILSONS THE LEATHER EXPERTS INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets -
August 2, 1997 and February 1, 1997 3
Consolidated Statements of Operations -
Thirteen weeks ended August 2, 1997,
fourteen weeks ended August 3, 1996,
four weeks ended May 25, 1996,
ten weeks ended August 3, 1996,
twenty-six weeks ended August 2, 1997,
twenty-seven weeks ended August 3, 1996,
seventeen weeks ended May 25, 1996 and
ten weeks ended August 3, 1996 4
Consolidated Statements of Cash Flows -
Twenty-six weeks ended August 2, 1997,
seventeen weeks ended May 25, 1996 and
ten weeks ended August 3, 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 18
Item 6. Exhibits and Reports on Form 8-K 19
Signature 21
Index to Exhibits 22
2
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<TABLE>
<CAPTION>
Wilsons The Leather Experts Inc. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)
August 2 February 1
Assets 1997 1997
------ ----------- ----------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 24,091 $ 81,553
Accounts receivable, net 7,491 4,851
Inventories 87,177 64,919
Prepaid expenses 819 1,246
---------- ----------
Total current assets 119,578 152,569
Property and equipment, net 18,711 17,091
Other assets, net 1,222 1,555
Deferred income taxes 530 1,173
---------- ---------
$ 140,041 $ 172,388
========== =========
Liabilities and Shareholders' Equity
------------------------------------
Current Liabilities:
Accounts payable $ 12,735 $ 10,666
Accrued expenses 26,083 34,517
Income taxes payable 175 20,345
Deferred income taxes 4,288 3,243
---------- ---------
Total current liabilities 43,281 68,771
Long-term debt 61,311 55,811
Other long-term liabilities 1,996 4,341
---------- ---------
Shareholders' Equity:
Preferred stock, $.01 par value; 10,000,000
shares authorized, 0 and 7,405 shares, $1,000 stated
value issued and outstanding on August 2, 1997 - 7,405
and February 1, 1997, respectively
Common stock, $.01 par value; 45,000,000
shares authorized, 9,532,083 and 7,650,000 shares
issued and outstanding on August 2, 1997 and
February 1, 1997, respectively 95 77
Additional paid-in capital 29,339 12,501
Retained earnings 4,062 23,511
Cumulative translation adjustment (43) (29)
---------- ---------
Total shareholders' equity 33,453 43,465
---------- ---------
$ 140,041 $ 172,388
========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
3
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Wilsons The Leather Experts Inc. and Subsidiaries
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Fourteen Weeks Four Weeks Ten Weeks
Ended Ended Ended Ended
August 2, 1997 August 3, 1996 May 25, 1996 August 3, 1996
------------- -------------- ------------ --------------
(Company) (Combined (Predecessor (Company)
Companies) Companies)
<S> <C> <C> <C> <C>
Net sales $ 36,471 $ 41,442 $ 12,924 $ 28,518
Costs and expenses:
Cost of goods sold, buying and occupancy costs 36,957 38,236 12,037 26,199
Selling, general and administrative expenses 17,293 20,353 6,521 13,832
Depreciation and amortization 505 903 901 2
Restricted stock compensation expense 450 - - -
----------- ----------- ----------- -----------
Loss from operations (18,734) (18,050) (6,535) (11,515)
Interest expense, net 1,248 1,251 103 1,148
----------- ----------- ----------- -----------
Loss before income taxes (19,982) (19,301) (6,638) (12,663)
Income tax benefit (7,401) (7,391) (2,835) (4,556)
----------- ----------- ----------- -----------
Net loss $ (12,581) $ (11,910) $ (3,803) $ (8,107)
=========== =========== =========== ===========
Net loss per common share $ (1.22)
===========
Weighted average common shares outstanding 10,299
===========
Pro forma net loss per common share $ (1.20)
===========
Pro forma weighted average common
shares outstanding 10,455
===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
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Wilsons The Leather Experts Inc. and Subsidiaries
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Twenty-six Twenty-seven Seventeen Ten
Weeks Weeks Weeks Weeks
Ended Ended Ended Ended
August 2, 1997 August 3, 1996 May 25, 1996 August 3, 1996
-------------- -------------- ------------ --------------
(Company) (Combined (Predecessor (Company)
Companies) Companies)
<S> <C> <C> <C> <C>
Net sales $ 93,422 $108,213 $ 79,695 $ 28,518
Cost and expenses:
Cost of goods sold, buying and occupancy costs 84,222 90,936 64,737 26,199
Selling, general and administrative expenses 36,491 41,280 27,448 13,832
Depreciation and amortization 942 3,816 3,814 2
Restricted stock compensation expense 900 - - -
-------- -------- -------- --------
Loss from operations (29,133) (27,819) (16,304) (11,515)
Interest expense, net 1,919 2,398 1,250 1,148
-------- -------- -------- --------
Loss before income taxes (31,052) (30,217) (17,554) (12,663)
Income tax benefit (11,208) (11,117) (6,561) (4,556)
-------- -------- -------- --------
Net loss $(19,844) $(19,100) $(10,993) $ (8,107)
======== ======== ======== ========
Net loss per common share $ (2.06)
========
Weighted average common shares outstanding 9,650
========
Pro forma net loss per common share $ (2.06)
========
Pro forma weighted average common shares outstanding 9,619
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
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Wilsons The Leather Experts Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Twenty-six Seventeen Ten
Weeks Weeks Weeks
Ended Ended Ended
August 2, 1997 May 25, 1996 August 3, 1996
-------------- ------------ --------------
(Company) (Predecessor (Company)
Companies)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (19,844) $ (10,993) $ (8,107)
Adjustments to reconcile net loss to net cash used in operating activities-
Restructuring charges paid - (5,957) -
Depreciation and amortization 942 3,814 2
Amortization of deferred financing costs 333 - 111
Loss on disposal of assets - 184 -
Restricted stock compensation expense 900 - -
Deferred income taxes 1,688 5,115 (4,939)
Changes in operating assets and liabilities, net of assets and
liabilities acquired:
Accounts receivable, net (2,640) (222) (2,709)
Inventories (22,258) 14,410 (24,526)
Prepaid expenses 612 114 (4,494)
Other noncurrent assets - 4 -
Accounts payable and accrued expenses (4,197) (9,689) 2,625
Income taxes payable and other liabilities (17,015) (11,965) 1,180
--------- --------- ---------
Net cash used in operating activities (61,479) (15,185) (40,857)
--------- --------- ---------
INVESTING ACTIVITIES:
Additions to property, equipment and other noncurrent assets (2,562) (3,430) (823)
Acquisitions, net of cash acquired - - 37,072
--------- --------- ---------
Net cash provided by (used in) investing activities (2,562) (3,430) 36,249
--------- --------- ---------
FINANCING ACTIVITIES:
Change in due to/from CVS - (105,013) -
Capital contributed by CVS - 124,000 -
Change in book overdrafts (2,873) (4,360) 2,051
Proceeds from sale of common and preferred stock 9,452 - 12,000
--------- --------- ---------
Net cash provided by financing activities 6,579 14,627 14,051
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (57,462) (3,988) 9,443
CASH AND CASH EQUIVALENTS, beginning of period 81,553 7,270 -
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 24,091 $ 3,282 $ 9,443
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for-
Interest $ 388 $ 1,580 $ 210
========= ========= =========
Income taxes $ 7,420 $ 204 $ -
========= ========= =========
Noncash investing and financing activities-
Liabilities assumed for acquisition of business $ - $ - $ 46,927
========= ========= =========
Issuance of long-term debt $ - $ - $ 55,811
========= ========= =========
Accrued preferred stock dividends $ (395) $ - $ -
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
Wilsons The Leather Experts Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1. Nature of Organization and Acquisition
Wilsons The Leather Experts Inc., a Minnesota corporation (Wilsons), was
formed to acquire 100% of the common stock of Wilsons Center, Inc. and its
subsidiaries (the Predecessor Companies prior to the Acquisition) in a
management-led buyout (Acquisition) from CVS New York, Inc., a New York
corporation (CVS; formerly Melville Corporation, the parent company to the
Predecessor Companies). Wilsons and its wholly owned subsidiaries are
collectively referred to as the Company. In May 1996, pursuant to a sale
agreement dated May 24, 1996 between Wilsons and CVS, Wilsons acquired the
common stock for (i) $2.0 million in cash, (ii) a 10% senior secured
subordinated note due December 31, 2000 in the principal amount of $55.8
million, (iii) a warrant to purchase 1,350,000 shares of common stock, (iv) a
warrant to purchase 1,080,000 shares of common stock, (v) 4,320,000 shares of
common stock, and (vi) 7,405 shares of Series A Preferred Stock (Series A
Preferred). As part of the Acquisition, the Leather Investors Limited
Partnerships I and II in turn purchased from CVS the 4,320,000 shares of Common
stock and the 7,405 shares of Series A Preferred for $10 million. On May 27,
1997, the 7,405 shares of Series A Preferred were exchanged for 617,083 shares
of Wilsons' common stock.
The Acquisition was accounted for using the purchase method. The basis of
CVS's 15% equity interest in the Predecessor Companies was carried over to its
equity interest in the Company in accordance with Emerging Issues Task Force
discussion 88-16. Accordingly, the purchase price of $67.8 million and CVS's
carryover basis has been allocated on a preliminary basis to the assets acquired
and liabilities assumed based on their estimated fair values. This resulted in
the carrying value of the net assets acquired exceeding the new basis by
approximately $52.5 million, which was applied to reduce the amounts assigned to
property and equipment.
2. Basis of Financial Statement Presentation
The consolidated financial statements of the Company include all accounts
of Wilsons The Leather Experts Inc. and its wholly owned subsidiaries. The
consolidated financial statements of the Predecessor Companies include those of
Wilsons Center, Inc., a former subsidiary of CVS, and its wholly owned
subsidiary Rosedale Wilsons, Inc. and all of its retail subsidiaries. All
intercompany balances and transactions have been eliminated.
The financial statements for the fourteen and twenty-seven weeks ended
August 3, 1996, are for both the Predecessor Companies and the Company and are
not intended to represent what the results of operations of the Company would
have been if the Company had operated as a stand-alone company.
7
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The accompanying unaudited financial statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosure, normally included in
financial statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted pursuant to such rules and
regulations. Although management believes that the accompanying disclosures are
adequate to make the information presented not misleading, it is suggested that
these interim financial statements be read in conjunction with the Company's
most recent audited financial statements and related notes included in its Form
S-1 Registration Statement. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary for a fair
presentation of the financial position, results of operations and cash flows for
the interim periods presented have been made. The Company's business is highly
seasonal, and accordingly, interim operating results are not necessarily
indicative of the results that may be expected for the fiscal year ending
January 31, 1998.
Certain reclassifications have been made to the consolidated financial
statements of the prior year to conform to the 1997 presentation.
3. Inventories
Inventories, principally finished goods, consist of merchandise purchased
from domestic and foreign vendors and are carried at the lower of cost or market
value, determined by the retail inventory method on the last-in, first-out
(LIFO) basis. The difference in inventories between the LIFO and first-in,
first-out (FIFO) method was not material as of August 2, 1997. The Predecessor
Companies determined cost using the retail inventory method on the FIFO basis.
4. Net Loss Per Common Share and Pro Forma Net Loss Per Common Share
Net loss per common share and pro forma net loss per common share have been
computed by dividing net loss by the weighted average number of common shares
outstanding during the period, and dilutive common equivalent shares assumed to
be outstanding during each period. Common equivalent shares consist of dilutive
options and warrants to purchase common stock. However, pursuant to certain
rules of the Securities and Exchange Commission, the calculation also includes
equity securities, including options and warrants, issued within one year of an
initial public offering with an issue price less than the initial public
offering price, even if the effect is anti-dilutive. The treasury stock method
was used in determining the effect of such issuances. Pro forma net loss per
common share includes the effect of the exchange of Series A Preferred for
common stock (see Note 6).
5. Initial Public Offering/Conversion of Common Stock to a Single Class
On May 27, 1997, the Securities and Exchange Commission declared effective
the Company's Registration Statement on Form S-1 relating to the initial public
offering of 1,100,000 units. In addition, the underwriter exercised its over-
allotment option to purchase 165,000 units. Each unit consisted of one share of
common stock and one redeemable warrant to
8
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purchase one share of common stock for $13.50 per share. The Company received
net proceeds of approximately $9.5 million after payment of related underwriting
discount and offering costs.
On June 2, 1997, upon completion of the initial public offering, all shares
of all classes of common stock were converted to a single class of common stock
(the Conversion). As of February 1, 1997, 4,320,000, 2,925,000, and 405,000
shares of Class A, Class B, and Class C common stock, respectively, were issued
and outstanding. After the Conversion, and except as hereafter noted, such
shares of common stock have equal rights in all respects, including the right to
one vote per share of common stock for all matters submitted to holders of
common stock for a vote. However, each shareholder that is subject to the
shareholder agreement dated May 25, 1996 agrees to vote all of the voting shares
of common stock held by such shareholder in favor of the election to the Board
of Directors of two individuals who shall be nominated by a vote of a majority
of the outstanding shares of common stock held by the Employees and their
Permitted Transferees (as defined in the shareholder agreement) and, upon the
vote of a majority of the outstanding shares of common stock held by the
Employees and their Permitted Transferees, to remove or replace such directors,
until the earlier of (i) the completion of an underwritten public offering with
gross proceeds of at least $20 million or (ii) the general termination of the
shareholder agreement, which termination will be no later than May 25, 1998.
6. Series A Preferred Exchange
As of May 27, 1997, the holders of the 7,405 shares of Series A Preferred
exchanged their entire holdings of such shares for 617,083 shares of common
stock at an exchange rate of $12.00 per share. In connection with such
exchange, the holders of the Series A Preferred waived their rights to receive
any accrued dividends in respect of such Series A Preferred.
7. Private Offering of Senior Notes
On August 18, 1997, the Company completed a private offering of $75.0
million of 11 1/4% senior notes due 2004 (Senior Notes) to certain qualified
institutional buyers. Interest on the Senior Notes is payable semi-annually in
arrears on February 15 and August 15 of each year, commencing on February 15,
1998. The Senior Notes mature on August 15, 2004, unless previously redeemed,
and the Company is not required to make any mandatory redemption or sinking fund
payment prior to maturity. The Senior Notes are general unsecured obligations of
the Company and rank senior in right of payment to all existing and future
subordinated indebtedness of the Company and rank on equal terms in right of
payment with all other current and future unsubordinated indebtedness of the
Company. The Company used approximately $56.5 million of the net proceeds from
the offering to repurchase the outstanding senior secured subordinated note
issued to CVS in connection with the Acquisition. The balance of the net
proceeds, $15.6 million, will be used for general corporate purposes, including
capital expenditures and additional store openings.
9
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8. New Accounting Pronouncement
The Company will adopt in the fiscal year ending January 31, 1998,
Statement of Financial Accounting Standards No. 128 "Earnings per Share" (SFAS
No. 128), which was issued in February 1997. SFAS No. 128 requires disclosure
of basic earnings per share (EPS) and diluted EPS, which replaces the existing
primary EPS and fully diluted EPS, as defined by APB No. 15. Basic EPS is
computed by dividing net income by the weighted average number of shares of
common stock outstanding during the year. Diluted EPS is computed similar to
EPS as previously reported provided that, when applying the treasury stock
method to common equivalent shares, the Company must use its average share price
for the period rather than the more dilutive greater of the average share price
or end-of-period share price required by APB No. 15.
10
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion of the financial condition and results of
operations of Wilsons The Leather Experts Inc. and its wholly owned subsidiaries
(Wilsons or the Company) should be read in conjunction with the Company's most
recent audited financial statements and related notes included in its Form S-1
Registration Statement.
The financial statements for the fourteen and twenty-seven weeks ended
August 3, 1996, are for both the Predecessor Companies and the Company and are
not intended to represent what the results of operations of the Company would
actually have been if the Company had operated as a stand-alone company.
Overview
The Company was organized in May 1996 to acquire 100% of the common stock
of Wilsons Center, Inc. and its subsidiaries (the Predecessor Companies) (the
Acquisition) from CVS New York, Inc., a New York corporation (CVS; formerly
Melville Corporation, the parent company to the Predecessor Companies). In May
1996, the Company, which was owned by management and an investor group, acquired
such common stock.
Prior to the Acquisition, the Predecessor Companies were operated as part
of CVS. Certain of the historical financial statements presented herein are for
the seventeen weeks and four weeks ended May 25, 1996, during which the
Predecessor Companies did not operate as an independent company. Such
statements, therefore, may not necessarily reflect the results of operations or
the financial condition of the Company which would have resulted had the Company
operated as an independent company during the reporting period, and are not
necessarily indicative of the Company's future results or financial condition.
Throughout the late 1980's and early 1990's, as part of the growth strategy
of CVS, the Predecessor Companies pursued a rapid expansion program through
acquisitions and store openings, growing from 227 stores at the end of 1987 to a
peak of 631 stores at the end of 1993. Beginning in 1993, the Predecessor
Companies' business was negatively affected by the difficult retail apparel
market for mall-based chains, competition and changes in consumer fashion
preferences. In 1995, the Predecessor Companies initiated a store-closing
program, which resulted in a reduction of the number of stores to 461 by
February 1, 1997. The stores closed by the Company had not achieved cash flow
targets established by management.
In connection with the Acquisition, the Company sold 3,330,000 shares of
common stock to certain managers of the Company, including 1,080,000 shares (the
Restricted Stock) that were subject to vesting upon the occurrence of certain
events. As of August 2, 1997, 198,018 shares of such Restricted Stock had
vested and for the period ended February 1, 1997, the Company recorded a $1.5
million non-cash compensation charge related to such shares. The remaining
881,982 shares of Restricted Stock vested on August 18, 1997 with the repayment
of the senior secured subordinated note issued to CVS in connection with the
acquisition. The Company will
11
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be required to record an additional non-cash compensation charge of $8.5 million
related to such shares which is equal to the difference between the fair market
value of the Restricted Stock on the date the shares vested, which was $10.25
per share, and the original purchase price of the Restricted Stock, which was
$.60 per share.
The Company's business is highly seasonal and, accordingly, operating
results for the interim periods described below are not necessarily indicative
of the results that may be expected for a full fiscal year. A majority of the
Company's net sales and operating profit is generated in the peak selling season
period from October through December, which includes the Christmas selling
season. Wilsons recorded 55.6% of its sales for the fiscal year ended February
1, 1997 in the peak selling period. As a result, the Company's annual operating
results have been, and will continue to be, heavily dependent on the results of
its peak selling period. Net sales are generally lowest during the period from
April through July, and the Company typically does not become profitable until
the fourth quarter of a given year.
The Company does not believe that inflation has had a material adverse
effect on the results of operations for the periods presented; however, there
can be no assurance that the Company's business will not be affected by
inflation in the future.
Results of Operations for the Thirteen Weeks Ended August 2, 1997 Compared to
the Fourteen Weeks Ended August 3, 1996
Wilsons opened one store in the thirteen-week period ended August 2, 1997
compared to one store opening and six store closings in the fourteen-week period
ended August 3, 1996. As of August 2, 1997, Wilsons operated 452 stores compared
to 477 stores at August 3, 1996. The 25 fewer stores were a result of closing
stores that did not achieve cash flow targets established by management.
Sales for the thirteen-week period ended August 2, 1997 were $36.5 million
compared with $41.4 million for the fourteen weeks ended August 3, 1996, a
decrease of $4.9 million, or 11.8%. Approximately $2.9 million of the sales
decrease was due to one less week in the current quarter compared to one year
ago. In addition, the Company operated on average 28, or 5.8%, fewer stores in
the thirteen weeks ended August 2, 1997 as the Company closed underperforming
stores. Comparable store sales for the quarter declined 3.4%. The comparable
store sales decrease was primarily attributable to less low-priced clearance
merchandise associated with fewer closed stores in the immediately preceding
quarters compared to the period one year earlier. In addition, response to the
Company's special order promotion fell short of prior year results.
Cost of goods sold, buying and occupancy costs for the thirteen-week period
ended August 2, 1997 were $37.0 million, or 101.3% of sales, compared to $38.2
million, or 92.3% of sales, for the fourteen-week period of the previous year.
Gross margin net of occupancy costs decreased 5.7 points as a percent of sales
for the thirteen-week period as compared to the period one year ago due to
additional markdowns required to liquidate clearance merchandise in advance of
the fall season. Occupancy costs for the 1997 period
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decreased $0.8 million due to operating fewer stores; however, they increased as
a percent of sales in 1997 as comparable store sales declined while fixed rents
associated with store leases remained flat. The Company's inventories are valued
under the retail inventory method using the last-in, first-out (LIFO) basis. The
difference in inventories between LIFO and the first-in, first-out (FIFO) method
was not material as of August 2, 1997. Interim period inventory determinations
are partially based on assumptions as to future inventory levels at the end of
the fiscal year and expected rates of inflation for the year which may impact
future financial results.
Operating expenses for the thirteen-week period ended August 2, 1997 were
$18.2 million, or 50.0% of sales, compared to $21.3 million, or 51.3% of sales,
for the fourteen-week period ended August 3, 1996. The expense decrease of $3.0
million was due to reductions in corporate expenses, continued control of
variable expenses in the stores, operating on average 28 fewer locations, and
having one less week in the 1997 period. Offsetting the operating expense
reductions was a $0.5 million accrued expense associated with the vesting of
restricted stock.
As a result of the above, Wilsons had a loss from operations of $18.7
million for the thirteen-week period ended August 2, 1997, compared to a loss
from operations of $18.1 million for the fourteen-week period ended August 3,
1996.
Net interest expense for the thirteen-week period ended August 2, 1997 was
$1.2 million, or 3.4% of sales, compared to $1.3 million, or 3.0% of sales, for
the fourteen-week period ended August 3, 1996.
Income tax benefit for the thirteen-week period ended August 2, 1997 was
$7.4 million, or 20.3% of sales, compared to a $7.4 million income tax benefit,
or 17.8% of sales, for the fourteen weeks ended August 3, 1996. The effective
tax rate decreased in 1997 to a 37.0% tax rate from a 38.3% tax rate in 1996 due
primarily to the impact of state income taxes.
Results of Operations for the Twenty-six Weeks Ended August 2, 1997 Compared to
the Twenty-seven Weeks Ended August 3, 1996
Wilsons opened one store and closed 10 stores in the twenty-six week
period ended August 2, 1997, compared to four store openings and 21 store
closings in the twenty-seven week period ended August 3, 1996. As of August 2,
1997, Wilsons operated 452 stores compared to 477 stores at August 3, 1996. The
25 fewer stores were a result of closing stores that did not achieve cash flow
targets established by management.
Sales for the twenty-six week period ended August 2, 1997 were $93.4
million compared with $108.2 million in the twenty-seven weeks ended August 3,
1996, a decrease of $14.8 million, or 13.7%. Approximately $6.3 million of the
sales decrease was due to one less week in the 1997 period compared to the 1996
period. In addition, the Company operated on average 29, or 6.0%, fewer stores
in the twenty-six weeks ended August 2, 1997 as the Company closed
underperforming stores. Comparable store sales for the 1997 period declined
5.8%. The comparable store sales decrease was primarily attributable to less
low-priced clearance
13
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merchandise associated with fewer closed stores in the immediately preceding
quarter compared to the period one year earlier.
Cost of goods sold, buying and occupancy costs for the twenty-six week
period ended August 2, 1997 were $84.2 million, or 90.2% of sales, compared to
$90.9 million, or 84.0% of sales, for the twenty-seven week period of the
previous year. Gross margin net of occupancy costs decreased 3.4 points as a
percent of sales for the twenty-six week period as compared to the period one
year ago due to additional markdowns required to liquidate clearance
merchandise. Occupancy costs for the 1997 period decreased $2.0 million due to
operating fewer stores; however, they increased as a percent of sales in 1997 as
comparable store sales declined while fixed rents associated with store leases
remained flat. The Company's inventories are valued under the retail inventory
method using the last-in, first-out (LIFO) basis. The difference in inventories
between LIFO and the first-in, first-out (FIFO) method was not material as of
August 2, 1997. Interim period inventory determinations are partially based on
assumptions as to future inventory levels at the end of the fiscal year and
expected rates of inflation for the year which may impact future financial
results.
Operating expenses for the twenty-six week period ended August 2, 1997 were
$38.3 million, or 41.0% of sales, compared to $45.1 million, or 41.7% of sales,
for the twenty-seven week period ended August 3, 1996. The expense decrease of
$6.8 million was partially due to the $2.9 million decrease in depreciation and
amortization expense resulting from the purchase accounting adjustment that
reduced the amounts assigned to property and equipment. The remaining expense
decrease is due to reductions in corporate expenses, continued control of
variable expenses in the stores, operating on average 29 fewer locations, and
having one less week in the 1997 period. Offsetting the operating expense
reductions was a $0.9 million accrued expense associated with the vesting of
restricted stock.
As a result of the above, Wilsons had a loss from operations of $29.1
million for the twenty-six week period ended August 2, 1997, compared to a loss
from operations of $27.8 million for the twenty-seven week period ended August
3, 1996.
Net interest expense for the twenty-six week period ended August 2, 1997
was $1.9 million, or 2.1% of sales, compared to $2.4 million, or 2.2% of sales,
for twenty-seven week period ended August 3, 1996. The decrease in net interest
expense is primarily due to a decrease in the average amount of debt outstanding
and an increase in interest income offset by an increase in borrowing rates and
the amortization of deferred financing costs.
Income tax benefit for the twenty-six week period ended August 2, 1997 was
$11.2 million, or 12.0% of sales, compared to an $11.1 million income tax
benefit, or 10.3% of sales, for the twenty-seven weeks ended August 3, 1996.
The effective tax rate decreased in 1997 to a 36.1% tax rate from a 36.8% tax
rate in 1996 due primarily to the impact of state income taxes.
14
<PAGE>
Liquidity and Capital Resources
Wilsons' primary capital requirements are driven by the Company's strategy
to open new stores, remodel existing stores, update information systems and meet
seasonal working capital needs. The Company's peak working capital needs
typically occur during the period from August through early December as
inventory levels are increased in advance of the Company's peak selling season
from October through December. Commencing in 1997, the Company currently plans
to open 12 to 17 traditional stores and at least six airport stores annually for
the next several years. Such stores are part of the Company's long-term strategy
to identify new growth opportunities and increase profit margins.
General Electric Capital Corporation and a syndicate of banks have provided
the Company with a three-year senior credit facility (Senior Credit Facility)
that expires in May 1999. The Senior Credit Facility provides for borrowings of
up to $150.0 million in aggregate principal amount, which amount includes a
letter of credit subfacility of up to $90.0 million. The maximum amount
available under the Senior Credit Facility, however, is further subject to a
borrowing base limitation (less certain reserves) of 65% of eligible inventory.
The Company's borrowing availability is also reduced by outstanding letters of
credit. Interest is payable on borrowings at one or more variable rates
determined by reference to the "prime" rate plus .25% ("prime" plus 0.0% for the
first $10.0 million of borrowings) or LIBOR plus 1.75%. The spreads are subject
to possible changes based upon the Company's financial results. As of August 2,
1997, the Company had no consolidated borrowings outstanding under its Senior
Credit Facility. The Company pays a monthly fee equal to .375% per annum on the
unused amount of the Senior Credit Facility and on that portion of the first
$10.0 million in borrowings that bears interest at prime plus a spread. For
letters of credit, the Company pays a monthly fee in an amount equal to 1.25%
per annum times the daily average of the amount of letters of credit outstanding
during each month, which percentage is subject to possible changes based on the
Company's financial results. The Senior Credit Facility contains certain
covenants limiting, among other things, the Company's and each Guarantor's
ability to make capital expenditures, pay cash dividends or make other
distributions. The Company plans to use the Senior Credit Facility for its
immediate and future working capital needs, including capital expenditures. As
of August 2, 1997, there was $43.9 million in outstanding letters of credit
under the Senior Credit Facility. From inception through February 1, 1997, the
peak borrowings and letters of credit outstanding under the Senior Credit
Facility were $48.2 million and $60.9 million, respectively, and the average
amounts of such borrowings and amounts covered by outstanding letters of credit
for such periods were $15.8 million and $40.1 million, respectively. The Company
is highly dependent on the Senior Credit Facility to fund working capital and
letter of credit needs, and management believes that the Senior Credit Facility,
together with current and anticipated cash flow from operations, the net
proceeds from its initial public offering and the remaining net proceeds from
the sale of the Senior Notes, (discussed below) should be adequate to meet the
Company's anticipated working capital and capital expenditure requirements until
the Senior Credit Facility expires in 1999, when the Company expects to extend
or replace such facility. There can be no assurance, however, that the Senior
Credit Facility will be sufficient to fund such needs, or, if the Senior Credit
Facility is insufficient to meet such needs, that the Company will be able to
obtain any additional financing or obtain such financing on terms acceptable to
the Company.
15
<PAGE>
As of August 2, 1997, the Company also had outstanding the note payable to
CVS, which was a senior secured subordinated note for $61.3 million. $60.5
million of the principal amount of the note bore interest at the rate of 10% per
annum, compounded annually, with all such principal and interest due and payable
on December 31, 2000. As of August 2, 1997, $1.2 million in interest had accrued
on the note. The remaining principal balance of the note ($0.8 million) did not
bear interest. On August 18, 1997 the Company repurchased the senior secured
subordinated note with a portion of the proceeds of the private offering
discussed below.
On August 18, 1997, the Company completed a private offering of $75.0
million of 11 1/4% senior notes due 2004 (the Senior Notes) to certain
institutional buyers. Interest on the Senior Notes is payable semi-annually in
arrears on February 15 and August 15 of each year, commencing on February 15,
1998. The Senior Notes mature on August 15, 2004, unless previously redeemed,
and the Company is not required to make any mandatory redemption or sinking fund
payment prior to maturity. The Senior Notes are general unsecured obligations of
the Company and rank senior in right of payment to all existing and future
subordinated indebtedness of the Company and rank on equal terms in right of
payment with all other current and future unsubordinated indebtedness of the
Company. The Indenture governing the Senior Notes contains numerous operating
covenants that limit the discretion of management with respect to certain
business matters, and which place significant restrictions on, among other
things, the ability of the Company to incur additional indebtedness, to create
liens or other encumbrances, to declare or pay any dividend, to make certain
payments or investments, loans and guarantees and to sell or otherwise dispose
of assets and merge or consolidate with another entity. The Company used
approximately $56.5 million of the approximately $72.1 million net proceeds from
the offering to repurchase the outstanding senior secured subordinated note
payable to CVS. The balance of the net proceeds will be used for general
corporate purposes, including capital expenditures and additional store
openings. Such proceeds will reduce the total amount of borrowings and shorten
the length of time the Company will borrow under the Senior Credit Facility.
Cash Flow Analysis
Operating activities for the twenty-six week period ended August 2, 1997
resulted in cash used of $61.5 million compared to cash used of $56.0 million in
the twenty-seven week period ended August 3, 1996. The $61.5 million cash used
in operating activities in the twenty-six week period ended August 2, 1997 was
primarily a result of the $19.8 million net loss, the $22.3 million seasonal
increase in inventories, and the $17.0 million decrease in income taxes payable
and other liabilities resulting from the $11.2 million tax benefit generated by
the year-to-date net loss and the $7.4 million tax payments made in the first
half of 1997.
Fluctuation in certain balance sheet accounts between February 1, 1997 and
August 2, 1997 reflect normal seasonal variations within the retail industry.
The level of cash and cash equivalents, inventories and accounts receivable
fluctuate due to the seasonal nature of the retail business. Along with the
fluctuations in these current assets, there is also a corresponding fluctuation
in trade accounts payable and certain accrued expenses.
16
<PAGE>
Investing activity for twenty-six weeks ended August 2, 1997 was
comprised of capital expenditures totaling $2.6 million. The capital
expenditures were primarily for the implementation of certain new information
systems and the renovation of and improvements to existing stores. Capital
expenditures for the twenty-seven week period ended August 3, 1996 totaled $4.3
million. Commencing in 1997, the Company currently plans to open 12 to 17
traditional mall-based stores and at least six airport stores annually for the
next several years. The cost to open a traditional mall-based store is currently
estimated to range from $130,000 to $200,000. The cost to open an airport store
is currently estimated to range from $125,000 to $175,000. Capital expenditures
for the year ending January 31, 1998 are anticipated to be approximately $13.0
million.
Cash provided by financing activities for the twenty-six weeks ended August
2, 1997 was $6.6 million. The $6.6 million provided by financing activities in
1997 was the result of $9.5 million in net proceeds from the Company's initial
public offering offset by a $2.9 million decrease in book overdrafts which occur
as outstanding checks exceed funds on deposit in noninvestment accounts. The
proceeds from the offering enable the Company to reduce seasonal borrowings
under the Revolving Credit Facility. Financing activities in the 1996 period
included the elimination of all prior indebtedness owed by the Predecessor
Companies to CVS and the sale of $12.0 million of common and preferred stock.
In addition, on May 27, 1997, the holders of the 7,405 shares of preferred stock
exchanged their entire holdings of such shares for common stock in a noncash
transaction (see Note 6 of the Notes to the Consolidated Financial Statements).
Management believes that the Company's financial resources, including the
Senior Credit Facility, the balance of the net proceeds from the Senior Notes,
the net proceeds from its initial public offering and current and anticipated
cash flow from operations, will be adequate to fund the Company's operations for
the foreseeable future.
Except for historical information, matters discussed in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" are
forward-looking statements that involve risks and uncertainties, and actual
results may be materially different. Because actual results may differ, readers
are cautioned not to place undue reliance on forward-looking statements.
Factors that could cause actual results to differ include: declines in
comparable store sales; future losses; changes in consumer preferences and
fashion trends away from leather; economic downturns; heavy dependence on the
holiday selling season; high levels of Company debt and restrictions imposed by
lenders; limited operating history as a stand-alone Company; risks associated
with foreign contract manufacturing and importing; increased competition in the
retail leather apparel and accessories industry; risks associated with future
growth; decreased availability and increased cost of raw materials; loss of key
personnel; and volatile stock price and market.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
17
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
B. Series A Preferred Exchange
As of May 27, 1997, the holders of the 7,405 shares of Series A
Preferred exchanged their entire holdings of such shares for
617,083 shares of common stock at an exchange rate of $12.00 per
share. In connection with such exchange, the holders of the Series
A Preferred waived their rights to receive any accrued dividends in
respect of such Series A Preferred.
D. Use of Proceeds
On May 27, 1997, the Securities and Exchange Commission declared
effective the Company's Registration Statement on Form S-1
(Commission file number 333-13967) relating to the initial public
offering of 1,100,000 units. On June 2, 1997, the Company completed
the offering of 1,100,000 units at $9.00 per unit, or an aggregate
amount of $9,900,000. Each unit consisted of one share of a single
class of common stock and one redeemable warrant to purchase one
share of common stock for $13.50 per share. The redeemable warrants
are subject to redemption by the Company for $.01 per warrant any
time 90 or more days after May 27, 1997, on 30 days written notice,
provided that the closing bid price of the Company's common stock
exceeds $14.50 per share (subject to adjustment) for any ten
consecutive trading days prior to such notice. In addition, on June
27, 1997 the managing underwriter, Equity Securities Investments,
Inc. exercised its entire over-allotment option to purchase 165,000
units at $9.00 per unit, or an aggregate amount of $1,485,000. The
Company's net proceeds from the offering totaled $9.5 million.
The Company incurred the following actual expenses in connection
with the issuance and distribution of the 1,265,00 units as
discussed above:
<TABLE>
<CAPTION>
(in thousands)
--------------
<S> <C>
Underwriter's discount $ 854
Underwriter's expenses 171
Other expenses 909
------
Total expenses $1,934
</TABLE>
No direct or indirect payments of the proceeds received from the
offering were made to directors, officers, stockholders or
affiliates of the Company.
From May 27, 1997 to August 2, 1997 the Company used the net
proceeds to fund capital expenditures (in thousands), including
building new stores ($111),
18
<PAGE>
remodeling existing stores ($457), developing and
implementing new information systems ($187), other capital
purchases ($135), and for short-term investments (in thousands)
($8,561).
See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources" in
Part I., Item 2., of the document for a description of limitation
upon the payment of dividends.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit Description
------- -----------
10.1 Amendment No. 4 to Credit Agreement
10.2 Repurchase Agreement dated as of August 13, 1997, by
and between Wilsons The Leather Experts Inc. and CVS
New York, Inc.
10.3 Indenture dated as of August 18, 1997, by and among
Wilsons The Leather Experts Inc., the other
corporations listed on the signature pages thereof,
and Norwest Bank Minnesota, National Association
10.4 Purchase Agreement dated as of August 14, 1997, by and
among Wilsons The Leather Experts Inc., the Subsidiary
Guarantors party thereto, and BancAmerica Securities,
Inc.
10.5 Registration Rights Agreement dated as of August 18,
1997 by and among Wilsons The Leather Experts Inc.,
the Subsidiary Guarantors party thereto, and
BancAmerica Securities, Inc.
10.6 Amendment No. 2 to Pledge Agreement dated as of July
31, 1997, between River Hills Wilsons, Inc. and
General Electric Capital Corporation
10.7 Joinder Agreement dated as of July 31, 1997, by and
between Wilsons International Inc. and General
Electric Capital Corporation
10.8 Parent Guaranty dated as of May 25, 1996, by Wilsons
The Leather Experts Inc., Wilsons Center, Inc.,
Rosedale Wilsons, Inc. and River Hills Wilsons, Inc.
in favor of General Electric Capital Corporation
19
<PAGE>
10.9 Reaffirmation of Guaranty dated as of July 31, 1997,
by Wilsons The Leather Experts Inc., Wilsons Center,
Inc., Rosedale Wilsons, Inc. and River Hills Wilsons,
Inc., in favor of General Electric Capital Corporation
10.10 Store Guarantors' Guaranty dated as of May 25, 1996,
by Bermans The Leather Experts, Inc., Wilsons House of
Suede, Inc., Wilsons Tannery West, Inc., the
Georgetown Subsidiaries that are signatories thereto
and the Individual Store Subsidiaries that are
signatories thereto, in favor of General Electric
Capital Corporation
11.1 Computation of per share loss
27.1 Financial Data Schedule
B. Reports on Form 8-K: The Company did not file any reports on Form
8-K during the quarter ended August 2, 1997.
20
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WILSONS THE LEATHER EXPERTS INC.
By: /s/ Douglas J. Treff
---------------------------------------
Douglas J. Treff
Vice President, Finance,
Chief Financial Officer, and
Assistant Secretary
Date: September 11, 1997
---------------------------------------
21
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description Method of Filing
- ------- ----------- ----------------
<C> <S> <C>
10.1 Amendment No. 4 to Credit Agreement Electronic Transmission
10.2 Repurchase Agreement dated as of August 13, 1997, Electronic Transmission
by and between Wilsons The Leather Experts Inc.
and CVS New York, Inc.
10.3 Indenture dated as of August 18, 1997, by and Electronic Transmission
among Wilsons The Leather Experts Inc., the other
corporations listed on the signature pages
thereof, and Norwest Bank Minnesota, National
Association
10.4 Purchase Agreement dated as of August 14, 1997, by Electronic Transmission
and among Wilsons The Leather Experts Inc., the
Subsidiary Guarantors party thereto, and
BancAmerica Securities, Inc.
10.5 Registration Rights Agreement dated as of August Electronic Transmission
18, 1997 by and among Wilsons The Leather Experts
Inc., the Subsidiary Guarantors party thereto, and
BancAmerica Securities, Inc.
10.6 Amendment No. 2 to Pledge Agreement dated as of Electronic Transmission
July 31, 1997, between River Hills Wilsons, Inc.
and General Electric Capital Corporation
10.7 Joinder Agreement dated as of July 31, 1997, by Electronic Transmission
and between Wilsons International Inc. and General
Electric Capital Corporation
10.8 Parent Guaranty dated as of May 25, 1996, by Electronic Transmission
Wilsons The Leather Experts Inc., Wilsons Center,
Inc., Rosedale Wilsons, Inc. and River Hills
Wilsons, Inc. in favor of General Electric Capital
Corporation
10.9 Reaffirmation of Guaranty dated as of July 31, Electronic Transmission
1997, by Wilsons The Leather Experts Inc., Wilsons
Center, Inc., Rosedale Wilsons, Inc., River Hills
Wilsons, Inc. in favor of General Electric Capital
Corporation
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
10.10 Store Guarantors' Guaranty dated as of May 25, Electronic Transmission
1996, by Bermans The Leather Experts, Inc.,
Wilsons House of Suede, Inc., Wilsons Tannery
West, Inc., the Georgetown Subsidiaries that are
signatories thereto and the Individual Store
Subsidiaries that are signatories thereto, in
favor of General Electric Capital Corporation
11.1 Computation of per share loss Electronic Transmission
27.1 Financial Data Schedule Electronic Transmission
</TABLE>
<PAGE>
Exhibit 10.1
CONSENT AND AMENDMENT NO. 4 TO CREDIT AGREEMENT
This CONSENT AND AMENDMENT NO. 4 TO CREDIT AGREEMENT is entered into as of
this 31st day of July, 1997 (this "Amendment") by and between WILSONS LEATHER
HOLDINGS INC., a Minnesota corporation ("Borrower"), the other Loan Parties
signatory hereto, GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation
(in its individual capacity, "GE Capital"), for itself, as Lender, as Swing Line
Lender and as Agent for Lenders, and the other Lenders signatory hereto. Unless
otherwise specified herein, all capitalized terms used in this Amendment shall
have the meaning ascribed to them in the Credit Agreement (as hereinafter
defined).
RECITALS
WHEREAS, Borrower, GE Capital, certain Loan Parties and Lenders are parties
to a Credit Agreement dated as of May 25, 1996, as amended by that certain
Amendment No. 1 to Credit Agreement dated as of July 11, 1996, that certain
Amendment No. 2 to Credit Agreement dated as of October 22, 1996 and that
certain Amendment No. 3 to Credit Agreement dated as of May 23, 1997 (as further
amended, supplemented, restated or otherwise modified from time to time, the
"Credit Agreement"); and
WHEREAS, Borrower, desires to further amended the Credit Agreement as
herein set forth.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
agreements contained herein, and for good and valuable consideration, the
parties hereto agree as follows:
Section 1. Consent. Agent and lenders consent to the issuance by Newco
-------
of the Senior Notes and the guarantee of payment thereof by Borrower, and all of
the Guarantors (other than Newco); subject to the conditions herein set forth
and provided that (i) a portion of the proceeds of the issuance thereof are used
to prepay in full the Subordinated Note and all interest accrued with respect
thereto and (ii) all other proceeds of the Senior Notes (net of costs and
expenses of issuance) are loaned to, or contributed to the capital of, Second
Intermediate Parent and invested subject to a Control Letter in favor of Agent
for the benefit of Lenders.
Section 2. Amendments to Schedule A to Credit Agreement. Schedule A to
--------------------------------------------
the Credit Agreement is amended as follows:
(a) The defined term "Subordinated Note" and the related
definition are deleted.
(b) The following defined terms are added in alphabetical order:
<PAGE>
(i) "Senior Notes" shall mean senior unsecured notes issued by
Newco and guaranteed by Borrower, and all of the Guarantors (other
than Newco), in the initial principal amount of $75,000,000, bearing
interest at the rate of 11-1/4% per annum and maturing on August 15,
2004.
(ii) "Senior Notes Documents" shall mean the Senior Notes, the
----------------------
Indenture dated as August 18, 1997 between Newco and Norwest Bank,
Minnesota, N.A., as trustee, governing the terms and issuance of the
Senior Notes, and all guaranties executed and delivered by
Subsidiaries of Newco with respect to the Senior Notes as the same may
be amended, supplemented, restated or otherwise modified from time to
time.
(c) The following definitions is amended to read in its entirety as
follows:
"Borrowing Base" shall mean, as of any date of determination,
--------------
the sum of (i) sixty-five percent (65%) of the book value of
Eligible Inventory (other than Lay Away Inventory) valued on a
first-in, first-out basis (at the lower of cost or market) plus
----
(ii) sixty-five percent (65%) of Lay Away Inventory valued as
follows: (unpaid purchase price / .625) x .50, minus (iii)
Reserves. -----
(d) The following clause (d) is added to the definition of "Change
of Control"):
or (d) a "Change of Control" (as such term is defined in the
Senior Notes Documents) shall occur.
Section 3. Amendments to Credit Agreement.
------------------------------
(a) For purposes of Section 1.6 of the Credit Agreement, with
respect to adjustments in the Applicable Index Margin, Applicable LIBOR Margin,
Applicable L/C Margin and Applicable Swing Line Margin for the Fiscal Quarters
ending on the Saturday closest to the last day of October 1997, January 1998,
April 1998, and July 1998, EBIT/Cash Interest Coverage shall be determined as if
the Senior Notes had been outstanding during the entire four Fiscal Quarters
ending on the last day of each of the four Fiscal Quarter referenced above.
(b) Section 3.25 of the Credit Agreement is deleted.
(c) Clause (d) of Section 6.3 is amended to delete the reference to
(the Subordinated Note" and to insert in place thereof the Senior Notes."
-2-
<PAGE>
(d) Section 6.6 is amended to add the following clause (d) at the
end of that Section:
"and (d) guaranties of the Senior Notes; provided that if any Person
shall guarantee payment of the Senior Notes that is not a guarantor or
direct obligor with respect to the Obligations, the Credit Parties
shall cause such Person to guarantee payment of the Obligations and
grant to Agent a security interest in such Person's assets in a manner
consistent with the terms of the Loan Documents delivered on the
Closing Date."
(e) Section 6.14 is amended and restated to read in its entity as follows:
Restricted Payments. No Credit Party shall make any Restricted
-------------------
Payment, except (a) asset or Stock transfers permitted under Section
-------
6.1; (b) intercompany loans permitted under Section 6.3; (c)
--- -----------
restricted payments consisting of cash dividends paid to Parent, First
Intermediate Parent and Second Intermediate Parent at such times and
in such amounts as are sufficient to enable Newco to pay interest on
the Senior Notes when due and so long as no Event of Default under
Section 8.1(a) shall have occurred and be continuing, concurrently
with the payment of each such dividends to Parent, First Intermediate
Parent and Second Intermediate Parent (as applicable), such Loan
parties shall pay dividends to Newco for the purpose set forth above;
(d) restricted payments consisting of cash dividends paid to Parent,
First Intermediate Parent and Second Intermediate Parent so long as no
Event of Default shall have occurred and be continuing and
concurrently with the payment of each such dividend to Parent, First
Intermediate Parent and Second Intermediate Parent (as applicable),
such Loan Parties shall pay a dividend to Newco for the purposes set
forth in clause (h) below; (e) restricted payments consisting of cash
dividends paid to First Intermediate Parent and Second Intermediate
Parent, the proceeds of which are invested in investments permitted
under clause (a) of Section 6.2, subject to a Control Letter on terms
satisfactory to Agent; (f) cash dividends payable to Newco in such
amounts and at such times as are sufficient to permit Newco to pay
state and federal income taxes owed by it, audit expenses, costs
necessary to maintain its corporate existence in good standing and
maintain its status as a public reporting company under the Securities
and Exchange Act of 1934, as amended, and costs incurred in connection
with the issuance and registration of the Senior Notes; (g) a payment
consisting of payment in full of all principal and interest with
respect to the Subordinated Note with proceeds of the Senior Notes;
and (h) so long as no Event of Default shall have occurred and be
continuing, Newco may redeem Stock of former employees of any of the
Loan Parties in accordance with Sections 3 and 4 of the Shareholder
Agreement in an amount not to exceed $250,000 in any period of 12
months.
-3-
<PAGE>
(f) Section 6.18 is amended and restated to read in its entirety as
follows:
Changes Relating to Senior Notes. No Credit Party shall (a) change or
--------------------------------
amend the terms of the Senior Notes Documents if the effect of such
amendment is to: (i) increase the interest rate on such Senior Notes;
(ii) change the dates upon which payments of principal or interest are
due on the Senior Notes other than to extend such dates; (iii) change
any default or event of default other than to delete or make less
restrictive any default provision therein, or add any covenant with
respect to the Senior Notes; (iv) change the redemption or prepayment
provisions applicable to the Senior Notes other than to extend the
dates therefor or to reduce the premiums payable in connection
therewith; (v) grant any security or collateral to secure payment of
the Senior Notes; or (vi) change or amend any other term of the Senior
Notes Documents if such change or amendment would materially increase
the obligations of any obligor or confer additional material rights to
any holder of a Senior Note in a manner adverse to any Credit Party,
Agent or any Lender, or (b) prepay, defease or purchase any Senior
Note.
Section 4. Representations and Warranties of Loan Parties. The Loan
----------------------------------------------
Parties represent and warrant that:
(a) the execution, delivery and performance by the Loan Parties of
this Amendment have been duly authorized by all necessary corporate action
and this Amendment is a legal, valid and binding obligation of the Loan
Parties enforceable against the Loan Parties in accordance with its terms,
except as the enforcement thereof may be subject to (i) the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar
law affecting creditors' rights generally and (ii) general principles of
equity (regardless of whether such enforcement is sought in a proceeding in
equity or at law);
(b) each of the representations and warranties contained in the
Credit Agreement is true and correct in all material respects on and as of
the date hereof as if made on the date hereof, except to the extent that
such representations and warranties expressly relate to an earlier date;
(c) neither the execution, deliver and performance of this
Amendment nor the consummation of the transactions contemplated hereby does
or shall contravene, result in a breach of , violate (i) any provision of
any Loan Party's certificate or articles of incorporation or bylaws, (ii)
any law or regulation, or any order or decree of any court or governmental
instrumentality, or (iii) any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which any Loan Party or any of its
Subsidiaries is party or by which any Loan Party or any of its Subsidiaries
or any of their property is
-4-
<PAGE>
bound, except in any such case to the extent such conflict or beach has
been waived by a written waiver document; a copy of which has been
delivered to Agent on or before the date hereof.
Section 5. Condition to Effectiveness. This Amendment shall be
--------------------------
effective upon satisfaction of the following conditions precedent:
(a) Execution and delivery of this Amendment by all parties
hereto.
(b) The representations and warranties contained herein shall be
true and correct in all respects.
(c) Agent shall have received an opinion of counsel of the Credit
Parties in form and substance satisfactory to Agent and its counsel
covering, without limitation, each Credit Party's due incorporation, valid
existence and good standing, corporate power and authority to conduct
business, due authorization, execution and delivery of this Amendment and
for the reaffirmation of guaranty described below (as applicable) and each
of the other documents executed pursuant hereto, enforceability of this
Amendment, the reaffirmation of guaranty and each of the documents executed
pursuant hereto, and no conflicts with each Credit Party's certificate or
articles of incorporation, bylaws, laws generally and material contracts.
(d) Agent shall have received a fully executed reaffirmation of
guaranty from the Credit Parties (other than the Borrower and the Foreign
Subsidiaries) substantially in the form of Exhibit A hereto.
---------
(e) A certified copy of the Senior Notes Documents satisfactory in
form and substance to Agent and Requisite Lenders.
(f) Payment of an Amendment Fee to each Lender consenting hereto
on or prior to July 31, 1997, in an amount equal to .25% of such Lenders'
Commitment.
(g) Agent shall have received a Joinder Agreement with respect to
Wilsons International Inc. in form and substance reasonably satisfactory to
Agent.
(h) Agent shall have received an Amendment to Pledge Agreement of
Second Intermediate Parent listing the shares of Stock of each Store
Guarantor owned by it, along with share certificates evidencing such Stock
and stock powers endorsed in blank.
Section 6. Reference to and Effect Upon the Credit Agreement.
-------------------------------------------------
-5-
<PAGE>
(a) Except as specifically amended above, the Credit Agreement and
the other Loan Documents shall remain in full force and effect and are hereby
ratified and confirmed.
(b) The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of Agent or any
Lender under the Credit Agreement or any Loan Document, nor constitute a waiver
of any provision of the Credit Agreement or any Loan Document, except as
specifically set forth herein. Upon the effectiveness of this Amendment, each
reference in the Credit Agreement to "this Amendment", "hereunder", "hereof",
"herein" or words of similar import shall mean and be a reference to the Credit
Agreement as amended hereby.
Section 7. Costs and Expenses. As provided in Section 11.3 of the
------------------ ------------
Credit Agreement, Borrower agrees to reimburse Agent for all fees, costs and
expenses, including the fees, costs and expenses of counsel or other advisors
for advice, assistance or other representation in connection with this
Amendment.
Section 8. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF ILLINOIS.
Section 9. Headings. Section headings in this amendment are included
--------
herein for convenience of reference only and shall not constitute a part of this
amendment for any other purposes.
Section 10. Counterparts. This amendment may be executed in any number
------------
of counterparts, each of which when so executed shall be deemed an original, but
all such counterparts shall constitute one and the same instrument.
(signature page follows)
-6-
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed as of the date
first written above.
WILSONS LEATHER HOLDINGS INC.
By: /s/ David L. Rogers
----------------------------------
Title: President
-------------------------------
GENERAL ELECTRIC CAPITAL CORPORATION
as Agent, Lender and Swing Line Lender
By: /s/ Trevor Clark
----------------------------------
Title: Duly Authorized Signatory
-------------------------------
BANKBOSTON, NA. (formerly THE FIRST
NATIONAL BANK OF BOSTON)
By: /s/ Mark J. Lat
----------------------------------
Title: Vice President
-------------------------------
SANWA BUSINESS CREDIT CORPORATION,
as Lender
By: /s/ H.K.
----------------------------------
Title: Vice President
-------------------------------
SIGNET BANK, as Lender
By: Mara L. Surocinski
----------------------------------
Title: Assistant Vice President
-------------------------------
-7-
<PAGE>
THE CIT GROUP/BUSINESS CREDIT, INC.,
as Lender
By: Allison Friedman
-------------------------------------
Title: Assistant Secretary
----------------------------------
TRANSAMERICA BUSINESS CREDIT
CORPORATION, as Lender
By: M.N.M.
-------------------------------------
Title: Vice President
----------------------------------
CORESTATES BANK N.A., as Lender
By: Myron Landau
-------------------------------------
Title: VP
----------------------------------
BANKAMERICA BUSINESS CREDIT, INC.
By: Thomas G. Sullivan
-------------------------------------
Title: __________________________________
FIRST BANK NATIONAL ASSOCIATION,
as Lender
By: Robert E. Lercli, Jr.
-------------------------------------
Title: S.V.P.
----------------------------------
-8-
<PAGE>
Bermans The Leather Experts Inc.
River Hills Wilsons, Inc.
Wilsons The Leather Experts Inc.
Rosedale Wilsons, Inc.
Wilsons House of Suede, Inc.
Wilsons Center, Inc.
By: /s/ David L. Rogers
-------------------------------------
Title: President
---------------------------------
-9-
<PAGE>
Exhibit 10.1
STORE GUARANTORS:
Bermans The Leather Experts Inc.
Wilsons House of Suede, Inc.
Wilsons Tannery West, Inc.
Wilsons Leather of Alabama Inc.
Wilsons Leather of Connecticut Inc.
Wilsons Leather of Florida Inc.
Wilsons Leather of Georgia Inc.
Wilsons Leather of Indiana Inc.
Wilsons Leather of Iowa Inc.
Wilsons Leather of Louisiana Inc.
Wilsons Leather of Maryland Inc.
Wilsons Leather of Massachussets Inc.
Wilsons Leather of Michigan Inc.
Wilsons Leather of New Jersey Inc.
Wilsons Leather of New York Inc.
Wilsons Leather of North Carolina Inc.
Wilsons Leather of Ohio Inc.
Wilsons Leather of Pennsylvania Inc.
Wilsons Leather of Rhode Island Inc.
Wilsons Leather of Tennessee Inc.
Wilsons Leather of Texas Inc.
Wilsons Leather of Virginia Inc.
Wilsons Leather of West Virginia Inc.
Wilsons Leather of Wisconsin Inc.
Wilsons Leather of Arkansas Inc.
Wilsons Leather of Delaware Inc.
Wilsons Leather of Mississippi Inc.
Wilsons Leather of Missouri Inc.
Wilsons Leather of South Carolina Inc.
Wilsons Leather of Vermont Inc.
By: /s/ David L. Rogers
-------------------------------------
Title: President
------------------------------------
<PAGE>
EXHIBIT A
FORM OF REAFFIRMATION OF GUARANTY
---------------------------------
July 31, 1997
General Electric Capital Corporation, as Agent
105 West Madison Street
Suite 1600
Chicago, Illinois 60602
Attn: Wilsons Leather Account Manager
Please refer to (1) the Credit Agreement dated as of May 25, 1996 (as
amended, supplemented, restated or otherwise modified from time to time, the
"Credit Agreement") among Wilsons Leather Holdings Inc. ("Borrower"), and the
Loan Parties, General Electric Capital Corporation, individually and as agent
("Agent") and the other lenders signatory thereto; (2) the Parent Guaranty dated
as of May 25, 1996 (as amended, the "Parent Guaranty"), by certain of the
undersigned in favor of Agent on behalf of the Lenders under the Credit
Agreement and (3) the Store Guarantors' Guaranty (as amended, the "Store
Guarantors' Guaranty") dated as of May 25, 1996 by certain of the undersigned in
favor of Agent on behalf of the Lenders under the Credit Agreement. Pursuant to
Amendment No. 4 to Credit Agreement (the "Amendment") of even date herewith,
among Agent, the Lenders signatory thereto, Borrower and the Loan Parties
signatory thereto, certain provisions in the Credit Agreement were amended or
waived.
We hereby (i) acknowledge and reaffirm all of our obligations and
undertakings under the Parent Guaranty and the Store Guarantors' Guaranty and
the Store Guarantors' Guaranty (as applicable) (collective, the "Guaranties"),
and (ii) acknowledge and agree that subsequent to, and taking into account such
Amendment, the Guaranties are and shall remain in full force and effect in
accordance with the terms thereof.
PARENTS:
Wilsons The Leather Experts Inc.
Wilsons Center, Inc.
Rosedale Wilsons, Inc.
River Hills Wilsons, Inc.
By:____________________________________
Title:_________________________________
<PAGE>
Exhibit 10.2
REPURCHASE AGREEMENT
THIS AGREEMENT made and entered into as of this 13th day of August,
1997, by and between Wilsons The Leather Experts Inc. ("Wilsons") and CVS New
York, Inc. ("CVS"), a New York corporation formerly known as Melville
Corporation.
WITNESSETH
WHEREAS, as partial consideration for the purchase by Wilsons from CVS
of all of the outstanding capital stock of Wilsons Center, Inc., Wilsons issued
to CVS or registered assigns a secured Subordinated Note (the "CVS Note") dated
May 25, 1996 in the original principal amount of $55,811,000, bearing interest
on $55,000,000 of the principal amount of the CVS Note at the rate of 10% per
annum, compounded annually on May 25 of each year, commencing May 25, 1997;
WHEREAS, as of May 25, 1997, the $5,500,000 of interest accrued on the
CVS Note as of that date (the "Capitalized Interest") was added to, and became
part of, the principal amount of the CVS Note pursuant to the terms of the CVS
Note such that, as of the date hereof, the outstanding principal amount of the
CVS Note, including the Capitalized Interest, is $61,311,000 (the "Current
Principal Amount");
WHEREAS, CVS is currently the registered holder of the CVS Note;
WHEREAS, CVS desires that Wilsons repurchase and prepay the CVS Note
on the terms set forth in this Agreement, and Wilsons desires to repurchase and
prepay the CVS Note on such terms;
WHEREAS, the parties agree that the non-capitalized interest on the
Current Principal Amount accruing from May 26, 1997 through the date hereof (not
including interest as of this date) is $1,327,639.20 (the "Accrued Date of
Agreement Interest"), and that interest from and including this date to, but not
including, the date of repurchase of the CVS Note, shall accrue on the Current
Principal Amount in the amount of $16,805.56 per day (the "Daily Interest").
NOW THEREFORE, in consideration of the mutual agreements set forth in
this Agreement and for good and valuable other consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Repurchase and Sale of the CVS Note. Subject to the terms and
-----------------------------------
conditions hereinafter set forth, and in reliance on the representations and
warranties of Wilsons contained herein, CVS hereby agrees to sell to Wilsons the
CVS Note in its entirety, including all Capitalized Interest and all non-
capitalized accrued interest thereon, for an
<PAGE>
aggregate cash purchase price equal to the sum of (i) $49,538,733.30 in payment
of the amount by which the Current Principal Amount exceeds Capitalized
Interest, (ii) 100% of the Capitalized Interest, (iii) 100% of the Accrued Date
of Agreement Interest and (iv) 100% of the Daily Interest for each day from and
including the date of this Agreement to, but not including, the Closing Date (as
hereinafter defined). The sum of the amounts set forth in clauses (i), (ii),
(iii) and (iv) of the immediately preceding sentence is hereinafter sometimes
referred to as the "Note Repurchase Price." Subject to the terms and conditions
hereinafter set forth, and in reliance on the representations and warranties of
CVS contained herein, Wilsons hereby agrees to repurchase from CVS the CVS Note
in its entirety by prepayment of the Note Repurchase Price. The parties hereto
understand that the portion of the Note Repurchase Price paid for the amount by
which the Current Principal Amount exceeds Capitalized Interest constitutes a
discount thereon but agree that from and after the payment of the Note
Repurchase Price for the CVS Note, (1) the CVS Note, including all Capitalized
Interest and all non-capitalized accrued interest thereon, shall be deemed to
have been prepaid in full in full and complete satisfaction of all rights of CVS
as the holder of the CVS Note, (2) none of CVS or any of its affiliates or any
other person or entity shall have any rights with respect to the CVS Note and
(3) the CVS Note shall be canceled and shall create no further payment, covenant
or other obligations or liabilities in favor of CVS, any of its affiliates or
any other person or entity, all of which shall be extinguished, discharged,
terminated and released and of no further force or effect upon such payment of
the Note Repurchase Price. CVS waives the notice of prepayment which is
otherwise required by the terms of the CVS Note.
2. Surrender of Documents, Termination Statements and Releases. On
-----------------------------------------------------------
the Closing Date, upon payment by Wilsons of the Note Repurchase Price, CVS
shall surrender and deliver to Wilsons (i) the original CVS Note conspicuously
marked "Fully Paid and Canceled" and (ii) the original Warrant (the "Management
Warrant") registered in the name of CVS dated May 25, 1996 that is denominated
Warrant No. 2 for 1,200,000 shares of Common Stock of Wilsons (1,080,000 after
giving effect to the .90 for 1 reverse stock split effective October 11, 1996)
conspicuously marked "Canceled." On the Closing Date, CVS shall deliver to
Wilsons or counsel to the lenders under Wilsons' senior credit facility
appropriately signed amendments of UCC-1 Financing Statements, prepared by
counsel to the lenders under Wilsons' senior credit facility and executed by
CVS, removing CVS as a secured party for all UCC-1 Financing Statements
evidencing security interests of CVS in assets of Wilsons or any of its existing
direct or indirect subsidiaries (together with Wilsons' former subsidiaries, the
"Subsidiaries") or otherwise securing the CVS Note or any obligations of Wilsons
or any of its existing Subsidiaries to CVS, and CVS further agrees that on the
Closing Date, without any further action on the part of CVS, all security
interests and pledges of stock or assets of Wilsons or any of its Subsidiaries
or otherwise securing the CVS Note or otherwise securing any obligations of
Wilsons or any of its Subsidiaries to CVS, including without limitation the
Security Agreement among Wilsons, certain of its Subsidiaries and CVS dated as
of May 25, 1996, the Pledge Agreement between Wilsons and CVS dated as of May
25, 1996, the Pledge Agreement between Wilsons Center, Inc. and CVS
2
<PAGE>
dated as of May 25, 1996, the Pledge Agreement between Rosedale Wilsons, Inc.
and CVS dated as of May 25, 1996 and the Pledge Agreement between River Hills
Wilsons, Inc. and CVS dated as of May 25, 1996, as amended, shall be deemed to
have been terminated and released by reason of the execution of this Agreement
and shall be of no further force or effect. Without limiting anything stated in
the immediately preceding sentence, at any time and from time to time on or
after the Closing Date, CVS, without further consideration, shall promptly take
such further action and execute and deliver such further instruments and
documents as may be requested by Wilsons to evidence such terminations and
releases provided for in this paragraph, including the execution of termination
statements prepared by counsel to Wilsons or counsel to the lenders under
Wilsons' senior credit facility for all UCC-1 Financing Statements referencing
security interests of CVS in assets of former Subsidiaries of Wilsons, including
those that have been merged into other Subsidiaries of Wilsons.
3. Closing Date. Subject to the terms and conditions of this
------------
Agreement, the closing of the repurchase and sale of the CVS Note (the
"Closing") shall be held on August 18, 1997, at the offices of Faegre & Benson
in Minneapolis, Minnesota at 11:00 A.M., or at such other time and/or on such
other date and/or at such other place as the parties hereto may mutually agree
(the date of Closing being herein referred to as the "Closing Date"), provided
that as provided in Section 9.1, it is understood and agreed that either party
hereto may terminate this Agreement at any time after August 19, 1997, if the
conditions to Closing on the Closing Date shall not have been satisfied or
waived by the appropriate party or parties and the repurchase of the CVS Note
shall not have occurred. On the Closing Date, Wilsons shall wire transfer, or
cause to be wire transferred, to the account of CVS New York, Inc., account no.
825-2036-971 at Bank of New York, ABA #021-000-018, in immediately available
funds, the Note Repurchase Price, and CVS shall simultaneously surrender and
deliver to Wilsons the original CVS Note and Management Warrant and the other
documents referred to in Section 2 hereof.
4. Representations and Warranties of CVS. CVS represents and
-------------------------------------
warrants to Wilsons as follows:
4.1 Corporate Existence and Power. CVS is a corporation duly
-----------------------------
organized, validly existing and in good standing under the laws of the State of
New York and has all corporate power necessary to complete the sale of the CVS
Note to Wilsons pursuant to the terms of this Agreement and to perform its other
obligations under this Agreement. CVS has heretofore delivered to Wilsons true
and complete copies of the certificate of incorporation and bylaws of CVS as
currently in effect.
4.2 Corporate Authorization. The execution, delivery and performance
-----------------------
by CVS of this Agreement have been duly authorized by all necessary corporate
action on the part of CVS. This Agreement constitutes the valid and binding
agreement of CVS enforceable against CVS in accordance with its terms, except as
(i) the enforceability of this
3
<PAGE>
Agreement may be limited by bankruptcy, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and (ii) the
availability of equitable remedies may be limited by equitable principles of
general applicability.
4.3 Governmental Authorization. The execution, delivery and
--------------------------
performance by CVS of this Agreement require no action by or in respect of, or
filing with, any governmental body, agency or official.
4.4 Non-Contravention. The execution, delivery and performance by
-----------------
CVS of this Agreement do not and will not (i) violate the certificate of
incorporation or bylaws of CVS, (ii) violate any applicable statute, law, rule,
regulation, ordinance, judgment, ruling by a court, writ, injunction, order or
decree, or (iii) require any consent or other action by, or any notice to, any
person or entity under, or constitute a default or create a penalty under,
conflict with or give rise to any right of termination, cancellation or
acceleration of any right or obligation of CVS under, any agreement, contract,
lease, license or other instrument binding upon or applicable to CVS. Without
limiting the generality of the immediately preceding sentence, CVS acknowledges
that Nashua Hollis CVS, Inc. ("Nashua Hollis") has entered into an agreement to
sell the CVS Note to Donaldson Lufkin & Jenrette Securities Corporation ("DLJ")
or its designees if it is not purchased by Wilsons or its shareholders (the "DLJ
Agreement"), but CVS represents and warrants that DLJ has no rights to purchase
the CVS Note or other rights with respect to the CVS Note if it is repurchased
by Wilsons on or before August 19, 1997, and that the execution, delivery and
performance of this Agreement by CVS do not require any consent or other action
by DLJ or constitute a default under or conflict with any obligation of CVS or
Nashua Hollis to DLJ under, any agreement, contract, lease, license or other
instrument binding upon or applicable to CVS or Nashua Hollis. Nashua Hollis is
an indirect wholly-owned subsidiary of CVS.
4.5 Representations Regarding CVS Note. CVS is the record and
----------------------------------
beneficial owner and registered holder of the CVS Note, free and clear of any
pledge, lien, security interest or other encumbrance, restriction or adverse
claim (a "Lien"), and no Lien will arise as a result of the sale, surrender or
cancellation of the CVS Note. The CVS Note is genuine and has not been altered
since the original execution thereof, there are no limitations upon the right of
CVS to sell the CVS Note to Wilsons and there are no rights of any other person
or entity to acquire the CVS Note, subject to the DLJ Agreement to the extent
provided in Section 4.4 if Wilsons does not purchase the CVS Note on or before
August 19, 1997, and further subject to the first refusal rights of certain
shareholders of Wilsons expiring August 14, 1997 under a Registration Rights
Agreement dated as of May 25, 1996, to which CVS and Wilsons are parties (the
"Registration Rights Agreement"). CVS has the right to surrender and deliver the
CVS Note to Wilsons upon receipt of the Note Repurchase Price. No affiliate of
CVS, including Nashua Hollis, has any right, title or interest in the CVS Note.
4.6 Litigation. There is no action, suit, investigation or
----------
proceeding pending against or, to the knowledge of CVS, threatened against or
affecting, CVS or any affiliate of
4
<PAGE>
CVS before any court or arbitrator or any governmental body, agency or official
as of the date of this Agreement which in any manner challenges or seeks to
prevent, enjoin, alter or delay the transactions contemplated by this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF WILSONS
Wilsons represents and warrants to CVS as follows:
5.1 Corporate Existence and Power. Wilsons is a corporation duly
-----------------------------
organized, validly existing and in good standing under the laws of the State of
Minnesota and has all corporate power necessary to repurchase the CVS Note
pursuant to the terms of this Agreement and perform its other obligations under
this Agreement. Wilsons has heretofore delivered to CVS true and complete
copies of the articles of incorporation and bylaws of Wilsons as currently in
effect.
5.2 Corporate Authorization. The execution, delivery and performance
-----------------------
by Wilsons of this Agreement have been duly authorized by all necessary
corporate action on the part of Wilsons. This Agreement constitutes the valid
and binding agreement of Wilsons enforceable against Wilsons in accordance with
its terms, except as (i) the enforceability of this Agreement may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability.
5.3 Governmental Authorization. The execution, delivery and
--------------------------
performance by Wilsons of this Agreement require no action by or in respect of,
or filing with, any governmental body, agency or official, provided that this
Agreement must be filed with the Securities and Exchange Commission following
the repurchase of the CVS Note.
5.4 Non-Contravention. The execution, delivery and performance by
-----------------
Wilsons of this Agreement do not and will not (i) violate the articles of
incorporation or bylaws of Wilsons, (ii) violate any applicable statute, law,
rule, regulation, ordinance, judgment, ruling by a court, writ, injunction,
order or decree or (iii) require any consent or other action by, or any notice
to, any person or entity under, or constitute a default or create a penalty
under, conflict with or give rise to any right of termination, cancellation or
acceleration of any right or obligation of Wilsons under, any agreement,
contract, lease, license or other instrument binding upon or applicable to
Wilsons, provided that the repurchase of the CVS Note is not permitted without
the written consent of lenders under Wilsons' senior credit facility and
provided further that this Agreement must be filed with the Securities and
Exchange Commission following the repurchase of the CVS Note.
5
<PAGE>
5.5 Litigation. There is no action, suit, investigation or
----------
proceeding pending against, or, to the knowledge of Wilsons, threatened against
or affecting, Wilsons before any court or arbitrator or any governmental body,
agency or official as of the date of this Agreement which in any manner
challenges or seeks to prevent, enjoin, alter or delay the transactions
contemplated by this Agreement.
5.6 Financing. Wilsons has received and furnished a copy to CVS of a
---------
highly "confident letter" from BancAmerica Securities, Inc. relating to a
proposed financing through a Rule 144A private placement ("Highly Confident
Letter") for the purpose of, among other things, providing financing to purchase
the CVS Note (the "Financing"). As of the date hereof, Wilsons knows of no
facts or circumstances that are reasonably likely to result in the failure to
receive Financing referred to in the Highly Confident Letter.
ARTICLE 6
SURVIVAL OF REPRESENTATIONS
The representations and warranties contained in Articles IV and V
hereof shall survive the Closing and continue indefinitely and shall be
enforceable against the party making the representations and warranties by the
party for whose benefit they are made. Such representations and warranties shall
each be deemed to be representations and warranties made as of the Closing Date
(as well as the date of this Agreement) unless an officer of the party making
them shall deliver a certificate to the contrary to the other party hereto prior
to the Closing.
ARTICLE 7
COVENANTS AND AGREEMENTS OF CVS
7.1 Other Offers. From the date of this Agreement until the Closing
------------
Date or the termination of this Agreement, none of CVS or any of its affiliates,
agents or representatives will, directly or indirectly, take any action to
solicit, initiate or encourage the sale of the CVS Note to any person or entity
other than Wilsons or in any manner discuss, consider or accept (except upon any
exercise of first refusal rights by shareholders of Wilsons on or before August
14, 1997, pursuant to the terms of the Registration Rights Agreement) any
proposal to buy or sell the CVS Note except for the repurchase of the CVS Note
by Wilsons, provided that Wilsons acknowledges that it has been informed by CVS
that Nashua Hollis has entered into the DLJ Agreement to sell the CVS Note to
DLJ if it is not purchased by Wilsons or the shareholders of Wilsons.
7.2 Financing. CVS agrees that notwithstanding anything to the
---------
contrary provided in the CVS Note, Wilsons may complete the Financing without
being in default
6
<PAGE>
under the CVS Note as long as the proceeds of the Financing are used promptly to
repurchase the CVS Note pursuant to the terms of this Agreement.
ARTICLE 8
CONDITIONS TO CLOSING
8.1 Conditions to Obligations of CVS and Wilsons. The obligations of
--------------------------------------------
CVS and Wilsons to consummate the Closing are subject to the satisfaction of the
condition that no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Closing.
8.2 Conditions to Obligation of Wilsons. The obligation of Wilsons
-----------------------------------
to consummate the Closing is subject to the satisfaction of the following
further conditions:
(i) (A) CVS shall have performed in all material respects all
of its covenants, agreements and obligations hereunder required to be
performed by it on or prior to the Closing Date and (B) the
representations and warranties of CVS contained in this Agreement and
in any certificate or other writing delivered by CVS pursuant hereto
shall be true in all material respects at and as of the Closing Date
as if made at and as of such date.
(ii) Wilsons shall have received all documents it may
reasonably request relating to the existence and good standing of CVS
and the authority of CVS to enter into this Agreement, all in form and
substance reasonably satisfactory to Wilsons.
(iii) Wilsons shall have received at the Closing an opinion
dated the Closing Date from Davis Polk & Wardwell, counsel to CVS, in
substantially the form set forth in Exhibit A.
(iv) The Financing shall have been consummated and Wilsons
shall have received the requisite written consent of lenders to the
repurchase of the CVS Note and the Financing under its senior credit
facility.
(v) Wilsons shall have received the CVS Note and the
Management Warrant.
8.3. Conditions to Obligation of CVS. The obligation of CVS to
-------------------------------
consummate the Closing is subject to the satisfaction of the following further
conditions:
(i) (A) Wilsons shall have performed in all material respects
all of its covenants, agreements and obligations hereunder required to
be performed
7
<PAGE>
by it at or prior to the Closing Date and (B) the representations and
warranties of Wilsons contained in this Agreement and in any
certificate or other writing delivered by Wilsons pursuant hereto
shall be true in all material respects at and as of the Closing Date
as if made at and as of such date.
(ii) CVS shall have received all documents it may reasonably
request relating to the existence and good standing of Wilsons and the
authority of Wilsons to enter into this Agreement, all in form and
substance reasonably satisfactory to CVS.
(iii) CVS shall have received at the Closing an opinion dated
the Closing Date from Faegre & Benson LLP, counsel to Wilsons, in
substantially the form set forth in Exhibit B.
(iv) Wilsons shall have received the requisite written consent
of lenders to the repurchase of the CVS Note under Wilsons' senior
credit facility.
(v) CVS shall have received the Note Repurchase Price.
ARTICLE 9
TERMINATION
9.1 Grounds for Termination. This Agreement may be terminated at any
-----------------------
time prior to the Closing:
(i) by mutual written agreement of CVS and Wilsons;
(ii) by either of CVS or Wilsons if the Closing shall not have
been consummated on or before August 19, 1997 or if any shareholder of
Wilsons shall have exercised its first refusal rights under the
Registration Rights Agreement on or prior to August 14, 1997, and CVS
hereby agrees promptly to give notice to Wilsons if any shareholder of
Wilsons shall have exercised its first refusal rights under the
Registration Rights Agreement on or prior to August 14, 1997;
(iii) by either of CVS or Wilsons if there shall be any law or
regulation that makes consummation of the transactions contemplated
hereby illegal or otherwise prohibited or if consummation of the
transactions contemplated hereby would violate any nonappealable final
order, decree or judgment of any court or governmental body having
competent jurisdiction;
8
<PAGE>
(iv) by CVS, if any representation or warranty of Wilsons
contained in this Agreement shall prove to be inaccurate in any
material respect at the time when made and Wilsons shall refuse or
fail after written notice to correct such representation or warranty
within 5 days of such written notice; or
(v) by Wilsons, if any representation or warranty of CVS
contained in this Agreement shall prove to be inaccurate in any
material respect at the time when made and CVS shall refuse or fail
after written notice to correct such representation or warranty within
5 days of such written notice.
The party desiring to terminate this Agreement shall give notice of such
termination to the other parties hereto.
9.2 Effect of Termination. If this Agreement is terminated as
---------------------
permitted by Section 9.1 , termination shall be without liability of any party
(or any stockholder, director, officer, employee, agent, consultant or
representative of such party) to any other party to this Agreement; provided
--------
that if such termination shall result from the willful failure of Wilsons or CVS
to fulfill a condition to the performance of the obligations of the other party,
failure to perform a covenant of this Agreement or breach by such party of any
representation or warranty or agreement contained herein, such party shall be
fully liable for any and all damages incurred or suffered by the other party as
a result of such failure or breach.
ARTICLE 10
MISCELLANEOUS
10.1 Notices. All notices, requests and other communications to any
-------
party hereunder shall be in writing (including facsimile transmission) and shall
be given at the party's address (or telecopier number) set forth below, or such
other address (or telecopier number) as shall have been furnished to the party
giving or making such notice, request or other communication:
If to Wilsons, to:
Wilsons The Leather Experts Inc.
7401 Boone Avenue North
Brooklyn Park, MN 55428
Telecopier: (612) 391-4152
Attention: Joel Waller, David Rogers
9
<PAGE>
with copies to:
Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Telecopier: (612) 336-3026
Attention: Philip S. Garon, Esq.
If to CVS, to:
One CVS Drive
Woonsocket, Rhode Island 02895
Telecopier: (401) 762-8923
Attention: Chief Executive Officer,
Chief Financial Officer and
General Counsel
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopier: (212) 450-4800
Attention: Dennis S. Hersch, Esq.
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5:00 p.m. in
the place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.
10.2 Amendments and Waivers. (a) Any provision of this Agreement may
----------------------
be amended or waived if, but only if, such amendment or waiver is in writing and
is signed, in the case of an amendment, by each party to this Agreement, 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.
10
<PAGE>
10.3 Expenses. All costs and expenses incurred in connection with
--------
this Agreement shall be paid by the party incurring such cost or expense.
10.4 Successors and Assigns. The provisions of this Agreement shall
----------------------
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted 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 party hereto.
10.5 Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties hereto regarding the subject matter hereof.
10.6 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the law of the State of New York, without regard to
the conflicts of law rules of such state.
10.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one instrument.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
WILSONS THE LEATHER
EXPERTS INC.
By /s/ David L. Rogers
------------------------------------
Title: President
CVS NEW YORK, INC.
By /s/ Philip C. Galbo
------------------------------------
Title: Vice President and Treasurer
12
<PAGE>
Exhibit A
[On Davis Polk & Wardell Stationery]
August _____, 1997
Wilsons The Leather Experts Inc.
7401 Boone Avenue North
Brooklyn Park, MN 55428
Dear Sirs:
We have acted as special counsel to CVS New York, Inc. ("CVS"), a New
York corporation formerly known as Melville Corporation, in connection with the
repurchase and prepayment by Wilsons The Leather Experts Inc. ("Wilsons") of the
secured Subordinated Note of Wilsons dated May 25, 1996 in the original
principal amount of $55,811,000 payable to CVS or registered assigns (the "CVS
Note") pursuant to a Repurchase Agreement dated as of August 13, 1997 between
CVS and Wilsons (the "Repurchase Agreement"). This opinion is being furnished
to you pursuant to Section 8.2(iii) of the Repurchase Agreement. Capitalized
terms used herein but not otherwise defined herein are used herein as defined in
the Repurchase Agreement.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, certificates and other
instruments, and have conducted such other investigations of fact and law, as we
have deemed necessary or advisable for the purpose of rendering this opinion.
On the basis of the foregoing, we are of the opinion that:
1. CVS has been duly incorporated, is validly existing and is in
good standing under the laws of the State of New York. CVS has all corporate
power required to enter into and perform all of its obligations under the
Repurchase Agreement, including the surrender and delivery of the CVS Note to
Wilsons upon the prepayment of the Note Repurchase Price.
2. The execution, delivery and performance by CVS of the Repurchase
Agreement have been duly authorized by all necessary corporate action on the
part of CVS. The Repurchase Agreement has been duly executed and delivered by
CVS and constitutes the
<PAGE>
Wilsons The Leather Experts Inc.
August _____, 1997
Page 2
valid and binding obligation of CVS enforceable against CVS in accordance with
its terms, except (i) as the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent
conveyance, moratorium or similar laws now or hereafter relating to or affecting
the rights or remedies of creditors generally and (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability.
3. The execution, delivery and performance by CVS of the Repurchase
Agreement do not and will not (i) violate the certificate of incorporation or
bylaws of CVS or (ii) contravene or violate any applicable statute, law, rule or
regulation. *[or (iii) contravene, violate, conflict with, constitute a default
under or require any consent or notice under the DLJ Agreement]
4. No stamp taxes or other transfer taxes are required to be paid
under the laws of the State of New York in connection with the repurchase and
prepayment of the CVS Note.
In connection with the opinions set forth herein, we have assumed the
genuineness of all signatures (other than those of signatories on behalf of
CVS), the authenticity of all documents submitted to us as originals, the
conformity to the original documents of all documents submitted to us as copies,
and the authenticity of the originals of such latter documents.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York and the federal laws of
the United States of America.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by or furnished to any other person without our prior written
consent.
Very truly yours,
<PAGE>
Exhibit 10.3
_______________
WILSONS THE LEATHER EXPERTS INC.
SERIES A AND SERIES B NOTES
11 1/4% SENIOR NOTES DUE 2004
_______________
INDENTURE
Dated as of August 18, 1997
_______________
Norwest Bank Minnesota, National Association
_______________
Trustee
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C>
310 (a)(1).............................. 7.10
(a)(2).................................. 7.10
(a)(3).................................. N.A.
(a)(4).................................. N.A.
(a)(5).................................. 7.10
(b)..................................... 7.10
(c)..................................... N.A.
311 (a)................................. 7.11
(b)..................................... 7.11
(c)..................................... N.A.
312 (a)................................. 2.05
(b)..................................... 11.03
(c)..................................... 11.03
313 (a)................................. 7.06
(b)(1).................................. N.A.
(b)(2).................................. 7.07
(c)..................................... 7.06;11.02
(d)..................................... 7.06
314 (a)................................. 4.03;11.02
(b)..................................... N.A.
(c)(1).................................. 11.04
(c)(2).................................. 11.04
(c)(3).................................. N.A.
(d)..................................... N.A.
(e)..................................... 11.05
(f)..................................... N.A.
315 (a)................................. 7.01
(b)..................................... 7.05,11.02
(c)..................................... 7.01
(d)..................................... 7.01
(e)..................................... 6.11
316 (a)(last sentence).................. 2.09
(a)(1)(A)............................... 6.05
(a)(1)(B)............................... 6.04
(a)(2).................................. N.A.
(b)..................................... 6.07
(c)..................................... 2.12
317 (a)(1).............................. 6.08
(a)(2).................................. 6.09
(b)..................................... 2.04
318 (a)................................. 11.01
(b)..................................... N.A.
(c)..................................... 11.01
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE............................ 1
Section 1.01 Definitions............................................... 1
Section 1.02 Other Definitions......................................... 12
Section 1.03 Incorporation by Reference of Trust Indenture Act......... 13
Section 1.04 Rules of Construction..................................... 13
ARTICLE 2 THE SENIOR NOTES...................................................... 14
Section 2.01 Form and Dating........................................... 14
Section 2.02 Execution and Authentication.............................. 14
Section 2.03 Registrar and Paying Agent................................ 15
Section 2.04 Paying Agent to Hold Money in Trust....................... 15
Section 2.05 Holder Lists.............................................. 15
Section 2.06 Transfer and Exchange..................................... 15
Section 2.07 Replacement Senior Notes.................................. 21
Section 2.08 Outstanding Senior Notes.................................. 22
Section 2.09 Treasury Senior Notes..................................... 22
Section 2.10 Temporary Senior Notes.................................... 22
Section 2.11 Cancellation.............................................. 22
Section 2.12 Defaulted Interest........................................ 23
ARTICLE 3 REDEMPTION AND PREPAYMENT............................................. 23
Section 3.01 Notices to Trustee........................................ 23
Section 3.02 Selection of Senior Notes to Be Redeemed.................. 23
Section 3.03 Notice of Redemption...................................... 24
Section 3.04 Effect of Notice of Redemption............................ 24
Section 3.05 Deposit of Redemption Price............................... 24
Section 3.06 Senior Notes Redeemed in Part............................. 25
Section 3.07 Optional Redemption....................................... 25
Section 3.08 Mandatory Redemption...................................... 25
Section 3.09 Offer to Purchase by Application of Excess Proceeds....... 26
ARTICLE 4 COVENANTS............................................................. 27
Section 4.01 Payment of Senior Notes................................... 27
Section 4.02 Maintenance of Office or Agency........................... 28
Section 4.03 Reports................................................... 28
Section 4.04 Compliance Certificate.................................... 29
Section 4.05 Taxes..................................................... 29
Section 4.06 Stay, Extension and Usury Laws............................ 29
Section 4.07 Restricted Payments....................................... 30
Section 4.08 Dividend and Other Payment Restrictions Affecting
Subsidiaries............................................. 32
Section 4.09 Incurrence of Indebtedness and Issuance of Preferred
Stock.................................................... 32
Section 4.10 Asset Sales............................................... 35
Section 4.11 Transactions with Affiliates.............................. 35
Section 4.12 Liens..................................................... 36
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 4.13 Line of Business.......................................... 36
Section 4.14 Corporate Existence....................................... 36
Section 4.15 Offer to Repurchase Upon Change of Control................ 36
Section 4.16 Limitation On Issuances And Sales Of Capital Stock Of
Wholly Owned Restricted Subsidiaries..................... 37
Section 4.17 Limitations on Issuances of Guarantees of Indebtedness.... 37
Section 4.18 Payments For Consent...................................... 38
ARTICLE 5 SUCCESSORS............................................................ 38
Section 5.01 Merger, Consolidation, or Sale of Assets.................. 38
Section 5.02 Successor Corporation Substituted......................... 38
ARTICLE 6 DEFAULTS AND REMEDIES................................................. 39
Section 6.01 Events of Default......................................... 39
Section 6.02 Acceleration.............................................. 40
Section 6.03 Other Remedies............................................ 41
Section 6.04 Waiver of Past Defaults................................... 41
Section 6.05 Control by Majority....................................... 42
Section 6.06 Limitation on Suits....................................... 42
Section 6.07 Rights of Holders of Senior Notes to Receive Payment...... 42
Section 6.08 Collection Suit by Trustee................................ 42
Section 6.09 Trustee May File Proofs of Claim.......................... 43
Section 6.10 Priorities................................................ 43
Section 6.11 Undertaking for Costs..................................... 43
ARTICLE 7 TRUSTEE............................................................... 44
Section 7.01 Duties of Trustee......................................... 44
Section 7.02 Rights of Trustee......................................... 45
Section 7.03 Individual Rights of Trustee.............................. 45
Section 7.04 Trustee's Disclaimer...................................... 45
Section 7.05 Notice of Defaults........................................ 46
Section 7.06 Reports by Trustee to Holders of the Senior Notes......... 46
Section 7.07 Compensation and Indemnity................................ 46
Section 7.08 Replacement of Trustee.................................... 47
Section 7.09 Successor Trustee by Merger, etc.......................... 48
Section 7.10 Eligibility; Disqualification............................. 48
Section 7.11 Preferential Collection of Claims Against Company......... 48
ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE.............................. 48
Section 8.01 Option to Effect Legal Defeasance or Covenant
Defeasance............................................... 48
Section 8.02 Legal Defeasance and Discharge............................ 48
Section 8.03 Covenant Defeasance....................................... 49
Section 8.04 Conditions to Legal or Covenant Defeasance................ 49
Section 8.05 Deposited Money and Government Securities to be Held in
Trust;
Other Miscellaneous Provisions............................ 50
Section 8.06 Repayment to Company...................................... 51
Section 8.07 Reinstatement............................................. 51
ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER...................................... 51
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 9.01 Without Consent of Holders of Senior Notes............... 51
Section 9.02 With Consent of Holders of Senior Notes.................. 52
Section 9.03 Compliance with Trust Indenture Act...................... 53
Section 9.04 Revocation and Effect of Consents........................ 53
Section 9.05 Notation on or Exchange of Senior Notes.................. 54
Section 9.06 Trustee to Sign Amendments, etc.......................... 54
ARTICLE 10 GUARANTEES............................................................ 54
Section 10.01 Unconditional Guarantee.................................. 54
Section 10.02 Severability............................................. 55
Section 10.03 Release of a Guarantor................................... 55
Section 10.04 Limitation of Guarantor's Liability...................... 55
Section 10.05 Guarantors May Consolidate, Etc on Certain Terms......... 56
Section 10.06 Contribution............................................. 56
Section 10.07 Waiver of Subrogation.................................... 57
Section 10.08 Execution of Guarantee................................... 57
Section 10.09 Obligations of Each Guarantor Unconditional.............. 57
Section 10.10 Notice to Trustee........................................ 58
Section 10.11 Reliance on Judicial Order of Certificate of
Liquidating Agent....................................... 58
ARTICLE 11 MISCELLANEOUS......................................................... 58
Section 11.01 Trust Indenture Act Controls............................. 58
Section 11.02 Notices.................................................. 58
Section 11.03 Communication by Holders of Senior Notes with Other
Holders of Senior Notes................................. 60
Section 11.04 Certificate and Opinion as to Conditions Precedent....... 60
Section 11.05 Statements Required in Certificate or Opinion............ 60
Section 11.06 Rules by Trustee and Agents.............................. 60
Section 11.07 No Personal Liability of Directors, Officers, Employees
and Stockholders........................................ 60
Section 11.08 Governing Law............................................ 61
Section 11.09 No Adverse Interpretation of Other Agreements............ 61
Section 11.10 Successors............................................... 61
Section 11.11 Severability............................................. 61
Section 11.12 Counterpart Originals.................................... 61
Section 11.13 Table of Contents, Headings, etc......................... 61
</TABLE>
iii
<PAGE>
EXHIBITS
Exhibit A FORM OF SENIOR NOTE
Exhibit A-1 FORM OF SENIOR GUARANTEE
Exhibit B CERTIFICATE OF TRANSFEROR
iv
<PAGE>
INDENTURE dated as of August 18, 1997 among Wilsons The Leather Experts
Inc., a Minnesota corporation (the "Company"), the other corporations listed on
the signature pages hereof (each a "Guarantor" and collectively, the
"Guarantors"), and Norwest Bank Minnesota, National Association, as trustee (the
"Trustee").
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 11 1/4% Series A Senior Notes due 2004 (the "Series A Senior Notes") and the
11 1/4% Series B Senior Notes due 2004 (the "Series B Senior Notes" or the
"Exchange Notes" and, together with the Series A Senior Notes, the "Senior
Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"Adjusted Net Assets" of a Guarantor at any date shall mean the lesser of
(i) the amount by which the fair value of the property of such Guarantor exceeds
the total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date), but excluding liabilities under the
Guarantee, of such Guarantor at such date and (ii) the amount by which the
present fair salable value of the assets of such Guarantor at such date exceeds
the amount that will be required to pay the probable liability of such Guarantor
on its debts (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date and after giving effect to any collection from
any Subsidiary of such Guarantor in respect of the obligations of such
Subsidiary under the Guarantee), excluding debt in respect of the Guarantee, as
they become absolute and matured.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices; (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole shall be governed by Section 4.15 hereof
and/or Section 5.01 hereof and not by Section 4.10 hereof), and (ii) the issue
or sale by the Company or any of its Restricted Subsidiaries of Equity Interests
of any of the Company's Restricted Subsidiaries, in the case of either clause
(i) or (ii), whether in a single transaction or a series of related transactions
(a) that have a fair market value in excess of $1.0 million or (b) for net
1
<PAGE>
proceeds in excess of $1.0 million. Notwithstanding the foregoing: (i) a
transfer of assets by the Company to a Wholly Owned Restricted Subsidiary or by
a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned
Restricted Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned
Restricted Subsidiary to the Company or to another Wholly Owned Restricted
Subsidiary, and (iii) a Restricted Payment that is permitted by Section 4.07
hereof shall not be deemed to be Asset Sales.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company, or any
authorized committee of the Board of Directors.
"Borrowing Base" means, as of any date, an amount equal to the sum of (i)
sixty-five percent (65%) of the book value of Eligible Inventory, other than Lay
Away Inventory (as such terms are defined in the Senior Credit Facility on the
Issue Date) valued on a first-in, first-out basis (at the lower of cost or
market), plus (ii) sixty-five percent (65%) of Lay Away Inventory valued as
follows: (unpaid purchase price / .625) x .50, minus (iii) Reserves (as defined
in the Senior Credit Facility on the Issue Date). To the extent that information
is not available to calculate the amount of Eligible Inventory, Lay Away
Inventory or Reserves, as of a specific date, the Company may utilize the most
recent available information for purposes of calculating the Borrowing Base.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership (whether general or limited)
or limited liability company, partnership or membership interests and (iv) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person, other than interests or participations in the nature of compensation.
"Cash Equivalents" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency thereof
maturing within one year from the date of acquisition thereof, (ii) commercial
paper maturing no more than one year from the date of creation thereof and
having an investment rating of A-2 or P-2 or better from either Standard &
Poor's Corporation or Moody's Investors Service, Inc., (iii) time deposits,
demand deposits and certificates of deposit, maturing no more than one year from
the date of creation thereof, issued by commercial banks incorporated under the
laws of the United States of America, each having combined capital, surplus and
undivided profits of not less than $300,000,000 and having a senior secured
rating of "A" or better by a nationally recognized rating agency (an "A Bank"),
(iv) time deposits, maturing no more than 30 days from the date of creation
thereof with an A Bank, and (v) overnight repurchase obligations issued by an A
Bank.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation or the grant of mortgages, security interests or liens),
in one or a series of related transactions, of all or substantially all of the
assets of the Company and its Subsidiaries taken as a whole to any "person" (as
such term is used in Section
2
<PAGE>
13(d)(3) of the Exchange Act) other than the Company and/or one or more
Subsidiaries, (ii) the adoption of a plan relating to the complete liquidation
or dissolution of the Company, (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that any "person" (as defined above except that no two or more individuals or
entities shall be deemed to be a single "person" solely by reason of being
parties to the Shareholder Agreement), other than the Principals and their
Related Parties, becomes the "beneficial owner" (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that such person has the
right to acquire, whether such right is currently exercisable or is exercisable
only upon the occurrence of a subsequent condition and except that no individual
or entity shall be deemed to "beneficially own" any Voting Stock beneficially
owned by any other individual or entity solely by reason of being a party to the
Shareholder Agreement), directly or indirectly, of more than 40% of the Voting
Stock of the Company (measured by voting power rather than number of shares),
provided that a Change of Control shall not occur as a result of a merger,
consolidation or other transaction in which the persons who beneficially owned
the Voting Stock of the Company immediately prior to the transaction continue to
own, directly or indirectly, at least 60% of the Voting Stock of the corporation
surviving such transaction or its parent corporation (measured by voting power
rather than number of shares) in substantially the same percentage relative to
each other as they owned before the transaction (except as affected by cashing
out fractional shares or dissenting shareholders) or (iv) the first day on which
a majority of the members of the Board of Directors of the Company are not
Continuing Directors.
"Code" means the Internal Revenue Code of 1986, as amended (or any
successor statute thereto), and the regulations promulgated thereunder, all as
in effect from time to time.
"Company" means Wilsons The Leather Experts Inc., a Minnesota corporation.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), to the extent that any
such expense was deducted in computing such Consolidated Net Income, plus (iv)
depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) and other non-cash expenses (including non-cash compensation
expenses associated with vesting of restricted stock or other equity
compensation but excluding any non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such Person and
its Subsidiaries for such period to the extent that such depreciation,
amortization and other non-cash expenses were deducted in computing such
Consolidated Net Income, minus (v) non-cash items increasing such Consolidated
Net Income for such period, in each case, on a consolidated basis and determined
in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis,
3
<PAGE>
determined in accordance with GAAP; provided that (i) the Net Income (but not
loss) of any Person that is not a Restricted Subsidiary or that is accounted for
by the equity method of accounting shall be included only to the extent of the
amount of dividends or distributions paid in cash to the referent Person or a
Wholly Owned Restricted Subsidiary thereof that is a Guarantor, (ii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded, (iii) the
cumulative effect of a change in accounting principles shall be excluded and,
(iv) solely with respect to clause (i) of paragraph (c) of Section 4.07 hereof,
the Net Income of any Restricted Subsidiary shall be excluded to the extent that
the declaration or payment of dividends or similar distributions by that
Restricted Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval (that has not been obtained),
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its Restricted Subsidiaries as of such date plus (ii) the respective amounts
reported on such Person's balance sheet as of such date with respect to any
series of preferred stock (other than Disqualified Stock) that by its terms is
not entitled to the payment of dividends unless such dividends may be declared
and paid only out of net earnings in respect of the year of such declaration and
payment, but only to the extent of any cash received by such Person upon
issuance of such preferred stock, less (x) all write-ups (other than write-ups
resulting from foreign currency translations and write-ups of tangible assets of
a going concern business made within 12 months after the acquisition of such
business) subsequent to the date of this Indenture in the book value of any
asset owned by such Person or a Restricted Subsidiary of such Person, (y) all
Investments as of such date in unconsolidated Restricted Subsidiaries and in
Persons that are not Restricted Subsidiaries (except, in each case, Permitted
Investments), and (z) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing determined in accordance
with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of this Indenture or (ii) was nominated for election or
elected or appointed to such Board of Directors by the Board of Directors at a
time when a majority of the Board consisted of Continuing Directors.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 11.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Custodian" means any receiver, trustee, assignee, liquidatory
sequestration or similar official under any Bankruptcy Law.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Definitive Senior Notes" means Senior Notes that are in the form of the
Senior Notes attached hereto as Exhibit A, that do not include the information
called for by footnotes 1 and 2 thereof.
"Depository" means, with respect to the Senior Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depository with respect to the Senior Notes, until a successor shall have
been appointed and become such pursuant to the applicable provisions of this
Indenture, and, thereafter, "Depository" shall mean or include such successor.
4
<PAGE>
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Senior Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer that may be made by the Company pursuant
to the Registration Rights Agreement to exchange Exchange Notes for Series A
Senior Notes.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Senior Credit Facility) in
existence on the date of this Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated
interest expense of such Person and its Restricted Subsidiaries that was
capitalized during such period, and (iii) any interest expense on Indebtedness
of another Person that is guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries (whether or not such guarantee or Lien is called upon),
and (iv) the product of (a) all dividend payments, whether or not in cash, on
any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests of the Company, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person and its
Restricted Subsidiaries for any period, the ratio of the Consolidated Cash Flow
of such Person and its Restricted Subsidiaries for such period to the Fixed
Charges of such Person and its Restricted Subsidiaries for such period. In the
event that the Company or any of its Restricted Subsidiaries incurs, assumes,
guarantees or redeems any Indebtedness (other than revolving credit borrowings)
or issues preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be deemed to have
5
<PAGE>
occurred on the first day of the four-quarter reference period and Consolidated
Cash Flow for such reference period shall be calculated without giving effect to
clause (ii) of the proviso set forth in the definition of Consolidated Net
Income, and (ii) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of (including, without limitation, in any Asset Sale) prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Global Senior Note" means a Senior Note that contains the paragraph
referred to in footnote 1 and the additional schedule referred to in footnote 2
to the form of the Senior Note attached hereto as Exhibit A.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States of America is
pledged.
"Guarantee" means, individually and collectively, the guarantees given by
the Guarantors pursuant to Article 10 hereof, including a notation in the Senior
Notes substantially in the form attached hereto as Exhibit A-1.
"Guarantors" means each of (i) Subsidiaries of the Company in existence on
the date of this Indenture (except Wilsons (UK) Limited, Wilsons Leather Gatsair
Limited and Wilsons Leather Gatsland Limited) and listed on the signature pages
hereof and (ii) any other Subsidiary that executes a Guarantee in accordance
with the provisions of this Indenture, and their respective successors and
assigns to the extent not released pursuant to the terms of this Indenture.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Holder" means a Person in whose name a Senior Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
6
<PAGE>
Guarantee by such Person of any indebtedness of any other Person. The amount of
any Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness that does not require current payments
of interest, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Restricted Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of Section 4.07 hereof.
"Issue Date" means August 18, 1997.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant to
Section 5 of the Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct
7
<PAGE>
costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness (other than the Senior Credit Facility) secured by
a Lien on the asset or assets that were the subject of such Asset Sale and any
reserve for adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender, and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Senior Credit Facility) of the Company or any of its Restricted Subsidiaries
to declare a default on such other Indebtedness or cause the payment thereof to
be accelerated or payable prior to its stated maturity; and (iii) as to which
the lenders have been notified in writing that they will not have any recourse
to the stock or assets of the Company or any of its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the Company
or any Guarantor, as applicable, by two Officers of the Company or any
Guarantor, as applicable, one of whom must be the principal executive officer,
the principal financial officer, the treasurer or the principal accounting
officer of the Company or any Guarantor, as applicable, that meets the
requirements of Section 11.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 11.05 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or the Trustee.
"Permitted Business" means any business conducted by the Company or any of
its Subsidiaries on the Issue Date and any other clothing or accessories
retailing or wholesaling business.
"Permitted Investments" means (a) any Investment in the Company or in a
Wholly Owned Restricted Subsidiary of the Company that is a Guarantor; (b) any
Investment in Cash Equivalents; (c) any Investment by the Company or any
Restricted Subsidiary of the Company in a Person, if as a result of such
Investment (i) such Person becomes a Wholly Owned Restricted Subsidiary of the
Company and a Guarantor that is engaged in a Permitted Business, or (ii) such
Person is merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, the Company
or a Wholly Owned Restricted Subsidiary of the Company that is a Guarantor and
that is engaged in the same or a similar line of business as the Company and its
Restricted Subsidiaries were engaged in on the date of this Indenture; (d) any
Restricted Investment made as a result of the receipt of non-cash consideration
from an Asset Sale that was made pursuant to and in compliance with Section 4.10
hereof; (e) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than
8
<PAGE>
Disqualified Stock) of the Company; and (f) other Investments in any Person
having an aggregate fair market value (measured on the date each such Investment
was made and without giving effect to subsequent changes in value), when taken
together with all other Investments made pursuant to this clause (f) that are at
the time outstanding, not to exceed $5.0 million.
"Permitted Liens" means (i) Liens securing Obligations of the Company or
any Restricted Subsidiary under the Senior Credit Facility; (ii) Liens in favor
of the Company and liens by any store Subsidiary in favor of Wilsons Leather
Holdings Inc. deemed to arise by reason of the consignment of inventory to such
store Subsidiary; (iii) Liens on property of a Person existing at the time such
Person is merged into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company; (iv) Liens on property existing at the time of acquisition thereof by
the Company or any Restricted Subsidiary of the Company, provided that such
Liens were in existence prior to the contemplation of such acquisition; (v)
Liens to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds or other obligations of a like nature including pledges
or deposits to secure bids, tender contracts (other than contracts for the
payment of money) or leases incurred in the ordinary course of business; (vi)
Liens to secure Indebtedness (including Capital Lease Obligations) permitted by
clause (iv) of the third paragraph of Section 4.09 hereof covering only the
assets acquired with such Indebtedness; (vii) Liens existing on the date of this
Indenture; (viii) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, provided
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (ix) zoning restrictions,
easements, licenses or other restrictions on the use of any real estate or other
minor irregularities in the title thereto, so long as the same do not materially
impair the use, value or marketability of such real estate; (x) Liens on assets
of Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted
Subsidiaries and (xi) Liens incurred in the ordinary course of business of the
Company or any Restricted Subsidiary of the Company with respect to obligations
that do not exceed $5.0 million at any one time outstanding and that (a) are not
incurred in connection with the borrowing of money or the obtaining of advances
or credit (other than trade credit in the ordinary course of business) and (b)
do not in the aggregate materially detract from the value of the property or
materially impair the use thereof in the operation of business by the Company or
such Restricted Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than under the Senior Credit Facility, the extension, refinancing,
renewal, replacement, defeasance or refunding of which is governed by the
definition of such term); provided that: (i) the principal amount (or accreted
value, if applicable) of such Permitted Refinancing Indebtedness does not exceed
the principal amount of (or accreted value, if applicable), plus accrued
interest on, the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses incurred in
connection therewith); (ii) such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Senior
Notes, such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and is subordinated in right of payment to, the
Senior Notes on terms at least as favorable to the Holders of Senior Notes as
those contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv)
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<PAGE>
such Indebtedness is incurred either by the Company or by the Restricted
Subsidiary who is the obligor on the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof.
"Principals" means Joel N. Waller and David L. Rogers.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of August 18, 1997, by and among the Company and the other parties
named on the signature pages thereof, as such agreement may be amended, modified
or supplemented from time to time.
"Related Party" with respect to any Principal means (A) any spouse or
immediate family member of such Principal or (B) any trust, corporation,
partnership, limited liability company or other entity, a majority of the
beneficial interest or voting interest in which is held, directly or indirectly,
by such Principal and/or such other Persons referred to in the immediately
preceding clause (A) with respect to such Principal.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Services department of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Facility" means that certain Senior Credit Facility, dated
as of May 25, 1996, by and among Wilsons Leather Holdings Inc. (as borrower),
the Company and certain of its Subsidiaries (as guarantors) and the lenders
party thereto, providing for up to $150.0 million of revolving credit borrowings
and a $90.0 million letter of credit subfacility (as such amount may be
increased as permitted under Section 4.09) hereof, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, extended, renewed,
refunded, replaced or refinanced from time to time (including, without
limitation, any refinancing in which the Company replaces Wilsons Leather
Holdings Inc. as borrower). Indebtedness under the Senior Credit Facility
outstanding on the date on which Senior Notes are first issued and authenticated
under this Indenture shall be deemed to have been incurred on such date in
reliance on the exception provided by clause (i) of the third paragraph of
Section 4.09 hereof.
"Senior Note Custodian" means the Trustee, as custodian with respect to the
Senior Notes in global form, or any successor entity thereto.
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<PAGE>
"Shareholder Agreement" means the shareholder agreement dated as of May 25,
1996 among the Company, Leather Investors Limited Partnership I, Leather
Investors Limited Partnership II and certain other shareholders of the Company
and partners of such partnerships, as amended.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"TIA" means the Trustee Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA.
"Transfer Restricted Securities" means securities that bear or are required
to bear the legend set forth in Section 2.06 hereof.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Unrestricted Subsidiary" means (i) any Subsidiary (other than Wilsons
Leather Holdings Inc. or any of its parents or any successor to any of them)
that is designated by the Board of Directors as an Unrestricted Subsidiary
pursuant to a resolution of the Board of Directors; but only to the extent that
such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is
not party to any agreement, contract, arrangement or understanding with the
Company or any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Company; (c) is a Person with
respect to which neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation (x) to subscribe for additional Equity
Interests or (y) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results; (d) has
not guaranteed or otherwise directly or indirectly provided credit support for
any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e)
has at least one director on its board of directors that is not a director or
executive officer of the Company or any of its Restricted Subsidiaries and has
at least one executive officer that is not a director or executive officer of
the Company or any of its Restricted Subsidiaries. Any such designation by the
Board of Directors shall be evidenced to the Trustee by filing with the Trustee
a certified copy of the resolution of the Board of Directors giving effect to
such designation and an Officers' Certificate certifying that such designation
11
<PAGE>
complied with the foregoing conditions and was permitted by Section 4.07 hereof.
If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described in Section 4.09 hereof,
the Company shall be in default of such covenant). The Board of Directors of the
Company may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that such designation shall be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under Section 4.09 hereof,
calculated on a pro-forma basis as if such designation had occurred at the
beginning of the four-quarter reference period, and (ii) no Default or Event of
Default would be in existence following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the board of
directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person and/or by one or more Wholly Owned Subsidiaries
of such Person.
Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction"..................... 4.11
"Asset Sale Offer".......................... 3.09
"Change of Control Offer"................... 4.15
"Change of Control Payment"................. 4.15
"Change of Control Payment Date"............ 4.15
"Covenant Defeasance"....................... 8.03
"Event of Default".......................... 6.01
"Excess Proceeds"........................... 4.10
"incur"..................................... 4.09
"Legal Defeasance".......................... 8.02
"Offer Amount".............................. 3.09
"Offer Period".............................. 3.09
"Paying Agent".............................. 2.03
"Permitted Debt"............................ 4.09
"Purchase Date"............................. 3.09
"Registrar"................................. 2.03
</TABLE>
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<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Restricted Payments"....................... 4.07
</TABLE>
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Senior Notes and the Guarantees;
"indenture security Holder" means a Holder of a Senior Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Senior Notes means the Company and any successor obligor
upon the Senior Notes or any Guarantor.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement or successor sections or
rules adopted by the SEC from time to time.
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ARTICLE 2.
THE SENIOR NOTES
Section 2.01. Form and Dating.
The Senior Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto. The Guarantees shall be
substantially in the form of Exhibit A-1, the terms of which are incorporated in
and made part of this Indenture. The Senior Notes may have notations, legends
or endorsements required by law, stock exchange rule or usage. Each Senior Note
shall be dated the date of its authentication. The Senior Notes shall be in
denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Senior Notes shall constitute,
and are hereby expressly made, a part of this Indenture and the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
Senior Notes issued in global form shall be substantially in the form of
Exhibit A attached hereto (including the text referred to in footnotes 1 and 2
thereto). Senior Notes issued in definitive form shall be substantially in the
form of Exhibit A attached hereto (but without including the text referred to in
footnotes 1 and 2 thereto). Each Global Senior Note shall represent such of the
outstanding Senior Notes as shall be specified therein and each shall provide
that it shall represent the aggregate amount of outstanding Senior Notes from
time to time endorsed thereon and that the aggregate amount of outstanding
Senior Notes represented thereby may from time to time be reduced or increased,
as appropriate, to reflect exchanges and redemptions. Any endorsement of a
Global Senior Note to reflect the amount of any increase or decrease in the
amount of outstanding Senior Notes represented thereby shall be made by the
Trustee or the Senior Note Custodian, at the direction of the Trustee, in
accordance with instructions given by the Holder thereof as required by Section
2.06 hereof.
Section 2.02. Execution and Authentication.
Two Officers shall sign the Senior Notes for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Senior Note no longer holds that
office at the time a Senior Note is authenticated, the Senior Note shall
nevertheless be valid.
A Senior Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Senior Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate Senior Notes for original issue up to the aggregate
principal amount stated in paragraph 4 of the Senior Notes. The aggregate
principal amount of Senior Notes outstanding at any time may not exceed such
amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Senior Notes. An authenticating agent may authenticate Senior
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate of the Company.
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Section 2.03. Registrar and Paying Agent.
(a) The Company shall maintain an office or agency where Senior Notes may
be presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Senior Notes may be presented for payment ("Paying
Agent"). The Registrar shall keep a register of the Senior Notes and of their
transfer and exchange. The Company may appoint one or more co-registrars and
one or more additional paying agents. The term "Registrar" includes any co-
registrar and the term "Paying Agent" includes any additional paying agent. The
Company may change any Paying Agent or Registrar without notice to any Holder.
The Company shall notify the Trustee in writing of the name and address of any
Agent not a party to this Indenture. If the Company fails to appoint or
maintain another entity as Registrar or Paying Agent, the Trustee shall act as
such. The Company or any of its Subsidiaries may act as Paying Agent or
Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depository with respect to the Global Senior Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Senior Note Custodian with respect to the Global
Senior Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of Holders
or the Trustee all money held by the Paying Agent for the payment of principal,
premium or Liquidated Damages, if any, or interest on the Senior Notes, and will
notify the Trustee of any default by the Company or any Guarantor in making any
such payment. While any such default continues, the Trustee may require a
Paying Agent to pay all money held by it to the Trustee. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee.
Upon payment over to the Trustee, the Paying Agent (if other than the Company or
a Subsidiary) shall have no further liability for the money. If the Company or
a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate
trust fund for the benefit of the Holders all money held by it as Paying Agent.
Upon any bankruptcy or reorganization proceedings relating to the Company or a
Guarantor, the Trustee shall serve as Paying Agent for the Senior Notes.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, the Company and/or the Guarantors shall furnish to the
Trustee at least seven Business Days before each interest payment date and at
such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably require of the names and addresses
of the Holders of Senior Notes and the Company and the Guarantors shall
otherwise comply with TIA (S) 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Definitive Senior Notes. When Definitive
Senior Notes are presented by a Holder to the Registrar with a request:
(x) to register the transfer of the Definitive Senior Notes; or
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(y) to exchange such Definitive Senior Notes for an equal principal
amount of Definitive Senior Notes of other authorized
denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
Definitive Senior Notes presented or surrendered for register of transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written instruction
of transfer in form satisfactory to the Registrar duly executed
by such Holder or by his attorney, duly authorized in writing;
and
(ii) in the case of a Definitive Senior Note that is a Transfer
Restricted Security, such request shall be accompanied by the
following additional information and documents, as applicable:
(A) if such Transfer Restricted Security is being delivered to
the Registrar by a Holder for registration in the name of
such Holder, without transfer, a certification to that
effect from such Holder (in substantially the form of
Exhibit B hereto); or
(B) if such Transfer Restricted Security is being transferred
to a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) in accordance with Rule
144A under the Securities Act or pursuant to an exemption
from registration in accordance with Rule 144 or Rule 904
under the Securities Act or pursuant to an effective
registration statement under the Securities Act, a
certification to that effect from such Holder (in
substantially the form of Exhibit B hereto); or
(C) if such Transfer Restricted Security is being transferred
in reliance on another exemption from the registration
requirements of the Securities Act, a certification to
that effect from such Holder (in substantially the form of
Exhibit B hereto) and an Opinion of Counsel from such
Holder or the transferee reasonably acceptable to the
Company and to the Registrar to the effect that such
transfer is in compliance with the Securities Act.
(b) Transfer of a Definitive Senior Note for a Beneficial Interest in a
Global Senior Note. A Definitive Senior Note may not be exchanged for a
beneficial interest in a Global Senior Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive
Senior Note, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Trustee, together with:
(i) if such Definitive Senior Note is a Transfer Restricted
Security, a certification from the Holder thereof (in
substantially the form of Exhibit B hereto) to the effect that
such Definitive Senior Note is being transferred by such Holder
to a "qualified institutional buyer" (as defined in Rule 144A
under the Securities Act) in accordance with Rule 144A under
the Securities Act; and
(ii) whether or not such Definitive Senior Note is a Transfer
Restricted Security, written instructions from the Holder
thereof directing the Trustee to make, or to
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direct the Senior Note Custodian to make, an endorsement on the
Global Senior Note to reflect an increase in the aggregate
principal amount of the Senior Notes represented by the Global
Senior Note,
in which case the Trustee shall cancel such Definitive Senior Note in accordance
with Section 2.11 hereof and cause, or direct the Senior Note Custodian to
cause, in accordance with the standing instructions and procedures existing
between the Depository and the Senior Note Custodian, the aggregate principal
amount of Senior Notes represented by the Global Senior Note to be increased
accordingly. If no Global Senior Notes are then outstanding, the Company shall
issue and, upon receipt of an authentication order in accordance with Section
2.02 hereof, the Trustee shall authenticate a new Global Senior Note in the
appropriate principal amount.
(c) Transfer and Exchange of Global Senior Notes. The transfer and
exchange of Global Senior Notes or beneficial interests therein shall be
effected through the Depository, in accordance with this Indenture and the
procedures of the Depository therefor, which shall include restrictions on
transfer comparable to those set forth herein to the extent required by the
Securities Act.
(d) Transfer of a Beneficial Interest in a Global Senior Note for a
Definitive Senior Note.
(i) Any Person having a beneficial interest in a Global Senior Note
may upon request exchange such beneficial interest for a
Definitive Senior Note. Upon receipt by the Trustee of written
instructions or such other form of instructions as is customary
for the Depository, from the Depository or its nominee on
behalf of any Person having a beneficial interest in a Global
Senior Note, and, in the case of a Transfer Restricted
Security, the following additional information and documents
(all of which may be submitted by facsimile):
(A) if such beneficial interest is being transferred to the
Person designated by the Depository as being the
beneficial owner, a certification to that effect from such
Person (in substantially the form of Exhibit B hereto); or
(B) if such beneficial interest is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A
under the Securities Act) in accordance with Rule 144A
under the Securities Act or pursuant to an exemption from
registration in accordance with Rule 144 or Rule 904 under
the Securities Act or pursuant to an effective
registration statement under the Securities Act, a
certification to that effect from the transferor (in
substantially the form of Exhibit B hereto); or
(C) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to
that effect from the transferor (in substantially the form
of Exhibit B hereto) and an Opinion of Counsel from the
transferee or transferor reasonably acceptable to the
Company and to the Registrar to the effect that such
transfer is in compliance with the Securities Act,
in which case the Trustee or the Senior Note Custodian, at the
direction of the Trustee, shall, in accordance with the
standing instructions and procedures existing between the
Depository and the Senior Note Custodian, cause the
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aggregate principal amount of Global Senior Notes to be reduced
accordingly and, following such reduction, the Company shall
execute and, upon receipt of an authentication order in
accordance with Section 2.02 hereof, the Trustee shall
authenticate and deliver to the transferee a Definitive Senior
Note in the appropriate principal amount.
(ii) Definitive Senior Notes issued in exchange for a beneficial
interest in a Global Senior Note pursuant to this Section
2.06(d) shall be registered in such names and in such
authorized denominations as the Depository, pursuant to
instructions from its direct or indirect participants or
otherwise, shall instruct the Trustee. The Trustee shall
deliver such Definitive Senior Notes to the Persons in whose
names such Senior Notes are so registered.
(e) Restrictions on Transfer and Exchange of Global Senior Notes.
Notwithstanding any other provision of this Indenture (other than the provisions
set forth in subsection (f) of this Section 2.06), a Global Senior Note may not
be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) Authentication of Definitive Senior Notes in Absence of Depository.
If at any time:
(i) the Depository for the Senior Notes notifies the Company that
the Depository is unwilling or unable to continue as Depository
for the Global Senior Notes and a successor Depository for the
Global Senior Notes is not appointed by the Company within 90
days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of Definitive
Senior Notes under this Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02 hereof, authenticate and
deliver, Definitive Senior Notes in an aggregate principal amount equal to the
principal amount of the Global Senior Notes in exchange for such Global Senior
Notes.
(g) Legends.
(i) Except as permitted by the following paragraphs (ii) and (iii),
each Senior Note certificate evidencing Global Senior Notes and
Definitive Senior Notes (and all Senior Notes issued in
exchange therefor or substitution thereof) shall bear legends
in substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933
(THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY
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NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION
OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH
IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a
Global Senior Note) pursuant to Rule 144 under the Securities
Act or pursuant to an effective registration statement under
the Securities Act:
(A) in the case of any Transfer Restricted Security that is a
Definitive Senior Note, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted
Security for a Definitive Senior Note that does not bear
the legend set forth in (i) above and rescind any
restriction on the transfer of such Transfer Restricted
Security; and
(B) in the case of any Transfer Restricted Security
represented by a Global Senior Note, such Transfer
Restricted Security shall not be required to bear the
legend set forth in (i) above, but shall continue to be
subject to the provisions of Section 2.06(c) hereof;
provided, however, that with respect to any request for an
exchange of a Transfer Restricted Security that is
represented by a Global Senior Note for a Definitive
Senior Note that does not bear the legend set forth in (i)
above, which request is made in reliance upon Rule 144,
the Holder thereof shall certify in writing to the
Registrar that such request is being made pursuant to Rule
144 (such certification to be substantially in the form of
Exhibit B hereto).
(iii) Notwithstanding the foregoing, upon consummation of the
Exchange Offer, the Company shall issue and, upon receipt of an
authentication order in accordance with Section 2.02 hereof,
the Trustee shall authenticate, Exchange Notes in
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exchange for Series A Senior Notes accepted for exchange in the
Exchange Offer, which Exchange Notes shall not bear the legend
set forth in (i) above, and the Registrar shall rescind any
restriction on the transfer of such Senior Notes, in each case
unless the Holder of such Series A Senior Notes is either (A) a
broker-dealer, (B) a Person participating in the distribution
of the Series A Senior Notes or (C) a Person who is an
affiliate (as defined in Rule 144A) of the Company.
(h) Cancellation and/or Adjustment of Global Senior Notes. At such time
as all beneficial interests in Global Senior Notes have been exchanged for
Definitive Senior Notes, redeemed, repurchased or canceled, all Global Senior
Notes shall be returned to or retained and canceled by the Trustee in accordance
with Section 2.11 hereof. At any time prior to such cancellation, if any
beneficial interest in a Global Senior Note is exchanged for Definitive Senior
Notes, redeemed, repurchased or canceled, the principal amount of Senior Notes
represented by such Global Senior Note shall be reduced accordingly and an
endorsement shall be made on such Global Senior Note, by the Trustee or the
Senior Note Custodian, at the direction of the Trustee, to reflect such
reduction.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Definitive
Senior Notes and Global Senior Notes at the Registrar's
request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax
or similar governmental charge payable in connection therewith
(other than any such transfer taxes or similar governmental
charge payable upon exchange or transfer pursuant to Sections
3.07, 4.10, 4.15 and 9.05 hereto).
(iii) The Registrar shall not be required to register the transfer of
or exchange any Senior Note selected for redemption in whole or
in part, except the unredeemed portion of any Senior Note being
redeemed in part.
(iv) All Definitive Senior Notes and Global Senior Notes issued upon
any registration of transfer or exchange of Definitive Senior
Notes or Global Senior Notes shall be the valid obligations of
the Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Definitive Senior Notes
or Global Senior Notes surrendered upon such registration of
transfer or exchange.
(v) Prior to the issuance of any Exchange Notes in the Exchange
Offer, counsel to the Company and the Guarantors shall deliver
an Opinion of Counsel to the Trustee to the effect that:
(A) the Exchange Notes have been duly authorized and, when
executed and authenticated in accordance with the
provisions of this Indenture and delivered in exchange for
Series A Notes in accordance with the Indenture and the
Exchange Offer, will be entitled to the benefits of the
Indenture and will be valid and binding obligations of the
Company, enforceable in accordance with their terms; and
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(B) when the Exchange Notes are executed and authenticated in
accordance with the provisions of the Indenture and
delivered in exchange for Series A Notes in accordance
with the Indenture and the Exchange Offer, the Guarantees
endorsed thereon will be entitled to the benefits of the
Indenture and will be valid and binding obligations of the
Guarantors, enforceable in accordance with their terms,
in each case, subject to such exceptions and limitations as
were contained in the opinion delivered by such counsel with
respect to the Series A Notes.
(vi) The Company shall not be required:
(A) to issue, to register the transfer of or to exchange
Senior Notes during a period beginning at the opening of
business 15 days before the day of any selection of Senior
Notes for redemption under Section 3.02 hereof and ending
at the close of business on the day of selection; or
(B) to register the transfer of or to exchange any Senior Note
so selected for redemption in whole or in part, except the
unredeemed portion of any Senior Note being redeemed in
part; or
(C) to register the transfer of or to exchange a Senior Note
between a record date and the next succeeding interest
payment date.
(vii) Prior to due presentment for the registration of a transfer of
any Senior Note, the Trustee, any Agent and the Company may
deem and treat the Person in whose name any Senior Note is
registered as the absolute owner of such Senior Note for the
purpose of receiving payment of principal of and interest on
such Senior Notes, and neither the Trustee, any Agent nor the
Company shall be affected by notice to the contrary.
(viii) The Trustee shall authenticate Definitive Senior Notes and
Global Senior Notes in accordance with the provisions of
Section 2.02 hereof.
Section 2.07. Replacement Senior Notes.
If any mutilated Senior Note is surrendered to the Trustee, or the Company
and the Trustee receive evidence to their satisfaction of the destruction, loss
or theft of any Senior Note, the Company shall issue and the Trustee, upon the
written order of the Company signed by two Officers of the Company, shall
authenticate a replacement Senior Note if the Trustee's requirements are met.
If required by the Trustee or the Company, an indemnity bond must be supplied by
the Holder that is sufficient in the judgment of the Trustee and the Company to
protect the Company, the Trustee, any Agent and any authenticating agent from
any loss that any of them may suffer if a Senior Note is replaced. The Company
may charge for its expenses in replacing a Senior Note.
Every replacement Senior Note is an obligation of the Company and shall be
entitled to all of the benefits of this Indenture equally and proportionately
with all other Senior Notes duly issued hereunder.
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Section 2.08. Outstanding Senior Notes.
The Senior Notes outstanding at any time are all the Senior Notes
authenticated by the Trustee except for those canceled by it, those delivered to
it for cancellation, those reductions in the interest in a Global Senior Note
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section
2.09 hereof, a Senior Note does not cease to be outstanding (unless canceled by
the Trustee at the direction of the Company) because the Company or an Affiliate
of the Company holds the Senior Note.
If a Senior Note is replaced pursuant to Section 2.07 hereof, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Senior Note is held by a bona fide purchaser.
If the principal amount of any Senior Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate
of any thereof) holds, on a redemption date or maturity date, money sufficient
to pay Senior Notes payable on that date, then on and after that date such
Senior Notes shall be deemed to be no longer outstanding and shall cease to
accrue interest.
Section 2.09. Treasury Senior Notes.
In determining whether the Holders of the required principal amount of
Senior Notes have concurred in any direction, waiver or consent, Senior Notes
owned by the Company, any Guarantor or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company, shall be considered as though not outstanding, except that for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Senior Notes that a Trustee knows are so
owned shall be so disregarded.
Section 2.10. Temporary Senior Notes.
Until definitive Senior Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Senior Notes upon a written
order of the Company signed by two Officers of the Company. Temporary Senior
Notes shall be substantially in the form of definitive Senior Notes but may have
variations that the Company considers appropriate for temporary Senior Notes and
as shall be reasonably acceptable to the Trustee. Without unreasonable delay,
the Company shall prepare and the Trustee shall authenticate definitive Senior
Notes in exchange for temporary Senior Notes.
Holders of temporary Senior Notes shall be entitled to all of the benefits
of this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Senior Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Senior Notes surrendered to them for registration of transfer, exchange or
payment. The Trustee and no one else shall cancel all Senior Notes surrendered
for registration of transfer, exchange, payment, replacement or cancellation and
shall destroy canceled Senior Notes (subject to the record retention requirement
of the Exchange Act). Certification of the destruction of all canceled Senior
Notes shall be delivered to the Company. The Company may not issue new Senior
Notes to replace Senior Notes that it has paid or that have been delivered to
the Trustee for cancellation.
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Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Senior Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Senior Notes and in Section 4.01 hereof. The Company shall notify the
Trustee in writing of the amount of defaulted interest proposed to be paid on
each Senior Note and the date of the proposed payment. The Company shall fix
or cause to be fixed each such special record date and payment date, provided
that no such special record date shall be less than 10 days prior to the related
payment date for such defaulted interest. At least 15 days before the special
record date, the Company (or, upon the written request of the Company, the
Trustee in the name and at the expense of the Company) shall mail or cause to be
mailed to Holders a notice that states the special record date, the related
payment date and the amount of such interest to be paid.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Senior Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Senior Notes to be redeemed and (iv) the redemption price.
Section 3.02. Selection of Senior Notes to be Redeemed.
If less than all of the Senior Notes are to be redeemed at any time, the
Trustee shall select the Senior Notes to be redeemed among the Holders of the
Senior Notes in compliance with the requirements of the principal national
securities exchange, if any, on which the Senior Notes are listed or, if the
Senior Notes are not so listed, on a pro rata basis, by lot or in accordance
with any other method the Trustee considers fair and appropriate. In the event
of partial redemption by lot, the particular Senior Notes to be redeemed shall
be selected, unless otherwise provided herein, not less than 30 nor more than 60
days prior to the redemption date by the Trustee from the outstanding Senior
Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Senior
Notes selected for redemption and, in the case of any Senior Note selected for
partial redemption, the principal amount thereof to be redeemed. Senior Notes
selected shall be in amounts equal to or greater than $1,000 and portions of
Senior Notes selected shall be in amounts of $1,000 or whole multiples of
$1,000; except that if all of the Senior Notes of a Holder are to be redeemed,
the entire outstanding amount of Senior Notes held by such Holder, even if not a
multiple of $1,000, shall be redeemed. Except as provided in the preceding
sentence, provisions of this Indenture that apply to Senior Notes called for
redemption also apply to portions of Senior Notes called for redemption.
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Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, at least 30 days but not
more than 60 days before a redemption date, the Company shall mail or cause to
be mailed, by first class mail, a notice of redemption to each Holder whose
Senior Notes are to be redeemed at its registered address.
The notice shall identify the Senior Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Senior Note is being redeemed in part, the portion of the
principal amount of such Senior Note to be redeemed and that, after the
redemption date upon surrender of such Senior Note, a new Senior Note or
Senior Notes in principal amount equal to the unredeemed portion shall be
issued upon cancellation of the original Senior Note;
(d) the name and address of the Paying Agent;
(e) that Senior Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Senior Notes called for redemption ceases to accrue on
and after the redemption date;
(g) the paragraph of the Senior Notes and/or Section of this
Indenture pursuant to which the Senior Notes called for redemption are
being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Senior
Notes.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
shall have delivered to the Trustee, at least 45 days prior to the redemption
date, an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
preceding paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03 hereof,
Senior Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05. Deposit of Redemption Price.
One Business Day prior to the redemption date, the Company shall deposit
with the Trustee or with the Paying Agent money sufficient to pay the redemption
price of and accrued interest on all Senior Notes to be redeemed on that date.
The Trustee or the Paying Agent shall promptly return to the Company any money
deposited with the Trustee or the Paying Agent by the Company in excess of the
amounts necessary to pay the redemption price of, and accrued interest on, all
Senior Notes to be redeemed.
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<PAGE>
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the Senior
Notes or the portions of Senior Notes called for redemption. If a Senior Note
is redeemed on or after an interest record date but on or prior to the related
interest payment date, then any accrued and unpaid interest shall be paid to the
Person in whose name such Senior Note was registered at the close of business on
such record date. If any Senior Note called for redemption shall not be so paid
upon surrender for redemption because of the failure of the Company to comply
with the preceding paragraph, interest shall be paid on the unpaid principal,
from the redemption date until such principal is paid, and to the extent lawful
on any interest not paid on such unpaid principal, in each case at the rate
provided in the Senior Notes and in Section 4.01 hereof.
Section 3.06. Senior Notes Redeemed in Part.
Upon surrender of a Senior Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Senior Note equal in
principal amount to the unredeemed portion of the Senior Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the Senior Notes pursuant to this Section
3.07 prior to August 15, 2001. Thereafter, the Company shall have the option to
redeem the Senior Notes, in whole or in part, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the applicable
redemption date, if redeemed during the twelve-month period beginning on August
15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001...................................... 105.625%
2002...................................... 102.813%
2003 (and thereafter)..................... 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Section 3.07, on
any one occasion prior to August 15, 2000, the Company may redeem up to 25% of
the aggregate principal amount of Senior Notes originally issued pursuant to
this Indenture with the net proceeds of a public offering of its common stock at
a redemption price equal to 111.25% of the principal amount thereof plus accrued
and unpaid interest and Liquidated Damages thereon, if any; provided that at
least 75% in aggregate principal amount of the Senior Notes originally issued
remains outstanding immediately after the occurrence of such redemption and that
such redemption occurs within 45 days of the date of the closing of such public
offering.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant
to the provisions of Section 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
Except as set forth under Sections 4.10 and 4.15 hereof, the Company shall
not be required to make mandatory redemption or sinking fund payments with
respect to the Senior Notes.
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<PAGE>
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the Company shall be
required to commence an offer to all Holders to purchase Senior Notes (an "Asset
Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the principal amount of Senior Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Senior Notes tendered in response to the
Asset Sale Offer. Payment for any Senior Notes so purchased shall be made in
the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Senior Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Senior Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Senior Notes pursuant to the Asset
Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice,
which shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer
shall remain open;
(b) the Offer Amount (including a description of any pari passu
Indebtedness that is the subject of a concurrent Asset Sale Offer to be
paid from such Offer Amount), the purchase price and the Purchase Date;
(c) that any Senior Note not tendered or accepted for payment shall
continue to accrue interest;
(d) that, unless the Company defaults in making such payment, any
Senior Note accepted for payment pursuant to the Asset Sale Offer shall
cease to accrue interest after the Purchase Date;
(e) that Holders electing to have a Senior Note purchased pursuant
to an Asset Sale Offer may only elect to have all of such Senior Note
purchased and may not elect to have only a portion of such Senior Note
purchased;
(f) that Holders electing to have a Senior Note purchased pursuant
to any Asset Sale Offer shall be required to surrender the Senior Note,
with the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Senior Note completed, or transfer by book-entry transfer, to the
Company, the Depository, or a Paying Agent at the address specified in the
notice at least three days before the Purchase Date;
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<PAGE>
(g) that Holders shall be entitled to withdraw their election if the
Company, the Depository or the Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Senior Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Senior
Note purchased;
(h) that, if the aggregate principal amount of Senior Notes
surrendered by Holders exceeds the Offer Amount, the Company shall select
the Senior Notes to be purchased on a pro rata basis (with such adjustments
as may be deemed appropriate by the Company so that only Senior Notes in
denominations of $1,000, or integral multiples thereof, shall be purchased,
giving effect to any pari passu Indebtedness subject to an Asset Sale
Offer); and
(i) that Holders whose Senior Notes were purchased only in part
shall be issued new Senior Notes equal in principal amount to the
unpurchased portion of the Senior Notes surrendered (or transferred by
book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis (giving effect to any pari passu
Indebtedness subject to an Asset Sale Offer) to the extent necessary, the Offer
Amount of Senior Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Senior Notes
tendered, and shall deliver to the Trustee an Officers' Certificate stating that
such Senior Notes or portions thereof were accepted for payment by the Company
in accordance with the terms of this Section 3.09. The Company, the Depository
or the Paying Agent, as the case may be, shall promptly (but in any case not
later than five days after the Purchase Date) mail or deliver to each tendering
Holder an amount equal to the purchase price of the Senior Notes tendered by
such Holder and accepted by the Company for purchase, and the Company shall
promptly issue a new Senior Note, and the Trustee, upon written request from the
Company shall authenticate and mail or deliver such new Senior Note to such
Holder, in a principal amount equal to any unpurchased portion of the Senior
Note surrendered. Any Senior Note not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company shall publicly
announce the results of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
Section 4.01. Payment of Senior Notes.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Senior Notes on the dates and in the manner provided in
the Senior Notes. Principal, premium, if any, and interest shall be considered
paid on the date due if the Paying Agent, if other than the Company or a
Subsidiary thereof, holds as of 10:00 a.m. Central Time on the due date money
deposited by the Company in immediately available funds and designated for and
sufficient to pay all principal, premium, if any, and interest then due. The
Company shall pay all Liquidated Damages, if any, in the same manner on the
dates and in the amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable
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<PAGE>
interest rate on the Senior Notes to the extent lawful; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest and Liquidated Damages (without regard to any
applicable grace period) at the same rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an Affiliate
of the Trustee, Registrar or co-registrar) where Senior Notes may be surrendered
for registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Senior Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the Senior Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03.
Section 4.03. Reports.
(a) Whether or not required by the rules and regulations of the SEC, so
long as any Senior Notes are outstanding, the Company and the Guarantors shall
furnish to the Trustee for provision to all Holders (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the SEC on Forms 10-Q and 10-K if the Company and/or the Guarantors were
required to file such forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" that describes the financial
condition and results of operations of the Company and its consolidated
Subsidiaries (showing in reasonable detail, either on the face of the financial
statements or in the footnotes thereto and in Management's Discussion and
Analysis of Financial Condition and Results of Operations, the financial
condition and results of operations of the Company and the Restricted
Subsidiaries separate from the financial condition and results of operations of
the Unrestricted Subsidiaries of the Company) and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all reports that would be required to be filed with the SEC
on Form 8-K if the Company were required to file such reports. In addition,
whether or not required by the rules and regulations of the SEC, the Company
shall file a copy of all such information with the SEC for public availability
(unless the SEC will not accept such a filing). The Company and the Guarantors
shall at all times comply with TIA (S) 314(a).
(b) For so long as any Transfer Restricted Securities remain outstanding,
the Company shall furnish to all Holders and prospective purchasers of the
Senior Notes designated by the Holders of Transfer Restricted Securities,
promptly upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
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<PAGE>
Section 4.04. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 90 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Senior Notes
is prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article Four or Article Five hereof or, if any such violation
has occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Senior Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Senior Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and (to the extent that it may lawfully do
so) the Company hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
29
<PAGE>
Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company) or
to the direct or indirect holders of the Company's or any of its Restricted
Subsidiaries' Equity Interests in their capacity as such (other than dividends
or distributions payable in Equity Interests (other than Disqualified Stock) of
the Company); (ii) purchase, redeem or otherwise acquire or retire for value
(including without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company or other Affiliate of the Company (other than any
such Equity Interests owned by the Company or any Wholly Owned Restricted
Subsidiary of the Company); (iii) make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is pari passu with or subordinated to the Senior Notes (other
than under the Senior Credit Facility and the Senior Notes), except a payment of
interest or principal at Stated Maturity; or (iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
Section 4.09 below; and
(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of this Indenture (excluding Restricted
Payments permitted by clause (ii), (iii), (iv), (vi) or (vii) of the next
succeeding paragraph), is less than the sum of (i) 50% of the Consolidated
Net Income of the Company for the period (taken as one accounting period)
from the beginning of the first fiscal quarter commencing after the date of
this Indenture to the end of the Company's most recently ended fiscal
quarter for which internal financial statements are available at the time
of such Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, less 100% of such deficit), plus (ii) 100% of the
aggregate net cash proceeds received by the Company from the issue or sale
since the date of this Indenture of Equity Interests of the Company (other
than Disqualified Stock) or of Disqualified Stock or debt securities of the
Company that have been converted into such Equity Interests (other than
Equity Interests (or Disqualified Stock or convertible debt securities)
sold to a Subsidiary of the Company and other than Disqualified Stock or
convertible debt securities that have been converted into Disqualified
Stock), plus (iii) to the extent that any Restricted Investment that was
made after the date of this Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the cash return of capital
with respect to such Restricted Investment (less the cost of disposition,
if any) and (B) the initial amount of such Restricted Investment, plus (iv)
50% of any dividends received by the Company or a Wholly Owned Restricted
Subsidiary after the date of this Indenture from an Unrestricted Subsidiary
of the Company, to the extent that such dividends were not otherwise
included in Consolidated Net Income of the Company for such period, plus
(v) $5.0 million.
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<PAGE>
The foregoing provisions shall not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated Indebtedness or Equity Interests
of the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of,
other Equity Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other acquisition shall
be excluded from clause (c)(ii) of the preceding paragraph; (iii) the
defeasance, redemption, repurchase or other acquisition of pari passu or
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a
Subsidiary of the Company to the holders of its Equity Interests on a pro rata
basis; (v) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company or any Subsidiary of the Company
held by any member of the Company's (or any of its Subsidiaries') management
pursuant to any management equity subscription agreement, stock option agreement
or shareholder agreement; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$500,000 in any twelve-month period and no Default or Event of Default shall
have occurred and be continuing immediately after such transaction; (vi) if an
Asset Sale Offer is required in respect of the Senior Notes pursuant to this
Indenture, the making and consummation of an asset sale offer in accordance with
the provisions of an indenture governing pari passu Indebtedness permitted by
this Indenture; or (vii) if a Change of Control Offer is required in respect of
the Senior Notes pursuant to this Indenture, the making and consummation of a
change of control offer as required by the provisions of an indenture governing
pari passu Indebtedness permitted by this Indenture, provided that the
definition of "change of control" and the terms and timing of a change of
control offer applicable to such pari passu Indebtedness are substantially
identical to the definition of Change of Control and the terms and timing of a
Change of Control Offer under this Indenture.
If the Company or any Wholly Owned Restricted Subsidiary of the Company
sells or otherwise disposes of any Equity Interests of any direct or indirect
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, such Person is no longer a Wholly Owned Restricted Subsidiary of
the Company, the Company shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the fair market value of the Equity
Interests of such Subsidiary not sold or disposed of in an amount determined as
provided in the second succeeding paragraph below.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default, provided
that in no event shall the business currently operated by Wilson Leather
Holdings Inc. or any of its direct or indirect parent companies be transferred
to or held by an Unrestricted Subsidiary. For purposes of making such
determination, all outstanding Investments by the Company and its Restricted
Subsidiaries (except to the extent repaid in cash) in the Subsidiary so
designated shall be deemed to be Restricted Payments at the time of such
designation and shall reduce the amount available for Restricted Payments under
the first paragraph of this Section 4.07. All such outstanding Investments shall
be deemed to constitute Investments in an amount equal to the greatest of (x)
the net book value of such Investments at the time of such designation, (y) the
fair market value of such Investments at the time of such designation and (z)
the original fair market value of such Investments at the time they were made.
Such designation shall only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company
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<PAGE>
or such Subsidiary, as the case may be, pursuant to the Restricted Payment. The
fair market value of any non-cash Restricted Payment shall be determined by the
Board of Directors whose resolution with respect thereto shall be delivered to
the Trustee, such determination to be based upon an opinion or appraisal issued
by an accounting, appraisal or investment banking firm of national standing if
such fair market value exceeds $1.0 million. Not later than the date of making
any Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this Section 4.07 were
computed.
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits, or (b) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries, except for such encumbrances
or restrictions existing under or by reason of (a) Existing Indebtedness as in
effect on the date of this Indenture (b) the Senior Credit Facility as in effect
as of the date of this Indenture (after giving effect to amendments thereto
effective on such date) and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings
thereof, provided that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacement or refinancings are no more
restrictive with respect to such dividend and other payment restrictions than
those contained in the Indebtedness refinanced, (c) this Indenture and the
Senior Notes, (d) applicable law, (e) any instrument governing Indebtedness or
Capital Stock of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of this Indenture to
be incurred, (f) by reason of customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices, (g) Capital Lease Obligations and purchase money obligations for
property acquired in the ordinary course of business that impose restrictions of
the nature described in clause (iii) above on the property so acquired, (h)
Permitted Refinancing Indebtedness, provided that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the Indebtedness
being refinanced, or (i) customary limitations of the nature described in clause
(iii) above imposed by any agreement entered into in connection with an Asset
Sale (or transaction that would be an Asset Sale but for the size of the
transaction) prior to the consummation thereof, provided that such limitations
apply only to the assets to be sold in such Asset Sale.
Section 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and the
Company shall not issue any Disqualified Stock and shall not permit any of its
Subsidiaries to issue any shares of preferred stock; provided, however, that the
Company or any Guarantor may incur Indebtedness (including Acquired Debt) and
the Company may issue shares of Disqualified Stock if the Fixed Charge
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<PAGE>
Coverage Ratio for the Company's most recently ended four full fiscal quarters
for which internal financial statements are available immediately preceding the
date on which such additional Indebtedness is incurred or such Disqualified
Stock is issued would have been at least 2.5 to 1, determined on a pro forma
basis (including a pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred, or the Disqualified Stock had
been issued, as the case may be, at the beginning of such four-quarter period.
The Company and each Guarantor shall not incur any Indebtedness that is
contractually subordinated to any other Indebtedness of the Company or such
Guarantor, as the case may be, unless such Indebtedness is also contractually
subordinated to the Senior Notes or the Guarantee of such Guarantor, as
applicable, on substantially identical terms; provided, however, that no
Indebtedness of the Company or such Guarantor, as the case may be, shall be
deemed to be contractually subordinated to any other Indebtedness of the Company
or such Guarantor, as the case may be, solely by virtue of being unsecured.
The provisions of the first paragraph of this Section 4.09 shall not apply
to the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company and any Guarantor of
Indebtedness and letters of credit pursuant to the Senior Credit
Facility; provided, however, that the aggregate principal amount of
all Indebtedness (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the
Company and its Subsidiaries thereunder) outstanding under the Senior
Credit Facility does not exceed the greater of $150.0 million or the
amount of the Borrowing Base; provided, further, that any acquisition
of capital stock or substantially all of the assets of any business
(including by way of any merger, consolidation or similar transaction
and including any Permitted Investment permitted by clause (c) of the
definition of such term) may be financed with borrowings under the
Senior Credit Facility only to the extent that the Company would, at
the time of such borrowings and after giving pro forma effect thereto
as if such borrowings and such acquisition had occurred at the
beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of
this covenant;
(ii) the incurrence by the Company and its Restricted
Subsidiaries of the Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented
by the Senior Notes and the incurrence by the Guarantors of the
Guarantees;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case
incurred for the purpose of financing all or any part of the purchase
price or cost of construction or improvement of property, plant or
equipment used in the business of the Company or such Restricted
Subsidiary, in an aggregate principal amount not to exceed $6.0
million at any time outstanding;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or
the net proceeds of which are used to refund, refinance or replace
Indebtedness that was permitted by this Indenture to be incurred;
provided, however, that Permitted Refinancing Indebtedness with
respect to
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clauses (iv), (vi) and (vii) (and any Existing Indebtedness
of like character outstanding on the Issue Date) would otherwise be
permitted to be incurred pursuant to such clauses, as applicable;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company
and/or any of its Wholly Owned Restricted Subsidiaries; provided,
however, that (i) if the Company or any Guarantor is the obligor on,
and the lender is not a Guarantor of, such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in full in
cash of all Obligations with respect to the Senior Notes or the
Guarantee of such Guarantor as applicable and (ii)(A) any subsequent
issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a Wholly
Owned Restricted Subsidiary and (B) any sale or other transfer of any
such Indebtedness to a Person that is not either the Company or a
Wholly Owned Restricted Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose
of fixing or hedging interest rate risk with respect to any floating
rate Indebtedness that is permitted by the terms of this Indenture to
be outstanding;
(viii) the guarantee by the Company or any of the Guarantors of
Indebtedness of the Company or a Restricted Subsidiary of the Company
that was permitted to be incurred by another provision of this Section
4.09;
(ix) the incurrence by the Company or any of the Restricted
Subsidiaries of additional Indebtedness (which may, but need not, be
incurred under the Senior Credit Facility) in an aggregate principal
amount (or accreted value, as applicable) at any time outstanding,
including all Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any other Indebtedness incurred pursuant to this
clause (ix), not to exceed $12.0 million; provided, however that no
more than $2.0 million of such outstanding Indebtedness may be
incurred by Restricted Subsidiaries that are not Guarantors; and
(x) the incurrence by the Company's Unrestricted Subsidiaries
of Non-Recourse Debt, provided, however, that if any such Indebtedness
ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such
event shall be deemed to constitute an incurrence of Indebtedness by a
Restricted Subsidiary of the Company.
For purposes of determining compliance with this Section 4.09, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (x) above or is
entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this Section 4.09 and such item of Indebtedness
shall be treated as having been incurred pursuant to only one of such clauses or
pursuant to the first paragraph hereof. Accrual of interest, the accretion of
accreted value and the payment of interest in the form of additional
Indebtedness shall not be deemed to be an incurrence of Indebtedness for
purposes of this Section 4.09.
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Section 4.10. Asset Sales.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash;
provided that the amount of (x) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet) of the Company or any
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the Senior Notes or any guarantee thereof)
that are assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases the Company or such Restricted Subsidiary from
further liability and (y) any securities, notes or other obligations received by
the Company or any such Restricted Subsidiary from such transferee that are
converted by the Company or such Restricted Subsidiary into cash (to the extent
of the cash received) within five Business Days after such Asset Sale, shall be
deemed to be cash for purposes of this provision.
Subject to the provisions relating to Excess Proceeds set forth below,
within 360 days after the receipt of any Net Proceeds from an Asset Sale, the
Company may apply such Net Proceeds at its option, (a) to repay Indebtedness
under the Senior Credit Facility (and to correspondingly permanently reduce
commitments with respect thereto), or (b) to the acquisition of a controlling
interest in another business, the making of a capital expenditure or the
acquisition of other long-term assets, in each case, in a Permitted Business.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce Indebtedness under the Senior Credit Facility or otherwise
invest such Net Proceeds in any manner that is not prohibited by this Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as provided
in the first sentence of this paragraph shall be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million,
the Company shall be required to make an "Asset Sale Offer" to purchase the
maximum principal amount of Senior Notes and pari passu Indebtedness (to the
extent the terms thereof require an asset sale offer) that may be purchased out
of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of
the principal amount thereof plus accrued and unpaid interest thereon, if any,
to the date of purchase, in accordance with the procedures set forth in this
Indenture. To the extent that the aggregate amount of Senior Notes and pari
passu Indebtedness tendered pursuant to an Asset Sale Offer (and any such
required asset sale offer) is less than the Excess Proceeds, the Company may use
any remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Senior Notes and pari passu Indebtedness permitted by this
Indenture surrendered by holders thereof exceeds the amount of Excess Proceeds,
such Senior Notes and pari passu Indebtedness shall be purchased on a pro rata
basis. The Trustee shall cooperate with the trustee or representative of such
pari passu Indebtedness in the determination of Indebtedness to be repurchased
pursuant to this Section 4.10. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a
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comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (ii) the Company delivers to the Trustee (a) with respect
to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $1.0 million, a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the disinterested members of the
Board of Directors and (b) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess of
$5.0 million (other than any purchase from a leather goods wholesaler made in
the ordinary course of business and consistent with past practices), an opinion
as to the fairness to the Holders of such Affiliate Transaction from a financial
point of view issued by an accounting, appraisal or investment banking firm of
national standing; provided that (w) any employment agreement entered into by
the Company or any of its Restricted Subsidiaries in the ordinary course of
business, (x) payment of reasonable directors' fees to directors of the Company
who are not employees, officers or Affiliates of the Company or any of its
Affiliates, (y) transactions between or among the Company and/or its Restricted
Subsidiaries, and (z) Restricted Payments that are permitted by the provisions
of Section 4.07 above, in each case, shall not be deemed Affiliate Transactions.
Section 4.12. Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired, or any income or
profits therefrom or assign or convey any right to receive income therefrom,
except Permitted Liens.
Section 4.13. Line of Business.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, engage in any business other than a Permitted Business, except
to such extent as would not be material to the Company and its Restricted
Subsidiaries taken as a whole.
Section 4.14. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its corporate
existence, and the corporate, partnership or other existence of each of its
Restricted Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Subsidiary and (ii) the rights (charter and statutory), licenses and
franchises of the Company and its Restricted Subsidiaries; provided, however,
that the Company shall not be required to preserve any such right, license or
franchise, or the corporate, partnership or other existence of any of its
Restricted Subsidiaries, if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Restricted Subsidiaries, taken as a whole, and that the loss
thereof is not adverse in any material respect to the Holders of the Senior
Notes.
Section 4.15. Offer to Repurchase upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of Senior
Notes shall have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Senior Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control
36
<PAGE>
Payment"). Within ten days following any Change of Control, the Company shall
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Senior Notes on the
date specified in such notice, which date shall be no earlier than 30 days and
no later than 60 days from the date such notice is mailed (the "Change of
Control Payment Date"), pursuant to the procedures required by this Indenture
and described in such notice. The Company shall comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Senior Notes as a result of a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (i) accept for payment all Senior Notes or portions thereof
properly tendered pursuant to the Change of Control Offer, (ii) deposit with the
Paying Agent an amount equal to the Change of Control Payment in respect of all
Senior Notes or portions thereof so tendered and (iii) deliver or cause to be
delivered to the Trustee the Senior Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Senior Notes or portions
thereof being purchased by the Company. The Paying Agent shall promptly mail to
each Holder of Senior Notes so tendered the Change of Control Payment for such
Senior Notes, and the Trustee shall promptly authenticate and mail (or cause to
be transferred by book entry) to each Holder a new Senior Note equal in
principal amount to any unpurchased portion of the Senior Notes surrendered, if
any; provided that each such new Senior Note shall be in a principal amount of
$1,000 or an integral multiple thereof. The Company shall publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
(c) Notwithstanding anything herein to the contrary, the Company shall
not be required to make a Change of Control Offer upon a Change of Control if a
third party makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in this Section 4.15 and
purchases all Senior Notes validly tendered and not withdrawn under such Change
of Control Offer.
Section 4.16. Limitation on Issuances and Sales of Capital Stock of Wholly
owned Restricted Subsidiaries.
The Company (i) shall not, and shall not permit any Wholly Owned Restricted
Subsidiary of the Company to, transfer, convey, sell, lease or otherwise dispose
of any Capital Stock of any Wholly Owned Restricted Subsidiary of the Company to
any Person (other than the Company or a Wholly Owned Restricted Subsidiary of
the Company), unless (a) such transfer, conveyance, sale, lease or other
disposition is of all the Capital Stock of such Wholly Owned Restricted
Subsidiary and (b) the cash Net Proceeds from such transfer, conveyance, sale,
lease or other disposition are applied in accordance with Section 4.10 above and
(ii) shall not permit any Wholly Owned Restricted Subsidiary of the Company to
issue any of its Equity Interests (other than, if necessary, shares of its
Capital Stock constituting directors' qualifying shares) to any Person other
than to the Company or a Wholly Owned Restricted Subsidiary of the Company.
Section 4.17. Limitations on Issuances of Guarantees of Indebtedness
The Company shall not permit any Subsidiary, directly or indirectly, to
guarantee or pledge any assets to secure the payment of any other Indebtedness
of the Company unless such Subsidiary simultaneously executes and delivers a
supplemental indenture to this Indenture providing for the Guarantee of the
payment of the Senior Notes by such Subsidiary, which Guarantee shall be senior
to or pari passu with such Subsidiary's guarantee of or pledge to secure such
other Indebtedness; provided
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however that, with respect to any Subsidiary's guarantee of the Senior Credit
Facility, the Guarantee of the Senior Notes shall not be secured notwithstanding
the delivery of a secured guarantee by such Subsidiary to secure the Senior
Credit Facility and provided further that nothing herein shall prohibit the
grant of such security securing obligations under the Senior Credit Facility by
such Subsidiary. Notwithstanding the foregoing, any such Guarantee by a
Subsidiary of the Senior Notes shall provide by its terms that it shall be
automatically and unconditionally released and discharged upon any sale,
exchange or transfer, to any Person not an Affiliate of the Company, of all of
the Company's stock in, or all or substantially all the assets of, such
Subsidiary, which sale, exchange or transfer is made in compliance with the
applicable provisions of this Indenture.
Section 4.18. Payments for Consent.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Senior Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Senior Notes unless such consideration is offered to be
paid or is paid to all Holders of the Senior Notes that consent, waive or agree
to amend in the time frame set forth in the solicitation documents relating to
such consent, waiver or agreement.
ARTICLE 5.
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
The Company shall not consolidate or merge with or into (whether or not the
Company is the surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions to, another corporation, Person or entity
unless (i) the Company is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company) or the entity or Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of the Company under the Senior Notes and this
Indenture pursuant to a supplemental indenture in a form reasonably satisfactory
to the Trustee; (iii) immediately after such transaction no Default or Event of
Default exists; and (iv) except in the case of a merger of the Company with or
into a Wholly Owned Restricted Subsidiary of the Company, the Company or the
entity or Person formed by or surviving any such consolidation or merger (if
other than the Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (A) will have Consolidated
Net Worth immediately after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the transaction and
(B) will, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.09 above.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company in accordance with Section 5.01 hereof,
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<PAGE>
the successor corporation formed by such consolidation or into or with which the
Company is merged or to which such sale, assignment, transfer, lease, conveyance
or other disposition is made shall succeed to, and be substituted for (so that
from and after the date of such consolidation, merger, sale, lease, conveyance
or other disposition, the provisions of this Indenture referring to the
"Company" shall refer instead to the successor corporation and not to the
Company), and may exercise every right and power of the Company under this
Indenture with the same effect as if such successor Person had been named as the
Company herein; provided, however, that the predecessor Company shall not be
relieved from the obligation to pay the principal of and interest on the Senior
Notes except in the case of a sale of all of the Company's assets that meets the
requirements of Section 5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on, or
Liquidated Damages with respect to, the Senior Notes and such default
continues for a period of 30 days;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Senior Notes when the same becomes due and payable
at maturity, upon redemption (including in connection with an offer to
purchase) or otherwise;
(c) the Company fails to comply with any of the provisions of
Section 4.07, 4.09, 4.10, 4.15 or 5.01 hereof;
(d) the Company fails to observe or perform any other covenant,
representation, warranty or other agreement in this Indenture or the Senior
Notes for 60 days after notice to the Company by the Trustee or the Holders
of at least 25% in principal amount of the Senior Notes then outstanding;
(e) a default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries, whether such Indebtedness or guarantee now exists,
or is created after the date of this Indenture, which default (a) is caused
by a failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b)
results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5 million or more;
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company
or any of its Restricted Subsidiaries and such judgment or judgments remain
undischarged for a period (during which execution shall not be effectively
stayed) of 60 days, provided that the aggregate of all such undischarged
judgments exceeds $5 million;
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<PAGE>
(g) the Company or any of its Restricted Subsidiaries pursuant to or
within the meaning of Bankruptcy Law:
(i) commences a voluntary case;
(ii) consents to the entry of an order for relief against it in
an involuntary case;
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property;
(iv) makes a general assignment for the benefit of its
creditors; or
(v) generally is not paying its debts as they become due;
(h) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company or any of its Restricted
Subsidiaries in an involuntary case;
(ii) appoints a Custodian of the Company or any of its
Restricted Subsidiaries for all or substantially all of
the property of the Company or any of its Restricted
Subsidiaries; or
(iii) orders the liquidation of the Company or any of its
Restricted Subsidiaries;
and the order or decree remains unstayed and in effect for 60
consecutive days; or
(i) except as permitted by this Indenture, any Guarantee shall be
held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any Guarantor, or
any Person acting on behalf of any Guarantor, shall deny or disaffirm its
obligations under its Guarantee.
Section 6.02. Acceleration.
If any Event of Default (other than an Event of Default specified in clause
(g) or (h) of Section 6.01 hereof with respect to the Company or any Restricted
Subsidiary) occurs and is continuing, the Trustee or the Holders of at least 25%
in principal amount of the then outstanding Senior Notes may declare all the
Senior Notes to be due and payable immediately; provided, that so long as any
Indebtedness permitted to be incurred pursuant to the Senior Credit Facility
shall be outstanding, such acceleration shall not be effective until the earlier
of (i) an acceleration of any such Indebtedness under the Senior Credit Facility
or (ii) five Business Days after receipt by the Company of written notice of
such acceleration of the Senior Notes. Upon any such declaration, the Senior
Notes shall become due and payable immediately. Notwithstanding the foregoing,
if an Event of Default specified in clause (g) or (h) of Section 6.01 hereof
occurs with respect to the Company or any Restricted Subsidiary that is a
Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary, all outstanding Senior Notes
shall be due and payable immediately without further action or notice. The
Holders of a majority in aggregate principal amount of the then outstanding
Senior Notes by written notice
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to the Trustee may on behalf of all of the Holders rescind an acceleration and
its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default (except nonpayment of principal,
interest, premium or Liquidated Damages that has become due solely because of
the acceleration) have been cured or waived.
If an Event of Default occurs on or after August 15, 2001 by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the Company
with the intention of avoiding payment of the premium that the Company would
have had to pay if the Company then had elected to redeem the Senior Notes
pursuant to Section 3.07 hereof, then, upon acceleration of the Senior Notes, an
equivalent premium shall also become and be immediately due and payable, to the
extent permitted by law, anything in this Indenture or in the Senior Notes to
the contrary notwithstanding. If an Event of Default occurs prior to August 15,
2001 by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding the prohibition on
redemption of the Senior Notes prior to such date, then, upon acceleration of
the Senior Notes, an additional premium shall also become and be immediately due
and payable in an amount, for each of the years beginning on August 15 of the
years set forth below, as set forth below (expressed as a percentage of the
principal amount to the date of payment that would otherwise be due but for the
provisions of this sentence):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1997................................ 111.250%
1998................................ 109.844%
1999................................ 108.438%
2000................................ 107.031%
</TABLE>
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal, premium, if any, and
interest on the Senior Notes or to enforce the performance of any provision of
the Senior Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Senior Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Senior Note in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 6.04. Waiver of PasT Defaults.
Holders of not less than a majority in aggregate principal amount of the
then outstanding Senior Notes by notice to the Trustee may on behalf of the
Holders of all of the Senior Notes waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of the principal of, premium and Liquidated Damages, if any, or
interest on, the Senior Notes (including in connection with an offer to
purchase) (provided, however, that the Holders of a majority in aggregate
principal amount of the then outstanding Senior Notes may rescind an
acceleration and its consequences, including any related payment default that
resulted from such acceleration). Upon any such waiver, such Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.
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Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding Senior
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Senior Notes or that may involve
the Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Senior Note may pursue a remedy with respect to this
Indenture or the Senior Notes only if:
(a) the Holder of a Senior Note gives to the Trustee written notice
of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Senior Notes make a written request to the Trustee to pursue
the remedy;
(c) such Holder of a Senior Note or Holders of Senior Notes offer
and, if requested, provide to the Trustee indemnity satisfactory to the
Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the provision
of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Senior Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Senior Note may not use this Indenture to prejudice the rights of
another Holder of a Senior Note or to obtain a preference or priority over
another Holder of a Senior Note.
Section 6.07. Rights of Holders of Senior Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Senior Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Senior Note, on or after the respective due
dates expressed in the Senior Note (including in connection with an offer to
purchase), or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company or any Guarantor for the whole
amount of principal of, premium and Liquidated Damages, if any, and interest
remaining unpaid on the Senior Notes and interest on overdue principal and, to
the extent lawful, interest and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
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Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Senior Notes allowed in any judicial proceedings relative to the
Company (or any other obligor upon the Senior Notes), its creditors or its
property and shall be entitled and empowered to collect, receive and distribute
any money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder to
make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 hereof. To the extent that the
payment of any such compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof out of the estate in any such proceeding, shall be denied
for any reason, payment of the same shall be secured by a Lien on, and shall be
paid out of, any and all distributions, dividends, money, securities and other
properties that the Holders may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Senior
Notes or the rights of any Holder, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Senior Notes for amounts due and unpaid on the
Senior Notes for principal, premium and Liquidated Damages, if any, and
interest, ratably, without preference or priority of any kind, according to the
amounts due and payable on the Senior Notes for principal, premium and
Liquidated Damages, if any, and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Senior Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This
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Section does not apply to a suit by the Trustee, a suit by a Holder of a Senior
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Senior Notes.
ARTICLE 7.
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need
perform only those duties that are specifically set forth in
this Indenture and no others, and no implied covenants or
obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However, the
Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of
this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holder, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
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(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company or any Guarantor shall be
sufficient if signed by an Officer of the Company or such Guarantor.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Senior Notes and may otherwise deal with the Company or any Affiliate
of the Company with the same rights it would have if it were not Trustee.
However, in the event that the Trustee acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the SEC for permission to
continue as trustee or resign. Any Agent may do the same with like rights and
duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Senior Notes, it shall not be
accountable for the Company's use of the proceeds from the Senior Notes or any
money paid to the Company or upon the Company's direction under any provision of
this Indenture, it shall not be responsible for the use or application of any
money received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Senior
Notes or any other document in connection with the sale of the Senior Notes or
pursuant to this Indenture other than its certificate of authentication.
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Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Senior Notes a notice
of the Default or Event of Default within 90 days after it occurs. Except in
the case of a Default or Event of Default in payment of principal of, premium,
if any, or interest on any Senior Note, the Trustee may withhold the notice if
and so long as a committee of its Responsible Officers in good faith determines
that withholding the notice is in the interests of the Holders of the Senior
Notes.
Section 7.06. Reports by Trustee to Holders of the Senior Notes.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, and for so long as Senior Notes remain outstanding, the
Trustee shall mail to the Holders of the Senior Notes a brief report dated as of
such reporting date that complies with TIA (S) 313(a) (but if no event described
in TIA (S) 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA
(S) 313(b)(2). The Trustee shall also transmit by mail to the Holders all
reports as required by TIA (S) 313(c) and all reports provided to the Trustee by
the Company pursuant to Section 4.03 hereof.
A copy of each report at the time of its mailing to the Holders of Senior
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Senior Notes are listed in accordance with TIA (S) 313(d).
The Company shall promptly notify the Trustee when the Senior Notes are listed
on any stock exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
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To secure the Company's payment obligations in this Section, the Trustee
shall have a Lien prior to the Senior Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Senior Notes. Such Lien shall survive the satisfaction
and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to the
extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of a majority in
principal amount of the then outstanding Senior Notes may remove the Trustee by
so notifying the Trustee and the Company in writing. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Senior Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount of the then outstanding Senior
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Senior Note who
has been a Holder of a Senior Note for at least six months, fails to comply with
Section 7.10, such Holder of a Senior Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Holders of the Senior Notes. The retiring
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Trustee shall promptly transfer all property held by it as Trustee to the
successor Trustee, provided all sums owing to the Trustee hereunder have been
paid and subject to the Lien provided for in Section 7.07 hereof.
Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the
Company's obligations under Section 7.07 hereof shall continue for the benefit
of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trust power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA (S) 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Senior Notes
upon compliance with the conditions set forth below in this Article Eight.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Senior Notes on
the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Senior Notes, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.05 hereof and the other Sections of this
Indenture referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Senior Notes and this Indenture (and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders
of outstanding Senior Notes to receive solely from the trust fund
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described in Section 8.04 hereof, and as more fully set forth in such Section,
payments in respect of the principal of, premium, if any, and interest on such
Senior Notes when such payments are due, (b) the Company's obligations with
respect to such Senior Notes under Article 2 and Section 4.02 hereof, (c) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and the
Company's obligations in connection therewith and (d) this Article Eight.
Subject to compliance with this Article Eight, the Company may exercise its
option under this Section 8.02 notwithstanding the prior exercise of its option
under Section 8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.03, 4.04, 4.05, 4.07,
4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16 and 4.17 hereof with respect to
the outstanding Senior Notes on and after the date the conditions set forth
below are satisfied (hereinafter, "Covenant Defeasance"), and the Senior Notes
shall thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Senior Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Senior
Notes, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Section 6.01 hereof,
but, except as specified above, the remainder of this Indenture and such Senior
Notes shall be unaffected thereby. In addition, upon the Company's exercise
under Section 8.01 hereof of the option applicable to this Section 8.03 hereof,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
Sections 6.01(c) through 6.01(f) hereof shall not constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Senior Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as shall
be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium and
Liquidated Damages, if any, and interest on the outstanding Senior Notes on
the stated date for payment thereof or on the applicable redemption date,
as the case may be;
(b) in the case of an election under Section 8.02 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that (A) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of this Indenture, there has
been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders of the outstanding Senior Notes will not
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recognize income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that the
Holders of the outstanding Senior Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the incurrence of Indebtedness all or a portion of
the proceeds of which will be used to defease the Senior Notes pursuant to
this Article Eight concurrently with such incurrence) or insofar as
Sections 6.01(g) or 6.01(h) hereof is concerned, at any time in the period
ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that on the day after the last day of the applicable
preference period under Bankruptcy Law following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Senior
Notes shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Senior Notes and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as Paying
Agent) as the Trustee may determine, to the Holders of such Senior Notes of all
sums due and to become due thereon in respect of principal, premium, if any, and
interest, but such money need not be segregated from other funds except to the
extent required by law.
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The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Senior
Notes.
Anything in this Article Eight to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable Government Securities held by it as provided
in Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest on any Senior Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Senior Note shall thereafter,
as an unsecured creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States dollars
or non-callable Government Securities in accordance with Section 8.02 or 8.03
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Senior
Notes shall be revived and reinstated as though no deposit had occurred pursuant
to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Senior Note
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Senior Notes to receive such payment from
the money held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Senior Notes.
Notwithstanding Section 9.02 of this Indenture, the Company and the Trustee
may amend or supplement this Indenture or the Senior Notes without the consent
of any Holder of a Senior Note:
(a) to cure any ambiguity, defect or inconsistency;
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(b) to provide for uncertificated Senior Notes in addition to or in
place of certificated Senior Notes; provided, that the uncertificated
Senior Notes are issued in registered form for purposes of Section 163(f)
of the Code, or in a manner such that the uncertificated Senior Notes are
described in Section 162(f)(2)(B) of the Code;
(c) to provide for the assumption of the obligations to the Holders
of the Senior Notes in the case of a merger or consolidation of the Company
pursuant to Article Five hereof or of a Guarantor pursuant to Article 10
hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Senior Notes (including, without limitation,
adding any Person as a Guarantor hereunder) or that does not adversely
affect the legal rights hereunder of any Holder of the Senior Note; or
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company in the execution of any
amended or supplemental Indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations that
may be therein contained, but the Trustee shall not be obligated to enter into
such amended or supplemental Indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Senior Notes.
Except as provided below in this Section 9.02, the Company and the Trustee
may amend or supplement this Indenture (including Sections 3.09, 4.10 and 4.15
hereof) and the Senior Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the Senior Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for the Senior Notes), and, subject to Sections 6.04 and 6.07
hereof, any existing Default or Event of Default (other than a Default or Event
of Default in the payment of the principal of, premium, if any, or interest on
the Senior Notes, except a payment default resulting from an acceleration that
has been rescinded) or compliance with any provision of this Indenture or the
Senior Notes may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Senior Notes (including consents
obtained in connection with a tender offer or exchange offer for the Senior
Notes).
Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Senior Notes as aforesaid, and upon
receipt by the Trustee of the documents described in Section 7.02 hereof, the
Trustee shall join with the Company in the execution of such amended or
supplemental Indenture unless such amended or supplemental Indenture affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise, in
which case the Trustee may in its discretion, but shall not be obligated to,
enter into such amended or supplemental Indenture.
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It shall not be necessary for the consent of the Holders of Senior Notes
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Senior Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
Holders of a majority in aggregate principal amount of the Senior Notes then
outstanding may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Senior Notes. However, without the
consent of each Holder affected, an amendment or waiver may not (with respect to
any Senior Notes held by a non-consenting Holder):
(a) reduce the principal amount of Senior Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any
Senior Note or alter or waive any of the provisions with respect to the
redemption of the Senior Notes except as provided above with respect to
Sections 3.09, 4.10 and 4.15 hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Senior Note;
(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Senior Notes (except a rescission
of acceleration of the Senior Notes by the Holders of at least a majority
in aggregate principal amount of the then outstanding Senior Notes and a
waiver of the payment default that resulted from such acceleration);
(e) make any Senior Note payable in money other than that stated in
the Senior Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Senior Notes to
receive payments of principal of or premium, if any, or interest or
Liquidated Damages, if any, on the Senior Notes;
(g) waive a redemption payment with respect to any Senior Note
(except as provided above with respect to Sections 3.09, 4.10 and 4.15
hereof); or
(h) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Senior Notes shall
be set forth in a amended or supplemental Indenture that complies with the TIA
as then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Senior Note is a continuing consent by the Holder of a Senior
Note and every subsequent Holder of a Senior Note or portion of a Senior Note
that evidences the same debt as the consenting Holder's Senior
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Note, even if notation of the consent is not made on any Senior Note. However,
any such Holder of a Senior Note or subsequent Holder of a Senior Note may
revoke the consent as to its Senior Note if the Trustee receives written notice
of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Senior Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Senior Note thereafter authenticated. The Company
in exchange for all Senior Notes may issue and the Trustee shall authenticate
new Senior Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Senior Note shall
not affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article Nine if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The
Company may not sign an amendment or supplemental Indenture until the Board of
Directors approves it. In executing any amended or supplemental indenture, the
Trustee shall be entitled to receive and (subject to Section 7.01) shall be
fully protected in relying upon, an Officer's Certificate and an Opinion of
Counsel stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10.
GUARANTEES
Section 10.01. Unconditional Guarantee.
Each Guarantor hereby unconditionally, jointly and severally, guarantees
(such guarantee to be referred to herein as the "Guarantee") to each Holder of a
Senior Note authenticated and delivered by the Trustee and to the Trustee and
its successors and assigns, irrespective of the validity and enforceability of
this Indenture, the Senior Notes or the obligations of the Company hereunder or
thereunder, that: (i) the principal of, interest and Liquidated Damages, if any,
on the Senior Notes will be promptly paid in full when due, subject to any
applicable grace period, whether at stated maturity, by acceleration or
otherwise and interest on the overdue principal of, and interest on any
interest, to the exent lawful, and Liquidated Damages, if any, on the Senior
Notes and all other obligations of the Company to the Holders or the Trustee
hereunder or thereunder will be promptly paid in full, all in accordance with
the terms hereof and thereof; and (ii) in case of any extension of time of
payment or renewal of any Senior Notes or of any such other obligations, the
same will be promptly paid in full when due in accordance with the terms of the
extension or renewal, subject to any applicable grace period, whether at stated
maturity, by acceleration or otherwise, subject, however, in the case of clauses
(i) and (ii) above, to the limitations set forth in Section 10.04. Each
Guarantor hereby agrees that its Obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Senior Notes
or this Indenture, the absence of any action to enforce the same, any waiver or
consent by any Holder of the Senior Notes with respect to any provisions hereof
or thereof, the recovery of any judgment against the Company, any action to
enforce the same or any other circumstances which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
waives diligence, presentment, demand for payment, filing of claims
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with a court in the event of insolvency or bankruptcy of the Company, any right
to require a proceeding first against the Company, protest, notice and all
demands whatsoever and covenants that this Guarantee will not be discharged
except by complete performance of the obligations contained in the Senior Notes,
this Indenture and in this Guarantee. If any Holder or the Trustee is required
by any court or otherwise to return to the Company, any Guarantor, or any
custodian, trustee, liquidator or other similar official acting in relation to
the Company or any Guarantor, any amount paid by the Company or any Guarantor to
the Trustee or such Holder, this Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect as to such amount only.
Each Guarantor further agrees that, as between each Guarantor, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity of the
Obligations guaranteed hereby may be accelerated as provided in Article Six for
the purposes of this Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby, and (y) in the event of any acceleration of such Obligations
as provided in Article Six, such Obligations (whether or not due and payable)
shall forthwith become due and payable by each Guarantor for the purpose of this
Guarantee.
Section 10.02. Severability.
In case any provision of this Guarantee shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
Section 10.03. Release of a Guarantor.
Upon (i) the sale or disposition of all of the capital stock of a Guarantor
(or all or substantially all of its assets), by way of merger, consolidation or
otherwise, to an entity which is not the Company or a Subsidiary of the Company
or (ii) the designation of a Guarantor as an Unrestricted Subsidiary which, in
each case, is otherwise in compliance with this Indenture, such Guarantor and,
if and only if such sale or disposition meets the test set forth below in
Section 10.05(b)(x), the purchaser of such assets or the entity succeeding to
the interests of such Guarantor by merger, consolidation or otherwise, shall be
deemed released from all its obligations under this Article Ten and its
Guarantee. The Trustee shall deliver an appropriate instrument evidencing such
release upon receipt of a written request by the Company accompanied by an
Officers' Certificate certifying as to the compliance with this Section 10.03
and the other provisions of this Indenture. Any Guarantor not so released
remains liable for the full amount of principal of and interest on the Senior
Notes as provided in this Article Ten.
Section 10.04. Limitation of Guarantor's Liability.
Each Guarantor and by its acceptance hereof each Holder hereby confirms
that it is the intention of all such parties that the guarantee by such
Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or
conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law.
To effectuate the foregoing intention, the Holders and such Guarantor hereby
irrevocably agree that the Obligations of such Guarantor under its Guarantee
shall be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor and after giving effect to
any collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its Guarantee or
pursuant to Section 10.06, result in the Obligations of such Guarantor under its
Guarantee not constituting such fraudulent transfer or conveyance.
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Section 10.05. Guarantors May Consolidate, Etc. on Certain Terms.
(a) Nothing contained in this Indenture or in any of the Senior Notes
shall prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor or shall prevent any sale or conveyance of all or
substantially all of the assets of a Guarantor to the Company or another
Guarantor. Upon any such consolidation, merger, sale or conveyance, the
Guarantee given by such Guarantor shall no longer have any force or effect.
(b) Except as set forth in Article Four nothing contained in this
Indenture or in any of the Senior Notes shall prevent any consolidation or
merger of a Guarantor with or into a corporation or corporations other than the
Company or another Guarantor (whether or not affiliated with the Guarantor), or
successive consolidations or mergers in which a Guarantor or its successor or
successors shall be a party or parties, or shall prevent any sale or conveyance
of all or substantially all of the assets of a Guarantor to a corporation other
than the Company or another Guarantor (whether or not affiliated with the
Guarantor); provided, however, that, subject to Sections 10.03 and 10.05(a),
either (x) the transaction is not an Asset Sale based only on the size of such
transaction or is an Asset Sale consummated in accordance with Section 4.10, or
(y) (i) immediately after such transaction, and giving effect thereto (A) no
Default or Event of Default shall have occurred as a result of such transaction
and be continuing, (B) such Guarantor, or any Person formed by or surviving any
such consolidation or merger, would have Consolidated Net Worth (immediately
after giving effect to such transaction), equal to or greater than the
Consolidated Net Worth of such Guarantor immediately preceding the transaction,
and (C) the Company would be permitted by virtue of the Company's pro forma
Fixed Charge Coverage Ratio, immediately after giving effect to such
transaction, to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in Section 4.09 hereof and (ii) each
Guarantor hereby covenants and agrees that, upon any such consolidation, merger,
sale or conveyance, the Guarantee of such Guarantor set forth in this Article
Ten, and the due and punctual performance and observance of all of the covenants
and conditions of this Indenture to be performed by such Guarantor, shall be
expressly assumed (in the event that the Guarantor is not the surviving
corporation in such transaction), by supplemental indenture satisfactory in form
to the Trustee, executed and delivered to the Trustee, together with an
Officers' Certificate of the Company and an Opinion of Counsel stating that the
transaction and such supplemental indenture comply with this Indenture, by the
corporation formed by such consolidation, or into which the Guarantor shall have
merged, or by the corporation that shall have acquired such property. In the
case of any such consolidation, merger, sale or conveyance to which the
foregoing clause (y) applies, upon the assumption by the successor corporation,
by supplemental indenture executed and delivered to the Trustee and satisfactory
in form to the Trustee of the due and punctual performance of all of the
covenants and conditions of this Indenture to be performed by the Guarantor,
such successor corporation shall succeed to and be substituted for the Guarantor
with the same effect as if it had been named herein as a Guarantor.
Section 10.06. Contribution.
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, inter se, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under this
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a pro rata amount based on the Adjusted Net Assets of each
Guarantor (including the Funding Guarantor) for all payments, damages and
expenses incurred by that Funding Guarantor in discharging the Company's
obligations with respect to the Senior Notes or any other Guarantor's
Obligations with respect to this Guarantee.
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Section 10.07. Waiver of Subrogation.
Until the 91st day after the Senior Notes have been paid in full, each
Guarantor hereby irrevocably waives any claim or other rights which it may now
or hereafter acquire against the Company that arise from the existence, payment,
performance or enforcement of such Guarantor's Obligations under this Guarantee
and this Indenture, including, without limitation, any right of subrogation,
reimbursement, exoneration, indemnification, and any right to participate in any
claim or remedy of any Holder of Senior Notes against the Company, whether or
not such claim, remedy or right arises in equity, or under contract, statute or
common law, including, without limitation, the right to take or receive from the
Company, directly or indirectly, in cash or other property or by setoff or in
any other manner, payment or security on account of such claim or other rights.
If any amount shall be paid to any Guarantor in violation of the preceding
sentence and the Senior Notes shall not have been paid in full, such amount
shall have been deemed to have been paid to such Guarantor for the benefit of,
and held in trust for the benefit of, the Holders of the Senior Notes, and shall
forthwith be paid to the Trustee for the benefit of such Holders to be credited
and applied upon the Senior Notes, whether matured or unmatured, in accordance
with the terms of this Indenture. Each Guarantor acknowledges that it will
receive direct and indirect benefits from the financing arrangements
contemplated by this Indenture and that the waiver set forth in this Section
10.07 is knowingly made in contemplation of such benefits.
Section 10.08. Execution of Guarantee.
To evidence their guarantee to the Holders specified in Section 10.01, the
Guarantors hereby agree to execute the Guarantee in substantially the form of
Exhibit A recited to be endorsed on each Senior Note ordered to be authenticated
and delivered by the Trustee. Each Guarantor hereby agrees that its Guarantee
set forth in Section 10.01 shall remain in full force and effect notwithstanding
any failure to endorse on each Senior Note a notation of such Guarantee. Each
such Guarantee shall be signed on behalf of each Guarantor by one Officer (each
of whom shall, in each case, have been duly authorized by all requisite
corporate actions) prior to the authentication of the Senior Note on which it is
endorsed, and the delivery of such Senior Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of such
Guarantee on behalf of such Guarantor. Such signatures upon the Guarantee may
be by manual or facsimile signature of such Officers and may be imprinted or
otherwise reproduced on the Guarantee, and in case any such Officer who shall
have signed the Guarantee shall cease to be such Officer before the Senior Note
on which such Guarantee is endorsed shall have been authenticated and delivered
by the Trustee or disposed of by the Company, such Senior Note nevertheless may
be authenticated and delivered or disposed of as though the person who signed
the Guarantee had not ceased to be such officer of the Guarantor.
Section 10.09. Obligations of Each Guarantor Unconditional.
Nothing contained in this Article Ten or elsewhere in this Indenture or in
the Senior Notes or the Guarantees is intended to or shall impair, as among any
Guarantor, its creditors, and the Holders of the Senior Notes, the obligation of
such Guarantor, which is absolute and unconditional, to pay to the Holders of
the Senior Notes the principal of and any interest on the Senior Notes as and
when the same shall become due and payable in accordance with the terms of the
Guarantees, or is intended to or shall affect the relative rights of the Holders
of the Senior Notes and creditors of any Guarantor, nor shall anything herein or
therein prevent the Holder of any Senior Note or the Trustee on its behalf from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, in respect of cash, property or
securities of any Guarantor received upon the exercise of such remedy.
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Section 10.10. Notice to Trustee.
The Company or any Guarantor shall give prompt written notice to the
Trustee of any fact known to the Company or any such Guarantor which would
prohibit the making of any payment to or by the Trustee in respect of the
Guarantees pursuant to the provisions of this Article Ten. Regardless of
anything to the contrary contained in this Article Ten or elsewhere in this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any Default or Event of Default with respect to any facts which would prohibit
the making of any payment to or by the Trustee unless and until the Trustee
shall have received notice in writing from the Company or a Guarantor, and,
prior to receipt of any such written notice, the Trustee shall be entitled to
assume (in the absence of actual knowledge to the contrary) that no such facts
exist .
Section 10.11. Reliance on Judicial Order of Certificate of Liquidating Agent.
Upon any payment or distribution of assets of any Guarantor referred to in
this Article Ten, the Trustee, subject to the provisions of Article Seven
hereof, and the Holders of the Senior Notes shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which bankruptcy,
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or upon certificate of the receiver, trustee in bankruptcy, liquidating trustee,
agent or other person making such payment or distribution, delivered to the
Trustee or the holders of the Senior Notes, for the purpose of ascertaining the
persons entitled to participate in such distribution, the amount thereof or
payable thereon, the amount or amounts paid or distribution thereon and all
other facts pertinent thereto or to this Article Ten.
ARTICLE 11.
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA (S)318(c), the imposed duties shall control.
Section 11.02. Notices.
Any notice or communication by the Company or the Trustee to the others is
duly given if in writing and delivered in Person or mailed by first class mail
(registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the others' address:
If to the Company or the Guarantors:
Wilsons The Leather Experts Inc.
7401 Boone Avenue North
Brooklyn Park, Minnesota 55428
Telecopier No.: (612) 391-4906
Attention: Chief Financial Officer
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With a copy to:
Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Telecopier No.: (612) 336-3026
Attention: Susan Jacobson
If to the Trustee:
Norwest Bank Minnesota, N.A.
Corporate Trust Services
6th and Marquette
Minneapolis, Minnesota 55479-0069
Telecopier No.: (612) 667-9825
Attention: Corporate Trust
With a copy to:
Norwest Bank Minnesota, N.A.
c/o The Depository Trust Company
55 Water Street
New York, New York 10041
Telecopier No.: (212) 558-2619
Attention: Norwest Window
The Company or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA (S) 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is given in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
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Section 11.03. Communication by Holders of Senior Notes with Other Holders of
Senior Notes.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders with
respect to their rights under this Indenture or the Senior Notes. The Company,
the Guarantors, the Trustee, the Registrar and anyone else shall have the
protection of TIA (S) 312(c).
Section 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company and/or the Guarantor to the
Trustee to take any action under this Indenture, the Company and/or such
Guarantor, as the case may be, shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
Section 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA (S)
314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
Section 11.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 11.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee, incorporator or
stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the Senior Notes, this Indenture
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or for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Senior Note waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Senior Notes.
Section 11.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE SENIOR NOTES AND THE SUBSIDIARY GUARANTEES.
Section 11.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 11.10. Successors.
All agreements of the Company in this Indenture and the Senior Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
Section 11.11. Severability.
In case any provision in this Indenture or in the Senior Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 11.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 11.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
61
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SIGNATURES:
THE COMPANY:
Dated as of August 18, 1997
WILSONS THE LEATHER EXPERTS INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
THE GUARANTORS:
WILSONS LEATHER HOLDINGS INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS CENTER, INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
ROSEDALE WILSONS, INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
RIVER HILLS WILSONS, INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
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BERMANS THE LEATHER EXPERTS INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS HOUSE OF SUEDE, INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS TANNERY WEST, INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER OF ALABAMA INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER OF CONNECTICUT INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER OF FLORIDA INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
63
<PAGE>
WILSONS LEATHER OF GEORGIA INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER OF INDIANA INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER OF IOWA INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER OF LOUISIANA INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER OF MARYLAND INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER OF MASSACHUSETTS INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
64
<PAGE>
WILSONS LEATHER OF MICHIGAN INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER OF NEW JERSEY INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER OF NEW YORK INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER OF NORTH CAROLINA INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER OF OHIO INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER OF PENNSYLVANIA INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
65
<PAGE>
WILSONS LEATHER OF RHODE ISLAND INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER OF TENNESSEE INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER OF TEXAS INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER OF VIRGINIA INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER OF WEST VIRGINIA INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER OF WISCONSIN INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
66
<PAGE>
WILSONS LEATHER OF ARKANSAS INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER OF DELAWARE INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER OF MISSISSIPPI INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER OF MISSOURI INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER OF SOUTH CAROLINA INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER OF VERMONT INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
67
<PAGE>
WILSONS INTERNATIONAL INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
NORWEST BANK MINNESOTA,
N.A., as Trustee
By: /s/ Curtis D. Schwegman
----------------------------------------
Name: Curtis D. Schwegman
Title: Assistant Vice President
68
<PAGE>
EXHIBIT A
(Face of Senior Note)
____% [Series A ] [Series B] Senior Note due 2004
No. _____ Cusip No.:__________
$__________
WILSONS THE LEATHER EXPERTS INC.
promises to pay to
or registered assigns,
the principal sum of SEVENTY FIVE MILLION
Dollars on August 15, 2004.
Interest Payment Dates: February 15 and August 15
Record Dates: February 1 and August 1
Dated: August 18, 1997
WILSONS THE LEATHER EXPERTS INC.
By:______________________________
Name:
Title:
By:______________________________
Name:
Title:
This is one of the Global
Senior Notes referred to in the
within-mentioned Indenture:
Norwest Bank Minnesota, N.A.,
as Trustee
By:__________________________________
Authorized Signatory
A-1
<PAGE>
(Back of Senior Note)
___% [Series A] [Series B] Senior Note due 2004
[Unless and until it is exchanged in whole or in part for Senior Notes in
definitive form, this Senior Note may not be transferred except as a whole by
the Depository to a nominee of the Depository or by a nominee of the Depository
to the Depository or another nominee of the Depository or by the Depository or
any such nominee to a successor Depository or a nominee of such successor
Depository. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC"), to the issuer or its agent for registration of transfer, exchange
or payment, and any certificate issued is registered in the name of Cede & Co.
or such other name as may be requested by an authorized representative of DTC
(and any payment is made to Cede & Co. or such other entity as may be requested
by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.]1/
--
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED
THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE
144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A
FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM
IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE.
______________________
1. This paragraph should be included only if the Senior Note is issued in
global form.
A-2
<PAGE>
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. Interest. Wilsons The Leather Experts Inc., a Minnesota corporation
(the "Company"), promises to pay interest on the principal amount of this Senior
Note at 11 1/4% per annum from August 18, 1997 until maturity and shall pay the
Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages semi-annually on February 15 and August 15 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Senior Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the date of issuance; provided that if there is no existing Default
in the payment of interest, and if this Senior Note is authenticated between a
record date referred to on the face hereof and the next succeeding Interest
Payment Date, interest shall accrue from such next succeeding Interest Payment
Date; provided, further, that the first Interest Payment Date shall be February
15, 1998. The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal and premium, if
any, from time to time on demand at a rate that is 1% per annum in excess of the
rate then in effect; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Senior Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Senior Notes at the close of business on the February 1 or
August 1 next preceding the Interest Payment Date, even if such Senior Notes are
canceled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Senior Notes will be payable as to principal, premium, interest
and Liquidated Damages at the office or agency of the Company maintained for
such purpose within or without the City and State of New York, or, at the option
of the Company, payment of interest and Liquidated Damages may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds will
be required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Senior Notes and all other Senior Notes the Holders of
which shall have provided wire transfer instructions to the Company or the
Paying Agent. Such payment shall be in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts.
3. Paying Agent and Registrar. Initially, Norwest Bank Minnesota, N.A.,
the Trustee under the Indenture, will act as Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar without notice to any Holder.
The Company or any of its Subsidiaries may act in any such capacity.
4. Indenture. The Company issued the Senior Notes under an Indenture
dated as of August 18, 1997 ("Indenture") among the Company, the Guarantors and
the Trustee. The terms of the Senior Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The
Senior Notes are subject to all such terms, and Holders are referred to the
Indenture and such Act for a statement of such terms. The Senior Notes are
obligations of the Company limited to $75 million in aggregate principal amount.
5. Optional Redemption.
A-3
<PAGE>
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Company shall not have the option to redeem the Senior Notes prior to August 15,
2001. Thereafter, the Company shall have the option to redeem the Senior Notes,
in whole or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on August 15 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001..................................... 105.625%
2002..................................... 102.813%
2003 (and thereafter).................... 100.000%
</TABLE>
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph
5, on any one occasion prior to August 15, 2000, the Company may redeem Senior
Notes with the net proceeds of a public offering of its common stock at a
redemption price equal to 111.25% of the principal amount thereof plus accrued
and unpaid interest and Liquidated Damages thereon, if any; provided that at
least 75% in aggregate principal amount of the Senior Notes originally issued
remains outstanding immediately after the occurrence of such redemption and that
such redemption occurs within 45 days of the date of the closing of such public
offering.
6. Mandatory Redemption.
Except as set forth in paragraph 7 below, the Company shall not be required
to make mandatory redemption or sinking fund payments with respect to the Senior
Notes.
7. Repurchase at Option of Holder.
(a) If there is a Change of Control, each Holder of Senior Notes shall
have the right to require the Company to make an offer (a "Change of Control
Offer") to repurchase all or any part (equal to $1,000 or an integral multiple
thereof) of such Holder's Senior Notes at a purchase price equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of purchase (the "Change of Control
Payment"). Within 10 days following any Change of Control, the Company shall
mail a notice to each Holder setting forth the procedures governing the Change
of Control Offer as required by the Indenture.
(b) If the Company or a Restricted Subsidiary consummates any Asset Sales,
within five days of each date on which the aggregate amount of Excess Proceeds
exceeds $10 million, the Company shall commence an offer to all Holders of
Senior Notes (an "Asset Sale Offer") pursuant to Section 3.09 of the Indenture
to purchase the maximum principal amount of Senior Notes (and pari passu
Indebtedness) that may be purchased out of the Excess Proceeds at an offer price
in cash in an amount equal to 100% of the principal amount thereof plus accrued
and unpaid interest, if any, to the date fixed for the closing of such offer, in
accordance with the procedures set forth in the Indenture. To the extent that
the aggregate amount of Senior Notes (and pari passu Indebtedness) tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company
may use such deficiency for general corporate purposes. If the aggregate
principal amount of Senior Notes and pari passu Indebtedness permitted by the
Indenture surrendered by holders thereof exceeds the amount of Excess Proceeds,
the Senior Notes and pari passu Indebtedness shall be purchased on a pro rata
basis. Holders of Senior Notes that are the subject of an offer to purchase
will receive an Asset Sale Offer from the Company prior to any related purchase
date and may elect to have
A-4
<PAGE>
such Senior Notes purchased by completing the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Senior Notes.
8. Notice of Redemption. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Senior Notes are to be redeemed at its registered address. Senior Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Senior Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Senior
Notes or portions thereof called for redemption.
9. Denominations, Transfer, Exchange. The Senior Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Senior Notes may be registered and Senior Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Senior Note or portion of a Senior Note
selected for redemption, except for the unredeemed portion of any Senior Note
being redeemed in part. Also, it need not exchange or register the transfer of
any Senior Notes for a period of 15 days before a selection of Senior Notes to
be redeemed or during the period between a record date and the corresponding
Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a Senior Note may be
treated as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions, the
Indenture or the Senior Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the then outstanding
Senior Notes, and any existing default or compliance with any provision of the
Indenture or the Senior Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Senior Notes. Without the
consent of any Holder of a Senior Note, the Indenture or the Senior Notes may be
amended or supplemented to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Senior Notes in addition to or in place of
certificated Senior Notes, to provide for the assumption of the obligations of
the Company or a Guarantor to Holders of the Senior Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Senior Notes or that does not adversely affect
the legal rights under the Indenture of any such Holder, or to comply with the
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
12. Defaults and Remedies. Events of Default include: (i) default for 30
days in the payment when due of interest or Liquidated Damages on the Senior
Notes; (ii) default in payment when due of principal of or premium, if any, on
the Senior Notes when the same becomes due and payable at maturity, upon
redemption (including in connection with an offer to purchase) or otherwise,
(iii) failure by the Company to comply with Section 4.07, 4.09, 4.10, 4.15 or
5.01 of the Indenture; (iv) failure by the Company for 60 days after notice to
the Company by the Trustee or the Holders of at least 25% in principal amount of
the Senior Notes then outstanding to comply with any other covenant,
representation, warranty or other agreement in the Indenture or the Senior
Notes; (v) payment default under certain other agreements relating to
Indebtedness of the Company or Restricted Subsidiaries or other defaults under
such agreements which default results in the acceleration of such Indebtedness
prior to its express maturity; (vi) certain final judgments for the payment of
money that remain undischarged for a period of 60 days; (vii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Restricted
A-5
<PAGE>
Subsidiaries; and (viii) except as permitted by the Indenture, any Guarantee
shall be held unenforceable in any judicial proceeding or shall cease to be in
full force and effect for any reason or any person acting on behalf of any
Guarantor shall deny or disaffirm its obligations under its Guarantee. If any
Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the then outstanding Senior Notes may declare
all the Senior Notes to be due and payable. Notwithstanding the foregoing, in
the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Senior Notes will become due and payable without
further action or notice. Holders may not enforce the Indenture or the Senior
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Senior Notes
may direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Senior Notes notice of any continuing Default or
Event of Default (except a Default or Event of Default relating to the payment
of principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Senior
Notes then outstanding by notice to the Trustee may on behalf of the Holders of
all of the Senior Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, the Senior Notes. The
Company is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Company is required upon becoming aware
of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
13. Trustee Dealings with Company. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder of the Company, as such, shall not have any
liability for any obligations of the Company under the Senior Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Senior Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Senior Notes.
15. Authentication. This Senior Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. Additional Rights of Holders of Transfer Restricted Securities. In
addition to the rights provided to Holders of Senior Notes under the Indenture,
Holders of Transfer Restricted Securities shall have all the rights set forth in
the Registration Rights Agreement dated as of August 18, 1997, between the
Company and the parties named on the signature pages thereof (the "Registration
Rights Agreement").
18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Senior Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Senior Notes
or as
A-6
<PAGE>
contained in any notice of redemption and reliance may be placed only on
the other identification numbers placed thereon.
19. Guarantees. Payment of principal and interest (including interest on
overdue principal and overdue interest, if lawful) is unconditionally guaranteed
by certain subsidiaries of the Company.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Wilsons The Leather Experts Inc.
7401 Boone Avenue North
Brooklyn Park, Minnesota 55428
Attention: Chief Financial Officer
A-7
<PAGE>
Assignment Form
To assign this Senior Note, fill in the form below: (I) or (we) assign and
transfer this Senior Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint __________________________________________________
to transfer this Senior Note on the books of the Company. The agent may
substitute another to act for him.
Date:__________________
Your Signature:___________________________________
(Sign exactly as your name appears on the face of
this Senior Note)
Signature Guarantee.
A-8
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Senior Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
[_]Section 4.10 [_]Section 4.15
If you want to elect to have only part of the Senior Note purchased by the
Company pursuant to Section 4.15 of the Indenture, state the amount you elect to
have purchased: $___________
Date:________________
Your Signature:___________________________________
(Sign exactly as your name appears on the face of
this Senior Note)
Tax Identification No.:___________________________
Signature Guarantee.
A-9
<PAGE>
SCHEDULE I
Wilsons Leather Holdings Inc.
Wilsons Center, Inc.
Rosedale Wilsons, Inc.
River Hills Wilsons, Inc.
Bermans The Leather Experts Inc.
Wilsons House Of Suede, Inc.
Wilsons Tannery West, Inc.
Wilsons Leather Of Alabama Inc.
Wilsons Leather Of Connecticut Inc.
Wilsons Leather Of Florida Inc.
Wilsons Leather Of Georgia Inc.
Wilsons Leather Of Indiana Inc.
Wilsons Leather Of Iowa Inc.
Wilsons Leather Of Louisiana Inc.
Wilsons Leather Of Maryland Inc.
Wilsons Leather Of Massachusetts Inc.
Wilsons Leather Of Michigan Inc.
Wilsons Leather Of New Jersey Inc.
Wilsons Leather Of New York Inc.
Wilsons Leather Of North Carolina Inc.
Wilsons Leather Of Ohio Inc.
Wilsons Leather Of Pennsylvania Inc.
Wilsons Leather Of Rhode Island Inc.
Wilsons Leather Of Tennessee Inc.
Wilsons Leather Of Texas Inc.
Wilsons Leather Of Virginia Inc.
Wilsons Leather Of West Virginia Inc.
Wilsons Leather Of Wisconsin Inc.
Wilsons Leather Of Arkansas Inc.
Wilsons Leather Of Delaware Inc.
Wilsons Leather Of Mississippi Inc.
Wilsons Leather Of Missouri Inc.
Wilsons Leather Of South Carolina Inc.
Wilsons Leather Of Vermont Inc.
Wilsons International Inc.
A-10
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE SENIOR NOTE/2/
The following exchanges of a part of this Global Senior Note for Definitive
Senior Notes have been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of decrease Amount of increase this authorized officer
in in Global Senior Note of
Date of Exchange Principal Amount Principal Amount of following such Trustee or Senior
- ---------------- of this Global Senior decrease Note
------------------
this Global Senior Note (or increase) Custodian
------------------ ---- ----------- ---------
Note
----
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
____________________
/2/ This should be included only if the Senior Note is issued in global form.
A-11
<PAGE>
EXHIBIT A-1
[FORM OF NOTATION ON SENIOR NOTE
RELATING TO GUARANTEE]
Each of the corporations listed on the signature pages hereto
(hereinafter referred to as the "Guarantors", which term includes any successor
or additional Guarantor under the Indenture (the "Indenture") referred to in the
Senior Note upon which this notation is endorsed), (i) has unconditionally
guaranteed that (a) the principal of, interest and Liquidated Damages, if any,
on the Senior Notes will be promptly paid in full when due, subject to any
applicable grace period, whether at stated maturity, by acceleration or
otherwise and interest on the overdue principal of, and interest on interest, to
the extent lawful, and Liquidated Damages, if any, on the Senior Note and all
other obligations of the Company to the Holders or the Trustee under the
Indenture or the Senior Note will be promptly paid in full, all in accordance
with the terms set forth in the Indenture; and (b) in case of any extension of
time of payment or renewal of the Senior Note or of any such other obligations,
the same will be promptly paid in full when due in accordance with the terms of
the extension or renewal, subject to any applicable grace period, whether at
stated maturity, by acceleration or otherwise, (ii) has agreed to pay any and
all costs and expenses (including reasonable attorneys' fees) incurred by the
Trustee or any Holder in enforcing any rights under this Guarantee; provided,
however, that this Guarantee is limited as to each Guarantor to the extent
necessary not to constitute a fraudulent conveyance or fraudulent transfer.
No stockholder, officer, director or incorporator, as such, past,
present or future, of any Guarantor shall have any personal liability under this
Guarantee by reason of his or its status as such stockholder, officer, director
or incorporator.
This Guarantee shall be binding upon each Guarantor and, to the extent
provided in the Indenture, its successors and assigns and shall inure to the
benefit of the successors and assigns of the Trustee and the Holders and, in the
event of any transfer or assignment of rights by any Holder or the Trustee, the
rights and privileges herein conferred upon that party shall automatically
extend to and be vested in such transferee or assignee, all subject to the terms
and conditions hereof.
This Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Senior Note upon which this Guarantee
is noted shall have been executed by the Trustee under the Indenture by the
manual signature of one of its authorized officers.
A-1(1)
<PAGE>
WILSONS LEATHER HOLDINGS INC.
By:_______________________________________
Name:
Title:
WILSONS CENTER, INC.
By:________________________________________
Name:
Title:
ROSEDALE WILSONS, INC.
By:________________________________________
Name:
Title:
RIVER HILLS WILSONS, INC.
By:________________________________________
Name:
Title:
BERMANS THE LEATHER EXPERTS INC.
By:________________________________________
Name:
Title:
WILSONS HOUSE OF SUEDE, INC.
By:________________________________________
Name:
Title:
A-1(2)
<PAGE>
WILSONS TANNERY WEST, INC.
By:________________________________
Name:
Title:
WILSONS LEATHER OF ALABAMA INC.
By:________________________________
Name:
Title:
WILSONS LEATHER OF CONNECTICUT INC.
By:________________________________
Name:
Title:
WILSONS LEATHER OF FLORIDA INC.
By:________________________________
Name:
Title:
WILSONS LEATHER OF GEORGIA INC.
By:________________________________
Name:
Title:
WILSONS LEATHER OF INDIANA INC.
By:________________________________
Name:
Title:
A-1(3)
<PAGE>
WILSONS LEATHER OF IOWA INC.
By:_________________________________
Name:
Title:
WILSONS LEATHER OF LOUISIANA INC.
By:_________________________________
Name:
Title:
WILSONS LEATHER OF MARYLAND INC.
By:_________________________________
Name:
Title:
WILSONS LEATHER OF MASSACHUSETTS INC.
By:_________________________________
Name:
Title:
WILSONS LEATHER OF MICHIGAN INC.
By:_________________________________
Name:
Title:
WILSONS LEATHER OF NEW JERSEY INC.
By:_________________________________
Name:
Title:
A-1(4)
<PAGE>
WILSONS LEATHER OF NEW YORK INC.
By:_________________________________
Name:
Title:
WILSONS LEATHER OF NORTH CAROLINA INC.
By:__________________________________
Name:
Title:
WILSONS LEATHER OF OHIO INC.
By:__________________________________
Name:
Title:
WILSONS LEATHER OF PENNSYLVANIA INC.
By:__________________________________
Name:
Title:
WILSONS LEATHER OF RHODE ISLAND INC.
By:__________________________________
Name:
Title:
WILSONS LEATHER OF TENNESSEE INC.
By:__________________________________
Name:
Title:
A-1(5)
<PAGE>
WILSONS LEATHER OF TEXAS INC.
By:__________________________________
Name:
Title:
WILSONS LEATHER OF VIRGINIA INC.
By:__________________________________
Name:
Title:
WILSONS LEATHER OF WEST VIRGINIA INC.
By:__________________________________
Name:
Title:
WILSONS LEATHER OF WISCONSIN INC.
By:__________________________________
Name:
Title:
WILSONS LEATHER OF ARKANSAS INC.
By:__________________________________
Name:
Title:
WILSONS LEATHER OF DELAWARE INC.
By:__________________________________
Name:
Title:
A-1(6)
<PAGE>
WILSONS LEATHER OF MISSISSIPPI INC.
By:__________________________________
Name:
Title:
WILSONS LEATHER OF MISSOURI INC.
By:__________________________________
Name:
Title:
WILSONS LEATHER OF SOUTH CAROLINA INC.
By:__________________________________
Name:
Title:
WILSONS LEATHER OF VERMONT INC.
By:__________________________________
Name:
Title:
WILSONS INTERNATIONAL INC.
By:__________________________________
Name:
Title:
A-1(7)
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
SENIOR NOTES
Re: 11 1/4% Senior Notes due 2004 of Wilsons The Leather Experts Inc.
This Certificate relates to $_____ principal amount of Senior Notes held in
* ________ book-entry or *_______ definitive form by ________________ (the
"Transferor").
The Transferor*:
[_] has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Senior Note held by the Depository a
Senior Note or Senior Notes in definitive, registered form of authorized
denominations in an aggregate principal amount equal to its beneficial interest
in such Global Senior Note (or the portion thereof indicated above); or
[_] has requested the Trustee by written order to exchange or register the
transfer of a Senior Note or Senior Notes.
In connection with such request and in respect of each such Senior Note,
the Transferor does hereby certify that Transferor is familiar with the
Indenture relating to the above captioned Senior Notes and as provided in
Section 2.06 of such Indenture, the transfer of this Senior Note does not
require registration under the Securities Act (as defined below) because:*
[_] Such Senior Note is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.06(a)(ii)(A) or Section
2.06(d)(i)(A) of the Indenture).
[_] Such Senior Note is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act")) in reliance on Rule 144A (in satisfaction of Section
2.06(a)(ii)(B), Section 2.06(b)(i) or Section 2.06(d)(i) (B) of the Indenture)
or pursuant to an exemption from registration in accordance with Rule 904 under
the Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section
2.06(d)(i)(B) of the Indenture.)
_______________
*Check applicable box.
B-1
<PAGE>
[_] Such Senior Note is being transferred in accordance with Rule 144 under
the Securities Act, or pursuant to an effective registration statement under the
Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section
2.06(d)(i)(B) of the Indenture).
[_] Such Senior Note is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Securities Act,
other than Rule 144A, 144 or Rule 904 under the Securities Act. An Opinion of
Counsel to the effect that such transfer does not require registration under the
Securities Act accompanies this Certificate (in satisfaction of Section
2.06(a)(ii)(C) or Section 2.06(d)(i)(C) of the Indenture).
________________________________________________
[INSERT NAME OF TRANSFEROR]
By:_____________________________________________
Date:____________________
_______________
*Check applicable box.
B-2
<PAGE>
Exhibit 10.4
WILSONS THE LEATHER EXPERTS INC.
EACH OF THE NAMED GUARANTORS HEREIN
$75,000,000
11 1/4% Senior Notes due 2004
Purchase Agreement
August 14, 1997
BANCAMERICA SECURITIES, INC.
1
<PAGE>
$75,000,000
11 1/4% SENIOR NOTES DUE 2004
of WILSONS THE LEATHER EXPERTS INC.
PURCHASE AGREEMENT
AUGUST 14, 1997
BancAmerica Securities, Inc.
231 South LaSalle Street
Chicago, Illinois 60697
Dear Sirs:
Wilsons The Leather Experts Inc., a Minnesota corporation (the
"Company"), proposes to issue and sell to BancAmerica Securities, Inc. (the
-------
"Initial Purchaser") an aggregate of $75,000,000 in principal amount of its 11
-----------------
1/4% Senior Notes (the "Senior Notes"), subject to the terms and conditions set
------------
forth herein. The Senior Notes are to be issued pursuant to the provisions of
an indenture (the "Indenture"), to be dated as of the Closing Date (as defined
---------
below), among the Company, the Guarantors (as defined below) and Norwest Bank
Minnesota, National Association, as trustee (the "Trustee"). The Senior Notes
-------
and the Exchange Notes (as defined below) issuable in exchange therefor are
collectively referred to herein as the "Notes." The Notes will be guaranteed
-----
(the "Subsidiary Guarantees") by each of the entities listed on Schedule A
---------------------
hereto (each a "Guarantor" and collectively the "Guarantors"). Capitalized
--------- ----------
terms used but not defined herein shall have the meanings given to such terms in
the Indenture.
I.. OFFERING MEMORANDUM. The Senior Notes will be offered and sold
-------------------
to the Initial Purchaser pursuant to an exemption from the registration
requirements under the Securities Act of 1933, as amended (the "Act"). The
---
Company and the Guarantors have prepared a preliminary offering memorandum,
dated July 31, 1997 (the "Preliminary Offering Memorandum"), and a final
-------------------------------
offering memorandum, dated August 14, 1997 (the "Offering Memorandum"), relating
-------------------
to the Senior Notes and the Subsidiary Guarantees.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Senior Notes (and all securities
issued in exchange therefor, in substitution thereof or upon conversion thereof)
shall bear the following legend:
2
<PAGE>
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A)
SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(a)
TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE
COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH
CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF
THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
-------------------------------
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Company agrees to
issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Company, an aggregate principal amount of $75,000,000 of
Senior Notes at a purchase price equal to 100% of the principal amount thereof
(the "Purchase Price").
--------------
3. TERMS OF OFFERING. The Initial Purchaser has advised the Company
-----------------
that the Initial Purchaser will make offers (the "Exempt Resales") of the Senior
--------------
Notes purchased hereunder on the terms set forth in the Offering Memorandum, as
amended or supplemented, solely to (i) persons whom the Initial Purchaser
reasonably believe to be "qualified institutional buyers" as
3
<PAGE>
defined in Rule 144A under the Act ("QIBs") and (ii) not more than ten other
----
institutional "accredited investors," as defined in Rule 501(a)(1), (2), (3) or
(7) under the Act, that make certain representations and agreements to the
Company (each, an "Accredited Institution") (such persons specified in clauses
----------------------
(i) and (ii) being referred to herein as the "Eligible Purchasers"). The Initial
-------------------
Purchaser will offer the Senior Notes to Eligible Purchasers initially at a
price equal to 100% of the principal amount thereof. Such price may be changed
at any time without notice.
Holders (including subsequent transferees) of the Senior Notes will
have the registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement"), to be dated the Closing Date, in substantially
-----------------------------
the form of Exhibit A hereto, for so long as such Senior Notes constitute
"Transfer Restricted Securities" (as defined in the Registration Rights
Agreement). Pursuant to the Registration Rights Agreement, the Company and the
Guarantors will agree to file with the Securities and Exchange Commission (the
"Commission") under the circumstances set forth therein, (i) a registration
----------
statement under the Act (the "Exchange Offer Registration Statement") relating
-------------------------------------
to the Company's 11 1/4% Senior Notes (the "Exchange Notes"), to be offered in
--------------
exchange for the Senior Notes (such offer to exchange being referred to as the
"Exchange Offer") and the Subsidiary Guarantees thereof and, in certain
--------------
circumstances, (ii) a shelf registration statement pursuant to Rule 415 under
the Act (the "Shelf Registration Statement" and, together with the Exchange
----------------------------
Offer Registration Statement, the "Registration Statements") relating to the
-----------------------
resale by certain holders of the Senior Notes and to use its best efforts to
cause such Registration Statements to be declared and remain effective and
usable for the periods specified in the Registration Rights Agreement and to
consummate the Exchange Offer. This Agreement, the Indenture, the Notes, the
Consent and Amendment No. 4 to Credit Agreement, to be dated as of July 31,
1997, among the Company, the Guarantors and the lenders signatory thereto, the
Subsidiary Guarantees and the Registration Rights Agreement are hereinafter
sometimes referred to collectively as the "Operative Documents."
-------------------
4. DELIVERY AND PAYMENT.
--------------------
(a) Delivery of, and payment of the Purchase Price for, the
Senior Notes shall be made at the offices of Faegre & Benson LLP at 2200 Norwest
Center, 90 South Seventh Street, Minneapolis, Minnesota 55402, or such other
location as may be mutually acceptable. Such delivery and payment shall be made
at 9:00 a.m. Minneapolis time, on August 18, 1997 or at such other time as shall
be agreed upon by the Initial Purchaser and the Company. The time and date of
such delivery and the payment are herein called the "Closing Date."
------------
(b) One or more of the Senior Notes in definitive global form,
registered in the name of Cede & Co., as nominee of the Depository Trust Company
("DTC"), having an aggregate principal amount corresponding to the aggregate
---
principal amount of the Senior Notes (collectively, the "Global Note"), shall be
-----------
delivered by the Company to the Initial Purchaser (or as the Initial Purchaser
directs) in each case with any transfer taxes thereon duly paid by the Company
against payment by the Initial Purchaser of the Purchase Price thereof by wire
transfer in same day funds to the order of the Company. The Global Note shall
be made available to the Initial
4
<PAGE>
Purchaser for inspection not later than 9:30 a.m., Chicago time, on the business
day immediately preceding the Closing Date.
5. AGREEMENTS OF THE COMPANY AND THE GUARANTORS. Each of the
---------------------------------------------
Company and the Guarantors hereby agrees with the Initial Purchaser as follows:
(a) To advise the Initial Purchaser promptly and, if requested
by the Initial Purchaser, confirm such advice in writing, (i) of the issuance by
any state securities commission of any stop order suspending the qualification
or exemption from qualification of any Senior Notes for offering or sale in any
jurisdiction designated by the Initial Purchaser pursuant to Section 5(e)
hereof, or the initiation of any proceeding by any state securities commission
or any other federal or state regulatory authority for such purpose, and (ii) of
the happening of any event during the period referred to in Section 5(c) below
that makes any statement of a material fact made in the Preliminary Offering
Memorandum or the Offering Memorandum untrue or that requires any additions to
or changes in the Preliminary Offering Memorandum or the Offering Memorandum in
order to make the statements therein not misleading. The Company shall use its
best efforts to prevent the issuance of any stop order or order suspending the
qualification or exemption of any Senior Notes under any state securities or
Blue Sky laws and, if at any time any state securities commission or other
federal or state regulatory authority shall issue an order suspending the
qualification or exemption of any Senior Notes under any state securities or
Blue Sky laws, the Company shall use its best efforts to obtain the withdrawal
or lifting of such order at the earliest possible time.
(b) To furnish the Initial Purchaser and those persons
identified by the Initial Purchaser to the Company as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and any amendments
or supplements thereto, as the Initial Purchaser may reasonably request. Subject
to the Initial Purchaser's compliance with its representations and warranties
and agreements set forth in Section 7 hereof, the Company consents to the use of
the Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments and supplements thereto required pursuant hereto, by the Initial
Purchaser in connection with Exempt Resales.
(c) During such period as in the opinion of counsel for the
Initial Purchaser an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchaser and in connection with
market-making activities of the Initial Purchaser, for so long as any Senior
Notes are outstanding, (i) not to make any amendment or supplement to the
Offering Memorandum of which the Initial Purchaser shall not previously have
been advised or to which the Initial Purchaser shall reasonably object after
being so advised and (ii) to prepare promptly, upon the Initial Purchaser's
reasonable request, any amendment or supplement to the Offering Memorandum which
may be necessary or advisable in connection with such Exempt Resales or such
market-making activities.
5
<PAGE>
(d) If, during the period referred to in Section 5(c) above, any
event shall occur or condition shall exist as a result of which, in the opinion
of counsel to the Initial Purchaser, it becomes necessary to amend or supplement
the Offering Memorandum in order to make the statements therein, in the light of
the circumstances when such Offering Memorandum is delivered to an Eligible
Purchaser, not misleading, or if, in the opinion of counsel to the Initial
Purchaser, it is necessary to amend or supplement the Offering Memorandum to
comply with any applicable law, forthwith to prepare an appropriate amendment or
supplement to such Offering Memorandum so that the statements therein, as so
amended or supplemented, will not, in the light of the circumstances when it is
so delivered, be misleading, or so that such Offering Memorandum will comply
with applicable law, and to furnish to the Initial Purchaser and such other
persons as the Initial Purchaser may designate such number of copies thereof as
the Initial Purchaser may reasonably request.
(e) Prior to the sale of all Senior Notes pursuant to Exempt
Resales as contemplated hereby, to cooperate with the Initial Purchaser and
counsel to the Initial Purchaser in connection with the registration or
qualification of the Senior Notes for offer and sale to the Initial Purchaser
and pursuant to Exempt Resales under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchaser may request and to continue such
qualification in effect so long as required for Exempt Resales and to file such
consents to service of process or other documents as may be necessary in order
to effect such registration or qualification; provided, however, that neither
the Company nor any Guarantor shall be required in connection therewith to
register or qualify as a foreign corporation in any jurisdiction in which it is
not now so qualified or to take any action that would subject it to general
consent to service of process or taxation, other than as to matters and
transactions relating to the Preliminary Offering Memorandum, the Offering
Memorandum or Exempt Resales, in any jurisdiction in which it is not now so
subject.
(f) So long as the Notes are outstanding, furnish to the Trustee
for provision to the Holders of Senior Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and results of
operations of the Company and its consolidated Subsidiaries (showing in
reasonable detail, either on the face of the financial statements or in the
footnotes thereto and in Management's Discussion and Analysis of Financial
Condition and Results of Operations, the financial condition and results of
operations of the Company and its Restricted Subsidiaries separate from the
financial condition and results of operations of the Unrestricted Subsidiaries
of the Company) and, with respect to the annual information only, a report
thereon by the Company's certified independent accountants and (ii) all current
reports that would be required to be filed with the Commission on Form 8-K if
the Company were required to file such reports.
(g) So long as the Notes are outstanding, to furnish to the
Initial Purchaser as soon as available copies of all reports or other
communications furnished by the Company or any of the Guarantors to its security
holders in their capacity as such or furnished to or
6
<PAGE>
filed with the Commission or any national securities exchange on which any class
of securities of the Company or any of the Guarantors is listed and such other
publicly available information concerning the Company and/or its subsidiaries as
the Initial Purchaser may reasonably request.
(h) So long as any of the Senior Notes remain outstanding and
during any period in which the Company and the Guarantors are not subject to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), to make available to any holder of Senior Notes in connection
------------
with any sale thereof, and any prospective purchaser of such Senior Notes from
such holder, the information ("Rule 144A Information") required by Rule
---------------------
144A(d)(4) under the Act.
(i) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or cause to be
paid all expenses incident to the performance of the obligations of the Company
and the Guarantors under this Agreement, including: (i) the fees, disbursements
and expenses of counsel to the Company and the Guarantors and accountants of the
Company and the Guarantors in connection with the sale and delivery of the
Senior Notes to the Initial Purchaser and pursuant to Exempt Resales, and all
other fees or expenses in connection with the preparation, printing, filing and
distribution of the Preliminary Offering Memorandum, the Offering Memorandum and
all amendments and supplements to any of the foregoing (including financial
statements) specified in Section 5(b) and 5(c) prior to or during the period
specified in Section 5(c), including the mailing and delivering of copies
thereof to the Initial Purchaser and persons designated by it in the quantities
specified herein, (ii) all costs and expenses related to the transfer and
delivery of the Senior Notes to the Initial Purchaser and pursuant to Exempt
Resales, including any transfer or other taxes payable thereon, (iii) all costs
of printing or producing this Agreement, the other Operative Documents and any
other agreements or documents in connection with the offering, purchase, sale or
delivery of the Senior Notes, (iv) all expenses in connection with the
registration or qualification of the Senior Notes and the Subsidiary Guarantees
for offer and sale under the securities or Blue Sky laws of the several states
and all costs of printing or producing any preliminary and supplemental Blue Sky
memoranda in connection therewith (including the filing fees and fees and
disbursements of counsel for the Initial Purchaser in connection with such
registration or qualification and memoranda relating thereto), (v) the cost of
printing certificates representing the Senior Notes and the Subsidiary
Guarantees, (vi) all expenses and listing fees in connection with the
application for quotation of the Senior Notes in the National Association of
Securities Dealers, Inc. ("NASD") Automated Quotation System - PORTAL
----
("PORTAL"), (vii) the fees and expenses of the Trustee and the Trustee's counsel
------
in connection with the Indenture, the Notes and the Subsidiary Guarantees,
(viii) the costs and charges of any transfer agent, registrar and/or depositary
(including DTC), (ix) any fees charged by rating agencies for the rating of the
Notes, (x) all costs and expenses of the Exchange Offer and any Registration
Statement, as set forth in the Registration Rights Agreement, and (xi) and all
other costs and expenses incident to the performance of the obligations of the
Company and the Guarantors hereunder for which provision is not otherwise made
in this Section.
7
<PAGE>
(j) To use its best efforts to effect the inclusion of the
Senior Notes in PORTAL and to maintain the listing of the Senior Notes on PORTAL
for so long as the Senior Notes are outstanding.
(k) To obtain the approval of DTC for "book-entry" transfer of
the Notes, and to comply with all of its agreements set forth in the
representation letters of the Company and the Guarantors to DTC relating to the
approval of the Notes by DTC for "book-entry" transfer.
(l) During the period beginning on the date hereof and
continuing to and including the Closing Date, not to offer, sell, contract to
sell or otherwise transfer or dispose of any debt securities of the Company or
any Guarantor or any warrants, rights or options to purchase or otherwise
acquire debt securities of the Company or any Guarantor substantially similar to
the Senior Notes and the Subsidiary Guarantees (other than the Senior Notes and
the Subsidiary Guarantees), without the prior written consent of the Initial
Purchaser.
(m) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Senior Notes to the Initial Purchaser
or pursuant to Exempt Resales in a manner that would require the registration of
any such sale of the Senior Notes under the Act.
(n) Not to voluntarily claim, and to actively resist any
attempts to claim, the benefit of any usury laws against the holders of any
Senior Notes.
(o) To cause the Exchange Offer to be made in the appropriate
form to permit Exchange Notes and guarantees thereof by the Guarantors
registered pursuant to the Act to be offered in exchange for the Senior Notes
and the Subsidiary Guarantees and to comply with all applicable federal and
state securities laws in connection with the Exchange Offer.
(p) To comply with all of its agreements set forth in the
Registration Rights Agreement.
(q) To use its best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by it prior
to the Closing Date and to satisfy all conditions precedent to the delivery of
the Senior Notes and the Subsidiary Guarantees.
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY AND THE
-----------------------------------------------------------------
GUARANTORS. As of the date hereof, each of the Company and the Guarantors
- -----------
represents and warrants to, and agrees with, the Initial Purchaser that:
(a) The Preliminary Offering Memorandum and the Offering
Memorandum do not, and any supplement or amendment to them will not, contain any
untrue
8
<PAGE>
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (a) shall not apply
to statements in or omissions from the Preliminary Offering Memorandum or the
Offering Memorandum (or any supplement or amendment thereto) based upon
information relating to the Initial Purchaser furnished to the Company in
writing by the Initial Purchaser expressly for use therein. To the knowledge of
the Company and the Guarantors, no stop order preventing the use of the
Preliminary Offering Memorandum or the Offering Memorandum, or any amendment or
supplement thereto, or any order asserting that any of the transactions
contemplated by this Agreement are subject to the registration requirements of
the Act, has been issued.
(b) Each of the Company and its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and has the corporate power and
authority to carry on its business as described in the Preliminary Offering
Memorandum and the Offering Memorandum and to own, lease and operate its
properties, and each is duly qualified and is in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole (a
"Material Adverse Effect").
- ------------------------
(c) All outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid, non-assessable and
not subject to any preemptive or similar rights.
(d) The entities listed on Schedule B hereto are the only
subsidiaries, direct or indirect, of the Company. All of the outstanding shares
of capital stock of each of the Company's subsidiaries have been duly authorized
and validly issued and are fully paid and non-assessable, and are owned by the
Company, directly or indirectly through one or more subsidiaries, free and clear
of any security interest, claim, lien, encumbrance or adverse interest of any
nature (each, a "Lien"), except that all such shares of capital stock of each of
----
the Company's subsidiaries have been pledged to secure the Senior Credit
Facility and, prior to the repayment thereof with the proceeds of the Offering,
the CVS Note (as defined in the Offering Memorandum).
(e) This Agreement has been duly authorized, executed and
delivered by the Company and each of the Guarantors.
(f) The Indenture has been duly authorized by the Company and
each of the Guarantors and, on the Closing Date, will have been validly executed
and delivered by the Company and each of the Guarantors. When the Indenture has
been duly executed and delivered by the Company and each of the Guarantors, the
Indenture will be a valid and binding agreement of the Company and each
Guarantor, enforceable against the Company and each Guarantor in
9
<PAGE>
accordance with its terms except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability. On the Closing Date, the
Indenture will conform in all material respects to the requirements of the Trust
Indenture Act of 1939, as amended (the "TIA" or "Trust Indenture Act"), and the
--- -------------------
rules and regulations of the Commission applicable to an indenture which is
qualified thereunder.
(g) The Senior Notes have been duly authorized and, on the
Closing Date, will have been validly executed and delivered by the Company. When
the Senior Notes have been issued, executed and authenticated in accordance with
the provisions of the Indenture and delivered to and paid for by the Initial
Purchaser in accordance with the terms of this Agreement, the Senior Notes will
be entitled to the benefits of the Indenture and will be valid and binding
obligations of the Company, enforceable in accordance with their terms except as
(i) the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, fraudulent transfer or similar laws affecting creditors'
rights generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability. On the Closing Date, the Senior Notes will conform as to legal
matters to the description thereof contained in the Offering Memorandum.
(h) On the Closing Date, the Exchange Notes will have been duly
authorized by the Company. When the Exchange Notes are issued, executed and
authenticated in accordance with the terms of the Exchange Offer and the
Indenture, the Exchange Notes will be entitled to the benefits of the Indenture
and will be the valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability.
(i) The Subsidiary Guarantee to be endorsed on the Senior Notes
by each Guarantor has been duly authorized by such Guarantor and, on the Closing
Date, will have been duly executed and delivered by each such Guarantor. When
the Senior Notes have been issued, executed and authenticated in accordance with
the Indenture and delivered to and paid for by the Initial Purchaser in
accordance with the terms of this Agreement, the Subsidiary Guarantee of each
Guarantor endorsed thereon will be entitled to the benefits of the Indenture and
will be the valid and binding obligation of such Guarantor, enforceable against
such Guarantor in accordance with its terms, except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent conveyance,
fraudulent transfer or similar laws affecting creditors' rights generally and
(ii) rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability. On the Closing Date,
the Subsidiary Guarantees to be endorsed on the Senior Notes will conform as to
legal matters to the description thereof contained in the Offering Memorandum.
10
<PAGE>
(j) The Subsidiary Guarantee to be endorsed on the Exchange
Notes by each Guarantor has been duly authorized by such Guarantor and, when
issued, will have been duly executed and delivered by each such Guarantor. When
the Exchange Notes have been issued, executed and authenticated in accordance
with the terms of the Exchange Offer and the Indenture, the Subsidiary Guarantee
of each Guarantor endorsed thereon will be entitled to the benefits of the
Indenture and will be the valid and binding obligation of such Guarantor,
enforceable against such Guarantor in accordance with its terms, except as (i)
the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, fraudulent transfer or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability. When
the Exchange Notes are issued, authenticated and delivered, the Subsidiary
Guarantees to be endorsed on the Exchange Notes will conform as to legal matters
to the description thereof in the Offering Memorandum.
(k) All indebtedness of the Company and the Guarantors that will
be repaid with the proceeds of the issuance and sale of the Senior Notes was
incurred, and the indebtedness represented by the Senior Notes is being
incurred, for proper purposes and in good faith and each of the Company and
Guarantors was, at the time of the incurrence of such indebtedness that will be
repaid with the proceeds of the issuance and sale of the Senior Notes, and will
be on the Closing Date (after giving effect to the application of the proceeds
from the issuance of the Senior Notes) solvent, and had at the time of the
incurrence of such indebtedness that will be repaid with the proceeds of the
issuance and sale of the Senior Notes and will have on the Closing Date (after
giving effect to the application of the proceeds from the issuance of the Senior
Notes) sufficient capital for carrying on their respective businesses and were,
at the time of the incurrence of such indebtedness that will be repaid with the
proceeds of the issuance and sale of the Senior Notes, and will be on the
Closing Date (after giving effect to the application of the proceeds from the
issuance of the Senior Notes) able to pay their respective debts as they mature.
(l) The Registration Rights Agreement has been duly authorized
by the Company and each of the Guarantors and, on the Closing Date, will have
been duly executed and delivered by the Company and each of the Guarantors. When
the Registration Rights Agreement has been duly executed and delivered, the
Registration Rights Agreement will be a valid and binding agreement of the
Company and each of the Guarantors, enforceable against the Company and each
Guarantor in accordance with its terms except as (i) the enforceability thereof
may be limited by bankruptcy, insolvency, fraudulent conveyance, fraudulent
transfer or similar laws affecting creditors' rights generally and (ii) rights
of acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability. On the Closing Date, the
Registration Rights Agreement will conform as to legal matters to the
description thereof in the Offering Memorandum.
(m) Neither the Company nor any of its subsidiaries is in
violation of its respective charter or by-laws or in default in the performance
of any obligation, agreement, covenant or condition contained in any indenture,
loan agreement, mortgage, lease or other agreement or instrument that is
material to the Company and its subsidiaries, taken as a whole, to
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which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries or their respective property is bound.
(n) Except as described in the Preliminary Offering Memorandum
and the Offering Memorandum, the declaration or payment of dividends by each of
the Company's subsidiaries is not subject to any governmental approval and is
not limited, directly or indirectly, by operation of the terms of such
subsidiary's charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to such subsidiary or its
stockholders.
(o) The execution, delivery and performance of this Agreement
and the other Operative Documents by the Company and each of the Guarantors,
compliance by the Company and each of the Guarantors with all provisions hereof
and thereof and the consummation of the transactions contemplated hereby and
thereby will not (i) require any consent, approval, authorization or other order
of, or qualification with, any court or governmental body or agency (except such
as may be required under the securities or Blue Sky laws of the various states),
(ii) conflict with or constitute a breach of any of the terms or provisions of,
or a default under, the charter or by-laws of the Company or any of its
subsidiaries or any indenture, loan agreement, mortgage, lease or other
agreement or instrument that is material to the Company and its subsidiaries,
taken as a whole, to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries or their respective property is
bound, other than conflicts, breaches or defaults for which the requisite
written waivers, consents or amendments have been received, (iii) violate or
conflict with any applicable law or any rule, regulation, judgment, order or
decree of any court or any governmental body or agency having jurisdiction over
the Company, any of its subsidiaries or their respective property, (iv) except
as provided in the Senior Credit Facility, result in the imposition or creation
of (or the obligation to create or impose) a Lien under, any agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or their respective property is
bound, or (v) result in the termination or revocation of any Authorization (as
defined below) of the Company or any of its subsidiaries or result in any other
impairment of the rights of the holder of any such Authorization.
(p) There are no legal or governmental proceedings pending or,
to the knowledge of the Company and the Guarantors, threatened to which the
Company or any of its subsidiaries is or could be a party or to which any of
their respective property is or could be subject, which might result, singly or
in the aggregate, in a Material Adverse Effect.
(q) Neither the Company nor any of its subsidiaries has violated
any foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws") or any
------------------
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the rules and regulations promulgated thereunder, except for such
-----
violations which, singly or in the aggregate, would not have a Material Adverse
Effect.
12
<PAGE>
(r) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any Authorization, any related constraints on operating
activities and any potential liabilities to third parties) which would, singly
or in the aggregate, have a Material Adverse Effect.
(s) Each of the Company and its subsidiaries has such permits,
licenses, consents, exemptions, franchises, authorizations and other approvals
(each, an "Authorization") of, and has made all filings with and notices to, all
-------------
governmental or regulatory authorities and self-regulatory organizations and all
courts and other tribunals, including without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and operate its
respective properties and to conduct its business, except where the failure to
have any such Authorization or to make any such filing or notice would not,
singly or in the aggregate, have a Material Adverse Effect. Each such
Authorization is valid and in full force and effect and each of the Company and
its subsidiaries is in compliance with all the terms and conditions thereof and
with the rules and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has occurred (including, without
limitation, the receipt of any notice from any authority or governing body)
which allows or, after notice or lapse of time or both, would allow, revocation,
suspension or termination of any such Authorization or results or, after notice
or lapse of time or both, would result in any other impairment of the rights of
the holder of any such Authorization; and such Authorizations contain no
restrictions that are burdensome to the Company or any of its subsidiaries;
except where such failure to be valid and in full force and effect or to be in
compliance, the occurrence of any such event or the presence of any such
restriction would not, singly or in the aggregate, have a Material Adverse
Effect.
(t) Any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries.
(u) The accountants, Arthur Andersen, LLP and KPMG Peat Marwick,
LLP, that have certified the financial statements and supporting schedules
included in the Preliminary Offering Memorandum and the Offering Memorandum are
independent public accountants with respect to the Company and the Guarantors,
as required by the Act and the Exchange Act. The historical financial
statements, together with related schedules and notes, set forth in the
Preliminary Offering Memorandum and the Offering Memorandum comply as to form in
all material respects with the requirements applicable to registration
statements on Form S-1 under the Act.
(v) The historical financial statements, together with related
schedules and notes forming part of the Offering Memorandum (and any amendment
or supplement thereto), present fairly the consolidated financial position,
results of operations and changes in financial position of the Company and its
subsidiaries on the basis stated in the Offering Memorandum at the
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<PAGE>
respective dates or for the respective periods to which they apply; such
statements and related schedules and notes have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, except as disclosed therein; and the other financial and
statistical information and data set forth in the Offering Memorandum (and any
amendment or supplement thereto) are, in all material respects, accurately
presented and prepared on a basis consistent with such financial statements and
the books and records of the Company.
(w) The pro forma financial statements included in the
Preliminary Offering Memorandum and the Offering Memorandum have been prepared
on a basis consistent with the historical financial statements of the Company
and its subsidiaries and give effect to assumptions used in the preparation
thereof on a reasonable basis and in good faith and present fairly the
historical and proposed transactions contemplated by the Preliminary Offering
Memorandum and the Offering Memorandum; and such pro forma financial statements
comply as to form in all material respects with the requirements applicable to
pro forma financial statements included in registration statements on Form S-1
under the Act. The other pro forma financial and statistical information and
data included in the Offering Memorandum are, in all material respects,
accurately presented and prepared on a basis consistent with the pro forma
financial statements.
(x) Neither the Company nor any Guarantor is or, after giving
effect to the offering and sale of the Senior Notes and the application of the
net proceeds thereof as described in the Offering Memorandum, will be, an
"investment company," as such term is defined in the Investment Company Act of
1940, as amended.
(y) Except for the Registration Rights Agreement, there are no
contracts, agreements or understandings between the Company or any Guarantor and
any person granting such person the right to require the Company or such
Guarantor to file a registration statement under the Act with respect to any
securities of the Company or such Guarantor (except as described in the Offering
Memorandum) or to require the Company or such Guarantor to include such
securities with the Notes and Subsidiary Guarantees registered pursuant to any
Registration Statement.
(z) Neither the Company nor any of its subsidiaries nor any
agent thereof acting on the behalf of them has taken, and none of them will
take, any action that might cause this Agreement or the issuance or sale of the
Senior Notes to violate Regulation G (12 C.F.R. Part 207), Regulation T (12
C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R.
Part 224) of the Board of Governors of the Federal Reserve System.
(aa) Since the respective dates as of which information is given
in the Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there has not occurred any material adverse change or any
development involving a prospective material adverse change in the condition,
financial or otherwise, or the earnings, business, management or
14
<PAGE>
operations of the Company and its subsidiaries, taken as a whole, (ii) there has
not been any material adverse change or any development involving a prospective
material adverse change in the capital stock or in the long-term debt of the
Company or any of its subsidiaries and (iii) neither the Company nor any of its
subsidiaries has incurred any material liability or obligation, direct or
contingent.
(bb) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4) under the Act.
(cc) When the Senior Notes and the Subsidiary Guarantees are
issued and delivered pursuant to this Agreement, neither the Senior Notes nor
the Subsidiary Guarantees will be of the same class (within the meaning of Rule
144A under the Act) as any security of the Company or the Guarantors that is
listed on a national securities exchange registered under Section 6 of the
Exchange Act or that is quoted in a United States automated inter-dealer
quotation system.
(dd) No form of general solicitation or general advertising (as
defined in Regulation D under the Act) was used by the Company, the Guarantors
or any of their respective representatives (other than the Initial Purchaser, as
to whom the Company and the Guarantors make no representation) in connection
with the offer and sale of the Senior Notes contemplated hereby, including, but
not limited to, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. No securities of the same class as the
Senior Notes have been issued and sold by the Company within the six-month
period immediately prior to the date hereof.
(ee) Prior to the effectiveness of any Registration Statement,
the Indenture is not required to be qualified under the TIA.
(ff) No registration under the Act of the Senior Notes or the
Subsidiary Guarantees is required for the sale of the Senior Notes and the
Subsidiary Guarantees to the Initial Purchaser as contemplated hereby or for the
Exempt Resales assuming the accuracy of the Initial Purchaser's representations
and warranties and agreements set forth in Section 7 hereof.
(gg) No "nationally recognized statistical rating organization"
as such term is defined for purposes of Rule 436(g)(2) under the Act (i) has
imposed (or has informed the Company or any Guarantor that it is considering
imposing) any condition (financial or otherwise) on the Company's or any
Guarantor's retaining any rating assigned as of the date hereof to the Company,
any Guarantor or any securities of the Company or any Guarantor or (ii) has
indicated to the Company or any Guarantor that it is considering (a) the
downgrading, suspension or withdrawal of, or any review for a possible change
that does not indicate the direction of the possible change in, any rating so
assigned or (b) any change in the outlook for any rating of the Company or any
Guarantor.
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<PAGE>
(hh) Each certificate signed by any officer of the Company or any
Guarantor and delivered to the Initial Purchaser or counsel for the Initial
Purchaser shall be deemed to be a representation and warranty by the Company or
such Guarantor to the Initial Purchaser as to the matters covered thereby. The
Company and each Guarantor acknowledges that the Initial Purchaser and, for
purposes of the opinions to be delivered to the Initial Purchaser pursuant to
Section 9 hereof, counsel to the Company and the Guarantors and counsel to the
Initial Purchaser will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
7. INITIAL PURCHASER'S REPRESENTATIONS AND WARRANTIES. The Initial
--------------------------------------------------
Purchaser represents and warrants to, and agrees with, the Company and the
Guarantors that:
(a) The Initial Purchaser is a QIB with such knowledge and
experience in financial and business matters as is necessary in order to
evaluate the merits and risks of an investment in the Senior Notes.
(b) The Initial Purchaser (A) is not acquiring the Senior Notes
with a view to any distribution thereof or with any present intention of
offering or selling any of the Senior Notes in a transaction that would violate
the Act or the securities laws of any state of the United States or any other
applicable jurisdiction and (B) will be reoffering and reselling the Senior
Notes only to (y) QIBs in reliance on the exemption from the registration
requirements of the Act provided by Rule 144A or (z) not more than ten
Accredited Institutions that execute and deliver a letter containing certain
representations and agreements in the form attached as Annex A to the Offering
-------
Memorandum.
(c) The Initial Purchaser agrees that no form of general
solicitation or general advertising (within the meaning of Regulation D under
the Act) has been or will be used by such Initial Purchaser or any of its
representatives in connection with the offer and sale of the Senior Notes
pursuant hereto, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising.
(d) The Initial Purchaser agrees that, in connection with Exempt
Resales, such Initial Purchaser will solicit offers to buy the Senior Notes only
from, and will offer to sell the Senior Notes only to, Eligible Purchasers.
Each Initial Purchaser further agrees that it will offer to sell the Senior
Notes only to, and will solicit offers to buy the Senior Notes only from, (A)
Eligible Purchasers that the Initial Purchaser reasonably believes are QIBs, (B)
Accredited Institutions who make the representations contained in, and execute
and return to the Initial Purchaser, a certificate in the form of Annex A
-------
attached to the Offering Memorandum, in each case, that agree that (x) the
Senior Notes purchased by them may be resold, pledged or otherwise transferred
within the time period referred to under Rule 144(k) (taking into account the
provisions
16
<PAGE>
of Rule 144(d) under the Act, if applicable) under the Act, as in effect on the
date of the transfer of such Senior Notes, only (I) to the Company, (II) to a
person whom the seller reasonably believes is a QIB purchasing for its own
account or for the account of a QIB in a transaction meeting the requirements of
Rule 144A under the Act, (III) in an offshore transaction (as defined in Rule
902 under the Act) meeting the requirements of Rule 904 of the Act, (IV) in a
transaction meeting the requirements of Rule 144 under the Act, (V) to an
Accredited Institution that, prior to such transfer, furnishes the Trustee a
signed letter containing certain representations and agreements relating to the
registration of transfer of such Senior Note (the form of which is substantially
the same as Annex A to the Offering Memorandum) and an opinion of counsel
-------
acceptable to the Company that such transfer is in compliance with the Act, (VI)
in accordance with another exemption from the registration requirements of the
Act (and based upon an opinion of counsel acceptable to the Company) or (VII)
pursuant to an effective registration statement and, in each case, in accordance
with the applicable securities laws of any state of the United States or any
other applicable jurisdiction and (y) they will deliver to each person to whom
such Senior Notes or an interest therein is transferred a notice substantially
to the effect of the foregoing.
The Initial Purchaser acknowledges that the Company and the Guarantors
and, for purposes of the opinions to be delivered to the Initial Purchaser
pursuant to Section 9 hereof, counsel to the Company and the Guarantors and
counsel to the Initial Purchaser will rely upon the accuracy and truth of the
foregoing representations and the Initial Purchaser hereby consents to such
reliance.
8. INDEMNIFICATION.
---------------
(a) The Company and each Guarantor agree, jointly and severally,
to indemnify and hold harmless the Initial Purchaser, its directors, its
officers and each person, if any, who controls the Initial Purchaser within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act from and
against any and all losses, claims, damages, liabilities and judgments
(including, without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action,
that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Offering Memorandum (or any amendment or
supplement thereto), the Preliminary Offering Memorandum or any Rule 144A
Information provided by the Company or any Guarantor to any holder or
prospective purchaser of Senior Notes pursuant to Section 5(h) 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, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to the Initial Purchaser furnished in
writing to the Company by the Initial Purchaser expressly for use in the
Preliminary Offering Memorandum or the Offering Memorandum.
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<PAGE>
(b) The Initial Purchaser agrees to indemnify and hold harmless
the Company and the Guarantors, and their respective directors and officers and
each person, if any, who controls (within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act) the Company or the Guarantors, to the same
extent as the foregoing indemnity from the Company and the Guarantors to the
Initial Purchaser but only with reference to information relating to the Initial
Purchaser furnished in writing to the Company by the Initial Purchaser expressly
for use in the Preliminary Offering Memorandum or the Offering Memorandum.
(c) In case any action shall be commenced involving any person
in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b)
(the "indemnified party"), the indemnified party shall promptly notify the
------------ -----
person against whom such indemnity may be sought (the "indemnifying party") in
------------------
writing and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 8(a) and 8(b), the Initial Purchaser shall not
be required to assume the defense of such action pursuant to this Section 8(c),
but may employ separate counsel and participate in the defense thereof, but the
fees and expenses of such counsel, except as provided below, shall be at the
expense of the Initial Purchaser). Any indemnified party shall have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the indemnified party unless (i) the employment of such counsel shall have been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party, and the indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified parties
and all such fees and expenses shall be reimbursed as they are incurred. Such
firm shall be designated in writing by the Initial Purchaser, in the case of the
parties indemnified pursuant to Section 8(a), and by the Company, in the case of
parties indemnified pursuant to Section 8(b). The indemnifying party shall
indemnify and hold harmless the indemnified party from and against any and all
losses, claims, damages, liabilities and judgments by reason of any settlement
of any action (i) effected with its written consent or (ii) effected without its
written consent if the settlement is entered into more than twenty business days
after the indemnifying party shall have received a request from the indemnified
party for reimbursement for the fees and expenses of counsel to which the
indemnified party is entitled under this Agreement (in any case where such fees
and expenses are at the expense of the indemnifying party) and, prior to the
date of such settlement, the indemnifying party shall have failed to comply with
such reimbursement
18
<PAGE>
request. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement or compromise of, or consent to the
entry of judgment with respect to, any pending or threatened action in respect
of which the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims that
are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this
Section 8 is unavailable to an indemnified party or insufficient in respect of
any losses, claims, damages, liabilities or judgments referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Guarantors, on the one hand, and the Initial Purchaser, on the
other hand, from the offering of the Senior Notes or (ii) if the allocation
provided by clause 8(d)(i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause 8(d)(i) above but also the relative fault of the Company and the
Guarantors, on the one hand, and the Initial Purchaser, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Guarantors, on the one hand, and the Initial Purchaser, on the other hand, shall
be deemed to be in the same proportion as the total net proceeds from the
offering of the Senior Notes (before deducting expenses) received by the
Company, and the total discounts and commissions received by the Initial
Purchaser bear to the total price to investors of the Senior Notes, in each case
as set forth in the table on the cover page of the Offering Memorandum. The
relative fault of the Company and the Guarantors, on the one hand, and the
Initial Purchaser, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Guarantors, on the one hand, or the
Initial Purchaser, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company, the Guarantors and the Initial Purchaser agree that it
would not be just and equitable if contribution pursuant to this Section 8(d)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses incurred
by such indemnified party in connection with investigating or defending any
matter, including any action, that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8,
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<PAGE>
the Initial Purchaser shall not be required to contribute any amount in excess
of the amount by which the total price of the Senior Notes purchased by it that
were sold to investors in Exempt Resales exceeds the amount of any damages which
the Initial Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
(e) The remedies provided for in this Section 8 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.
9. CONDITIONS OF INITIAL PURCHASER'S OBLIGATIONS. The obligations of
---------------------------------------------
the Initial Purchaser to purchase the Senior Notes under this Agreement are
subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company and
the Guarantors contained in this Agreement shall be true and correct on the
Closing Date with the same force and effect as if made on and as of the Closing
Date.
(b) On or after the date hereof, (i) there shall not have
occurred any downgrading, suspension or withdrawal of, nor shall any notice have
been given of any potential or intended downgrading, suspension or withdrawal
of, or of any review (or of any potential or intended review) for a possible
change that does not indicate the direction of the possible change in, any
rating of the Company or any Guarantor or any securities of the Company or any
Guarantor (including, without limitation, the placing of any of the foregoing
ratings on credit watch with negative or developing implications or under review
with an uncertain direction) by any "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2) under the
Act, (ii) there shall not have occurred any change, nor shall notice have been
given of any potential or intended change, in the outlook for any rating of the
Company or any Guarantor by any such rating organization and (iii) no such
rating organization shall have given notice that it has assigned (or is
considering assigning) a lower rating to the Notes than that on which the Notes
were marketed.
(c) Since the respective dates as of which information is given
in the Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there shall not have occurred any change or any development
involving a prospective change in the condition, financial or otherwise, or the
earnings, business, management or operations of the Company and its
subsidiaries, taken as a whole, (ii) there shall not have been any change or any
development involving a prospective change in the capital stock or in the long-
term debt of the Company or any of its subsidiaries and (iii) neither the
Company nor any of its subsidiaries shall have incurred any liability or
obligation, direct or contingent, the effect of which, in any such case
described in clause
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9(c)(i), 9(c)(ii) or 9(c)(iii), in your judgment, is material and adverse and,
in your judgment, makes it impracticable to market the Senior Notes on the terms
and in the manner contemplated in the Offering Memorandum.
(d) You shall have received on the Closing Date a certificate
dated the Closing Date, signed by the President and the Chief Financial Officer
of the Company, confirming the matters set forth in Sections 9(a), 9(b) and
9(c).
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Initial Purchaser), dated the Closing
Date, of Faegre & Benson LLP, counsel for the Company and the Guarantors, to the
effect that:
(i) each of the Company and the Guarantors has been duly
incorporated, is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation and
has the corporate power and authority to carry on its business as
described in the Offering Memorandum and to own, lease and
operate its properties (which opinion, as to Guarantors that are
not incorporated in Minnesota, is based solely on good standing
certificates received from the Secretaries of State of such
Guarantors' respective states of incorporation);
(ii) all the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are
fully paid, non-assessable and not subject to any preemptive or
similar rights known to such counsel;
(iii) the Company, either directly or through one or
more subsidiaries, is the record owner of all of the outstanding
shares of capital stock of each of the Guarantors;
(iv) the Series A Senior Notes have been duly authorized and,
when executed and authenticated in accordance with the provisions
of the Indenture and delivered to and paid for by the Initial
Purchaser in accordance with the terms of this Agreement, will be
entitled to the benefits of the Indenture and will be valid and
binding obligations of the Company, enforceable in accordance
with their terms;
(v) the Subsidiary Guarantees have been duly authorized
and, when the Senior Notes are executed and authenticated in
accordance with the provisions of the Indenture and delivered to
and paid for by the Initial Purchaser in accordance with the
terms of this Agreement, the Subsidiary Guarantees endorsed
thereon will be entitled to the benefits of the Indenture
21
<PAGE>
and will be valid and binding obligations of the Guarantors,
enforceable in accordance with their terms;
(vi) the Indenture has been duly authorized, executed and
delivered by the Company and each Guarantor and is a valid and
binding agreement of the Company and each Guarantor, enforceable
against the Company and each Guarantor in accordance with its
terms;
(vii) this Agreement has been duly authorized, executed
and delivered by the Company and the Guarantors;
(viii) the Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and the
Guarantors and is a valid and binding agreement of the Company
and each Guarantor, enforceable against the Company and each
Guarantor in accordance with its terms;
(ix) the Exchange Notes have been duly authorized and,
when executed and authenticated in accordance with the provisions
of the Indenture and delivered in exchange for Senior Notes in
accordance with the Indenture and the Exchange Offer, will be
entitled to the benefits of the Indenture and will be valid and
binding obligations of the Company, enforceable in accordance
with their terms; and
(x) when the Exchange Notes are executed and
authenticated in accordance with the provisions of the Indenture
and delivered in exchange for Senior Notes in accordance with the
Indenture and the Exchange Offer, the Subsidiary Guarantees
endorsed thereon will be entitled to the benefits of the
Indenture and will be valid and binding obligations of the
Guarantors, enforceable in accordance with their terms.
(xi) the statements under the captions "The Acquisition,"
"Management," "Certain Transactions," "Description of Senior
Credit Facility," "Description of Senior Notes" and "Plan of
Distribution" in the Offering Memorandum, insofar as such
statements constitute a summary of the legal matters, documents
or proceedings referred to therein, fairly present in all
material respects such legal matters, documents and proceedings;
(xii) to such counsel's knowledge, the Company is not in
violation of its charter or by-laws and is not in default in the
performance of any obligation, agreement, covenant or condition
contained in any indenture, loan agreement, mortgage, lease or
other agreement or instrument that is material to the Company and
its subsidiaries, taken as a whole, to which the
22
<PAGE>
Company is a party or by which the Company or its property is
bound, in any such case where the effect of such violation or
default is material to the business of the Company and its
subsidiaries, taken as a whole;
(xiii) the execution, delivery and performance of this
Agreement and the other Operative Documents by the Company and
each of the Guarantors, compliance by the Company and each of the
Guarantors with all provisions hereof and thereof and the
consummation of the transactions contemplated hereby and thereby
will not (i) require any consent, approval, authorization or
other order of, or qualification with, any court or governmental
body or agency (except such as may be required under the
securities or Blue Sky laws of the various states), (ii) conflict
with or constitute a breach of any of the terms or provisions of,
or a default under, the charter or by-laws of the Company or any
of its subsidiaries or any indenture, loan agreement, mortgage,
lease or other agreement or instrument that is filed as a
material contract with the Commission as part of the Company's
Registration Statement on Form S-1 (File No. 333-13967) and the
Company's Quarterly Report on 10-Q for the quarter ended May 3,
1997 or otherwise identified to such counsel as material to the
Company and its subsidiaries, taken as a whole, to which the
Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or their respective property
is bound, other than conflicts, breaches or defaults for which
the requisite waivers, consents or amendments have been received,
(iii) to such counsel's knowledge, violate or conflict with any
applicable statute, rule or regulation, or any judgment, order or
decree naming the Company or any of its subsidiaries of any court
or any governmental body or agency having jurisdiction over the
Company, any of its subsidiaries or their respective property,
(iv) to such counsel's knowledge, and except as otherwise
provided in the Senior Credit Facility, result in the imposition
or creation of (or the obligation to create or impose) a Lien
under, any agreement or instrument to which the Company or any of
its subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound, or (v) to
such counsel's knowledge, result in the termination or revocation
of any Authorization of the Company or any of its subsidiaries or
result in any other impairment of the rights of the holder of any
such Authorization;
(xiv) such counsel does not have knowledge of any legal or
governmental proceedings pending or threatened to which the
Company or any of its subsidiaries is a party or to which any of
their respective property is subject, which might result, singly
or in the aggregate, in a Material Adverse Effect;
23
<PAGE>
(xv) Neither the Company nor any Guarantor is or, after
giving effect to the offering and sale of the Senior Notes and
the application of the net proceeds thereof as described in the
Offering Memorandum, will be, an "investment company" as such
term is defined in the Investment Company Act of 1940, as
amended;
(xvi) to such counsel's knowledge, and except for the
Registration Rights Agreement, there are no contracts, agreements
or understandings between the Company or any Guarantor and any
person granting such person the right to require the Company or
such Guarantor to file a registration statement under the Act
with respect to any securities of the Company or such Guarantor
(except as described in the Offering Memorandum) or to require
the Company or such Guarantor to include such securities with the
Notes and Subsidiary Guarantees registered pursuant to any
Registration Statement;
(xvii) the Indenture complies as to form in all material
respects with the requirements of the TIA, and the rules and
regulations of the Commission applicable to an indenture which is
qualified thereunder. It is not necessary in connection with the
offer, sale and delivery of the Senior Notes to the Initial
Purchaser in the manner contemplated by this Agreement or in
connection with the Exempt Resales to qualify the Indenture under
the TIA;
(xviii) no registration under the Act of the Senior Notes is
required for the sale of the Senior Notes to the Initial
Purchaser as contemplated by this Agreement or for the Exempt
Resales assuming (i) that the Initial Purchaser is a QIB, (ii)
the accuracy of, and compliance with, the Initial Purchaser's
representations and agreements contained in Section 7 of this
Agreement and (iii) the accuracy of the representations of the
Company and the Guarantors set forth in Section 6(ad) of this
Agreement and (iv) with respect to Accredited Institutions, the
accuracy of the representations made by each such Accredited
Institution as set forth in the letter of representation executed
by such Accre dited Institution in the form of Annex A to the
-------
Offering Memorandum;
(xix) such counsel has no reason to believe that, as of
the date of the Offering Memorandum or as of the Closing Date,
the Offering Memorandum, as amended or supplemented, if
applicable, (except for the financial statements and other
financial data included therein, as to which such counsel need
not express any belief) contains any untrue statement of a
material fact or omits to state a material fact necessary in
order to make the
24
<PAGE>
statements therein, in the light of the circumstances under which
they were made, not misleading.
The opinion of Faegre & Benson LLP described in Section 9(e) above
shall be rendered to you at the request of the Company and the Guarantors and
shall so state therein. In giving such opinion with respect to the matters
covered by Section 9(e)(xix), Faegre & Benson LLP may state that their opinion
and belief are based upon their participation in the preparation of the Offering
Memorandum and any amendments or supplements thereto and review and discussion
of the contents thereof, but are without independent check or verification
except as specified. Such opinion may be subject to such additional limitations
and exceptions as may be consented to by the Initial Purchaser or its counsel.
(f) The Initial Purchaser shall have received on the Closing Date an
opinion, dated the Closing Date, of Latham & Watkins, counsel for the Initial
Purchaser, in form and substance satisfactory to the Initial Purchaser.
(g) The Initial Purchaser shall have received, at the time this
Agreement is executed and at the Closing Date, letters dated the date hereof or
the Closing Date, as the case may be, in form and substance satisfactory to the
Initial Purchaser from Arthur Andersen LLP and KPMG Peat Marwick, LLP,
independent public accountants, containing the information and statements of the
type ordinarily included in accountants' "comfort letters" to the Initial
Purchaser with respect to the financial statements and certain financial
information contained in the Offering Memorandum.
(h) The Senior Notes shall have been approved by the NASD for trading
and duly listed in PORTAL.
(i) The Initial Purchaser shall have received a counterpart,
conformed as executed, of the Indenture which shall have been entered into by
the Company, the Guarantors and the Trustee.
(j) The Company and the Guarantors shall have executed the
Registration Rights Agreement and the Initial Purchaser shall have received an
original copy thereof, duly executed by the Company and the Guarantors.
(k) The Company shall not have failed at or prior to the Closing Date
to perform or comply with any of the agreements herein contained and required to
be performed or complied with by the Company at or prior to the Closing Date.
10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement shall
------------------------------------------
become effective upon the execution and delivery of this Agreement by the
parties hereto.
25
<PAGE>
This Agreement may be terminated at any time prior to the Closing Date
by the Initial Purchaser by written notice to the Company if any of the
following has occurred: (i) any outbreak or escalation of hostilities or other
national or international calamity or crisis or change in economic conditions or
in the financial markets of the United States or elsewhere that, in the Initial
Purchaser's judgment, is material and adverse and, in the Initial Purchaser's
judgment, makes it impracticable to market the Senior Notes on the terms and in
the manner contemplated in the Offering Memorandum, (ii) the suspension or
material limitation of trading in securities or other instruments on the New
York Stock Exchange, the American Stock Exchange, the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade or the
Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company or any Guarantor on any
exchange or in the over-the-counter market, (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority which in your reasonable
opinion materially and adversely affects, or will materially and adversely
affect, the business, prospects, financial condition or results of operations of
the Company and its subsidiaries, taken as a whole, (v) the declaration of a
banking moratorium by either federal or New York State authorities or (vi) the
taking of any action by any federal, state or local government or agency in
respect of its monetary or fiscal affairs which in your opinion has a material
adverse effect on the financial markets in the United States.
11. MISCELLANEOUS. Notices given pursuant to any provision of this
-------------
Agreement shall be addressed as follows: (i) if to the Company or any
Guarantor, to 7401 Boone Avenue North, Brooklyn Park, Minnesota 55428,
Attention: President and (ii) if to the Initial Purchaser, BancAmerica
Securities, Inc., 231 South LaSalle Street, Chicago, Illinois 60697, Attention:
High-Yield Syndication, or in any case to such other address as the person to be
notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, the Guarantors and the Initial
Purchaser set forth in or made pursuant to this Agreement shall remain operative
and in full force and effect, and will survive delivery of and payment for the
Senior Notes, regardless of (i) any investigation, or statement as to the
results thereof, made by or on behalf of the Initial Purchaser, the officers or
directors of the Initial Purchaser, any person controlling the Initial
Purchaser, the Company, any Guarantor, the officers or directors of the Company
or any Guarantor, or any person controlling the Company or any Guarantor, (ii)
acceptance of the Senior Notes and payment for them hereunder and (iii)
termination of Agreement.
If for any reason the Senior Notes are not delivered by or on behalf
of the Company as provided herein (other than as a result of any termination of
this Agreement pursuant to Section 10), the Company and each Guarantor, jointly
and severally, agree to reimburse the Initial Purchaser for all out-of-pocket
expenses (including the fees and disbursements of counsel) incurred by them.
Notwithstanding any termination of this Agreement, the Company shall be liable
for all
26
<PAGE>
expenses which it has agreed to pay pursuant to Section 5(i) hereof. The Company
and each Guarantor also agree, jointly and severally, to reimburse the Initial
Purchaser and its officers, directors and each person, if any, who controls such
Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act for any and all fees and expenses (including without limitation
the fees and expenses of counsel) incurred by them in connection with enforcing
their rights under this Agreement (including without limitation its rights under
this Section 8).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the Guarantors,
the Initial Purchaser, the Initial Purchaser's directors and officers, any
controlling persons referred to herein, the directors of the Company and the
Guarantors and their respective successors and assigns, all as and to the extent
provided in this Agreement, and no other person shall acquire or have any right
under or by virtue of this Agreement. The term "successors and assigns" shall
not include a purchaser of any of the Senior Notes from the Initial Purchaser
merely because of such purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
27
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Guarantors and the Initial Purchaser.
Very truly yours,
WILSONS THE LEATHER EXPERTS INC.
By: /s/ David L. Rogers
-----------------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER HOLDINGS INC.,
WILSONS CENTER, INC.,
ROSEDALE WILSONS, INC.,
RIVER HILLS WILSONS, INC.,
BERMANS THE LEATHER EXPERTS INC.,
WILSONS HOUSE OF SUEDE, INC.,
WILSONS TANNERY WEST, INC.,
WILSONS LEATHER OF ALABAMA INC.,
WILSONS LEATHER OF CONNECTICUT INC.,
WILSONS LEATHER OF FLORIDA INC.,
WILSONS LEATHER OF GEORGIA INC.,
WILSONS LEATHER OF INDIANA INC.,
WILSONS LEATHER OF IOWA INC.,
WILSONS LEATHER OF LOUISIANA INC.,
WILSONS LEATHER OF MARYLAND INC.,
WILSONS LEATHER OF MASSACHUSETTS INC.,
WILSONS LEATHER OF MICHIGAN INC.,
WILSONS LEATHER OF NEW JERSEY INC.,
WILSONS LEATHER OF NEW YORK, INC.,
WILSONS LEATHER OF NORTH CAROLINA INC.,
WILSONS LEATHER OF OHIO INC.,
WILSONS LEATHER OF PENNSYLVANIA INC.,
WILSONS LEATHER OR RHODE ISLAND INC.,
WILSONS LEATHER OF TENNESSEE INC.,
WILSONS LEATHER OF TEXAS INC.,
WILSONS LEATHER OF VIRGINIA INC.,
WILSONS LEATHER OF WEST VIRGINIA INC.,
WILSONS LEATHER OF WISCONSIN INC.,
WILSONS LEATHER OF ARKANSAS INC.,
WILSONS LEATHER OF DELAWARE INC.,
WILSONS LEATHER OF MISSISSIPPI INC.,
S-1
<PAGE>
WILSONS LEATHER OF MISSOURI INC.,
WILSONS LEATHER OF SOUTH CAROLINA INC.,
WILSONS LEATHER OF VERMONT INC.,
WILSONS INTERNATIONAL INC.
By: /s/ David L. Rogers
----------------------------------
Name: David L. Rogers
Title: President
BANCAMERICA SECURITIES, INC.
By: /s/ Zed S. Francis III
-----------------------------------
Name: Zed S. Francis III
Title: Executive Vice President
S-2
<PAGE>
SCHEDULE A
GUARANTORS
Wilsons Leather Holdings Inc.
Wilsons Center, Inc.
Rosedale Wilsons, Inc.
River Hills Wilsons, Inc.
Bermans The Leather Experts, Inc.
Wilsons House of Suede, Inc.
Wilsons Tannery West, Inc.
Wilsons Leather of Alabama Inc.
Wilsons Leather of Connecticut Inc.
Wilsons Leather of Florida Inc.
Wilsons Leather of Georgia Inc.
Wilsons Leather of Indiana Inc.
Wilsons Leather of Iowa Inc.
Wilsons Leather of Louisiana Inc.
Wilsons Leather of Maryland Inc.
Wilsons Leather of Massachusetts Inc.
Wilsons Leather of Michigan Inc.
Wilsons Leather of New Jersey Inc.
Wilsons Leather of New York Inc.
Wilsons Leather of North Carolina Inc.
<PAGE>
Wilsons Leather of Ohio Inc.
Wilsons Leather of Pennsylvania Inc.
Wilsons Leather of Rhode Island Inc.
Wilsons Leather of Tennessee Inc.
Wilsons Leather of Texas Inc.
Wilsons Leather of Virginia Inc.
Wilsons Leather of West Virginia Inc.
Wilsons Leather of Wisconsin Inc.
Wilsons Leather of Arkansas Inc.
Wilsons Leather of Delaware Inc.
Wilsons Leather of Mississippi Inc.
Wilsons Leather of Missouri Inc.
Wilsons Leather of South Carolina Inc.
Wilsons Leather of Vermont Inc.
Wilson International Inc.
2
<PAGE>
SCHEDULE B
SUBSIDIARIES(2)
Wilsons Leather Holdings Inc.
Wilsons Center, Inc.
Rosedale Wilsons, Inc.
River Hills Wilsons, Inc.
Bermans The Leather Experts Inc.
Wilsons House of Suede, Inc.
Wilsons Tannery West, Inc.
Wilsons Leather of Alabama Inc.
Wilsons Leather of Connecticut Inc.
Wilsons Leather of Florida Inc.
Wilsons Leather of Georgia Inc.
Wilsons Leather of Indiana Inc.
Wilsons Leather of Iowa Inc.
Wilsons Leather of Louisiana Inc.
Wilsons Leather of Maryland Inc.
Wilsons Leather of Massachusetts Inc.
Wilsons Leather of Michigan Inc.
Wilsons Leather of New Jersey Inc.
Wilsons Leather of New York Inc.
Wilsons Leather of North Carolina Inc.
Wilsons Leather of Ohio Inc.
<PAGE>
Wilsons Leather of Pennsylvania Inc.
Wilsons Leather of Rhode Island Inc.
Wilsons Leather of Tennessee Inc.
Wilsons Leather of Texas Inc.
Wilsons Leather of Virginia Inc.
Wilsons Leather of West Virginia Inc.
Wilsons Leather of Wisconsin Inc.
Wilsons Leather of Arkansas Inc.
Wilsons Leather of Delaware Inc.
Wilsons Leather of Mississippi Inc.
Wilsons Leather of Missouri Inc.
Wilsons Leather of South Carolina Inc.
Wilsons Leather of Vermont Inc.
Wilsons (UK) Limited
Wilsons Leather Gatsland Limited
Wilsons Leather Gatsair Limited
Wilsons International Inc.
2
<PAGE>
Exhibit A
________________________________________________________________________________
REGISTRATION RIGHTS AGREEMENT
Dated as of August 18, 1997
by and among
WILSONS THE LEATHER EXPERTS INC.
the SUBSIDIARY GUARANTORS party hereto
and
BANCAMERICA SECURITIES, INC.
________________________________________________________________________________
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
---------
into as of August __, 1997 by and among Wilsons the Leather Experts Inc., a
Minnesota corporation (the "Company"), the Subsidiary Guarantors (as defined
-------
herein) and BancAmerica Securities, Inc. (the "Initial Purchaser").
-----------------
This Agreement is made pursuant to the Purchase Agreement, dated August
14, 1997 (the "Purchase Agreement"), by and among the Company, the Initial
------------------
Purchaser and the Subsidiary Guarantors which provides for the sale by the
Company to the Initial Purchaser of an aggregate of $75 million principal amount
of the Company's 11 1/4% Senior Notes due 2004 (the " Senior Notes"). In order
to induce the Initial Purchaser to purchase the Senior Notes, the Company has
agreed to provide the registration rights set forth in this Agreement. The
execution and delivery of this Agreement is a condition to the obligations of
the Initial Purchaser set forth in Section 9 of the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
---
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
-------------
Commission: The Securities and Exchange Commission.
----------
Consummate: A Registered Exchange Offer shall be deemed "Consummated"
----------
for purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Exchange Notes to be issued in the Exchange Offer, (ii) the
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company
to the Registrar under the Indenture of Exchange Notes in the same aggregate
principal amount as the aggregate principal amount of Senior Notes that were
tendered by Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Senior Notes, each Interest
--------------------
Payment Date.
Effectiveness Target Date: As defined in Section 5.
-------------------------
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
Exchange Notes: The Company's 11 1/4% Senior Notes due 2004 to be issued
--------------
pursuant to the Indenture in the Exchange Offer.
Exchange Offer: The registration by the Company under the Act of the
--------------
Exchange Notes pursuant to a Registration Statement pursuant to which the
Company offers the Holders of all
1
<PAGE>
outstanding Transfer Restricted Securities the opportunity to exchange all such
outstanding Transfer Restricted Securities held by such Holders for Exchange
Notes in an aggregate principal amount equal to the aggregate principal amount
of the Transfer Restricted Securities tendered in such exchange offer by such
Holders.
Exchange Offer Registration Statement: The Registration Statement
-------------------------------------
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchaser
--------------
proposes to sell the Senior Notes to certain "qualified institutional buyers,"
as such term is defined in Rule 144A under the Act.
Holders: As defined in Section 2(b) hereof.
-------
Indemnified Holder: As defined in Section 8(a) hereof.
------------------
Initial Purchaser: As defined in the preamble hereto.
-----------------
Indenture: The Indenture, dated as of August 18, 1997, among the Company,
---------
Norwest Bank Minnesota, National Association, as trustee (the "Trustee"), and
-------
the Subsidiary Guarantors, pursuant to which the Notes are to be issued, as such
Indenture is amended or supplemented from time to time in accordance with the
terms thereof.
Interest Payment Date: As defined in the Indenture and the Notes.
---------------------
Issue Date: The date of this Agreement.
----------
NASD: National Association of Securities Dealers, Inc.
----
Notes: The Senior Notes and the Exchange Notes.
-----
Person: An individual, partnership, corporation, trust or unincorporated
------
organization, or a government or agency or political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement, as
----------
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
Record Holder: With respect to any Damages Payment Date relating to
-------------
Notes, each Person who is a Holder of Notes on the record date with respect to
the Interest Payment Date on which such Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
--------------------
Registration Statement: Any registration statement of the Company
----------------------
relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or
(b) the registration for resale of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, which is filed pursuant to the provisions of
this Agreement, in each case, including the Prospectus included therein, all
amendments and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.
2
<PAGE>
Shelf Filing Deadline: As defined in Section 4 hereof.
---------------------
Shelf Registration Statement: As defined in Section 4 hereof.
----------------------------
Subsidiary Guarantors: Those entities listed on Exhibit A hereto and by
---------------------
this reference incorporated herein.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
---
in effect on the date of the Indenture.
Transfer Restricted Securities: Each Senior Note, until the earliest
------------------------------
to occur of (a) the date on which such Senior Note is exchanged in the Exchange
Offer and entitled to be resold to the public by the Holder thereof without
complying with the prospectus delivery requirements of the Act, (b) the date on
which such Senior Note has been effectively registered under the Act and
disposed of in accordance with a Shelf Registration Statement and (c) the date
on which such Senior Note is distributed to the public pursuant to Rule 144
under the Act or by a Broker-Dealer pursuant to the "Plan of Distribution"
contemplated by the Exchange Offer Registration Statement (including delivery of
the Prospectus contained therein).
Underwritten Registration or Underwritten Offering: A registration in
------------------------- ---------------------
which securities of the Company are sold to an underwriter for reoffering to the
public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the
------------------------------
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to
-----------------------------------------
be a holder of Transfer Restricted Securities (each, a "Holder") whenever such
------
Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under applicable
law or Commission policy, the Company and the Subsidiary Guarantors shall (i)
cause to be filed with the Commission as soon as practicable after the Issue
Date, but in no event later than 60 days after the Issue Date, a Registration
Statement under the Act relating to the Exchange Notes and the Exchange Offer,
(ii) use their best efforts to cause such Registration Statement to become
effective at the earliest possible time, but in no event later than 150 days
after the Issue Date, (iii) in connection with the foregoing, (A) file all pre-
effective amendments to such Registration Statement as may be necessary in order
to cause such Registration Statement to become effective, (B) if applicable,
file a post-effective amendment to such Registration Statement pursuant to Rule
430A under the Act and (C) cause all necessary filings in connection with the
registration and qualification of the Exchange Notes to be made under the Blue
Sky laws of such jurisdictions as are necessary to permit Consummation of the
Exchange Offer, and (iv) upon the effectiveness of such Registration Statement,
commence the Exchange Offer. The Exchange Offer shall be on the appropriate form
permitting registration of the Exchange Notes to be
3
<PAGE>
offered in exchange for the Transfer Restricted Securities and to permit resales
of Notes held by Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company shall cause the Exchange Offer Registration Statement to
be effective continuously and shall keep the Exchange Offer open for a period of
not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; provided, however, that in no
event shall such period be less than 20 business days. The Company shall cause
the Exchange Offer to comply with all applicable federal and state securities
laws. No securities other than the Senior Notes and Exchange Notes shall be
included in the Exchange Offer Registration Statement. The Company shall use its
best efforts to cause the Exchange Offer to be Consummated on the earliest
practicable date after the Exchange Offer Registration Statement has become
effective, but in no event later than 30 business days thereafter.
(c) The Company shall indicate in a "Plan of Distribution" section
contained in the Prospectus contained in the Exchange Offer Registration
Statement that any Broker-Dealer who holds Notes that are Transfer Restricted
Securities and that were acquired for its own account as a result of market-
making activities or other trading activities (other than Transfer Restricted
Securities acquired directly from the Company) may exchange such Senior Notes
pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be
an "underwriter" within the meaning of the Act and must, therefore, deliver a
prospectus meeting the requirements of the Act in connection with any resales of
the Exchange Notes received by such Broker-Dealer in the Exchange Offer, which
prospectus delivery requirement may be satisfied by the delivery by such Broker-
Dealer of the Prospectus contained in the Exchange Offer Registration Statement.
Such "Plan of Distribution" section shall also contain all other information
with respect to such resales by Broker-Dealers that the Commission may require
in order to permit such resales pursuant thereto, but such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose the amount of
Senior Notes held by any such Broker-Dealer except to the extent required by the
Commission as a result of a change in policy after the date of this Agreement.
The Company and the Subsidiary Guarantors shall use their best efforts
to keep the Exchange Offer Registration Statement continuously effective,
supplemented and amended as required by the provisions of Section 6(c) below to
the extent necessary to ensure that it is available for resales of Notes
acquired by Broker-Dealers for their own accounts as a result of market-making
activities or other trading activities, and to ensure that it conforms with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period of 180 days from
the date on which the Exchange Offer Registration Statement is declared
effective.
The Company shall provide sufficient copies of the latest version of
such Prospectus to Broker-Dealers promptly upon request at any time during such
one-year period in order to facilitate such resales.
4
<PAGE>
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not required to file an
------------------
Exchange Offer Registration Statement or to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy (after the procedures set forth in Section 6(a) below have been complied
with) or (ii) if any Holder of Transfer Restricted Securities shall notify the
Company within 20 days of the Consummation of the Exchange Offer (A) that such
Holder is prohibited by applicable law or Commission policy from participating
in the Exchange Offer, or (B) that such Holder may not resell the Exchange Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and that the Prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such Holder, or
(C) that such Holder is a Broker-Dealer and holds Senior Notes acquired
directly from the Company or one of its affiliates, then the Company and the
Subsidiary Guarantors shall
(x) cause to be filed a shelf registration statement pursuant to
Rule 415 under the Act, which may be an amendment to the Exchange Offer
Registration Statement (in either event, the "Shelf Registration
------------------
Statement"), on or prior to the 60th day after the date on which the
Company (1) determines that it is not required to file the Exchange Offer
Registration Statement or (2) receives the notice contemplated by clause
(ii) above (the "Shelf Filing Deadline"), which Shelf Registration
---------------------
Statement shall provide for resales of all Transfer Restricted Securities
the Holders of which shall have provided the information required pursuant
to Section 4(b) hereof; and
(y) use their best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission on or before the 60th
day after the Shelf Filing Deadline.
The Company and the Subsidiary Guarantors shall use their best efforts to keep
such Shelf Registration Statement continuously effective, supplemented and
amended as required by the provisions of Sections 6(b) and (c) hereof to the
extent necessary to ensure that it is available for resales of Notes by the
Holders of Transfer Restricted Securities entitled to the benefit of this
Section 4(a), and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of at least two years following the
Issue Date; provided, that during any consecutive 365 day period, the Company
--------
may suspend the effectiveness of a Shelf Registration Statement, in the event
that, and for up to two periods of up to 45 consecutive days, but no more than
an aggregate of 60 days during any 365 day period if, (a)(i) an event occurs and
is continuing as a result of which the Shelf Registration Statement would, in
the Company's good faith judgment, contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein not misleading and (ii) if the Company determines in good faith that the
disclosure of such event at such time would have a material adverse effect on
the business, operations or prospects of the Company or (b) the disclosure
otherwise relates to a pending material business transaction which has not yet
been publicly disclosed.
(b) Provision by Holders of Certain Information in Connection with the
------------------------------------------------------------------
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
- ----------------------------
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor,
such information as the Company may reasonably request for use in connection
with any Shelf Registration Statement or Prospectus or preliminary Prospectus
included therein. No Holder of Transfer Restricted Securities shall be entitled
to Liquidated Damages pursuant to Section 5 hereof unless and until such
5
<PAGE>
Holder shall have used its best efforts to provide all such reasonably requested
information. Each Holder as to which any Shelf Registration Statement is being
effected agrees to furnish promptly to the Company all information required to
be disclosed in order to make the information previously furnished to the
Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (a) any of the Registration Statements required by this Agreement is
not filed with the Commission on or prior to the date specified for such filing
in this Agreement, (b) any of such Registration Statements has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), (c) the
-------------------------
Exchange Offer has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (d) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose during the respective periods specified herein
that such Registration Statements are to be kept continuously effective, without
being succeeded immediately by a post-effective amendment to such Registration
Statement that cures such failure and that is itself immediately declared
effective (each such event referred to in clauses (a) through (d), a
"Registration Default"), the Company and the Subsidiary Guarantors hereby
--------------------
jointly and severally agree to pay liquidated damages to each Holder of Transfer
Restricted Securities with respect to the first 90-day period immediately
following the occurrence of such Registration Default, in an amount equal to
$.05 per week per $1,000 principal amount of Transfer Restricted Securities held
by such Holder for each week or portion thereof that the Registration Default
continues. The amount of the liquidated damages shall increase by an additional
$.05 per week per $1,000 in principal amount of Transfer Restricted Securities
with respect to each subsequent 90-day period until all Registration Defaults
have been cured, up to a maximum amount of liquidated damages of $.50 per week
per $1,000 principal amount of Transfer Restricted Securities. All accrued
liquidated damages shall be paid to Record Holders by the Company by wire
transfer of immediately available funds or by federal funds check on each
Damages Payment Date, as provided in the Indenture. Following the cure of all
Registration Defaults relating to any particular Transfer Restricted Securities,
the accrual of liquidated damages with respect to such Transfer Restricted
Securities will cease.
All obligations of the Company and the Subsidiary Guarantors set forth in
the preceding paragraph that are outstanding with respect to any Transfer
Restricted Security at the time such security ceases to be a Transfer Restricted
Security shall survive until such time as all such obligations with respect to
such Security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
-------------------------------------
Exchange Offer, the Company and the Subsidiary Guarantors shall comply with all
of the provisions of Section 6(c) below, shall use their best efforts to effect
such exchange to permit the sale of Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof, and
shall comply with all of the following provisions:
(i) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer Restricted
Securities shall furnish, upon the request of the
6
<PAGE>
Company, prior to the Consummation thereof, a written representation to the
Company (which may be contained in the letter of transmittal contemplated
by the Exchange Offer Registration Statement) to the effect that (A) it is
not an affiliate of the Company, (B) it is not engaged in, and does not
intend to engage in, and has no arrangement or understanding with any
person to participate in, a distribution of the Exchange Notes to be issued
in the Exchange Offer and (C) it is acquiring the Exchange Notes in its
ordinary course of business. In addition, all such Holders of Transfer
Restricted Securities shall otherwise cooperate in the Company's
preparations for the Exchange Offer. Each Holder shall acknowledge and
agree (which acknowledgement and agreement may be contained in the letter
of transmittal contemplated by the Exchange Offer Registration Statement)
that any Broker-Dealer and any such Holder using the Exchange Offer to
participate in a distribution of the securities to be acquired in the
Exchange Offer (1) could not under Commission policy as in effect on the
date of this Agreement rely on the position of the Commission enunciated in
Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital
--------------------------- ----- -------
Holdings Corporation (available May 13, 1988), as interpreted in the
--------------------
Commission's letter to Shearman & Sterling dated July 2, 1993, and similar
no-action letters (including any no-action letter obtained pursuant to
clause (i) above), and (2) must comply with the registration and prospectus
delivery requirements of the Act in connection with a secondary resale
transaction and that such a secondary resale transaction should be covered
by an effective registration statement containing the selling security
holder information required by Item 507 or 508, as applicable, of
Regulation S-K if the resales are of Exchange Notes obtained by such Holder
in exchange for Senior Notes acquired by such Holder directly from the
Company.
(ii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Subsidiary Guarantors shall provide a
supplemental letter to the Commission (A) stating that the Company and the
Subsidiary Guarantors are registering the Exchange Offer in reliance on the
position of the Commission enunciated in Exxon Capital Holdings Corporation
----------------------------------
(available May 13, 1988), Morgan Stanley and Co., Inc. (available June 5,
----------------------------
1991) and (B) including a representation that neither the Company nor the
Subsidiary Guarantors have entered into any arrangement or understanding
with any Person to distribute the Exchange Notes to be received in the
Exchange Offer and that, to the best of the Company's information and
belief, each Holder participating in the Exchange Offer is acquiring the
Exchange Notes in its ordinary course of business and has no arrangement or
understanding with any Person to participate in the distribution of the
Exchange Notes received in the Exchange Offer.
(b) Shelf Registration Statement. In connection with the Shelf
----------------------------
Registration Statement, the Company and the Subsidiary Guarantors shall comply
with all the provisions of Section 6(c) below and shall use their best efforts
to effect such registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof, and pursuant thereto the Company will as expeditiously as
possible prepare and file with the Commission a Registration Statement relating
to the registration on any appropriate form under the Act, which form shall be
available for the sale of the Transfer Restricted Securities in accordance with
the intended method or methods of distribution thereof.
(c) General Provisions. In connection with any Registration Statement
------------------
and any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, any Registration
Statement and the related Prospectus required to permit resales of Notes by
Broker-Dealers), the Company shall:
7
<PAGE>
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements
(including, if required by the Act or any regulation thereunder, financial
statements of the Subsidiary Guarantors) for the period specified in
Section 3 or 4 of this Agreement, as applicable; upon the occurrence of any
event that would cause any such Registration Statement or the Prospectus
contained therein (A) to contain a material misstatement or omission or (B)
not to be effective and usable for resale of Transfer Restricted Securities
during the period required by this Agreement, the Company shall file
promptly an appropriate amendment to such Registration Statement, in the
case of clause (A), correcting any such misstatement or omission, and, in
the case of either clause (A) or (B), use its best efforts to cause such
amendment to be declared effective and such Registration Statement and the
related Prospectus to become usable for their intended purpose(s) as soon
as practicable thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be necessary
to keep the Registration Statement effective for the applicable period set
forth in Section 3 or 4 hereof, as applicable, or such shorter period as
will terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Act, and to comply fully with
the applicable provisions of Rules 424 and 430A under the Act in a timely
manner; and comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration Statement during
the applicable period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders promptly
and, if requested by such Persons, to confirm such advice in writing, (A)
when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to any Registration Statement
or any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or
for additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation of
any proceeding for any of the preceding purposes, (D) of the existence of
any fact or the happening of any event that makes any statement of a
material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto, or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes
in the Registration Statement or the Prospectus in order to make the
statements therein not misleading. If at any time the Commission shall
issue any stop order suspending the effectiveness of the Registration
Statement, or any state securities commission or other regulatory authority
shall issue an order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities under state securities
or Blue Sky laws, the Company and the Subsidiary Guarantors shall use their
best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time;
(iv) furnish to each of the selling Holders and each of the
underwriter(s), if any, before filing with the Commission, copies of any
Registration Statement or any Prospectus included therein or any amendments
or supplements to any such Registration Statement or Prospectus (including
all documents incorporated by reference after the initial filing of such
Registration Statement), which documents will be subject to the review of
such Holders and underwriter(s), if
8
<PAGE>
any, for a period of at least five business days, and the Company will not
file any such Registration Statement or Prospectus or any amendment or
supplement to any such Registration Statement or Prospectus (including all
such documents incorporated by reference) to which a selling Holder of
Transfer Restricted Securities covered by such Registration Statement or
the underwriter(s), if any, shall reasonably object within five business
days after the receipt thereof. A selling Holder or underwriter, if any,
shall be deemed to have reasonably objected to such filing if such
Registration Statement, amendment, Prospectus or supplement, as applicable,
as proposed to be filed, contains a material misstatement or omission;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Shelf Registration Statement or related
Prospectus, provide copies of such document to the selling Holders and to
the underwriter(s), if any, make the Company's representatives available
(and representatives of the Subsidiary Guarantors) for discussion of such
document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as such selling
Holders or underwriter(s), if any, reasonably may request; provided,
--------
however, that such persons shall first agree in writing with the Company
-------
that any information that is reasonably and in good faith designated by the
Company in writing as confidential at the time of delivery of such
information shall be kept confidential by such persons, unless and to the
extent that (i) disclosure of such information is required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities, (ii) disclosure of such information is required by law
(including any disclosure requirements pursuant to federal securities laws
in connection with the filing of the Shelf Registration Statement or the
use of any prospectus), (iii) such information becomes generally available
to the public other than as a result of a disclosure or failure to
safeguard such information by such person or (iv) such information becomes
available to such person from a source other than the Company and its
subsidiaries and such source is not bound by a confidentiality agreement;
(vi) make available at reasonable times during normal business
hours for inspection by the selling Holders, any underwriter participating
in any disposition pursuant to such Registration Statement, and any
attorney or accountant retained by such selling Holders or any of the
underwriter(s), all financial and other records, pertinent corporate
documents and properties of the Company and the Subsidiary Guarantors and
cause the Company's and the Subsidiary Guarantors' officers, directors and
employees to supply all information reasonably requested by any such
Holder, underwriter, attorney or accountant in connection with such
Registration Statement subsequent to the filing thereof and prior to its
effectiveness; provided, however, that such persons shall first agree in
-------- -------
writing with the Company that any information that is reasonably and in
good faith designated by the Company in writing as confidential at the time
of delivery of such information shall be kept confidential by such persons,
unless and to the extent that (i) disclosure of such information is
required by court or administrative order or is necessary to respond to
inquiries of regulatory authorities, (ii) disclosure of such information is
required by law (including any disclosure requirements pursuant to federal
securities laws in connection with the filing of the Shelf Registration
Statement or the use of any prospectus), (iii) such information becomes
generally available to the public other than as a result of a disclosure or
failure to safeguard such information by such person or (iv) such
information becomes available to such person from a source other than the
Company and its subsidiaries and such source is not bound by a
confidentiality agreement;
(vii) if requested by any selling Holders or the underwriter(s),
if any, promptly incorporate in any Registration Statement or Prospectus,
pursuant to a supplement or post-
9
<PAGE>
effective amendment if necessary, such information as such selling Holders
and underwriter(s), if any, may reasonably request to have included
therein, including, without limitation, information relating to the "Plan
of Distribution" of the Transfer Restricted Securities, information with
respect to the principal amount of Transfer Restricted Securities being
sold to such underwriter(s), the purchase price being paid therefor and any
other terms of the offering of the Transfer Restricted Securities to be
sold in such offering; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after the
Company is notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment;
(viii) cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating agencies, if
so requested by the Holders of a majority in aggregate principal amount of
Notes covered thereby or the underwriter(s), if any;
(ix) furnish to each selling Holder and each of the underwriter(s), if
any, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto, including
all documents incorporated by reference therein and all exhibits (including
exhibits incorporated therein by reference);
(x) deliver to each selling Holder and each of the underwriter(s), if
any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; the Company and the Subsidiary Guarantors
hereby consent to the use of the Prospectus and any amendment or supplement
thereto by each of the selling Holders and each of the underwriter(s), if
any, in connection with the offering and the sale of the Transfer
Restricted Securities covered by the Prospectus or any amendment or
supplement thereto;
(xi) enter into, and cause the Subsidiary Guarantors to enter into,
such agreements (including an underwriting agreement), and make, and cause
the Subsidiary Guarantors to make, such representations and warranties, and
take all such other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities pursuant
to any Registration Statement contemplated by this Agreement, all to such
extent as may be reasonably requested by the Initial Purchaser or by any
Holder of Transfer Restricted Securities or underwriter in connection with
any sale or resale pursuant to any Registration Statement contemplated by
this Agreement; and whether or not an underwriting agreement is entered
into and whether or not the registration is an Underwritten Registration,
the Company and the Subsidiary Guarantors shall:
(A) furnish to the Initial Purchaser, each selling Holder and each
underwriter, if any, in such substance and scope as they may request and
as are customarily made by issuers to underwriters in primary
underwritten offerings, upon the date of the Consummation of the
Exchange Offer and, if applicable, the effectiveness of the Shelf
Registration Statement:
(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, signed by (y) the
President or any Vice President and (z) a principal financial or
accounting officer of each of the Company and the Subsidiary
Guarantors, confirming, as of the date thereof, the matters set
forth in Sections 9(a), (b) and (c) of the Purchase Agreement and
such other matters as such parties may reasonably request;
10
<PAGE>
(2) an opinion, dated the date of Consummation of the Exchange
Offer or the date of effectiveness of the Shelf Registration
Statement, as the case may be, of counsel for the Company and the
Subsidiary Guarantors, covering the matters set forth in Section
9(e) of the Purchase Agreement and such other matter as such
parties may reasonably request, and in any event including a
statement to the effect that such counsel has participated in
conferences with officers and other representatives of the Company,
representatives of the independent public accountants for the
Company, the Initial Purchaser's representatives and the Initial
Purchaser's counsel in connection with the preparation of such
Registration Statement and the related Prospectus and have
considered the matters required to be stated therein and the
statements contained therein, although such counsel has not
independently verified the accuracy, completeness or fairness of
such statements; and that such counsel advises that, on the basis
of the foregoing (relying as to materiality to a large extent upon
facts provided to such counsel by officers and other
representatives of the Company and without independent check or
verification), no facts came to such counsel's attention that
caused such counsel to believe that the applicable Registration
Statement, at the time such Registration Statement or any post-
effective amendment thereto became effective, and, in the case of
the Exchange Offer Registration Statement, as of the date of
Consummation, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or that
the Prospectus contained in such Registration Statement as of its
date and, in the case of the opinion dated the date of Consummation
of the Exchange Offer, as of the date of Consummation, contained an
untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Without limiting the foregoing, such counsel may state further that
such counsel assumes no responsibility for, and has not
independently verified, the accuracy, completeness or fairness of
the financial statements, notes and schedules and other financial
data included in any Registration Statement contemplated by this
Agreement or the related Prospectus; and
(3) a customary comfort letter, dated as of the date of
Consummation of the Exchange Offer or the date of effectiveness of
the Shelf Registration Statement, as the case may be, from the
Company's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort letters
by underwriters in connection with primary underwritten offerings,
and affirming the matters set forth in the comfort letters
delivered pursuant to Section 9(g) of the Purchase Agreement,
without exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with
clause (A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company
pursuant to this clause (xi), if any.
If at any time the representations and warranties of the Company and
the Subsidiary Guarantors contemplated in clause (A)(1) above cease to be
true and correct, the Company or the
11
<PAGE>
Subsidiary Guarantors shall so advise the Initial Purchaser and the
underwriter(s), if any, and each selling Holder promptly and, if requested
by such Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted Securities,
cooperate with, and cause the Subsidiary Guarantors to cooperate with, the
selling Holders, the underwriter(s), if any, and their respective counsel
in connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders or underwriter(s) may request and do
any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted Securities
covered by the Shelf Registration Statement; provided, however, that
neither the Company nor the Subsidiary Guarantors shall be required to
register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service of
process in suits or to taxation, other than as to matters and transactions
relating to the Registration Statement, in any jurisdiction where it is not
now so subject;
(xiii) shall issue, upon the request of any Holder of Senior Notes
covered by the Shelf Registration Statement, Exchange Notes, having an
aggregate principal amount equal to the aggregate principal amount of
Senior Notes surrendered to the Company by such Holder in exchange therefor
or being sold by such Holder; such Exchange Notes to be registered in the
name of such Holder or in the name of the purchaser(s) of such Senior
Notes, as the case may be; in return, the Senior Notes held by such Holder
shall be surrendered to the Company for cancellation;
(xiv) cooperate with, and cause the Subsidiary Guarantors to
cooperate with, the selling Holders and the underwriter(s), if any, to
facilitate the timely preparation and delivery of certificates representing
Transfer Restricted Securities to be sold and not bearing any restrictive
legends; and enable such Transfer Restricted Securities to be in such
denominations and registered in such names as the Holders or the
underwriter(s), if any, may request at least two business days prior to any
sale of Transfer Restricted Securities made by such underwriter(s);
(xv) use its best efforts to cause the Transfer Restricted Securities
covered by the Registration Statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof or the underwriter(s), if any, to
consummate the disposition of such Transfer Restricted Securities, subject
to the proviso contained in clause (xii) above;
(xvi) if any fact or event contemplated by clause (c)(iii)(D) above
shall exist or have occurred, and subject to the proviso at the end of
Section 4(a) above, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so that, as
thereafter delivered to the purchasers of Transfer Restricted Securities,
the Prospectus will not contain an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein
not misleading;
(xvii) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of the Registration Statement and provide
the Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with the
Depositary Trust Company;
12
<PAGE>
(xviii) cooperate and assist in any filings required to be made
with the NASD and in the performance of any reasonable due diligence
investigation by any underwriter (including any "qualified independent
underwriter") that is required to be retained in accordance with the rules
and regulations of the NASD, and use its reasonable best efforts to cause
such Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to enable the
Holders selling Transfer Restricted Securities to consummate the
disposition of such Transfer Restricted Securities;
(xix) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to
its security holders, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be audited)
for the twelve-month period (A) commencing at the end of any fiscal quarter
in which Transfer Restricted Securities are sold to underwriters in a firm
or best efforts Underwritten Offering or (B) if not sold to underwriters in
such an offering, beginning with the first month of the Company's first
fiscal quarter commencing after the effective date of the Registration
Statement;
(xx) cause the Indenture to be qualified under the TIA not later than
the effective date of the first Registration Statement required by this
Agreement, and, in connection therewith, cooperate, and cause the
Subsidiary Guarantors to cooperate, with the Trustee and the Holders of
Notes to effect such changes to the Indenture as may be required for such
Indenture to be so qualified in accordance with the terms of the TIA; and
execute, and cause the Subsidiary Guarantors to execute, and use its best
efforts to cause the Trustee to execute, all documents that may be required
to effect such changes and all other forms and documents required to be
filed with the Commission to enable such Indenture to be so qualified in a
timely manner;
(xxi) cause all Transfer Restricted Securities covered by the
Registration Statement to be listed on each securities exchange on which
similar securities issued by the Company are then listed if requested by
the Holders of a majority in aggregate principal amount of Senior Notes or
the managing underwriter(s), if any; and
(xxii) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 and
Section 15 of the Exchange Act.
Each Holder agrees by acquisition of a Transfer Restricted Security that,
upon receipt of any notice from the Company of the existence of any fact of the
kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof,
or until it is advised in writing (the "Advice") by the Company that the use of
------
the Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus. If so
directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such notice. In the event
the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section
6(c)(iii)(D) hereof to and including the date when each selling Holder covered
by such Registration Statement shall have received the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or
shall have received the Advice.
13
<PAGE>
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's or the Subsidiary Guarantors'
performance of or compliance with this Agreement will be borne by the Company or
the Subsidiary Guarantors, regardless of whether a Registration Statement
becomes effective, including without limitation: (i) all registration and filing
fees and expenses (including filings made by the Initial Purchaser or Holder
with the NASD (and, if applicable, the fees and expenses of any "qualified
independent underwriter" and its counsel that may be required by the rules and
regulations of the NASD)); (ii) all fees and expenses of compliance with federal
securities and state Blue Sky or securities laws; (iii) all expenses of printing
(including printing certificates for the Exchange Notes to be issued in the
Exchange Offer and printing of Prospectuses), messenger and delivery services
and telephone; (iv) all fees and disbursements of counsel for the Company, the
Subsidiary Guarantors and, subject to Section 7(b) below, the Holders of
Transfer Restricted Securities; (v) all application and filing fees in
connection with listing Notes on a national securities exchange or automated
quotation system pursuant to the requirements hereof; and (vi) all fees and
disbursements of independent certified public accountants of the Company and the
Subsidiary Guarantors (including the expenses of any special audit and comfort
letters required by or incident to such performance).
The Company will, in any event, bear its and the Subsidiary Guarantors'
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expenses
of any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchaser and the Holders of Transfer Restricted Securities being
tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
Latham & Watkins or such other counsel as may be chosen by the Holders of a
majority in principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and the Subsidiary Guarantors, jointly and severally,
agree to indemnify and hold harmless (i) each Holder and (ii) each person, if
any, who controls (within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act) any Holder (any of the persons referred to in this clause (ii)
being hereinafter referred to as a "controlling person") and (iii) the
respective officers, directors, partners, employees, representatives and agents
of any Holder or any controlling person (any person referred to in clause (i),
(ii) or (iii) may hereinafter be referred to as an "Indemnified Holder"), to the
------------------
fullest extent lawful, from and against any and all losses, claims, damages,
liabilities, judgments, actions and expenses (including without limitation and
as incurred, reimbursement of all reasonable costs of investigating, preparing,
pursuing or defending any claim or action, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, including the
reasonable fees and expenses of counsel to any Indemnified Holder) directly or
indirectly caused by, related to, based upon, arising out of or in connection
with any untrue statement or alleged untrue
14
<PAGE>
statement of a material fact contained in any Registration Statement or
Prospectus (or any amendment or supplement thereto), or 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, claims, damages, liabilities or expenses are caused by an untrue
statement or omission or alleged untrue statement or omission that is made in
reliance upon and in conformity with information relating to any of the Holders
furnished in writing to the Company by any of the Holders expressly for use
therein.
In case any action or proceeding (including any governmental or regulatory
investigation or proceeding) shall be brought or asserted against any of the
Indemnified Holders with respect to which indemnity may be sought against the
Company or the Subsidiary Guarantors, such Indemnified Holder (or the
Indemnified Holder controlled by such controlling person) shall promptly notify
the Company and the Subsidiary Guarantors in writing (provided, that the failure
to give such notice shall not relieve the Company or the Subsidiary Guarantors
of its obligations pursuant to this Agreement). Such Indemnified Holder shall
have the right to employ its own counsel in any such action and the fees and
expenses of such counsel shall be paid, as incurred, by the Company and the
Subsidiary Guarantors (regardless of whether it is ultimately deter mined that
an Indemnified Holder is not entitled to indemnification hereunder). The Company
and the Subsidiary Guarantors shall not, in connection with any one such action
or proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) at any time
for all Indemnified Holders, which firm shall be designated by the Holders of a
majority in principal amount of the Senior Notes. The Company shall be liable
for any settlement of any such action or proceeding effected with the Company's
prior written consent, which consent shall not be withheld unreasonably, and the
Company agrees to indemnify and hold harmless any In demnified Holder from and
against any loss, claim, damage, liability or expense by reason of any
settlement of any action effected with the written consent of the Company. The
Company shall not, without the prior written consent of each Indemnified Holder,
settle or compromise or consent to the entry of judgment in or otherwise seek to
terminate any pending or threatened action, claim, litigation or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not any Indemnified Holder is a party thereto), unless such
settlement, compromise, consent or termination includes an unconditional release
of each Indemnified Holder from all liability arising out of such action, claim,
litigation or proceeding.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company and the Subsidiary
Guarantors, and their respective directors, officers, and any person controlling
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company, and the respective officers, directors, partners, employees,
representatives and agents of each such person, to the same extent as the
foregoing indemnity from the Company and the Subsidiary Guarantors to each of
the Indemnified Holders, but only with respect to claims and actions based on
information relating to such Holder furnished in writing by such Holder
expressly for use in any Registration Statement. In case any action or
proceeding shall be brought against the Company, the Subsidiary Guarantors or
their respective directors or officers or any such controlling person in respect
of which indemnity may be sought against a Holder of Transfer Restricted
Securities, such Holder shall have the rights and duties given the Company and
the Company or its directors or officers or such controlling person shall have
the rights and duties given to each Holder by the preceding paragraph. In no
event shall the liability of any selling Holder hereunder be greater in amount
than the dollar amount of the proceeds received by such Holder upon the sale of
the Transfer Restricted Securities giving rise to such indemnification
obligation.
15
<PAGE>
(c) If the indemnification provided for in this Section 8 is unavailable
to an indemnified party under Section 8(a) or Section 8(b) hereof (other than by
reason of exceptions provided in those Sections) in respect of any losses,
claims, damages, liabilities or expenses referred to therein, then each
applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Holders on the other hand from their sale of
Transfer Restricted Securities or if such allocation is not permitted by
applicable law, the relative fault of the Company on the one hand and of the
Indemnified Holder on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of the
Company and the Subsidiary Guarantors on the one hand and of the Indemnified
Holder on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Subsidiary Guarantors or by the Indemnified
Holder and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include, subject to the
limitations set forth in the second paragraph of Section 8(a), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company, the Subsidiary Guarantors and each Holder of Transfer
Restricted Securities agree that it would not be just and equitable if
contribution pursuant to this Section 8(c) were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or expenses referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with in vestigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8, none of the Holders (and its
related Indemnified Holders) shall be required to contribute, in the aggregate,
any amount in excess of the amount by which the total discount received by such
Holder with respect to the Senior Notes exceeds the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute pursuant
to this Section 8(c) are several in proportion to the respective principal
amount of Senior Notes held by each of the Holders hereunder and not joint.
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding, to make available to any Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
from such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A.
16
<PAGE>
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to the Company.
SECTION 12. MISCELLANEOUS
(a) Remedies. The Company and the Subsidiary Guarantors agree that
--------
monetary damages (including the liquidated damages contemplated hereby) would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of this Agreement and hereby agree to waive the defense in any
action for specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not, and will cause
--------------------------
the Subsidiary Guarantors not to, on or after the date of this Agreement enter
into any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as otherwise described in the Offering Memorandum,
neither the Company nor the Subsidiary Guarantors have previously entered into
any agreement granting any registration rights with respect to its securities to
any Person. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
the Company's securities under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Notes. The Company will not take any
--------------------------------
action, or permit any change to occur, with respect to the Notes that would
materially and adversely affect the ability of the Holders to Consummate any
Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not
----------------------
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless the Company has obtained the
written consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose securities are being tendered pursuant to the Exchange
Offer and that does not affect directly or indirectly the rights of other
Holders whose securities are not being tendered pursuant to
17
<PAGE>
such Exchange Offer may be given by the Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities being tendered or registered.
(e) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company:
Wilsons the Leather Experts Inc.
7401 Boone Avenue North
Brooklyn Park, Minnesota 55428
Telecopier No.: (612) 391-4906
Attention: Douglas J. Treff, CFO
With a copy to:
Faegre & Benson
2200 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Telecopier No.: (612) 336-3026
Attention: Susan Jacobson
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; provided, however, that
this Agreement shall not inure to the benefit of or be binding upon a successor
or assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
18
<PAGE>
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement together with the other Operative
----------------
Documents (as defined in the Purchase Agreement) is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Transfer Restricted Securities. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
19
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Very truly yours,
WILSONS THE LEATHER EXPERTS INC.
By:___________________________________
Name: David L. Rogers
Title: President
WILSONS LEATHER HOLDINGS INC.,
WILSONS CENTER, INC.,
ROSEDALE WILSONS, INC.,
RIVER HILLS WILSONS, INC.,
BERMANS THE LEATHER EXPERTS INC.,
WILSONS HOUSE OF SUEDE, INC.,
WILSONS TANNERY WEST, INC.,
WILSONS LEATHER OF ALABAMA INC.,
WILSONS LEATHER OF CONNECTICUT INC.,
WILSONS LEATHER OF FLORIDA INC.,
WILSONS LEATHER OF GEORGIA INC.,
WILSONS LEATHER OF INDIANA INC.,
WILSONS LEATHER OF IOWA INC.,
WILSONS LEATHER OF LOUISIANA INC.,
WILSONS LEATHER OF MARYLAND INC.,
WILSONS LEATHER OF MASSACHUSETTS INC.,
WILSONS LEATHER OF MICHIGAN INC.,
WILSONS LEATHER OF NEW JERSEY INC.,
WILSONS LEATHER OF NEW YORK, INC.,
WILSONS LEATHER OF NORTH CAROLINA INC.,
WILSONS LEATHER OF OHIO INC.,
WILSONS LEATHER OF PENNSYLVANIA INC.,
WILSONS LEATHER OR RHODE ISLAND INC.,
WILSONS LEATHER OF TENNESSEE INC.,
WILSONS LEATHER OF TEXAS INC.,
WILSONS LEATHER OF VIRGINIA INC.,
WILSONS LEATHER OF WEST VIRGINIA INC.,
WILSONS LEATHER OF WISCONSIN INC.,
WILSONS LEATHER OF ARKANSAS INC.,
WILSONS LEATHER OF DELAWARE INC.,
WILSONS LEATHER OF MISSISSIPPI INC.,
WILSONS LEATHER OF MISSOURI INC.,
WILSONS LEATHER OF SOUTH CAROLINA INC.,
S-1
<PAGE>
WILSONS LEATHER OF VERMONT INC.,
WILSONS INTERNATIONAL INC.
By:________________________________
Name: David L. Rogers
Title: President
BANCAMERICA SECURITIES, INC.
By:_________________________________
Name:
Title:
S-2
<PAGE>
EXHIBIT A
---------
Subsidiary Guarantors
---------------------
Wilsons Leather Holdings Inc.
Wilsons Center, Inc.
Rosedale Wilsons, Inc.
River Hills Wilsons, Inc.
Bermans The Leather Experts Inc.
Wilsons House of Suede, Inc.
Wilsons Tannery West, Inc.
Wilsons Leather of Alabama Inc.
Wilsons Leather of Connecticut Inc.
Wilsons Leather of Florida Inc.
Wilsons Leather of Georgia Inc.
Wilsons Leather of Indiana Inc.
Wilsons Leather of Iowa Inc.
Wilsons Leather of Louisiana Inc.
Wilsons Leather of Maryland Inc.
Wilsons Leather of Massachusetts Inc.
Wilsons Leather of Michigan Inc.
Wilsons Leather of New Jersey Inc.
Wilsons Leather of New York Inc.
Wilsons Leather of North Carolina Inc.
Wilsons Leather of Ohio Inc.
Wilsons Leather of Pennsylvania Inc.
A-1
<PAGE>
Wilsons Leather of Rhode Island Inc.
Wilsons Leather of Tennessee Inc.
Wilsons Leather of Texas Inc.
Wilsons Leather of Virginia Inc.
Wilsons Leather of West Virginia Inc.
Wilsons Leather of Wisconsin Inc.
Wilsons Leather of Arkansas Inc.
Wilsons Leather of Delaware Inc.
Wilsons Leather of Mississippi Inc.
Wilsons Leather of Missouri Inc.
Wilsons Leather of South Carolina Inc.
Wilsons Leather of Vermont Inc.
Wilsons International Inc.
A-2
<PAGE>
Exhibit 10.5
_____________________________________________________________________________
REGISTRATION RIGHTS AGREEMENT
Dated as of August 18, 1997
by and among
WILSONS THE LEATHER EXPERTS INC.
the SUBSIDIARY GUARANTORS party hereto
and
BANCAMERICA SECURITIES, INC.
_____________________________________________________________________________
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
---------
into as of August __, 1997 by and among Wilsons the Leather Experts Inc., a
Minnesota corporation (the "Company"), the Subsidiary Guarantors (as defined
-------
herein) and BancAmerica Securities, Inc. (the "Initial Purchaser").
-----------------
This Agreement is made pursuant to the Purchase Agreement, dated August
14, 1997 (the "Purchase Agreement"), by and among the Company, the Initial
------------------
Purchaser and the Subsidiary Guarantors which provides for the sale by the
Company to the Initial Purchaser of an aggregate of $75 million principal amount
of the Company's 11 1/4% Senior Notes due 2004 (the " Senior Notes"). In order
to induce the Initial Purchaser to purchase the Senior Notes, the Company has
agreed to provide the registration rights set forth in this Agreement. The
execution and delivery of this Agreement is a condition to the obligations of
the Initial Purchaser set forth in Section 9 of the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
---
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
-------------
Commission: The Securities and Exchange Commission.
----------
Consummate: A Registered Exchange Offer shall be deemed "Consummated" for
----------
purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Exchange Notes to be issued in the Exchange Offer, (ii) the
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company
to the Registrar under the Indenture of Exchange Notes in the same aggregate
principal amount as the aggregate principal amount of Senior Notes that were
tendered by Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Senior Notes, each Interest
--------------------
Payment Date.
Effectiveness Target Date: As defined in Section 5.
-------------------------
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
Exchange Notes: The Company's 11 1/4% Senior Notes due 2004 to be issued
--------------
pursuant to the Indenture in the Exchange Offer.
<PAGE>
Exchange Offer: The registration by the Company under the Act of the
--------------
Exchange Notes pursuant to a Registration Statement pursuant to which the
Company offers the Holders of all outstanding Transfer Restricted Securities the
opportunity to exchange all such outstanding Transfer Restricted Securities held
by such Holders for Exchange Notes in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities tendered in
such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement
-------------------------------------
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchaser proposes
--------------
to sell the Senior Notes to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act.
Holders: As defined in Section 2(b) hereof.
-------
Indemnified Holder: As defined in Section 8(a) hereof.
------------------
Initial Purchaser: As defined in the preamble hereto.
-----------------
Indenture: The Indenture, dated as of August 18, 1997, among the
---------
Company, Norwest Bank Minnesota, National Association, as trustee (the
"Trustee"), and the Subsidiary Guarantors, pursuant to which the Notes are to be
-------
issued, as such Indenture is amended or supplemented from time to time in
accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture and the Notes.
---------------------
Issue Date: The date of this Agreement.
----------
NASD: National Association of Securities Dealers, Inc.
----
Notes: The Senior Notes and the Exchange Notes.
-----
Person: An individual, partnership, corporation, trust or unincorporated
------
organization, or a government or agency or political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement, as
----------
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
Record Holder: With respect to any Damages Payment Date relating to
-------------
Notes, each Person who is a Holder of Notes on the record date with respect to
the Interest Payment Date on which such Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
--------------------
Registration Statement: Any registration statement of the Company
----------------------
relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or
(b) the registration for resale of Transfer
2
<PAGE>
Restricted Securities pursuant to the Shelf Registration Statement, which is
filed pursuant to the provisions of this Agreement, in each case, including the
Prospectus included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
Shelf Filing Deadline: As defined in Section 4 hereof.
---------------------
Shelf Registration Statement: As defined in Section 4 hereof.
----------------------------
Subsidiary Guarantors: Those entities listed on Exhibit A hereto and by
---------------------
this reference incorporated herein.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
---
in effect on the date of the Indenture.
Transfer Restricted Securities: Each Senior Note, until the earliest to
------------------------------
occur of (a) the date on which such Senior Note is exchanged in the Exchange
Offer and entitled to be resold to the public by the Holder thereof without
complying with the prospectus delivery requirements of the Act, (b) the date on
which such Senior Note has been effectively registered under the Act and
disposed of in accordance with a Shelf Registration Statement and (c) the date
on which such Senior Note is distributed to the public pursuant to Rule 144
under the Act or by a Broker-Dealer pursuant to the "Plan of Distribution"
contemplated by the Exchange Offer Registration Statement (including delivery of
the Prospectus contained therein).
Underwritten Registration or Underwritten Offering: A registration in
------------------------- ---------------------
which securities of the Company are sold to an underwriter for reoffering to the
public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the
------------------------------
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to be a
-----------------------------------------
holder of Transfer Restricted Securities (each, a "Holder") whenever such Person
------
owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under applicable
law or Commission policy, the Company and the Subsidiary Guarantors shall (i)
cause to be filed with the Commission as soon as practicable after the Issue
Date, but in no event later than 60 days after the Issue Date, a Registration
Statement under the Act relating to the Exchange Notes and the Exchange Offer,
(ii) use their best efforts to cause such Registration Statement to become
effective at the earliest possible time, but in no event later than 150 days
after the Issue Date, (iii) in connection with the foregoing, (A) file all pre-
effective amendments to such
3
<PAGE>
Registration Statement as may be necessary in order to cause such Registration
Statement to become effective, (B) if applicable, file a post-effective
amendment to such Registration Statement pursuant to Rule 430A under the Act and
(C) cause all necessary filings in connection with the registration and
qualification of the Exchange Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) upon the effectiveness of such Registration Statement, commence the
Exchange Offer. The Exchange Offer shall be on the appropriate form permitting
registration of the Exchange Notes to be offered in exchange for the Transfer
Restricted Securities and to permit resales of Notes held by Broker-Dealers as
contemplated by Section 3(c) below.
(b) The Company shall cause the Exchange Offer Registration Statement to
be effective continuously and shall keep the Exchange Offer open for a period of
not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; provided, however, that in no
event shall such period be less than 20 business days. The Company shall cause
the Exchange Offer to comply with all applicable federal and state securities
laws. No securities other than the Senior Notes and Exchange Notes shall be
included in the Exchange Offer Registration Statement. The Company shall use its
best efforts to cause the Exchange Offer to be Consummated on the earliest
practicable date after the Exchange Offer Registration Statement has become
effective, but in no event later than 30 business days thereafter.
(c) The Company shall indicate in a "Plan of Distribution" section
contained in the Prospectus contained in the Exchange Offer Registration
Statement that any Broker-Dealer who holds Notes that are Transfer Restricted
Securities and that were acquired for its own account as a result of market-
making activities or other trading activities (other than Transfer Restricted
Securities acquired directly from the Company) may exchange such Senior Notes
pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be
an "underwriter" within the meaning of the Act and must, therefore, deliver a
prospectus meeting the requirements of the Act in connection with any resales of
the Exchange Notes received by such Broker-Dealer in the Exchange Offer, which
prospectus delivery requirement may be satisfied by the delivery by such Broker-
Dealer of the Prospectus contained in the Exchange Offer Registration Statement.
Such "Plan of Distribution" section shall also contain all other information
with respect to such resales by Broker-Dealers that the Commission may require
in order to permit such resales pursuant thereto, but such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose the amount of
Senior Notes held by any such Broker-Dealer except to the extent required by the
Commission as a result of a change in policy after the date of this Agreement.
The Company and the Subsidiary Guarantors shall use their best efforts to
keep the Exchange Offer Registration Statement continuously effective,
supplemented and amended as required by the provisions of Section 6(c) below to
the extent necessary to ensure that it is available for resales of Notes
acquired by Broker-Dealers for their own accounts as a result of market-making
activities or other trading activities, and to ensure that it conforms with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period of 180 days from
the date on which the Exchange Offer Registration Statement is declared
effective.
The Company shall provide sufficient copies of the latest version of such
Prospectus to Broker-Dealers promptly upon request at any time during such one-
year period in order to facilitate such resales.
4
<PAGE>
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not required to file an
------------------
Exchange Offer Registration Statement or to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy (after the procedures set forth in Section 6(a) below have been complied
with) or (ii) if any Holder of Transfer Restricted Securities shall notify the
Company within 20 days of the Consummation of the Exchange Offer (A) that such
Holder is prohibited by applicable law or Commission policy from participating
in the Exchange Offer, or (B) that such Holder may not resell the Exchange Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and that the Prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such Holder, or
(C) that such Holder is a Broker-Dealer and holds Senior Notes acquired
directly from the Company or one of its affiliates, then the Company and the
Subsidiary Guarantors shall
(x) cause to be filed a shelf registration statement pursuant to Rule
415 under the Act, which may be an amendment to the Exchange Offer
Registration Statement (in either event, the "Shelf Registration Statement"),
----------------------------
on or prior to the 60th day after the date on which the Company (1)
determines that it is not required to file the Exchange Offer Registration
Statement or (2) receives the notice contemplated by clause (ii) above (the
"Shelf Filing Deadline"), which Shelf Registration Statement shall provide
----------------------
for resales of all Transfer Restricted Securities the Holders of which shall
have provided the information required pursuant to Section 4(b) hereof; and
(y) use their best efforts to cause such Shelf Registration Statement
to be declared effective by the Commission on or before the 60th day after
the Shelf Filing Deadline.
The Company and the Subsidiary Guarantors shall use their best efforts to keep
such Shelf Registration Statement continuously effective, supplemented and
amended as required by the provisions of Sections 6(b) and (c) hereof to the
extent necessary to ensure that it is available for resales of Notes by the
Holders of Transfer Restricted Securities entitled to the benefit of this
Section 4(a), and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of at least two years following the
Issue Date; provided, that during any consecutive 365 day period, the Company
--------
may suspend the effectiveness of a Shelf Registration Statement, in the event
that, and for up to two periods of up to 45 consecutive days, but no more than
an aggregate of 60 days during any 365 day period if, (a)(i) an event occurs and
is continuing as a result of which the Shelf Registration Statement would, in
the Company's good faith judgment, contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein not misleading and (ii) if the Company determines in good faith that the
disclosure of such event at such time would have a material adverse effect on
the business, operations or prospects of the Company or (b) the disclosure
otherwise relates to a pending material business transaction which has not yet
been publicly disclosed.
(b) Provision by Holders of Certain Information in Connection with the
------------------------------------------------------------------
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
- ----------------------------
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder
5
<PAGE>
furnishes to the Company in writing, within 20 days after receipt of a request
therefor, such information as the Company may reasonably request for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. No Holder of Transfer Restricted Securities shall
be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until
such Holder shall have used its best efforts to provide all such reasonably
requested information. Each Holder as to which any Shelf Registration Statement
is being effected agrees to furnish promptly to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (a) any of the Registration Statements required by this Agreement is
not filed with the Commission on or prior to the date specified for such filing
in this Agreement, (b) any of such Registration Statements has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), (c) the
-------------------------
Exchange Offer has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (d) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose during the respective periods specified herein
that such Registration Statements are to be kept continuously effective, without
being succeeded immediately by a post-effective amendment to such Registration
Statement that cures such failure and that is itself immediately declared
effective (each such event referred to in clauses (a) through (d), a
"Registration Default"), the Company and the Subsidiary Guarantors hereby
--------------------
jointly and severally agree to pay liquidated damages to each Holder of Transfer
Restricted Securities with respect to the first 90-day period immediately
following the occurrence of such Registration Default, in an amount equal to
$.05 per week per $1,000 principal amount of Transfer Restricted Securities held
by such Holder for each week or portion thereof that the Registration Default
continues. The amount of the liquidated damages shall increase by an additional
$.05 per week per $1,000 in principal amount of Transfer Restricted Securities
with respect to each subsequent 90-day period until all Registration Defaults
have been cured, up to a maximum amount of liquidated damages of $.50 per week
per $1,000 principal amount of Transfer Restricted Securities. All accrued
liquidated damages shall be paid to Record Holders by the Company by wire
transfer of immediately available funds or by federal funds check on each
Damages Payment Date, as provided in the Indenture. Following the cure of all
Registration Defaults relating to any particular Transfer Restricted Securities,
the accrual of liquidated damages with respect to such Transfer Restricted
Securities will cease.
All obligations of the Company and the Subsidiary Guarantors set forth
in the preceding paragraph that are outstanding with respect to any Transfer
Restricted Security at the time such security ceases to be a Transfer Restricted
Security shall survive until such time as all such obligations with respect to
such Security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
-------------------------------------
Exchange Offer, the Company and the Subsidiary Guarantors shall comply with all
of the provisions of Section 6(c) below,
6
<PAGE>
shall use their best efforts to effect such exchange to permit the sale of
Transfer Restricted Securities being sold in accordance with the intended method
or methods of distribution thereof, and shall comply with all of the following
provisions:
(i) As a condition to its participation in the Exchange Offer pursuant
to the terms of this Agreement, each Holder of Transfer Restricted Securities
shall furnish, upon the request of the Company, prior to the Consummation
thereof, a written representation to the Company (which may be contained in
the letter of transmittal contemplated by the Exchange Offer Registration
Statement) to the effect that (A) it is not an affiliate of the Company, (B)
it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a
distribution of the Exchange Notes to be issued in the Exchange Offer and (C)
it is acquiring the Exchange Notes in its ordinary course of business. In
addition, all such Holders of Transfer Restricted Securities shall otherwise
cooperate in the Company's preparations for the Exchange Offer. Each Holder
shall acknowledge and agree (which acknowledgement and agreement may be
contained in the letter of transmittal contemplated by the Exchange Offer
Registration Statement) that any Broker-Dealer and any such Holder using the
Exchange Offer to participate in a distribution of the securities to be
acquired in the Exchange Offer (1) could not under Commission policy as in
effect on the date of this Agreement rely on the position of the Commission
enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon
---------------------------- -----
Capital Holdings Corporation (available May 13, 1988), as interpreted in the
----------------------------
Commission's letter to Shearman & Sterling dated July 2, 1993, and similar
no-action letters (including any no-action letter obtained pursuant to clause
(i) above), and (2) must comply with the registration and prospectus delivery
requirements of the Act in connection with a secondary resale transaction and
that such a secondary resale transaction should be covered by an effective
registration statement containing the selling security holder information
required by Item 507 or 508, as applicable, of Regulation S-K if the resales
are of Exchange Notes obtained by such Holder in exchange for Senior Notes
acquired by such Holder directly from the Company.
(ii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Subsidiary Guarantors shall provide a
supplemental letter to the Commission (A) stating that the Company and the
Subsidiary Guarantors are registering the Exchange Offer in reliance on the
position of the Commission enunciated in Exxon Capital Holdings Corporation
----------------------------------
(available May 13, 1988), Morgan Stanley and Co., Inc. (available June 5,
----------------------------
1991) and (B) including a representation that neither the Company nor the
Subsidiary Guarantors have entered into any arrangement or understanding with
any Person to distribute the Exchange Notes to be received in the Exchange
Offer and that, to the best of the Company's information and belief, each
Holder participating in the Exchange Offer is acquiring the Exchange Notes in
its ordinary course of business and has no arrangement or understanding with
any Person to participate in the distribution of the Exchange Notes received
in the Exchange Offer.
(b) Shelf Registration Statement. In connection with the Shelf
----------------------------
Registration Statement, the Company and the Subsidiary Guarantors shall comply
with all the provisions of Section 6(c) below and shall use their best efforts
to effect such registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof, and pursuant thereto the Company will as expeditiously as
possible prepare and file with the Commission a Registration Statement relating
to the registration on any appropriate form under the Act, which form
7
<PAGE>
shall be available for the sale of the Transfer Restricted Securities in
accordance with the intended method or methods of distribution thereof.
(c) General Provisions. In connection with any Registration Statement
------------------
and any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, any Registration
Statement and the related Prospectus required to permit resales of Notes by
Broker-Dealers), the Company shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements
(including, if required by the Act or any regulation thereunder, financial
statements of the Subsidiary Guarantors) for the period specified in Section
3 or 4 of this Agreement, as applicable; upon the occurrence of any event
that would cause any such Registration Statement or the Prospectus contained
therein (A) to contain a material misstatement or omission or (B) not to be
effective and usable for resale of Transfer Restricted Securities during the
period required by this Agreement, the Company shall file promptly an
appropriate amendment to such Registration Statement, in the case of clause
(A), correcting any such misstatement or omission, and, in the case of either
clause (A) or (B), use its best efforts to cause such amendment to be
declared effective and such Registration Statement and the related Prospectus
to become usable for their intended purpose(s) as soon as practicable
thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be necessary
to keep the Registration Statement effective for the applicable period set
forth in Section 3 or 4 hereof, as applicable, or such shorter period as will
terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to
be filed pursuant to Rule 424 under the Act, and to comply fully with the
applicable provisions of Rules 424 and 430A under the Act in a timely manner;
and comply with the provisions of the Act with respect to the disposition of
all securities covered by such Registration Statement during the applicable
period in accordance with the intended method or methods of distribution by
the sellers thereof set forth in such Registration Statement or supplement to
the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, to confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or post-
effective amendment has been filed, and, with respect to any Registration
Statement or any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement under the Act or of the suspension by any state securities
commission of the qualification of the Transfer Restricted Securities for
offering or sale in any jurisdiction, or the initiation of any proceeding for
any of the preceding purposes, (D) of the existence of any fact or the
happening of any event that makes any statement of a material fact made in
the Registration Statement, the Prospectus, any amendment or supplement
thereto, or any document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in the Registration
Statement or the Prospectus in order to make the statements therein not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
8
<PAGE>
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws, the
Company and the Subsidiary Guarantors shall use their best efforts to
obtain the withdrawal or lifting of such order at the earliest possible
time;
(iv) furnish to each of the selling Holders and each of the
underwriter(s), if any, before filing with the Commission, copies of any
Registration Statement or any Prospectus included therein or any amendments
or supplements to any such Registration Statement or Prospectus (including
all documents incorporated by reference after the initial filing of such
Registration Statement), which documents will be subject to the review of
such Holders and underwriter(s), if any, for a period of at least five
business days, and the Company will not file any such Registration
Statement or Prospectus or any amendment or supplement to any such
Registration Statement or Prospectus (including all such documents
incorporated by reference) to which a selling Holder of Transfer Restricted
Securities covered by such Registration Statement or the underwriter(s), if
any, shall reasonably object within five business days after the receipt
thereof. A selling Holder or underwriter, if any, shall be deemed to have
reasonably objected to such filing if such Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed to be
filed, contains a material misstatement or omission;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Shelf Registration Statement or related
Prospectus, provide copies of such document to the selling Holders and to
the underwriter(s), if any, make the Company's representatives available
(and representatives of the Subsidiary Guarantors) for discussion of such
document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as such selling
Holders or underwriter(s ), if any, reasonably may request; provided,
--------
however, that such persons shall first agree in writing with the Company
-------
that any information that is reasonably and in good faith designated by the
Company in writing as confidential at the time of delivery of such
information shall be kept confidential by such persons, unless and to the
extent that (i) disclosure of such information is required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities, (ii) disclosure of such information is required by law
(including any disclosure requirements pursuant to federal securities laws
in connection with the filing of the Shelf Registration Statement or the
use of any prospectus), (iii) such information becomes generally available
to the public other than as a result of a disclosure or failure to
safeguard such information by such person or (iv) such information becomes
available to such person from a source other than the Company and its
subsidiaries and such source is not bound by a confidentiality agreement;
(vi) make available at reasonable times during normal business
hours for inspection by the selling Holders, any underwriter participating
in any disposition pursuant to such Registration Statement, and any
attorney or accountant retained by such selling Holders or any of the
underwriter(s), all financial and other records, pertinent corporate
documents and properties of the Company and the Subsidiary Guarantors and
cause the Company's and the Guarantors' officers, directors and employees
to supply all information reasonably requested by any such Holder,
underwriter, attorney or accountant in connection with such Registration
Statement subsequent to the filing thereof and prior to its effectiveness;
provided, however, that such persons shall first agree in writing with the
-------- -------
Company that any information that is reasonably and in good faith
designated by the Company in writing as confidential at the time of
delivery of such
9
<PAGE>
information shall be kept confidential by such persons, unless and to the
extent that (i) disclosure of such information is required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities, (ii) disclosure of such information is required by law
(including any disclosure requirements pursuant to federal securities laws
in connection with the filing of the Shelf Registration Statement or the
use of any prospectus), (iii) such information becomes generally available
to the public other than as a result of a disclosure or failure to
safeguard such information by such person or (iv) such information becomes
available to such person from a source other than the Company and its
subsidiaries and such source is not bound by a confidentiality agreement;
(vii) if requested by any selling Holders or the
underwriter(s), if any, promptly incorporate in any Registration Statement
or Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such selling Holders and underwriter(s), if
any, may reasonably request to have included therein, including, without
limitation, information relating to the "Plan of Distribution" of the
Transfer Restricted Securities, information with respect to the principal
amount of Transfer Restricted Securities being sold to such underwriter(s),
the purchase price being paid therefor and any other terms of the offering
of the Transfer Restricted Securities to be sold in such offering; and make
all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Company is notified of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment;
(viii) cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating agencies, if
so requested by the Holders of a majority in aggregate principal amount of
Notes covered thereby or the underwriter(s), if any;
(ix) furnish to each selling Holder and each of the
underwriter(s), if any, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference);
(x) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement
thereto as such Persons reasonably may request; the Company and the
Subsidiary Guarantors hereby consent to the use of the Prospectus and any
amendment or supplement thereto by each of the selling Holders and each of
the underwriter(s), if any, in connection with the offering and the sale of
the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
(xi) enter into, and cause the Subsidiary Guarantors to enter
into, such agreements (including an underwriting agreement), and make, and
cause the Subsidiary Guarantors to make, such representations and
warranties, and take all such other actions in connection therewith in
order to expedite or facilitate the disposition of the Transfer Restricted
Securities pursuant to any Registration Statement contemplated by this
Agreement, all to such extent as may be reasonably requested by the Initial
Purchaser or by any Holder of Transfer Restricted Securities or underwriter
in connection with any sale or resale pursuant to any Registration
Statement contemplated by this Agreement; and whether or not an
underwriting agreement is entered into
10
<PAGE>
and whether or not the registration is an Underwritten Registration, the
Company and the Subsidiary Guarantors shall:
(A) furnish to the Initial Purchaser, each selling Holder and
each underwriter, if any, in such substance and scope as they may
request and as are customarily made by issuers to underwriters in
primary underwritten offerings, upon the date of the Consummation of
the Exchange Offer and, if applicable, the effectiveness of the Shelf
Registration Statement :
(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, signed by (y) the
President or any Vice President and (z) a principal financial or
accounting officer of each of the Company and the Subsidiary
Guarantors, confirming, as of the date thereof, the matters set
forth in Sections 9(a), (b) and (c) of the Purchase Agreement and
such other matters as such parties may reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Company and the Subsidiary Guarantors, covering the matters set
forth in Section 9(e) of the Purchase Agreement and such other
matter as such parties may reasonably request, and in any event
including a statement to the effect that such counsel has
participated in conferences with officers and other
representatives of the Company, representatives of the
independent public accountants for the Company, the Initial
Purchaser's representatives and the Initial Purchaser's counsel
in connection with the preparation of such Registration Statement
and the related Prospectus and have considered the matters
required to be stated therein and the statements contained
therein, although such counsel has not independently verified the
accuracy, completeness or fairness of such statements; and that
such counsel advises that, on the basis of the foregoing (relying
as to materiality to a large extent upon facts provided to such
counsel by officers and other representatives of the Company and
without independent check or verification), no facts came to such
counsel's attention that caused such counsel to believe that the
applicable Registration Statement, at the time such Registration
Statement or any post-effective amendment thereto became
effective, and, in the case of the Exchange Offer Registration
Statement, as of the date of Consummation, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the
opinion dated the date of Consummation of the Exchange Offer, as
of the date of Consummation, contained an untrue statement of a
material fact or omitted to state a material fact necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Without
limiting the foregoing, such counsel may state further that such
counsel assumes no responsibility for, and has not independently
verified, the accuracy, completeness or fairness of the financial
statements, notes and schedules and other financial data included
in any Registration Statement contemplated by this Agreement or
the related Prospectus; and
(3) a customary comfort letter, dated as of the date of
Consummation of the Exchange Offer or the date of effectiveness
of the Shelf Registration Statement, as the
11
<PAGE>
case may be, from the Company's independent accountants, in the
customary form and covering matters of the type customarily
covered in comfort letters by underwriters in connection with
primary underwritten offerings, and affirming the matters set
forth in the comfort letters delivered pursuant to Section 9(g)
of the Purchase Agreement, without exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with
clause (A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company
pursuant to this clause (xi), if any.
If at any time the representations and warranties of the Company and
the Subsidiary Guarantors contemplated in clause (A)(1) above cease to be
true and correct, the Company or the Subsidiary Guarantors shall so advise
the Initial Purchaser and the underwriter(s), if any, and each selling
Holder promptly and, if requested by such Persons, shall confirm such
advice in writing;
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with, and cause the Subsidiary Guarantors to
cooperate with, the selling Holders, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification of
the Transfer Restricted Securities under the securities or Blue Sky laws of
such jurisdictions as the selling Holders or underwriter(s) may request and
do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted Securities
covered by the Shelf Registration Statement; provided, however, that
neither the Company nor the Subsidiary Guarantors shall be required to
register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service of
process in suits or to taxation, other than as to matters and transactions
relating to the Registration Statement, in any jurisdiction where it is not
now so subject;
(xiii) shall issue, upon the request of any Holder of Senior
Notes covered by the Shelf Registration Statement, Exchange Notes, having
an aggregate principal amount equal to the aggregate principal amount of
Senior Notes surrendered to the Company by such Holder in exchange therefor
or being sold by such Holder; such Exchange Notes to be registered in the
name of such Holder or in the name of the purchaser(s) of such Senior
Notes, as the case may be; in return, the Senior Notes held by such Holder
shall be surrendered to the Company for cancellation;
(xiv) cooperate with, and cause the Subsidiary Guarantors to
cooperate with, the selling Holders and the underwriter(s), if any, to
facilitate the timely preparation and delivery of certificates representing
Transfer Restricted Securities to be sold and not bearing any restrictive
legends; and enable such Transfer Restricted Securities to be in such
denominations and registered in such names as the Holders or the
underwriter(s), if any, may request at least two business days prior to any
sale of Transfer Restricted Securities made by such underwriter(s);
12
<PAGE>
(xv) use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the underwriter(s), if
any, to consummate the disposition of such Transfer Restricted Securities,
subject to the proviso contained in clause (xii) above;
(xvi) if any fact or event contemplated by clause (c)(iii)(D)
above shall exist or have occurred, and subject to the proviso at the end
of Section 4(a) above, prepare a supplement or post-effective amendment to
the Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document so
that, as thereafter delivered to the purchasers of Transfer Restricted
Securities, the Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(xvii) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Registration Statement
and provide the Trustee under the Indenture with printed certificates for
the Transfer Restricted Securities which are in a form eligible for deposit
with the Depositary Trust Company;
(xviii) cooperate and assist in any filings required to be made
with the NASD and in the performance of any reasonable due diligence
investigation by any underwriter (including any "qualified independent
underwriter") that is required to be retained in accordance with the rules
and regulations of the NASD, and use its reasonable best efforts to cause
such Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to enable the
Holders selling Transfer Restricted Securities to consummate the
disposition of such Transfer Restricted Securities;
(xix) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 (which need not be
audited) for the twelve-month period (A) commencing at the end of any
fiscal quarter in which Transfer Restricted Securities are sold to
underwriters in a firm or best efforts Underwritten Offering or (B) if not
sold to underwriters in such an offering, beginning with the first month of
the Company's first fiscal quarter commencing after the effective date of
the Registration Statement;
(xx) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement required
by this Agreement, and, in connection therewith, cooperate, and cause the
Subsidiary Guarantors to cooperate, with the Trustee and the Holders of
Notes to effect such changes to the Indenture as may be required for such
Indenture to be so qualified in accordance with the terms of the TIA; and
execute, and cause the Subsidiary Guarantors to execute, and use its best
efforts to cause the Trustee to execute, all documents that may be required
to effect such changes and all other forms and documents required to be
filed with the Commission to enable such Indenture to be so qualified in a
timely manner;
(xxi) cause all Transfer Restricted Securities covered by the
Registration Statement to be listed on each securities exchange on which
similar securities issued by the Company are then
13
<PAGE>
listed if requested by the Holders of a majority in aggregate principal
amount of Senior Notes or the managing underwriter(s), if any; and
(xxii) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of Section
13 and Section 15 of the Exchange Act.
Each Holder agrees by acquisition of a Transfer Restricted Security
that, upon receipt of any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof,
or until it is advised in writing (the "Advice") by the Company that the use of
------
the Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus. If
so directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such notice. In the event
the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section
6(c)(iii)(D) hereof to and including the date when each selling Holder covered
by such Registration Statement shall have received the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or
shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's or the Subsidiary
Guarantors' performance of or compliance with this Agreement will be borne by
the Company or the Subsidiary Guarantors, regardless of whether a Registration
Statement becomes effective, including without limitation: (i) all registration
and filing fees and expenses (including filings made by the Initial Purchaser or
Holder with the NASD (and, if applicable, the fees and expenses of any
"qualified independent underwriter" and its counsel that may be required by the
rules and regulations of the NASD)); (ii) all fees and expenses of compliance
with federal securities and state Blue Sky or securities laws; (iii) all
expenses of printing (including printing certificates for the Exchange Notes to
be issued in the Exchange Offer and printing of Prospectuses), messenger and
delivery services and telephone; (iv) all fees and disbursements of counsel for
the Company, the Subsidiary Guarantors and, subject to Section 7(b) below, the
Holders of Transfer Restricted Securities; (v) all application and filing fees
in connection with listing Notes on a national securities exchange or automated
quotation system pursuant to the requirements hereof; and (vi) all fees and
disbursements of independent certified public accountants of the Company and the
Subsidiary Guarantors (including the expenses of any special audit and comfort
letters required by or incident to such performance).
The Company will, in any event, bear its and the Subsidiary
Guarantors' internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expenses of any annual audit and the fees and expenses of any Person,
including special experts, retained by the Company.
14
<PAGE>
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchaser and the Holders of Transfer Restricted Securities being
tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
Latham & Watkins or such other counsel as may be chosen by the Holders of a
majority in principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and the Subsidiary Guarantors, jointly and severally,
agree to indemnify and hold harmless (i) each Holder and (ii) each person, if
any, who controls (within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act) any Holder (any of the persons referred to in this clause (ii)
being hereinafter referred to as a "controlling person") and (iii) the
respective officers, directors, partners, employees, representatives and agents
of any Holder or any controlling person (any person referred to in clause (i),
(ii) or (iii) may hereinafter be referred to as an "Indemnified Holder"), to
------------------
the fullest extent lawful, from and against any and all losses, claims,
damages, liabilities, judgments, actions and expenses (including without
limitation and as incurred, reimbursement of all reasonable costs of
investigating, preparing, pursuing or defending any claim or action, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel to any
Indemnified Holder) directly or indirectly caused by, related to, based upon,
arising out of or in connection with any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus (or any amendment or supplement thereto), or 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, claims, damages, liabilities or expenses are caused by an untrue
statement or omission or alleged untrue statement or omission that is made in
reliance upon and in conformity with information relating to any of the Holders
furnished in writing to the Company by any of the Holders expressly for use
therein.
In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted against any
of the Indemnified Holders with respect to which indemnity may be sought against
the Company or the Subsidiary Guarantors, such Indemnified Holder (or the
Indemnified Holder controlled by such controlling person) shall promptly notify
the Company and the Subsidiary Guarantors in writing (provided, that the failure
to give such notice shall not relieve the Company or the Subsidiary Guarantors
of its obligations pursuant to this Agreement). Such Indemnified Holder shall
have the right to employ its own counsel in any such action and the fees and
expenses of such counsel shall be paid, as incurred, by the Company and the
Subsidiary Guarantors (regardless of whether it is ultimately determined that an
Indemnified Holder is not entitled to indemnification hereunder). The Company
and the Subsidiary Guarantors shall not, in connection with any one such action
or proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) at any time
for all Indemnified Holders, which firm shall be designated by the Holders of a
majority in principal amount of the Senior Notes. The Company shall be liable
for any settlement of
15
<PAGE>
any such action or proceeding effected with the Company's prior written consent,
which consent shall not be withheld unreasonably, and the Company agrees to
indemnify and hold harmless any Indemnified Holder from and against any loss,
claim, damage, liability or expense by reason of any settlement of any action
effected with the written consent of the Company. The Company shall not, without
the prior written consent of each Indemnified Holder, settle or compromise or
consent to the entry of judgment in or otherwise seek to terminate any pending
or threatened action, claim, litigation or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not any
Indemnified Holder is a party thereto), unless such settlement, compromise,
consent or termination includes an unconditional release of each Indemnified
Holder from all liability arising out of such action, claim, litigation or
proceeding.
(b) Each Holder of Transfer Restricted Securities agrees, severally
and not jointly, to indemnify and hold harmless the Company and the Subsidiary
Guarantors, and their respective directors, officers, and any person controlling
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company, and the respective officers, directors, partners, employees,
representatives and agents of each such person, to the same extent as the
foregoing indemnity from the Company and the Subsidiary Guarantors to each of
the Indemnified Holders, but only with respect to claims and actions based on
information relating to such Holder furnished in writing by such Holder
expressly for use in any Registration Statement. In case any action or
proceeding shall be brought against the Company, the Subsidiary Guarantors or
their respective directors or officers or any such controlling person in respect
of which indemnity may be sought against a Holder of Transfer Restricted
Securities, such Holder shall have the rights and duties given the Company and
the Company or its directors or officers or such controlling person shall have
the rights and duties given to each Holder by the preceding paragraph. In no
event shall the liability of any selling Holder hereunder be greater in amount
than the dollar amount of the proceeds received by such Holder upon the sale of
the Transfer Restricted Securities giving rise to such indemnification
obligation.
(c) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages, liabilities or expenses referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Holders on the other hand from their sale of
Transfer Restricted Securities or if such allocation is not permitted by
applicable law, the relative fault of the Company on the one hand and of the
Indemnified Holder on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of the
Company and the Subsidiary Guarantors on the one hand and of the Indemnified
Holder on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Subsidiary Guarantors or by the Indemnified
Holder and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set forth in the second paragraph of Section
8(a), any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim.
16
<PAGE>
The Company, the Subsidiary Guarantors and each Holder of Transfer
Restricted Securities agree that it would not be just and equitable if
contribution pursuant to this Section 8(c) were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or expenses referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8, none of the Holders (and its
related Indemnified Holders) shall be required to contribute, in the aggregate,
any amount in excess of the amount by which the total discount received by such
Holder with respect to the Senior Notes exceeds the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute pursuant
to this Section 8(c) are several in proportion to the respective principal
amount of Senior Notes held by each of the Holders hereunder and not joint.
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding, to make available to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities from such Holder or beneficial owner, the information required by
Rule 144A(d)(4) under the Act in order to permit resales of such Transfer
Restricted Securities pursuant to Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.
17
<PAGE>
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to the Company.
SECTION 12. MISCELLANEOUS
(a) Remedies. The Company and the Subsidiary Guarantors agree that
--------
monetary damages (including the liquidated damages contemplated hereby) would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of this Agreement and hereby agree to waive the defense in any
action for specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not, and will cause
--------------------------
the Subsidiary Guarantors not to, on or after the date of this Agreement enter
into any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as otherwise described in the Offering Memorandum,
neither the Company nor the Subsidiary Guarantors have previously entered into
any agreement granting any registration rights with respect to its securities to
any Person. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
the Company's securities under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Notes. The Company will not take any
--------------------------------
action, or permit any change to occur, with respect to the Notes that would
materially and adversely affect the ability of the Holders to Consummate any
Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not
----------------------
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless the Company has obtained the
written consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose securities are being tendered pursuant to the Exchange
Offer and that does not affect directly or indirectly the rights of other
Holders whose securities are not being tendered pursuant to such Exchange Offer
may be given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities being tendered or registered.
(e) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
18
<PAGE>
(ii) if to the Company:
Wilsons the Leather Experts Inc.
7401 Boone Avenue North
Brooklyn Park, Minnesota 55428
Telecopier No.: (612) 391-4906
Attention: Douglas J. Treff, CFO
With a copy to:
Faegre & Benson
2200 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Telecopier No.: (612) 336-3026
Attention: Susan Jacobson
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; provided, however, that
this Agreement shall not inure to the benefit of or be binding upon a successor
or assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity,
19
<PAGE>
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be affected or impaired
thereby.
(k) Entire Agreement. This Agreement together with the other
----------------
Operative Documents (as defined in the Purchase Agreement) is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Transfer Restricted Securities. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
20
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
Very truly yours,
WILSONS THE LEATHER EXPERTS INC.
By: /s/ David L. Rogers
----------------------------------
Name: David L. Rogers
Title: President
WILSONS LEATHER HOLDINGS INC.,
WILSONS CENTER, INC.,
ROSEDALE WILSONS, INC.,
RIVER HILLS WILSONS, INC.,
BERMANS THE LEATHER EXPERTS INC.,
WILSONS HOUSE OF SUEDE, INC.,
WILSONS TANNERY WEST, INC.,
WILSONS LEATHER OF ALABAMA INC.,
WILSONS LEATHER OF CONNECTICUT INC.,
WILSONS LEATHER OF FLORIDA INC.,
WILSONS LEATHER OF GEORGIA INC.,
WILSONS LEATHER OF INDIANA INC.,
WILSONS LEATHER OF IOWA INC.,
WILSONS LEATHER OF LOUISIANA INC.,
WILSONS LEATHER OF MARYLAND INC.,
WILSONS LEATHER OF MASSACHUSETTS INC.,
WILSONS LEATHER OF MICHIGAN INC.,
WILSONS LEATHER OF NEW JERSEY INC.,
WILSONS LEATHER OF NEW YORK, INC.,
WILSONS LEATHER OF NORTH CAROLINA INC.,
WILSONS LEATHER OF OHIO INC.,
WILSONS LEATHER OF PENNSYLVANIA INC.,
WILSONS LEATHER OR RHODE ISLAND INC.,
WILSONS LEATHER OF TENNESSEE INC.,
WILSONS LEATHER OF TEXAS INC.,
WILSONS LEATHER OF VIRGINIA INC.,
WILSONS LEATHER OF WEST VIRGINIA INC.,
WILSONS LEATHER OF WISCONSIN INC.,
WILSONS LEATHER OF ARKANSAS INC.,
WILSONS LEATHER OF DELAWARE INC.,
WILSONS LEATHER OF MISSISSIPPI INC.,
WILSONS LEATHER OF MISSOURI INC.,
WILSONS LEATHER OF SOUTH CAROLINA INC.,
S-1
<PAGE>
WILSONS LEATHER OF VERMONT INC.,
WILSONS INTERNATIONAL INC.
By: /s/ David L. Rogers
-----------------------------------
Name: David L. Rogers
Title: President
BANCAMERICA SECURITIES, INC.
By: /s/ Zed S. Francis III
-----------------------------
Name: Zed S. Francis III
Title: Executive Vice President
S-2
<PAGE>
EXHIBIT A
---------
Subsidiary Guarantors
---------------------
Wilsons Leather Holdings Inc.
Wilsons Center, Inc.
Rosedale Wilsons, Inc.
River Hills Wilsons, Inc.
Bermans The Leather Experts Inc.
Wilsons House of Suede, Inc.
Wilsons Tannery West, Inc.
Wilsons Leather of Alabama Inc.
Wilsons Leather of Connecticut Inc.
Wilsons Leather of Florida Inc.
Wilsons Leather of Georgia Inc.
Wilsons Leather of Indiana Inc.
Wilsons Leather of Iowa Inc.
Wilsons Leather of Louisiana Inc.
Wilsons Leather of Maryland Inc.
Wilsons Leather of Massachusetts Inc.
Wilsons Leather of Michigan Inc.
Wilsons Leather of New Jersey Inc.
Wilsons Leather of New York Inc.
Wilsons Leather of North Carolina Inc.
Wilsons Leather of Ohio Inc.
Wilsons Leather of Pennsylvania Inc.
A-1
<PAGE>
Wilsons Leather of Rhode Island Inc.
Wilsons Leather of Tennessee Inc.
Wilsons Leather of Texas Inc.
Wilsons Leather of Virginia Inc.
Wilsons Leather of West Virginia Inc.
Wilsons Leather of Wisconsin Inc.
Wilsons Leather of Arkansas Inc.
Wilsons Leather of Delaware Inc.
Wilsons Leather of Mississippi Inc.
Wilsons Leather of Missouri Inc.
Wilsons Leather of South Carolina Inc.
Wilsons Leather of Vermont Inc.
Wilsons International Inc.
A-2
<PAGE>
Exhibit 10.6
AMENDMENT NO. 2 TO
PLEDGE AGREEMENT
RIVER HILLS WILSONS, INC.
-------------------------
This Amendment No. 2 to PLEDGE AGREEMENT RIVER HILLS WILSONS, INC.
(this "Amendment") is entered into as of this 31st day of July, 1997 between
RIVER HILLS WILSONS, INC., a Minnesota corporation ("Pledgor") and GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation, individually and as agent
(in such capacity, "Agent") for the lenders ("Lenders") signatory to the Credit
Agreement (as hereinafter defined). Unless otherwise specified herein,
capitalized terms used in this Agreement shall have the meanings ascribed to
them by the Credit Agreement (as hereinafter defined).
RECITALS
--------
WHEREAS, Pledgor, Borrower (and certain Affiliates of Borrower), Agent
and Lenders have entered into that certain Credit Agreement dated as of May 25,
1996, as heretofore amended and as further amended, supplemented, restated or
otherwise modified from time to time (the "Credit Agreement");
WHEREAS, Pledgor and Agent have entered into that certain Pledge
Agreement dated as of May 25, 1996, as amended by that certain Amendment No. 1
to Pledge Agreement dated as of September 18, 1996 (as further amended,
supplemented, restated or otherwise modified from time to time, the "Pledge
Agreement"); and
WHEREAS, Pledgor and Agent desire to enter into certain amendments to
the Pledge Agreement in order to satisfy the condition set forth in Section 5.11
to the Credit Agreement, and as more fully set forth herein;
NOW THEREFORE, in consideration of the mutual execution hereof and
other good and valuable consideration, the parties hereto agree as follows:
1. Schedule I to the Pledge Agreement is hereby amended by inserting
the following entry to the table contained therein:
<PAGE>
<TABLE>
<CAPTION>
Stock Minority
Name and Address Class of Certificate Number of Shares
of Pledgor Stock Issuer Stock Number(s) Shares Outstanding
---------- ------------ ----- --------- ------ -----------
<S> <C> <C> <C> <C> <C>
River Hills Wilsons Common 1 100
Wilsons, Inc. International
7401 Boone Inc.
Avenue North
Brooklyn Park,
MN 55428
</TABLE>
2. This Amendment may be executed in counterparts with each such
counterpart being considered an original and all such counterparts constituting
one and the same document. THE TERMS OF THIS AMENDMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
ILLINOIS (EXCLUSIVE OF ANY RULES AND AS TO CONFLICT OF LAWS) AND THE LAWS OF THE
UNITED STATES APPLICABLE THEREIN.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first written above.
RIVER HILLS WILSONS, INC., Pledgor
By /s/ David L. Rogers
-------------------------------
Its President
---------------------------
Accepted and Acknowledged by:
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
By /s/ Trevor Clark
-------------------------------
Its Duly Authorized Signatory
---------------------------
<PAGE>
Exhibit 10.7
JOINDER AGREEMENT
-----------------
This Joinder Agreement is dated as of July 31, 1997, by and between Wilsons
International Inc., a Minnesota corporation ("New Store Guarantor"), and General
Electric Capital Corporation, a New York corporation ("Agent").
WHEREAS, Agent, certain Lenders signatory thereto, Wilsons Leather
Holdings, Inc., a Minnesota corporation ("Borrower") and certain Loan Parties
that are Affiliates of Borrower are parties to a Credit Agreement dated as of
May 25, 1996 (as the same may be amended, restated, supplemented or otherwise
modified from time to time, the "Credit Agreement");
WHEREAS, the Credit Parties, including Borrower and certain Store
Guarantors entered into a Security Agreement with Agent dated as of May 25, 1996
(as the same may be amended, restated, supplemented or otherwise modified from
time to time, the "Security Agreement"), a copy of which is attached hereto as
Exhibit A;
WHEREAS, certain Credit Parties, designated as Store Guarantors, entered
into a Store Guarantors' Guaranty dated as of May 25, 1996 (as the same may be
amended, restated, supplemented or otherwise modified from time to time, the
"Store Guarantors' Guaranty"), a copy of which is attached hereto as Exhibit B;
WHEREAS, New Store Guarantor was incorporated after May 25, 1996 for the
purpose of holding the Stock of Foreign Subsidiaries;
WHEREAS, under the terms of the Credit Agreement and the other Loan
Documents, Subsidiaries of Parent are required to guarantee the Obligations of
Borrower and grant a security interest in their assets as collateral therefor;
and
WHEREAS, the New Store Guarantor derives direct and indirect benefits from
the Loans and other financial accommodations provided by Agent and Lenders to
Borrower;
NOW, THEREFORE, for and in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Joinder in Guaranty. The New Store Guarantor guarantees payment and
performance of the Obligations in accordance with the terms of the Store
Guarantors' Guaranty, which is incorporated herein by reference.
2. Joinder in Security Agreement. The New Store Guarantor hereby grants
to Agent for the benefit of Lenders a security interest in all Collateral in
which it has an interest, whether now owned or hereafter arising, in accordance
with the terms of the Security Agreement, which is incorporated herein by
reference.
<PAGE>
3. General. The New Store Guarantor agrees to comply with and be bound by
the terms of the Store Guarantors' Guaranty and the Security Agreement as fully
as if it had been a signatory thereto on the date that such documents were
originally executed and delivered by the other Credit Parties that are parties
thereto.
4. Defined Terms. Except as otherwise defined herein, all defined terms
herein shall have the respective meanings ascribed thereto in Schedule A to the
Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Joinder Agreement as of the date set forth above.
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Trevor Clark
---------------------------------
Title: Duly Authorized Signatory
------------------------------
WILSONS INTERNATIONAL INC.
By: /s/ David L. Rogers
---------------------------------
Title: President
------------------------------
-2-
<PAGE>
Exhibit 10.8
PARENT GUARANTY
---------------
This PARENT GUARANTY (as it may be amended, supplemented or otherwise
modified from time to time, this "Guaranty") is dated as of May 25, 1996, by
WILSONS THE LEATHER EXPERTS INC., a Minnesota corporation ("Newco"), WILSONS
CENTER, INC., a Minnesota corporation ("Parent"), ROSEDALE WILSONS, INC., a
Minnesota corporation ("First Intermediate Parent"), and RIVER HILLS WILSONS,
INC., a Minnesota corporation ("Second Intermediate Parent") (Newco, Parent,
First Intermediate Parent and Second Intermediate Parent are individually
referred to as a "Guarantor" and together as the "Guarantors"), in favor of
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation, as agent ("Agent")
on its behalf and for the ratable benefit of the Lenders.
WHEREAS, Newco is the legal and beneficial owner of all of the issued
and outstanding capital stock of Parent which in turn owns all of the issued and
outstanding capital stock of First Intermediate Parent which in turn owns all of
the issued and outstanding capital stock of Second Intermediate Parent;
WHEREAS, Second Intermediate Parent owns all of the issued and
outstanding capital stock of (i) Borrower, (ii) House of Suede; (iii) Bermans;
(iv) Tannery; (v) the Individual Store Subsidiaries; and (vi) the Georgetown
Subsidiaries;
WHEREAS, Agent and the Lenders have entered into that certain Credit
Agreement of even date herewith (as the same may be amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement")
with Wilsons Leather Holdings Inc., a Minnesota corporation ("Borrower"), and
certain of Borrower's corporate Affiliates;
WHEREAS, Borrower will become liable for the Obligations, including,
without limitation, loans and other financial accommodations from the Lenders
(including Agent in its individual capacity) under the Credit Agreement;
WHEREAS, the Guarantors will derive substantial direct and indirect
benefit and advantage from the financial accommodations to Borrower set forth in
the Credit Agreement, including the loans and advances made to Borrower
thereunder, and it will be to the Guarantors direct and indirect interest and
economic benefit to assist Borrower in procuring such financial accommodations
from the Lenders; and
WHEREAS, a condition to Agent and the Lenders entering into the Credit
Agreement is that the Guarantors execute and deliver this Guaranty;
NOW, THEREFORE, in consideration of the premises and in order to
induce Agent and the Lenders to enter into the Credit Agreement and the Lenders
to make loans thereunder, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Guarantors hereby
agree as follows:
<PAGE>
SECTION 1. Definitions.
-----------
Unless otherwise defined herein, all capitalized terms used herein
shall have the respective meanings assigned to such terms in Schedule A to the
Credit Agreement.
SECTION 2. Guaranty of Payment.
-------------------
(a) The Guarantors hereby absolutely and unconditionally guarantee
the full and prompt payment to Agent, for its benefit and the ratable benefit of
the Lenders, when due, whether upon demand, at maturity or by reason of
acceleration or otherwise and at all times thereafter, of any and all existing
and future Obligations.
(b) The Guarantors acknowledge that valuable consideration supports
this Guaranty, including, without limitation, the consideration set forth in the
recitals above as well as any commitment to lend, extension of credit or other
financial accommodation, whether heretofore or hereafter made by the Lenders to
Borrower, any extension, renewal or replacement of any of the Obligations; any
forbearance with respect to any of the Obligations or otherwise; any purchase of
Borrower's assets by the Lenders; or any other valuable consideration.
(c) The Guarantors agree that all payments under this Guaranty shall
be made in United States currency and in the same manner as provided for the
Obligations.
SECTION 3. Costs and Expenses.
------------------
The Guarantors agree to pay on demand, if not paid by Borrower, all
costs and expenses of every kind incurred by Agent or the Lenders: (a) in
enforcing this Guaranty, (b) in collecting any of the Obligations from Borrower
or the Guarantors, (c) in realizing upon or protecting any collateral for this
Guaranty or for payment of any of the Obligations and (d) for any other purpose
related to the Obligations or this Guaranty. "Costs and expenses" as used in
the preceding sentence shall include, without limitation, reasonable attorneys'
fees incurred by Agent or, to the extent provided in the Credit Agreement, any
Lender in retaining counsel for advice, suit, appeal, any insolvency or other
proceedings under the United States Bankruptcy Code or otherwise, or for any
purpose specified in the preceding sentence.
SECTION 4. Nature of Guaranty: Continuing, Absolute and
---------------------------------------------
Unconditional.
--------------
(a) This Guaranty is and is intended to be a continuing guaranty of
payment of the Obligations, independent of and in addition to any other
guaranty, endorsement, collateral or other agreement held by Agent or the
Lenders therefor or with respect thereto, whether or not furnished by the
Guarantors. The obligations of the Guarantors to repay the Obligations
hereunder shall be unlimited.
(b) Until the Obligations have been paid in full, the Guarantors
shall have no right, claim or remedy of subrogation, reimbursement, contribution
or any similar rights against Borrower or any other guarantor with respect to
the Obligations and hereby waive any right to enforce any remedy which Agent or
any Lender now has or may hereafter have against Borrower, any endorser or any
other guarantor of all or any part of the Obligations, and the Guarantors
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<PAGE>
hereby waive any benefit of, and any right to participate in, any security or
collateral given to Agent, on behalf of the Lenders, to secure payment of the
Obligations or any part thereof or any other liability of Borrower to Agent or
the Lenders. If any amount shall be paid to the Guarantors on account of any
payment made hereunder at any time when the Obligations shall not have been paid
in full, such amount shall be held in trust for the benefit of Agent and the
Lenders and shall forthwith be paid to Agent to be credited and applied, whether
the Obligations are matured or unmatured, in accordance with the terms of the
Credit Agreement. The Guarantors authorize Agent, on behalf of the Lenders, to
take any action or exercise any remedy with respect to the Collateral which
Agent, on behalf of the Lenders, in its sole discretion shall determine, without
notice to the Guarantors. The Guarantors further agree that any and all claims
of any Guarantor against Borrower, any endorser or any other guarantor of all or
any part of the Obligations, or against any of their respective properties,
whether arising by reason of any payment by any Guarantor to Agent, on behalf of
the Lenders, pursuant to the provisions hereof, or otherwise, shall be
subordinate and subject in right of payment to the prior payment, in full, of
any and all principal and interest, all fees, all reasonable costs of collection
(including reasonable attorneys' fees and time charges) and any other
liabilities or obligations owing to the Lenders by Borrower which may arise
either with respect to or on any note, instrument, document, item, agreement or
other writing heretofore, now or hereafter delivered to any Lender or Agent. In
the event Agent, on behalf of the Lenders, in its sole discretion elects to give
notice of any action with respect to the Collateral securing the Obligations or
any part thereof, ten (10) days' written notice mailed to the Guarantors by
ordinary mail at the address shown hereon shall be deemed reasonable notice of
any matters contained in such notice. The Guarantors consent and agree that
Agent, on behalf of the Lenders, shall be under no obligation to marshall any
assets in favor of the Guarantors or against or in payment of any or all of the
Obligations.
(c) For the further security of the Lenders and without in any way
diminishing the liability of the Guarantors, following the occurrence of an
Event of Default and acceleration of the Obligations of Borrower, all debts and
liabilities, present or future of Borrower to any Guarantor and all monies
received from Borrower or for its account by any Guarantor in respect thereof
shall be received in trust for the Lenders and forthwith upon receipt shall be
paid over to Agent, for the benefit of the Lenders, until all of such
Obligations have been paid in full.
(d) This Guaranty and the Guarantors' obligations hereunder are
absolute and unconditional and shall not be changed or affected by any
representation, oral agreement, act or thing whatsoever, except as herein
provided. This Guaranty is intended by the Guarantors to be the final, complete
and exclusive expression of the guaranty agreement between the Guarantors and
Agent, on behalf of the Lenders. No modification or amendment of any provision
of this Guaranty shall be effective unless in writing and signed by a duly
authorized officer of Agent, on its behalf and the ratable benefit of the
Lenders.
SECTION 5. Certain Rights and Obligations.
------------------------------
(a) The Guarantors authorize Agent and the Lenders, without notice,
demand or any reservation of rights against the Guarantors and without impairing
or affecting the validity or enforceability of this Guaranty or the Guarantors'
obligations hereunder, from time to time: (i) to renew, extend, increase,
accelerate or otherwise change the time for payment of, the terms
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<PAGE>
of or the interest on the Obligations or any part thereof or grant other
indulgences to Borrower or others; (ii) to accept from any Person and hold
collateral for the payment of the Obligations or any part thereof, and to
modify, exchange, enforce or refrain from enforcing, or release, compromise,
settle, waive, subordinate or surrender, with or without consideration, such
collateral or any part thereof, (iii) to accept and hold any endorsement or
guaranty of payment of the Obligations or any part thereof, and to discharge,
release or substitute any such obligation of any such endorser or guarantor, or
any Person who has given any security interest in any collateral as security for
the payment of the Obligations or any part thereof, or any other Person in any
way obligated to pay the Obligations or any part thereof, and to enforce or
refrain from enforcing, or compromise or modify, the terms of any obligation of
any such endorser, guarantor or Person; (iv) to dispose of any and all
Collateral securing the Obligations in any manner as Agent or the Lenders, in
their sole discretion, may deem appropriate, and to direct the order or manner
of such disposition and the enforcement of any and all endorsements and
guaranties relating to the Obligations or any part thereof as Agent or the
Lenders, in their sole discretion may determine; (v) except as otherwise
provided in the Credit Agreement, to determine the manner, amount and time of
application of payments and credits, if any, to be made on all or any part of
any component or components of the Obligations (whether principal, interest,
fees, costs and expenses, or otherwise) including, without limitation, the
application of payments received from any source to the payment of indebtedness
other than the Obligations even though the Lenders might lawfully have elected
to apply such payments to the Obligations or to amounts which are not covered by
this Guaranty; and (vi) to take advantage or refrain from taking advantage of
any security or accept or make or refrain from accepting or making any
compositions or arrangements when and in such manner as Agent or the Lenders, in
their sole discretion, may deem appropriate and generally do or refrain from
doing any act or thing which might otherwise, at law or in equity, release the
liability of the Guarantors as guarantors or sureties in whole or in part, and
in no case shall Agent or the Lenders be responsible or shall the Guarantors be
released either in whole or in part for any act or omission in connection with
Agent or the Lenders having sold any security at an under value.
(b) If any default shall be made in the payment of any of the
Obligations and any grace period has expired with respect thereto, the
Guarantors hereby agree to pay the same in full to the extent hereinafter
provided: (i) without deduction by reason of any setoff, defense (other than
payment) or counterclaim of Borrower; (ii) without requiring presentment,
protest or notice of nonpayment or notice of default to any Guarantor, to
Borrower or to any other Person; (iii) without demand for payment or proof of
such demand or filing of claims with a court in the event of receivership,
bankruptcy or reorganization of Borrower; (iv) without requiring Agent or the
Lenders to resort first to Borrower (this being a guaranty of payment and not of
collection) or to any other guarantor or any other Person obligated with respect
to the Obligations or any collateral which the Lenders may hold; (v) without
requiring notice of acceptance hereof or assent hereto by Agent or the Lenders;
and (vi) without requiring notice that any of the Obligations has been incurred,
extended or continued or of the reliance by Agent or the Lenders upon this
Guaranty; all of which the Guarantors hereby waive.
(c) This Guaranty and the Guarantors' obligation hereunder shall at
all times be valid and enforceable and shall not be impaired or affected by any
other agreements or circumstances of any nature whatsoever which otherwise
constitute a defense to this Guaranty,
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<PAGE>
including, without limitation, any of the following, all of which the Guarantors
hereby waive: (i) any failure or omission to perfect or continue the perfection
of any security interest in or other lien on, or preserve rights to, any
collateral securing payment of any of the Obligations or the Guarantors'
obligation hereunder, (ii) the invalidity, unenforceability, propriety of manner
of enforcement of, or loss or change in priority of any such security interest
or other lien or guaranty of the Obligations; (iii) any failure or omission to
protect, preserve or insure any such collateral; (iv) failure of any Guarantor
to receive notice of any intended disposition of such collateral; (v) any
defense arising by reason of the cessation from any cause whatsoever of
liability of Borrower including, without limitation, any failure, negligence or
omission by Agent or the Lenders in enforcing their claims against Borrower,
(vi) any waiver of any right, remedy or power or of any default with respect to
the Obligations or any part thereof or any release, settlement or compromise of
any obligation of Borrower; (vii) the invalidity or unenforceability of any of
the Obligations or the invalidity or unenforceability of any agreement relating
thereto or with respect to any collateral securing the Obligations or any part
thereof; (viii) any change of ownership of Borrower or the insolvency,
bankruptcy or any other change in the legal status of Borrower, (ix) any change
in, or the imposition of, any law, decree, regulation or other governmental act
which does or might impair, delay or in any way affect the validity,
enforceability or the payment when due of the Obligations; (x) the existence of
any claim, setoff or other right which the Guarantors may have at any time
against Agent, any Lender, Borrower or any other guarantor in connection
herewith or any unrelated transaction; (xi) the failure of Borrower or the
Guarantors to maintain in full force, validity or effect or to obtain or renew
when required all governmental and other approvals, licenses or consents
required in connection with the Obligations or this Guaranty, or to take any
other action required in connection with the performance of all obligations
pursuant to the Obligations or this Guaranty; (xii) Agent's election, on behalf
of the Lenders, in any case instituted under chapter 11 of the United States
Bankruptcy Code, of the application of section 1111(b)(2) of the United States
Bankruptcy Code; (xiii) any borrowing, use of cash collateral or grant of a
security interest by Borrower, as Borrower in possession, under section 363 or
364 of the United States Bankruptcy Code; (xiv) the disallowance of all or any
portion of any of the Lenders' claims for repayment of the Obligations under
section 502 or 506 of the United States Bankruptcy Code; or (xv) any other fact
or circumstance which might otherwise constitute grounds at law or in equity for
the discharge or release of any Guarantor from its obligations hereunder, all
whether or not the Guarantors shall have had notice or knowledge of any act or
omission referred to in the foregoing clauses (i) through (xv) of this
subsection 5(c). It is agreed that the Guarantors' liability hereunder is
independent of any other guaranties or other obligations at any time in effect
with respect to the Obligations or any part thereof and that the Guarantors'
liability hereunder may be enforced regardless of the existence, validity,
enforcement or non-enforcement of any such other guaranties or other obligations
or any provision of any applicable law or regulation purporting to prohibit
payment by Borrower of the Obligations in the manner agreed upon between the
Lenders and Borrower.
(d) Credit may be granted or continued from time to time by the
Lenders to Borrower without notice to or authorization from the Guarantors
regardless of Borrower's financial or other condition at the time of any such
grant or continuation. Neither Agent nor any Lender shall have an obligation to
disclose or discuss with the Guarantors its assessment of the financial
condition of Borrower.
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<PAGE>
SECTION 6. Representations and Warranties.
------------------------------
The Guarantors represent and warrant that:
(a) Existence. The Guarantors and their Subsidiaries (i) are
corporations duly organized, validly existing and in good standing under the
laws of their respective jurisdiction of incorporation and have been duly
qualified to conduct business and are in good standing in each other
jurisdiction where their ownership or lease of property or the conduct of their
business require such qualification except where the failure to so qualify would
not have a Material Adverse Effect; (ii) have the requisite corporate power and
authority and the legal right to own, pledge, mortgage or otherwise encumber and
operate their properties, to lease the property they operate under lease and to
conduct their business as now, heretofore and proposed to be conducted; (iii)
have all material licenses, permits, consents or approvals from or by, and have
made all filings with, and have given all notices to, all Governmental
Authorities having jurisdiction, to the extent required for such ownership,
operation and conduct; (iv) are in compliance with their respective certificate
or articles of incorporation and bylaws; and (v) are in compliance with all
applicable provisions of law except where the failure to so be in compliance
would not have a Material Adverse Effect.
(b) Authority. The Guarantors have full power, authority and legal
right to enter into this Guaranty and the other Loan Documents to which they are
parties. The execution, delivery and performance by the Guarantors of this
Guaranty and such other Loan Documents: (i) have been duly authorized by all
necessary action on the part of the Guarantors; (ii) are not in contravention of
the terms of each Guarantor's respective certificate of incorporation or bylaws
or of any indenture, agreement or undertaking to which each Guarantor is a party
or by which each Guarantor or any of its property is bound; (iii) do not and
will not require any governmental consent, registration or approval or the
consent of any other Person that has not been obtained; (iv) do not and will not
contravene any contractual or governmental restriction to which any Guarantor or
any of its property may be subject; and (v) do not and will not, except as
contemplated herein, result in the imposition of any Lien upon any property of
any Guarantor under any existing indenture, mortgage, deed of trust, loan or
credit agreement or other material agreement or instrument to which any
Guarantor is a party or by which any Guarantor or any of its property may be
bound or affected.
(c) Binding Effect. This Guaranty and all of the other Loan
Documents to which the Guarantors are a party have been duly executed and
delivered by each Guarantor, are the legal, valid and binding obligations of
each Guarantor and are enforceable against each Guarantor in accordance with
their terms.
(d) Negative Pledge. The Guarantors are not a party to or bound by
any indenture, contract, instrument or other agreement which prohibits the
creation, incurrence or sufferance to exist of any Lien upon its property,
except the Loan Documents and the Subordinated Note.
(e) Survival of Representations and Warranties. All representations
and warranties contained in this Guaranty or any of the other Loan Documents to
which the
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<PAGE>
Guarantors are a party shall survive the execution and delivery of this Guaranty
and the termination hereof.
(f) The Guarantors ratify and confirm the representations and
warranties made with respect to them in Section 3 of the Credit Agreement, which
are incorporated herein by reference.
SECTION 7. Covenants.
---------
The Guarantors covenant that until the Obligations are paid in full
they shall perform, comply with and be bound by all of the terms and conditions
set forth in the Credit Agreement which relate to the Guarantors, including,
without limitation, Schedule E thereto, with such terms and conditions being
incorporated in this Guaranty by reference and shall cause Borrower to comply
with all covenants set forth in the Credit Agreement.
SECTION 8. Termination.
-----------
This Guaranty shall remain in full force and effect until all of the
Obligations shall be finally and irrevocably paid in full and the Obligations
under the Credit Agreement shall have been terminated. Payment of all of the
Obligations from time to time shall not operate as a discontinuance of this
Guaranty. The Guarantors further agree that, to the extent that Borrower makes
a payment or payments to Agent or any of the Lenders on the Obligations, or
Agent or the Lenders receive any proceeds of Collateral securing the
Obligations, which payment or receipt of proceeds or any part thereof is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be returned or repaid to Borrower, its estate, trustee, receiver,
Borrower in possession or any other Person, including, without limitation, any
guarantor, under any insolvency or bankruptcy law, state or federal law, common
law or equitable cause, then to the extent of such payment, return or repayment,
the obligation or part thereof which has been paid, reduced or satisfied by such
amount shall be reinstated and continued in full force and effect as of the date
when such initial payment, reduction or satisfaction occurred, and this Guaranty
shall continue in full force notwithstanding any contrary action which may have
been taken by the Lenders in reliance upon such payment, and any such contrary
action so taken shall be without prejudice to Agent's or the Lenders' rights
under this Guaranty and shall be deemed to have been conditioned upon such
payment having become final and irrevocable.
SECTION 9. Guaranty of Performance.
-----------------------
The Guarantors also guarantee the full, prompt and unconditional
performance of all obligations and agreements of every kind owed or hereafter to
be owed by any Guarantor or Borrower to Agent or the Lenders. Every provision
for the benefit of Agent or the Lenders contained in this Guaranty shall apply
to the guaranty of performance given in this Section 9.
SECTION 10. Taxes.
-----
All payments hereunder shall be made without any counterclaim or
setoff, free and clear of, and without reduction by reason of, any taxes,
levies, imposts, charges and withholdings, restrictions or conditions of any
nature other than taxes imposed on the net income of Agent or a
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<PAGE>
Lender ("Taxes"), which are now or may hereafter be imposed, levied or assessed
by any country, political subdivision or taxing authority, all of which will be
for the account of and paid by the Guarantors. If for any reason, any such
reduction is made or any Taxes are paid by the Lender, the Guarantors will pay
to Agent, for the benefit of the Lenders, such additional amounts as may be
necessary to ensure that Agent, and the Lenders receive the same net amount
which they would have received had no reduction been made or Taxes paid.
SECTION 11. Security.
---------
To secure payment of the Guarantors' obligations under this Guaranty,
concurrently with the execution of this Guaranty: (a) the Guarantors are
entering into a Security Agreement pursuant to which they have granted to Agent
a security interest in all or substantially all of their respective personal
property other than fixtures and equipment and (b)(i) Newco is entering into a
pledge agreement granting to Agent, for its benefit and the ratable benefit of
the Lenders, a first Lien or all of the capital stock of Parent; (ii) Parent is
entering into a pledge agreement granting to Agent, for its benefit and the
ratable benefit of the Lenders, a first Lien on all of the capital stock of
First Intermediate Parent; (iii) First Intermediate Parent is entering into a
pledge agreement granting to Agent, for its benefit and the ratable benefit of
the Lenders, a first Lien on all of the capital stock of Second Intermediate
Parent; and (iv) Second Intermediate Parent entering into a pledge agreement
granting to Agent, for its benefit and the ratable benefit of the Lenders, a
first Lien on all of the capital stock of Bermans, House of Suede and Borrower.
SECTION 12. Miscellaneous.
--------------
(a) In addition to and without limiting any other right, power or
remedy of Agent or any Lender, whenever Agent or the Lenders have the right to
declare any of the Obligations to be immediately due and payable (whether or not
it has been so declared), the Lenders at their sole election without notice to
the Guarantors may appropriate and setoff against the Obligations: (i) any and
all indebtedness or other monies due or to become due to any Guarantor by Agent
or the Lenders in any capacity; and (ii) any monies, credits or other property
belonging to any Guarantor (including all account balances, whether provisional
or final and whether or not collected or available) at any time held by or
coming into the possession of Agent or any of the Lenders, or any affiliate of
Agent or any of the Lenders, whether for deposit or otherwise, whether or not
the Obligations or the obligation to pay such monies owed by Agent or the
Lenders is then due, and Agent, on behalf of the Lenders, is hereby granted a
security interest in and Lien upon such monies, credits and other property.
Agent or the Lenders shall be deemed to have exercised such right of setoff
immediately at the time of such election even though any charge therefor is made
or entered on Agent's or the Lenders' records subsequent thereto.
(b) In the event that acceleration of the time for payment of any of
the Obligations is stayed, upon the insolvency, bankruptcy or reorganization of
Borrower, or otherwise, all such amounts shall nonetheless be payable by the
Guarantors forthwith upon demand by Agent, on behalf of the Lenders.
(c) No delay on the part of Agent or any Lender in the exercise of
any right, power or remedy shall operate as a waiver thereof, and no single or
partial exercise by Agent or
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any Lender of any right, power or remedy shall preclude any further exercise
thereof; nor shall any amendment, supplement, modification or waiver of any of
the terms or provisions of this Guaranty be binding upon Agent or the Lenders,
except as expressly set forth in a writing duly signed and delivered by Agent.
The failure by Agent or any Lender at any time or times hereafter to require
strict performance by Borrower or any Guarantor of any of the provisions,
warranties, terms and conditions contained in any promissory note, security
agreement, agreement, indenture, guaranty, instrument or document now or at any
time or times hereafter executed by Borrower or any Guarantor and delivered to
Agent or any Lender shall not waive, affect or diminish any right of Agent or
any Lender at any time or times hereafter to demand strict performance thereof,
and such right shall not be deemed to have been waived by any act or knowledge
of Agent or any Lender, their agents, officers or employees, unless such waiver
is contained in an instrument in writing duly signed and delivered by Agent
and/or the Lenders, as the case may be. No waiver by Agent or the Lenders of
any default shall operate as a waiver of any other default hereunder or the same
default on a future occasion, and no action by Agent or the Lenders permitted
hereunder shall in any way affect or impair Agent's or any Lender's rights,
powers or the obligations of any Guarantor under this Guaranty. Any
determination by a court of competent jurisdiction of the amount of any
Obligations owing by Borrower to the Lenders shall be conclusive and binding on
the Guarantors irrespective of whether Borrower was a party to the suit or
action in which such determination was made. The rights and remedies of Agent
and the Lenders hereunder are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights or remedies provided by law.
(d) This Guaranty shall bind each Guarantor and the successors and
assigns of each Guarantor and shall inure to the benefit of Agent and the
Lenders and their successors and assigns. All references herein to Borrower
shall be deemed to include its successors and assigns including, without
limitation, a receiver, trustee or Borrower in possession of or for Borrower.
(e) Section headings in this Guaranty are included herein for
convenience of reference only and shall not constitute a part of this Guaranty
for any other purpose or be given any substantive effect.
(f) Whenever possible, each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable law.
Any provision of this Guaranty which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remainder of such
provision or the remaining provisions of this Guaranty, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(g) It is understood that while the amount of the Obligations is not
limited, if, in any action or proceeding involving any state or federal
bankruptcy, insolvency or other law affecting the rights of creditors generally,
this Guaranty would be held or determined to be void, invalid or unenforceable
on account of the amount of the aggregate liability under this Guaranty, then,
notwithstanding any other provision of this Guaranty to the contrary, the
aggregate amount of such liability shall without any further action of the
Guarantors, the Lenders, Agent or any
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other Person, be automatically limited and reduced to the highest amount which
is valid and enforceable as determined in such action or proceeding.
(h) This Guaranty sets forth the entire understanding and agreement
of the Guarantors and Agent with respect to the subject matter hereof and
supersedes all other understandings, oral or written, with respect to the
subject matter hereof.
(i) The Guarantors agree to pay all costs, reasonable fees and
expenses (including reasonable attorneys' fees) incurred by Agent or the Lenders
after a default by any Guarantor under this Guaranty.
(j) THE GUARANTORS AND AGENT HEREBY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN COOK COUNTY, CITY OF
CHICAGO, ILLINOIS, AND IRREVOCABLY AGREE THAT ALL ACTIONS OR PROCEEDINGS
RELATING TO THIS GUARANTY OR THE OTHER LOAN DOCUMENTS TO WHICH THE GUARANTORS
ARE A PARTY SHALL BE LITIGATED IN SUCH COURTS, AND THE GUARANTORS AND AGENT
WAIVE ANY OBJECTION WHICH THEY MAY HAVE BASED ON IMPROPER VENUE OF FORUM NON
CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND EACH WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY REGISTERED OR CERTIFIED MAIL OR MESSENGER DIRECTED
TO IT AT THE ADDRESS SET FORTH IN SECTION 13 HEREOF AND AGREES THAT SUCH SERVICE
SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING CONTAINED IN THIS SECTION 12 SHALL
AFFECT THE RIGHT OF AGENT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR AFFECT THE RIGHT OF AGENT TO BRING ANY ACTION OR PROCEEDING AGAINST
THE GUARANTORS IN THE COURTS OF ANY OTHER JURISDICTION TO THE EXTENT NECESSARY
TO ENFORCE ITS LIENS AGAINST ASSETS LOCATED IN SUCH JURISDICTION.
(k) THIS GUARANTY SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED UNDER
AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS,
WITHOUT REGARD TO CONFLICT OF LAWS PROVISIONS.
SECTION 13. Notices.
-------
Unless otherwise specifically provided herein, any notice or other
communication required or permitted to be given shall be in writing addressed to
the respective party as set forth below and may be personally served, telecopied
or sent by overnight courier service or United States mail certified or
registered and shall be deemed to have been given (a) if delivered in person,
when delivered; (b) if delivered by telecopy, on the date of transmission if
transmitted on a Business Day before 5:00 p.m. (Chicago time) or, if not, on the
next succeeding Business Day; (c) if delivered by overnight courier, two
Business Days after delivery to such courier properly addressed; or (d) if by
United States mail, four Business Days after depositing in the United States
mail, with postage prepaid and properly addressed.
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<PAGE>
Notices shall be addressed as follows:
(a) If to Newco:
Wilsons The Leather Experts Inc.
400 Highway 169 South, Suite 600
Minneapolis, Minnesota 55426
Attention: _________________
Telecopy: _________________
(b) If to Parent:
Wilsons Center, Inc.
400 Highway 169 South, Suite 600
Minneapolis, Minnesota 55426
Attention: __________________
Telecopy: __________________
(c) If to First Intermediate Parent:
Rosedale Wilsons, Inc.
400 Highway 169 South, Suite 600
Minneapolis, Minnesota 55426
Attention: _________________
Telecopy: _________________
(d) If to Second Intermediate Parent:
River Hills Wilsons, Inc.
400 Highway 169 South, Suite 600
Minneapolis, Minnesota 55426
Attention: _________________
Telecopy: _________________
in each case with copies to:
Faegre & Benson
2200 Norwest Center
Minneapolis, Minnesota 55402
Attention: Susan Jacobson
Telecopy: (612) 336-3026
(e) If to Agent:
General Electric Capital Corporation
105 West Madison Street
Suite 1600
-11-
<PAGE>
Chicago, Illinois 60602
Attention: __________________
Telecopy: __________________
with copies to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: David G. Crumbaugh
Telecopy: 312/558-5700
and
---
General Electric Capital Corporation
210 High Ridge Road
Stamford, Connecticut 06927
Attention: Corporate Counsel
Telecopy: 203/316-7889
or in any case, to such other address as the party addressed shall have
previously designated by written notice to the serving party, given in
accordance with this Section 13. A notice not given as provided above shall, if
it is in writing, be deemed given if and when actually received by the party to
whom given.
SECTION 14. Waivers.
-------
(a) THE GUARANTORS WAIVE THE BENEFIT OF ALL VALUATION, APPRAISAL AND
EXEMPTION LAWS.
(b) UPON THE OCCURRENCE OF AN EVENT OF A DEFAULT UNDER THE CREDIT
AGREEMENT, THE GUARANTORS HEREBY WAIVE ALL RIGHTS TO NOTICE AND HEARING OF ANY
KIND PRIOR TO THE EXERCISE BY AGENT OR THE LENDERS OF THEIR RIGHTS TO REPOSSESS
THE COLLATERAL WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE
COLLATERAL WITHOUT PRIOR NOTICE OR HEARING. THE GUARANTORS ACKNOWLEDGE THAT
THEY HAVE BEEN ADVISED BY COUNSEL OF THEIR CHOICE WITH RESPECT TO THIS
TRANSACTION AND THIS GUARANTY.
(c) THE GUARANTORS AND AGENT ACKNOWLEDGE THAT THE TIME AND EXPENSE
REQUIRED FOR TRIAL BY JURY EXCEED THE TIME AND EXPENSE REQUIRED FOR A BENCH
TRIAL AND HEREBY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY, ANY
OBJECTION BASED ON FORUM NON CONVENIENS, ANY OBJECTION TO VENUE OF ANY ACTION
INSTITUTED HEREUNDER, AND WAIVE ANY BOND OR SURETY OR SECURITY
-12-
<PAGE>
UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF AGENT OR THE
LENDERS.
(d) THE GUARANTORS ABSOLUTELY, UNCONDITIONALLY AND IRREVOCABLY WAIVE
ANY RIGHT TO ASSERT ANY DEFENSE (OTHER THAN PAYMENT), SETOFF, COUNTERCLAIM OR
CROSSCLAIM OF ANY NATURE WHATSOEVER WITH RESPECT TO THIS GUARANTY OR THE
OBLIGATIONS OF ANY GUARANTOR THEREUNDER OR THE OBLIGATIONS OF ANY OTHER PERSON
OR PARTY INCLUDING BORROWER) RELATING TO THIS GUARANTY, THE OBLIGATIONS OR THE
OBLIGATIONS OF ANY GUARANTOR IN ANY ACTION OR PROCEEDING BROUGHT BY THE LENDERS
TO COLLECT THE OBLIGATIONS OR TO ENFORCE THE OBLIGATIONS OF ANY GUARANTOR.
[signature page follows]
-13-
<PAGE>
IN WITNESS WHEREOF, this Guaranty has been executed as of the day
first written above.
WILSONS THE LEATHER EXPERTS INC.
By: _________________________________
Name: _______________________________
Title: ______________________________
WILSONS CENTER, INC.
By: _________________________________
Name: _______________________________
Title: ______________________________
ROSEDALE WILSONS, INC.
By: _________________________________
Name: _______________________________
Title: ______________________________
RIVER HILLS WILSONS, INC.
By: _________________________________
Name: _______________________________
Title: ______________________________
-14-
<PAGE>
Exhibit 10.9
REAFFIRMATION OF GUARANTY
-------------------------
July 31, 1997
General Electric Capital Corporation, as Agent
105 West Madison Street
Suite 1600
Chicago, Illinois 60602
Attn: Wilsons Leather Account Manager
Please refer to (1) the Credit Agreement dated as of May 25, 1996 (as
amended, supplemented, restated or otherwise modified from time to time, the
"Credit Agreement") among Wilsons Leather Holdings Inc. ("Borrower"), and the
Loan Parties, General Electric Capital Corporation, individually and as agent
("Agent") and the other lenders signatory thereto; (2) the Parent Guaranty dated
as of May 25, 1996 (as amended, the "Parent Guaranty"), by certain of the
undersigned in favor of Agent on behalf of the Lenders under the Credit
Agreement and (3) the Store Guarantors' Guaranty (as amended, the "Store
Guarantors' Guaranty") dated as of May 25, 1996 by certain of the undersigned in
favor of Agent on behalf of the Lenders under the Credit Agreement. Pursuant to
Amendment No. 4 to Credit Agreement (the "Amendment") of even date herewith,
among Agent, the Lenders signatory thereto, Borrower and the Loan Parties
signatory thereto, certain provisions in the Credit Agreement were amended or
waived.
We hereby (i) acknowledge and reaffirm all of our obligations and
undertakings under the Parent Guaranty and the Store Guarantors' Guaranty (as
applicable) (collectively, the "Guaranties"), and (ii) acknowledge and agree
that subsequent to, and taking into account such Amendment, the Guaranties are
and shall remain in full force and effect in accordance with the terms thereof.
PARENTS:
Wilsons The Leather Experts Inc.
Wilsons Center, Inc.
Rosedale Wilsons, Inc.
River Hills Wilsons, Inc.
By: /s/ David L. Rogers
---------------------------
Title: President
---------------------------
<PAGE>
STORE GUARANTORS:
Bermans The Leather Experts Inc.
Wilsons House of Suede, Inc.
Wilsons Tannery West, Inc.
Wilsons Leather of Alabama Inc.
Wilsons Leather of Connecticut Inc.
Wilsons Leather of Florida Inc.
Wilsons Leather of Georgia Inc.
Wilsons Leather of Indiana Inc.
Wilsons Leather of Iowa Inc.
Wilsons Leather of Louisiana Inc.
Wilsons Leather of Maryland Inc.
Wilsons Leather of Massachusetts Inc.
Wilsons Leather of Michigan Inc.
Wilsons Leather of New Jersey Inc.
Wilsons Leather of New York Inc.
Wilsons Leather of North Carolina Inc.
Wilsons Leather of Ohio Inc.
Wilsons Leather of Pennsylvania Inc.
Wilsons Leather of Rhode Island Inc.
Wilsons Leather of Tennessee Inc.
Wilsons Leather of Texas Inc.
Wilsons Leather of Virginia Inc.
Wilsons Leather of West Virginia Inc.
Wilsons Leather of Wisconsin Inc.
Wilsons Leather of Arkansas Inc.
Wilsons Leather of Delaware Inc.
Wilsons Leather of Mississippi Inc.
Wilsons Leather of Missouri Inc.
Wilsons Leather of South Carolina Inc.
Wilsons Leather of Vermont Inc.
By: /s/ David L. Rogers
-------------------------------
Title: President
-------------------------------
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<PAGE>
Exhibit 10.10
STORE GUARANTORS' GUARANTY
--------------------------
This STORE GUARANTORS' GUARANTY (as it may be amended, supplemented or
otherwise modified from time to time, this "Guaranty") is dated as of May 25,
1996, by BERMANS, THE LEATHER EXPERTS, INC., a Delaware corporation ("Bermans"),
WILSONS HOUSE OF SUEDE, INC., a California corporation ("House of Suede"),
GODSONS TANNERY WEST, INC., a California corporation ("Tannery"), the GEORGETOWN
SUBSIDIARIES (the "Georgetown Subsidiaries") that are signatories hereto and the
INDIVIDUAL STORE SUBSIDIARIES (the "Individual Store Subsidiaries") that are
signatories hereto (Bermans, House of Suede, Tannery, the Georgetown
Subsidiaries and the Individual Store Subsidiaries are individually referred to
as a "Guarantor" and together as the "Guarantors"), in favor of GENERAL ELECTRIC
CAPITAL CORPORATION, a New York corporation, as agent ("Agent") on its behalf
and for the ratable benefit of the Lenders.
WHEREAS, Agent and the Lenders have entered into that certain Credit
Agreement of even date herewith (as the same may be amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement")
with Wilsons Leather Holdings Inc., a Minnesota corporation ("Borrower"), and
certain of Borrower's corporate Affiliates;
WHEREAS, Borrower will become liable for the Obligations, including,
without limitation, loans and other financial accommodations from the Lenders
(including Agent in its individual capacity) under the Credit Agreement;
WHEREAS, the Guarantors will derive substantial direct and indirect
benefit and advantage from the financial accommodations to Borrower set forth in
the Credit Agreement, including the loans and advances made to Borrower
thereunder, and it will be to the Guarantor's direct and indirect interest and
economic benefit to assist Borrower in procuring such financial accommodations
from the Lenders; and
WHEREAS, a condition to Agent and the Lenders entering into the Credit
Agreement is that the Guarantors execute and deliver this Guaranty;
NOW, THEREFORE, in consideration of the premises and in order to
induce Agent and the Lenders to enter into the Credit Agreement and the Lenders
to make loans thereunder, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Guarantors hereby
agree as follows:
SECTION 1. Definitions.
-----------
Unless otherwise defined herein, all capitalized terms used herein
shall have the respective meanings assigned to such terms in Schedule A to the
Credit Agreement.
SECTION 2. Guaranty of Payment.
-------------------
(a) The Guarantors hereby absolutely and unconditionally guarantee
the full and prompt payment to Agent, for its benefit and the ratable benefit of
the Lenders, when due,
<PAGE>
whether upon demand, at maturity or by reason of acceleration or otherwise and
at all times thereafter, of any and all existing and future Obligations.
(b) The Guarantors acknowledge that valuable consideration supports
this Guaranty, including, without limitation, the consideration set forth in the
recitals above as well as any commitment to lend, extension of credit or other
financial accommodation, whether heretofore or hereafter made by the Lenders to
Borrower, any extension, renewal or replacement of any of the Obligations; any
forbearance with respect to any of the Obligations or otherwise; any purchase of
Borrower's assets by the Lenders; or any other valuable consideration.
(c) The Guarantors agree that all payments under this Guaranty shall
be made in United States currency and in the same manner as provided for the
Obligations.
SECTION 3. Costs and Expenses.
------------------
The Guarantors agree to pay on demand, if not paid by Borrower, all
costs and expenses of every kind incurred by Agent or the Lenders: (a) in
enforcing this Guaranty, (b) in collecting any of the Obligations from Borrower
or the Guarantors, (c) in realizing upon or protecting any collateral for this
Guaranty or for payment of any of the Obligations and (d) for any other purpose
related to the Obligations or this Guaranty. "Costs and expenses" as used in
the preceding sentence shall include, without limitation, reasonable attorneys'
fees incurred by Agent or, to the extent provided in the Credit Agreement, any
Lender in retaining counsel for advice, suit, appeal any insolvency or other
proceedings under the United States Bankruptcy Code or otherwise, or for any
purpose specified in the preceding sentence.
SECTION 4. Nature of Guaranty: Continuing, Absolute and Unconditional
----------------------------------------------------------
(a) This Guaranty is and is intended to be a continuing guaranty of
payment of the Obligations, independent of and in addition to any other
guaranty, endorsement, collateral or other agreement held by Agent or the
Lenders therefor or with respect thereto, whether or not furnished by the
Guarantors. The obligations of the Guarantors to repay the Obligations
hereunder shall be unlimited.
(b) Until the Obligations have been paid in full, the Guarantors
shall have no right, claim or remedy of subrogation, reimbursement, contribution
or any similar rights against Borrower or any other guarantor with respect to
the Obligations and hereby waive any right to enforce any remedy which Agent or
any Lender now has or may hereafter have against Borrower, any endorser or any
other guarantor of all or any part of the Obligations, and the Guarantors hereby
waive any benefit of, and any right to participate in, any security or
collateral given to Agent, on behalf of the Lenders, to secure payment of the
Obligations or any part thereof or any other liability of Borrower to Agent or
the Lenders. If any amount shall be paid to the Guarantors on account of any
payment made hereunder at any time when the Obligations shall not have been paid
in full, such amount shall be held in trust for the benefit of Agent and the
Lenders and shall forthwith be paid to Agent to be credited and applied, whether
the Obligations are matured or unmatured, in accordance with the terms of the
Credit Agreement. The Guarantors authorize Agent, on behalf of the Lenders, to
take any action or exercise any remedy with respect to the Collateral which
Agent, on behalf of the Lenders, in its sole discretion shall determine, without
2
<PAGE>
notice to the Guarantors. The Guarantors further agree that any and all claims
of any Guarantor against Borrower, any endorser or any other guarantor of all or
any part of the Obligations, or against any of their respective properties,
whether arising by reason of any payment by any Guarantor to Agent, on behalf of
the Lenders, pursuant to the provisions hereof, or otherwise, shall be
subordinate and subject in right of payment to the prior payment, in full of any
and all principal and interest, all fees, all reasonable costs of collection
(including reasonable attorneys' fees and time charges) and any other
liabilities or obligations owing to the Lenders by Borrower which may arise
either with respect to or on any note, instrument, document item, agreement or
other writing heretofore, now or hereafter delivered to any Lender or Agent. In
the event Agent, on behalf of the Lenders, in its sole discretion elects to give
notice of any action with respect to the Collateral securing the Obligations or
any part thereof, ten (10) days' written notice mailed to the Guarantors by
ordinary mail at the address shown hereon shall be deemed reasonable notice of
any matters contained in such notice. The Guarantors consent and agree that
Agent, on behalf of the Lenders, shall be under no obligation to marshal! any
assets in favor of the Guarantors or against or in payment of any or all of the
Obligations.
(c) For the further security of the Lenders and without in any way
diminishing the liability of the Guarantors, following the occurrence of an
Event of Default and acceleration of the Obligations of Borrower, all debts and
liabilities, present or future of Borrower to any Guarantor and all monies
received from Borrower or for its account by any Guarantor in respect thereof
shall be received in trust for the Lenders and forthwith upon receipt shall be
paid over to Agent, for the benefit of the Lenders, until all of such
Obligations have been paid in full.
(d) This Guaranty and the Guarantors' obligations hereunder are
absolute and unconditional and shall not be changed or affected by any
representation, oral agreement, act or thing whatsoever, except as herein
provided. This Guaranty is intended by the Guarantors to be the final, complete
and exclusive expression of the guaranty agreement between the Guarantors and
Agent, on behalf of the Lenders. No modification or amendment of any provision
of this Guaranty shall be effective unless in writing and signed by a duly
authorized officer of Agent, on its behalf and the ratable benefit of the
Lenders.
SECTION 5. Certain Rights and Obligations.
------------------------------
(a) The Guarantors authorize Agent and the Lenders, without notice,
demand or any reservation of rights against the Guarantors and without impairing
or affecting the validity or enforceability of this Guaranty or the Guarantors'
obligations hereunder, from time to time: (i) to renew, extend, increase,
accelerate or otherwise change the time for payment of, the terms of or the
interest on the Obligations or any part thereof or grant other indulgences to
Borrower or others; (ii) to accept from any Person and hold collateral for the
payment of the Obligations or any part thereof, and to modify, exchange, enforce
or refrain from enforcing, or release, compromise, settle, waive, subordinate or
surrender, with or without consideration, such collateral or any part thereof;
(iii) to accept and hold any endorsement or guaranty of payment of the
Obligations or any part thereof, and to discharge, release or substitute any
such obligation of any such endorser or guarantor, or any Person who has given
any security interest in any collateral as security for the payment of the
Obligations or any part thereof, or any other Person in any way obligated to pay
the Obligations or any part thereof, and to enforce or refrain from
3
<PAGE>
enforcing, or compromise or modify, the terms of any obligation of any such
endorser, guarantor or Person; (iv) to dispose of any and all Collateral
securing the Obligations in any manner as Agent or the Lenders, in their sole
discretion, may deem appropriate, and to direct the order or manner of such
disposition and the enforcement of any and all endorsements and guaranties
relating to the Obligations or any part thereof as Agent or the Lenders, in
their sole discretion may determine; (v) except as otherwise provided in the
Credit Agreement, to determine the manner, amount and time of application of
payments and credits, if any, to be made on all or any part of any component or
components of the Obligations (whether principal interest, fees, costs and
expenses, or otherwise) including, without limitation, the application of
payments received from any source to the payment of indebtedness other than the
Obligations even though the Lenders might lawfully have elected to apply such
payments to the Obligations or to amounts which are not covered by this
Guaranty; and (vi) to take advantage or refrain from taking advantage of any
security or accept or make or refrain from accepting or making any compositions
or arrangements when and in such manner as Agent or the Lenders, in their sole
discretion, may deem appropriate and generally do or refrain from doing any act
or thing which might otherwise, at law or in equity, release the liability of
the Guarantors as guarantors or sureties in whole or in part, and in no case
shall Agent or the Lenders be responsible or shall the Guarantors be released
either in whole or in part for any act or omission in connection with Agent or
the Lenders having sold any security at an under value.
(b) If any default shall be made in the payment of any of the
Obligations and any grace period has expired with respect thereto, the
Guarantors hereby agree to pay the same in full to the extent hereinafter
provided: (i) without deduction by reason of any setoff, defense (other than
payment) or counterclaim of Borrower; (ii) without requiring presentment,
protest or notice of nonpayment or notice of default to any Guarantor, to
Borrower or to any other Person; (iii) without demand for payment or proof of
such demand or filing of claims with a court in the event of receivership,
bankruptcy or reorganization of Borrower; (iv) without requiring Agent or the
Lenders to resort first to Borrower (this being a guaranty of payment and not of
collection) or to any other guarantor or any other Person obligated with respect
to the Obligations or any collateral which the Lenders may hold; (v) without
requiring notice of acceptance hereof or assent hereto by Agent or the Lenders;
and (vi) without requiring notice that any of the Obligations has been incurred,
extended or continued or of the reliance by Agent or the Lenders upon this
Guaranty; all of which the Guarantors hereby waive.
(c) This Guaranty and the Guarantors' obligation hereunder shall at
all times be valid and enforceable and shall not be impaired or affected by any
other agreements or circumstances of any nature whatsoever which otherwise
constitute a defense to this Guaranty, including, without limitation, any of the
following, all of which the Guarantors hereby waive: (i) any failure or
omission to perfect or continue the perfection of any security interest in or
other lien on, or preserve rights to, any collateral securing payment of any of
the Obligations or the Guarantors' obligation hereunder; (ii) the invalidity,
unenforceability, propriety of manner of enforcement of, or loss or change in
priority of any such security interest or other lien or guaranty of the
Obligations; (iii) any failure or omission to protect, preserve or insure any
such collateral; (iv) failure of any Guarantor to receive notice of any intended
disposition of such collateral; (v) any defense arising by reason of the
cessation from any cause whatsoever of liability of Borrower including, without
limitation, any failure, negligence or omission by Agent or the Lenders in
4
<PAGE>
enforcing their claims against Borrower; (vi) any waiver of any right, remedy or
power or of any default with respect to the Obligations or any part thereof or
any release, settlement or compromise of any obligation of Borrower; (vii) the
invalidity or unenforceability of any of the Obligations or the invalidity or
unenforceability of any agreement relating thereto or with respect to any
collateral securing the Obligations or any part thereof; (viii) any change of
ownership of Borrower or the insolvency, bankruptcy or any other change in the
legal status of Borrower; (ix) any change in, or the imposition of, any law,
decree, regulation or other governmental act which does or might impair, delay
or in any way affect the validity, enforceability or the payment when due of the
Obligations; (x) the existence of any claim, setoff or other right which the
Guarantors may have at any time against Agent, any Lender, Borrower or any other
guarantor in connection herewith or any unrelated transaction; (xi) the failure
of Borrower or the Guarantors to maintain in full force, validity or effect or
to obtain or renew when required all governmental and other approvals, licenses
or consents required in connection with the Obligations or this Guaranty, or to
take any other action required in connection with the performance of all
obligations pursuant to the Obligations or this Guaranty; (xii) Agent's
election, on behalf of the Lenders, in any case instituted under chapter 11 of
the United States Bankruptcy Code, of the application of section 1111(b)(2) of
the United States Bankruptcy Code; (xiii) any borrowing, use of cash collateral,
or grant of a security interest by Borrower, as Borrower in possession, under
section 363 or 364 of the United States Bankruptcy Code; (xiv) the disallowance
of all or any portion of any of the Lenders' claims for repayment of the
Obligations under section 502 or 506 of the United States Bankruptcy Code; or
(xv) any other fact or circumstance which might otherwise constitute grounds at
law or in equity for the discharge or release of any Guarantor from its
obligations hereunder, all whether or not the Guarantors shall have had notice
or knowledge of any act or omission referred to in the foregoing clauses (i)
through (xv) of this subsection 5(c). It is agreed that the Guarantors'
liability hereunder is independent of any other guaranties or other obligations
at any time in effect with respect to the Obligations or any part thereof and
that the Guarantors' liability hereunder may be enforced regardless of the
existence, validity, enforcement or non-enforcement of any such other guaranties
or other obligations or any provision of any applicable law or regulation
purporting to prohibit payment by Borrower of the Obligations in the manner
agreed upon between the Lenders and Borrower.
(d) Credit may be granted or continued from time to time by the
Lenders to Borrower without notice to or authorization from the Guarantors
regardless of Borrower's financial or other condition at the time of any such
grant or continuation. Neither Agent nor any Lender shall have an obligation to
disclose or discuss with the Guarantors its assessment of the financial
condition of Borrower.
SECTION 6. Representations and Warranties.
------------------------------
The Guarantors represent and warrant that:
(a) Existence. The Guarantors and their Subsidiaries (i) are
corporations duly organized, validly existing and in good standing under the
laws of their respective jurisdiction of incorporation and have been duly
qualified to conduct business and are in good standing in each other
jurisdiction where ownership or lease of property or the conduct of their
business require such qualification except where the failure to so qualify would
not have a Material Adverse
5
<PAGE>
Effect; (ii) have the requisite corporate power and authority and the legal
right to own, pledge, mortgage or otherwise encumber and operate their
properties, to lease the property they operate under lease and to conduct their
business as now, heretofore and proposed to be conducted; (iii) have all
material licenses, permits, consents or approvals from or by, and have made all
filings with, and have given all notices to, all Governmental Authorities having
jurisdiction, to the extent required for such ownership, operation and conduct;
(iv) are in compliance with their respective certificate or articles of
incorporation and bylaws; and (v) are in compliance with all applicable
provisions of law except where the failure to so be in compliance would not have
a Material Adverse Effect.
(b) Authority. The Guarantors have full power, authority and legal
right to enter into this Guaranty and the other Loan Documents to which they are
parties. The execution, delivery and performance by the Guarantors of this
Guaranty and such other Loan Documents: (i) have been duly authorized by all
necessary action on the part of the Guarantors; (ii) are not in contravention of
the teens of each Guarantor's respective certificate of incorporation or bylaws
or of any indenture, agreement or undertaking to which each Guarantor is a party
or by which each Guarantor or any of its property is bound; (iii) do not and
will not require any governmental consent, registration or approval or the
consent of any other Person that has not been obtained; (iv) do not and will not
contravene any contractual or governmental restriction to which any Guarantor or
any of its property may be subject; and (v) do not and will not, except as
contemplated herein, result in the imposition of any Lien upon any property of
any Guarantor under any existing indenture, mortgage, deed of trust, loan or
credit agreement or other material agreement or instrument to which any
Guarantor is a party or by which any Guarantor or any of its property may be
bound or affected.
(c) Binding Effect. This Guaranty and all of the other Loan
Documents to which the Guarantors are a party have been duly executed and
delivered by each Guarantor, are the legal, valid and binding obligations of
each Guarantor and are enforceable against each Guarantor in accordance with
their terms.
(d) Negative Pledge. The Guarantors are not a party to or bound by
any indenture, contract, instrument or other agreement which prohibits the
creation, incurrence or sufferance to exist of any Lien upon its property,
except the Loan Documents and the Subordinated Note.
(e) Survival of Representations and Warranties. All representations
and warranties contained in this Guaranty or any of the other Loan Documents to
which the Guarantors are a party shall survive the execution and delivery of
this Guaranty and the termination hereof.
(f) The Guarantors ratify and confirm the representations and
warranties made with respect to them in Section 3 of the Credit Agreement, which
are incorporated herein by reference.
6
<PAGE>
SECTION 7. Covenants.
---------
The Guarantors covenant that until the Obligations are paid in full
they shall perform, comply with and be bound by all of the terms and conditions
set forth in the Credit Agreement which relate to the Guarantors, including,
without limitation, Schedule E thereto, with such terms and conditions being
incorporated in this Guaranty by reference and shall cause Borrower to comply
with all covenants set forth in the Credit Agreement.
SECTION 8. Termination.
-----------
This Guaranty shall remain in full force and effect until all of the
Obligations shall be finally and irrevocably paid in full and the Obligations
under the Credit Agreement shall have been terminated. Payment of all of the
Obligations from time to time shall not operate as a discontinuance of this
Guaranty. The Guarantors further agree that, to the extent that Borrower makes
a payment or payments to Agent or any of the Lenders on the Obligations, or
Agent or the Lenders receive any proceeds of Collateral securing the
Obligations, which payment or receipt of proceeds or any part thereof is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be returned or repaid to Borrower, its estate, trustee, receiver,
Borrower in possession or any other Person, including, without limitation, any
guarantor, under any insolvency or bankruptcy law, state or federal law, common
law or equitable cause, then to the extent of such payment, return or repayment,
the obligation or part thereof which has been paid, reduced or satisfied by such
amount shall be reinstated and continued in full force and effect as of the date
when such initial payment, reduction or satisfaction occurred, and this Guaranty
shall continue in full force notwithstanding any contrary action which may have
been taken by the Lenders in reliance upon such payment, and any such contrary
action so taken shall be without prejudice to Agent's or the Lenders' rights
under this Guaranty and shall be deemed to have been conditioned upon such
payment having become final and irrevocable.
SECTION 9. Guaranty of Performance.
-----------------------
The Guarantors also guarantee the full, prompt and unconditional
performance of all obligations and agreements of every kind owed or hereafter to
be owed by any Guarantor or Borrower to Agent or the Lenders. Every provision
for the benefit of Agent or the Lenders contained in this Guaranty shall apply
to the guaranty of performance given in this Section 9.
SECTION 10. Taxes.
-----
All payments hereunder shall be made without any counterclaim or
setoff, free and clear of, and without reduction by reason of, any taxes,
levies, imposts, charges and withholdings, restrictions or conditions of any
nature other than taxes imposed on the net income of Agent or a Lender
("Taxes"), which are now or may hereafter be imposed, levied or assessed by any
country, political subdivision or taxing authority, all of which will be for the
account of and paid by the Guarantors. If for any reason, any such reduction is
made or any Taxes are paid by the Lender, the Guarantors will pay to Agent, for
the benefit of the Lenders, such additional amounts as may be necessary to
ensure that Agent, and the Lenders receive the same net amount which they would
have received had no reduction been made or Taxes paid.
7
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SECTION 11. Cross Guaranty.
--------------
(a) Cross-Guaranty. Notwithstanding any provision herein contained
to the contrary, each Guarantor's liability under this Guaranty shall be limited
to an amount not to exceed as of any date of determination the greater of:
(i) the net amount of all intercompany loans advanced to such
Guarantor by Borrower or otherwise transferred to such Guarantor, or
(ii) the amount which could be claimed by Agent and the Lenders
from such Guarantor under this Guaranty without rendering such claim
voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy
Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform
Fraudulent Conveyance Act or similar statute or common law after taking
into account, among other things, such Guarantor's right of contribution
and indemnification from the other Guarantors under Section 11(b) hereof.
(b) Contribution with Respect to Guaranty Obligations.
(i) To the extent that any Guarantor shall make a payment
under this Guaranty of all or any of the Obligations (a "Guarantor
Payment") which, taking into account all other Guarantor Payments then
previously or concurrently, made by the other Guarantors, exceeds the
amount which such Guarantor would otherwise have paid if each Guarantor had
paid the aggregate Obligations satisfied by such Guarantor Payment in the
same proportion that such Guarantor's Allocable Amounts (as defined below)
(in effect immediately prior to such Guarantor Payment) bore to the
aggregate Allocable Amounts of all of the Guarantors in effect immediately
prior to the making of such Guarantor Payment, then such Guarantor shall be
entitled to receive contribution and indemnification payments from, and be
reimbursed by, each of the other Guarantors for the amount of such excess,
pro rata based upon their respective Allocable Amounts in effect
immediately prior to such Guarantor Payment.
(ii) As of any date of determination, the "Allocable Amount"-of
any Guarantor shall be equal to the maximum amount of the claim which could
then be recovered from such Guarantor hereunder without rendering such
claim voidable or avoidable under Section 548 of Chapter 11 of the
Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer
Act, Uniform Fraudulent Conveyance Act or similar statute or common law.
(iii) This Section 11(b) is intended only to define the relative
rights of the Guarantors and nothing set forth in this Section 11(b) is
intended to or shall impair the obligations of Guarantors, jointly and
severally, to pay any amounts as and when the same shall become due and
payable in accordance with the terms of this Guaranty.
(iv) The parties hereto acknowledge that the rights of
contribution and indemnification hereunder shall constitute assets of any
Guarantor to which such contribution and indemnification is owing.
8
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SECTION 12. Security.
--------
To secure payment of the Guarantors' obligations under this Guaranty,
concurrently with the execution of this Guaranty, the Guarantors are entering
into a Security Agreement pursuant to which they have granted to Agent a
security interest in all or substantially all of their respective personal
property other than fixtures and equipment.
SECTION 13. Miscellaneous.
-------------
(a) In addition to and without limiting any other right, power or
remedy of Agent or any Lender, whenever Agent or the Lenders have the right to
declare any of the Obligations to be immediately due and payable (whether or not
it has been so declared), the Lenders at their sole election without notice to
the Guarantors may appropriate and setoff against the Obligations: (i) any and
all indebtedness or other monies due or to become due to any Guarantor by Agent
or the Lenders in any capacity; and (ii) any monies, credits or other property
belonging to any Guarantor (including all account balances, whether provisional
or final and whether or not collected or available) at any time held by or
coming into the possession of Agent or any of the Lenders, or any affiliate of
Agent or any of the Lenders, whether for deposit or otherwise, whether or not
the Obligations or the obligation to pay such monies owed by Agent or the
Lenders is then due, and Agent on behalf of the Lenders, is hereby granted a
security interest in and Lien upon such monies, credits and other property.
Agent or the Lenders shall be deemed to have exercised such right of set-off
immediately at the time of such election even though any charge therefor is made
or entered on Agent's or the Lenders' records subsequent thereto.
(b) In the event that acceleration of the time for payment of any of
the Obligations is stayed, upon the insolvency, bankruptcy or reorganization of
Borrower, or otherwise, all such amounts shall nonetheless be payable by the
Guarantors forthwith upon demand by Agent, on behalf of the Lenders.
(c) No delay on the part of Agent or any Lender in the exercise of
any right, power or remedy shall operate as a waiver thereof, and no single or
partial exercise by Agent or any Lender of any right, power or remedy shall
preclude any further exercise thereof; nor shall any amendment, supplement,
modification or waiver of any of the terms or provisions of this Guaranty be
binding upon Agent or the Lenders, except as expressly set forth in a writing
duly signed and delivered by Agent. The failure by Agent or any Lender at any
time or times hereafter to require strict performance by Borrower or any
Guarantor of any of the provisions, warranties, terms and conditions contained
in any promissory note, security agreement, agreement, indenture, guaranty,
instrument or document now or at any time or times hereafter executed by
Borrower or any Guarantor and delivered to Agent or any Lender shall not waive,
affect or diminish any right of Agent or any Lender at any time or times
hereafter to demand strict performance thereof, and such right shall not be
deemed to have been waived by any act or knowledge of Agent or any Lender, their
agents, officers or employees, unless such waiver is contained in an instrument
in writing duly signed and delivered by Agent and/or the Lenders, as the case
may be. No waiver by Agent or the Lenders of any default shall operate as a
waiver of any other default hereunder or the same default on a future occasion,
and no action by Agent or the Lenders permitted hereunder shall in any way
affect or impair Agent's or any Lender's rights, powers or the obligations of
any
9
<PAGE>
Guarantor under this Guaranty. Any determination by a court of competent
jurisdiction of the amount of any Obligations owing by Borrower to the Lenders
shall be conclusive and binding on the Guarantors irrespective of whether
Borrower was a party to the suit or action in which such determination was made.
The rights and remedies of Agent and the Lenders hereunder are cumulative and
may be exercised singly or concurrently, and are not exclusive of any rights or
remedies provided by law.
(d) This Guaranty shall bind each Guarantor and the successors and
assigns of each Guarantor and shall inure to the benefit of Agent and the
Lenders and their successors and assigns. All references herein to Borrower
shall be deemed to include its successors and assigns including, without
limitation, a receiver, trustee or Borrower in possession of or for Borrower.
(e) Section headings in this Guaranty are included herein for
convenience of reference only and shall not constitute a part of this Guaranty
for any other purpose or be given any substantive effect.
(f) Whenever possible, each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable law.
Any provision of this Guaranty which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remainder of such
provision or the remaining provisions of this Guaranty, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(g) It is understood that while the amount of the Obligations is not
limited, if, in any action or proceeding involving any state or federal
bankruptcy, insolvency or other law affecting the rights of creditors generally,
this Guaranty would be held or determined to be void, invalid or unenforceable
on account of the amount of the aggregate liability under this Guaranty, then,
notwithstanding any other provision of this Guaranty to the contrary, the
aggregate amount of such liability shall, without any further action of the
Guarantors, the Lenders, Agent or any other Person, be automatically limited and
reduced to the highest amount which is valid and enforceable as determined in
such action or proceeding.
(h) This Guaranty sets forth the entire understanding and agreement
of the Guarantors and Agent with respect to the subject matter hereof and
supersedes all other understandings, oral or written, with respect to the
subject matter hereof.
(i) The Guarantors agree to pay all costs, reasonable fees and
expenses (including reasonable attorneys' fees) incurred by Agent or the Lenders
after a default by any Guarantor under this Guaranty.
(j) THE GUARANTORS AND AGENT HEREBY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN COOK COUNTY, CITY OF
CHICAGO, ILLINOIS, AND IRREVOCABLY AGREE THAT ALL ACTIONS OR PROCEEDINGS
RELATING TO THIS GUARANTY OR THE OTHER LOAN DOCUMENTS TO WHICH THE GUARANTORS
ARE A PARTY SHALL BE LITIGATED IN SUCH COURTS, AND THE GUARANTORS AND AGENT
10
<PAGE>
WAIVE ANY OBJECTION WHICH THEY MAY HAVE BASED ON IMPROPER VENUE OF FORUM NON
CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND EACH WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY REGISTERED OR CERTIFIED MAIL OR MESSENGER DIRECTED
TO IT AT THE ADDRESS SET FORTH IN SECTION 13 HEREOF AND AGREES THAT SUCH SERVICE
SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING CONTAINED IN THIS SECTION 12 SHALL
AFFECT THE RIGHT OF AGENT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR AFFECT THE RIGHT OF AGENT TO BRING ANY ACTION OR PROCEEDING AGAINST
THE GUARANTORS IN TEE COURTS OF ANY OTHER JURISDICTION TO THE EXTENT NECESSARY
TO ENFORCE ITS LIENS AGAINST ASSETS LOCATED IN SUCH JURISDICTION.
(k) THIS GUARANTY SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED UNDER
AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS,
WITHOUT REGARD TO CONFLICT OF LAWS PROVISIONS.
SECTION 14. Notices.
-------
Unless otherwise specifically provided herein, any notice or other
communication required or permitted to be given shall be in writing addressed to
the respective party as set forth below and may be personally served, telecopied
or sent by overnight courier service or United States mail certified or
registered and shall be deemed to have been given (a) if delivered in person,
when delivered; (b) if delivered by telecopy, on the date of transmission if
transmitted on a Business Day before 5:00 p.m. (Chicago time) or, if not, on the
next succeeding Business Day; (c) if delivered by overnight courier, two
Business Days after delivery to such courier properly addressed; or (d) if by
United States mail, four Business Days after depositing in the United States
mail, with postage prepaid and properly addressed.
Notices shall be addressed as follows:
(a) If to the Guarantors:
Wilsons House of Suede, Inc. as agent for the Store Guarantors:
400 Highway 169 South, Suite 600
Minneapolis, Minnesota 55426
Attention: _____________________
Telecopy: _____________________
with a copy to:
Faegre & Benson
2200 Norwest Center
Minneapolis, Minnesota 55402
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<PAGE>
Attention: Susan Jacobson
Telecopy: (612) 336-3026
(b) If to Agent:
General Electric Capital Corporation
105 West Madison Street Suite 1600
Chicago, Illinois 60602
Attention: Wilsons Leather Account Manager
Telecopy: (312) 419-5957
with copies to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: David G. Crumbaugh
Telecopy: 312/558-5700
and
General Electric Capital Corporation
210 High Ridge Road
Stamford, Connecticut 06927
Attention: Corporate Counsel
Telecopy: 203/316-7889
or in any case, to such other address as the party addressed shall have
previously designated by written notice to the serving party, given in
accordance with this Section 13. A notice not given as provided above shall, if
it is in writing, be deemed given if and when actually received by the party to
whom given.
SECTION 15. Waivers.
-------
(a) THE GUARANTORS WAIVE THE BENEFIT OF ALL VALUATION, APPRAISAL AND
EXEMPTION LAWS.
(b) IN THE EVENT OF A DEFAULT UNDER THE CREDIT AGREEMENT, THE
GUARANTORS HEREBY WAIVE ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO
THE EXERCISE BY AGENT OR THE LENDERS OF THEIR RIGHTS TO REPOSSESS THE COLLATERAL
WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL
WITHOUT PRIOR NOTICE OR HEARING. THE GUARANTORS ACKNOWLEDGE THAT THEY HAVE BEEN
ADVISED BY COUNSEL OF THEIR CHOICE WITH RESPECT TO THIS TRANSACTION AND THIS
GUARANTY.
12
<PAGE>
(c) THE GUARANTORS AND AGENT ACKNOWLEDGE THAT THE TIME AND EXPENSE
REQUIRED FOR TRIAL BY JURY EXCEED THE TIME AND EXPENSE REQUIRED FOR A BENCH
TRIAL AND HEREBY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY, ANY
OBJECTION BASED ON FORUM NON CONVENIENS, ANY OBJECTION TO VENUE OF ANY ACTION
INSTITUTED HEREUNDER, AND WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND
WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF AGENT OR THE LENDERS.
(d) THE GUARANTORS ABSOLUTELY, UNCONDITIONALLY AND IRREVOCABLY WAIVE
ANY RIGHT TO ASSERT ANY DEFENSE (OTHER THAN PAYMENT), SETOFF, COUNTERCLAIM OR
CROSSCLAIM OF ANY NATURE WHATSOEVER WITH RESPECT TO THIS GUARANTY OR THE
OBLIGATIONS OF ANY GUARANTOR HEREUNDER OR THE OBLIGATIONS OF ANY OTHER PERSON OR
PARTY (INCLUDING BORROWER) RELATING TO THIS GUARANTY, THE OBLIGATIONS OR THE
OBLIGATIONS OF ANY GUARANTOR IN ANY ACTION OR PROCEEDING BROUGHT BY THE LENDERS
TO COLLECT THE OBLIGATIONS OR TO ENFORCE THE OBLIGATIONS OF ANY GUARANTOR.
[signature pages follow]
13
<PAGE>
IN WITNESS WHEREOF, this Guaranty has been executed as of the day
first written above.
ACADIANA MALL WILSONS, INC.
ANNAPOLIS WILSONS, INC.
ANTELOPE VALLEY WILSONS, INC.
ARDEN FAIR WILSONS, INC.
ARSENAL WILSONS, INC.
ATLANTA AIRPORT CONCOURSE T WILSON, INC.
AUBURN-MAINE WILSONS,-INC.
AUBURN WILSONS, INC.
AUGUSTA MALL WILSONS, INC.
AVENUE OF THE AMERICAS WILSONS, INC.
BALDWIN HILLS WILSONS, INC.
BANGOR MALL WILSONS, INC.
BARTON CREEK WILSONS, INC.
BAYSHORE REASONS, INC.
BAYSHORE (CA) WILSONS, INC.
BAYSIDE TANNERY WEST, INC.
BEAVER VALLEY WILSONS, INC.
BELLEVUE BERMANS INC.
BELLIS FAIR WILSONS, INC.
BERKSHIRE WILSONS, INC.
BERMANS, THE LEATHER EXPERTS, INC.
BIRCHWOOD MALL WILSONS, INC.
BOISE WILSONS, INC.
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<PAGE>
BOULDER WILSONS, INC.
BOULEVARD MALL WILSONS, INC.
BRAINTREE TANNERY WEST, INC.
BRIARWOOD WILSONS, INC.
BRIDGEWATER COMMONS WILSONS, INC.
BRUNSWICK SQUARE WILSONS, INC.
BUCKLAND HILLS PELLE CUIR, INC.
BURLINGTON WILSONS, INC.
BURTON WILSONS, INC.
CAMBRIDGE GALLERIA WILSONS, INC.
CAPITOL COURT WILSONS, INC.
CARBONDALE IL WILSONS, INC.
CAROLINA PLACE WILSONS, INC.
CARSON WILSONS, INC.
CARY TOWN WILSONS, INC.
CASCADE MALL WILSONS, INC.
CENTURY CITY WILSONS, INC.
CHAMPLAIN CENTRE WILSONS, INC.
CHARLESTON CENTER WILSONS, INC.
CHARLESTOWNE WILSONS, INC.
CHAUTAUQUA WILSONS, INC.
CHERRY HILL WILSONS, INC.
CHICAGO RIDGE WILSONS, INC.
CHICAGO YARD WILSONS, INC.
CHRISTIANA WILSONS, INC.
15
<PAGE>
CHULA VISTA WILSONS, INC.
CEILO VISTA WILSONS, INC.
CLERMONT COUNTY WILSONS, INC.
COLONIE WILSONS, INC.
CONCOURSE A WILSONS, INC.
CORONADO WILSONS, INC.
CORTANA MALL WILSONS, INC.
COUNCIL BLUFFS WILSONS, INC.
COUNTY FAIR WEAPONS, INC.
CROSS COUNTY WILSONS, INC.
CROSS CREEK MALL WILSONS, INC.
CROSSROADS WILSONS, INC., A NEVADA CORPORATION
CROSSROADS WILSONS, INC., A UTAH CORPORATION
CRYSTAL WATERFORD WILSONS, INC.
CUMBERLAND WILSONS, INC.
DAKOTA SQUARE WILSONS, INC.
DANBURY FAIR WILSONS, INC.
DEL AMO BERMANS, INC.
EASTFIELD WILSONS, INC.
EASTLAND MALL WILSONS, INC.
EASTLAND (MICH.) WILSONS, INC.
EASTPOINT WILSONS, INC.
EASTVIEW WILSONS, INC.
EMERALD SQUARE WILSONS, INC.
16
<PAGE>
ESCONDIDO WILSONS, INC.
FAIRLANE WILSONS, INC.
FASHION PLACE WILSONS, INC.
FASHION SQUARE-SAGINAW WILSONS, INC.
FLATBUSH WILSONS, INC.
FOOTHILLS WILSONS, INC.
FORD CITY PELLE CUIR, INC.
FOUR SEASONS WILSONS, INC.
FOX RUN WILSONS, INC.
FRANKLIN MILLS BERMANS OUTLET, INC.
GARDEN STATE TANNERY WEST, INC.
GENESEE VALLEY WILSONS, INC.
GOLF MILL WILSONS, INC.
GOVERNOR'S SQUARE WILSONS, INC.
GRAND RAPIDS WILSONS, INC.
GRAND TRAVERSE WILSON, INC.
GREAT MALL SNYDER LEATHER OUTLET, INC.
GREAT NORTHWEST BERMANS OUTLET, INC.
GREEN ACRES WILSONS, INC.
GURNEE MILLS BERMANS OUTLET, INC.
GWINNETT PLACE WILSONS, INC.
HAMILTON PLACE WILSONS, INC.
HAMILTON WILSONS, INC.
HANES MALL WILSONS, INC.
17
<PAGE>
HANFORD WILSONS, INC.
HARRISBURG WILSONS, INC.
HARTSFIELD ATRIUM WILSONS, INC.
HAYWOOD WILSONS, INC.
HENRIETTA WILSONS, INC.
HICKORY RIDGE BERMANS, INC.
HOLYOKE WILSONS, INC.
HULEN MALL WILSONS, INC.
HUNTINGTON-WEST VA. WILSONS, INC.
INGRAM PARK WILSONS, INC.
IRONDEQUOIT WILSONS, INC.
IRVING WILSONS, INC.
JANESVILLE WILSONS, INC.
JEFFERSON YORKTOWN WILSONS, INC.
KELSO WILSONS, INC.
KENWOOD WILSONS, INC.
KING OF PRUSSIA WILSONS, INC.
KITSAP MALL WILSONS, INC.
LAKEVIEW SQUARE WILSONS, INC.
LAKEWOOD WILSONS, INC.
LANDMARK CENTER (VA) WILSONS, INC.
LANESBOROUGH BERKSHIRE MALL WILSONS, INC.
LANSING MALL WILSONS, INC.
LAREDO WILSONS, INC.
18
<PAGE>
LAUREL MALL WILSONS, INC.
LAYTON HILLS WILSONS, INC.
LEOMINSTER WILSONS, INC.
LIBERTY TREE MALL WILSONS, INC.
LINDALE WILSONS, INC.
LIVINGSTON MALL WILSONS, INC.
LONG BEACH WILSONS, INC.
LONG RIDGE WILSONS, INC.
MACHESNEY WILSONS, INC.
MACON MALL WILSONS, INC.
MADISON SQUARE WILSONS, INC.
MAIN PLACE WILSONS, INC.
MAINE MALL WILSONS, INC.
MALL AT 163RD ST. WILSONS, INC.
MARLEY STATION WILSONS, INC.
MENLO PARK WILSONS, INC.
MERIDEN SQUARE WILSONS, INC.
METRO WILSONS, INC.
MIDLAND MALL WILSONS HOUSE OF SUEDE, INC.
MIDLAND MALL WILSONS, INC.
MID-RIVERS BERMANS, INC.
MILITARY CIRCLE WILSONS, INC.
MISSION VALLEY WILSONS, INC.
MONROEVILLE WILSONS, INC.
19
<PAGE>
MONTCLAIR WILSONS, INC.
MONTEBELLO WILSONS, INC.
NANUET TANNERY WEST, INC.
NATICK MALL WILSONS, INC.
NESHAMINY WILSONS, INC.
NEWBURGH MALL WILSONS, INC.
NEWPORT CITY WILSONS, INC.
NORTHGATE WILSONS, INC.
NORTH COUNTY FAIR TANNERY WEST, INC.
NORTH EAST WILSONS, INC.
NORTH DARTMOUTH WILSONS, INC.
NORTHGATE-DURHAM WILSONS, INC.
NORTHPOINT WILSONS, INC.
NORTHSHORE WILSONS, INC.
NORTHTOWN WILSONS, INC.
OAKRIDGE WILSONS, INC.
OAKVIEW WILSONS, INC.
OAKWOOD WILSONS, INC.
OCEAN COUNTY WILSONS, INC.
OLD CAPITAL CENTER WILSONS, INC.
ONODAGA COUNTY REASONS, INC.
ORLAND SQUARE WILSONS, INC.
ORLANDO FASHION WILSONS, INC.
PARADISE VALLEY MALL WILSONS, INC.
PARAMUS PARK WILSONS, INC.
20
<PAGE>
PARK CITY WILSONS, INC.
PARK LANE WILSONS, INC.
PARK PLAZA WILSONS, INC.
PARKERSBURG WILSONS, INC.
PARKWAY PLAZA WILSONS, INC.
PARMATOWN WILSONS, INC.
PEACHTREE MALL WILSONS, INC.
PENTAGON CITY TANNERY WEST, INC.
PHEASANT WILSONS, INC.
PHILADELPHIA GALLERY WILSONS, INC.
PHILLIPSBURG WILSONS, INC.
PITTSBURGH WILSONS, INC.
PORTAGE WILSONS, INC.
POUGHKEEPSIE GALLERIA WILSONS, INC.
RACEWAY WILSONS, INC.
RANDHURST WILSONS, INC.
RD. SQUARE WILSONS, INC.
RIDGEDALE TANNERY WEST, INC.
RIVERCHASE WILSONS, INC.
RI-WARWICK WILSONS HOUSE OF SUEDE, INC.
ROANOKE WILSONS, INC.
ROCKAWAY TANNERY WEST, INC.
ROCKINGHAM PARK WILSONS, INC.
ROGUE VALLEY WILSONS, INC.
21
<PAGE>
ROOSEVELT FIELD TANNERY WEST, INC.
ROOSEVELT FIELD WILSONS, INC.
ROSS PARK WILSONS, INC.
RUSHMORE MALL WILSONS, INC.
SACRAMENTO WILSONS, INC.
SALISBURY CENTRE WILSONS, INC.
SALMON RUN WILSONS, INC.
SAN LEANDRO WILSONS, INC.
SANDUSKY MALL WILSONS, INC.
SANTA ANITA WILSONS, INC.
SANTA MARIA WILSONS, INC.
SANTA ROSA WILSONS, INC.
SAWGRASS MILLS BERMANS OUTLET, INC.
SCOTTSDALE FASHION WILSONS, INC.
SERRAMONTE WILSONS, INC.
SHERWOOD WILSONS, INC.
SHOPPINGTOWN WILSONS, INC.
SIERRA VISTA WILSONS, INC.
SMITH HAVEN TANNERY WEST, INC.
SMITH HAVEN WILSONS, INC.
SNYDER LEATHER OF WARWICK, RI, INC.
SOLANO MALL WILL
SOUTH HILL (WA) WILSONS, INC.
SOUTH HILLS WILSONS, INC.
SOUTH SQUARE WILSONS, INC.
22
<PAGE>
SOUTHERN HILLS WILSONS, INC.
SOUTHLAKE WILSONS, INC.
SOUTHWEST PLAZA WILSONS, INC.
SPOTSYLVANIA WILSONS, INC.
SPRING HILL WILSONS, INC.
SQUARE ONE WILSONS, INC.
STATEN ISLAND WILSONS, INC.
STEEPLEGATE WILSONS, INC.
STEINWAY STREET WILSONS, INC.
STONERIDGE TANNERY WEST, INC.
STONEWOOD WILSONS, INC.
STRATFORD SQUARE WILSONS, INC.
ST. CHARLES WILSONS, INC.
ST. LAURENCE CENTER WILSONS, INC.
SWANSEA WILSONS, INC.
TACOMA WILSONS, INC.
TAYLOR TOWNSHIP WILSONS, INC.
THE OAKS WILSONS, INC.
TOUHY AVENUE PELLE CUIR, INC.
TOWN CENTER WILSONS, INC.
TOWNE EAST WILSONS, INC.
TRUMBULL PARK WILSONS, INC.
TUCSON MALL WILSONS, INC.
TWELVE OAKS TANNERY WEST, INC.
TYLER MALL WILSONS, INC.
23
<PAGE>
TYLER WILSONS, INC.
UNIVERSITY MALL WILSONS, INC.
VALLEY WEST WILSONS, INC.
VANCOUVER WILSONS, INC.
VICTOR VALLEY WILSONS, INC.
WAYNE COUNTY WILSONS, INC.
WEST COVINA WILSONS, INC.
WESTLAND-DETROIT WILSONS, INC.
WESTMINSTER (COLO.) WILSONS, INC.
WHITE PLAINS GALLERIA WILSONS, INC.
WILLOWBROOK WILSONS, INC.
WILSONS HOUSE OF SUEDE, INC.
WILSONS TANNERY WEST, INC.
WILSONS/GEORGETOWN LEATHER DESIGN OF ARLINGTON,
VA, INC.
WILSONS/GEORGETOWN LEATHER DESIGN OF BETHESDA, MD,
INC.
WILSONS/GEORGETOWN LEATHER DESIGN OF COLUMBIA, MD,
INC.
WILSONS/GEORGETOWN LEATHER DESIGN OF DALE CITY,
VA, INC.
WILSONS/GEORGETOWN LEATHER DESIGN OF DENVER, CO,
INC.
WILSONS/GEORGETOWN LEATHER DESIGN OF FAIRFAX, VA,
INC.
WILSONS/GEORGETOWN LEATHER DESIGN OF FARMINGTON,
CT, INC.
WILSONS/GEORGETOWN LEATHER DESIGN OF GAITHERSBURG,
MD, INC.
24
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WILSONS/GEORGETOWN LEATHER DESIGN OF KING OF
PRUSSIA, PA, INC.
WILSONS/GEORGETOWN LEATHER DESIGN OF LANDOVER, MD,
INC.
WILSONS/GEORGETOWN LEATHER DESIGN OF MCLEAN, VA,
INC.
WILSONS/GEORGETOWN LEATHER DESIGN OF NASHVILLE,
TN, INC.
WILSONS/GEORGETOWN LEATHER DESIGN OF OWINGS, MD,
INC.
WILSONS/GEORGETOWN LEATHER DESIGN OF SPRINGFIELD,
VA, INC.
WILSONS/GEORGETOWN LEATHER DESIGN OF STAMFORD, CT,
INC.
WILSONS/GEORGETOWN LEATHER DESIGN OF ST. LOUIS,
MO, INC.
WILSONS/GEORGETOWN LEATHER DESIGN OF TOWSON, MD,
INC.
WILSONS/GEORGETOWN LEATHER DESIGN OF WILLOW GROVE,
PA, INC.
WILSONS/GEORGETOWN LEATHER DESIGN OF WOODBRIDGE,
NJ. INC.
WOODBRIDGE MALL WILSONS, INC.
YAKIMA WILSONS, INC.
YORK MALL WILSONS, INC.
YUBA CITY WILSONS, INC.
By:__________________________
Name:________________________
The authorized officer of
each of the foregoing corporations
25
<PAGE>
Exhibit 11.1
Wilsons The Leather Experts Inc. and Subsidiaries
Computation of Per Share Loss
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Thirteen Twenty-six
Weeks Weeks
Ended Ended
August 2, 1997 August 2, 1997
-------------- --------------
<S> <C> <C>
Weighted average number of issued shares outstanding 8,928 8,279
Effect of:
1996 Stock Option Plan 102 102
Melville Warrant to purchase common stock 1,269 1,269
----------- -----------
Weighted average shares outstanding 10,299 9,650
=========== ===========
Net loss $ (12,581) $ (19,844)
=========== ===========
Net loss per common share $ (1.22) $ (2.06)
=========== ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
WILSONS THE LEATHER EXPERTS INC. AND SUBSIDIARIES AS OF AUGUST 2, 1997 AND FOR
THE THIRTEEN AND TWENTY-SIX WEEK PERIODS ENDED AUGUST 2, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JAN-31-1998 JAN-31-1998
<PERIOD-START> MAY-04-1997 FEB-02-1997
<PERIOD-END> AUG-02-1997 AUG-02-1997
<CASH> 24,091 24,091
<SECURITIES> 0 0
<RECEIVABLES> 12,334 12,334
<ALLOWANCES> 4,843 4,843
<INVENTORY> 87,177 87,177
<CURRENT-ASSETS> 119,578 119,578
<PP&E> 20,622 20,622
<DEPRECIATION> 1,911 1,911
<TOTAL-ASSETS> 140,041 140,041
<CURRENT-LIABILITIES> 43,281 43,281
<BONDS> 61,311 61,311
0 0
0 0
<COMMON> 95 95
<OTHER-SE> 33,358 33,358
<TOTAL-LIABILITY-AND-EQUITY> 140,041 140,041
<SALES> 36,471 93,422
<TOTAL-REVENUES> 36,471 93,422
<CGS> 36,957 84,222
<TOTAL-COSTS> 54,250 120,713
<OTHER-EXPENSES> 955 1,842
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,248 1,919
<INCOME-PRETAX> (19,982) (31,052)
<INCOME-TAX> (7,401) (11,208)
<INCOME-CONTINUING> (12,581) (19,844)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (12,581) (19,844)
<EPS-PRIMARY> (1.22) (2.06)
<EPS-DILUTED> (1.22) (2.06)
</TABLE>
